Newspaper article International Herald Tribune

World Bank Report Finds Economic Clouds Lifting

Newspaper article International Herald Tribune

World Bank Report Finds Economic Clouds Lifting

Article excerpt

In the report, the World Bank estimates the world economy grew just 2.3 percent in 2012. It expects growth to pick up only modestly in the coming years, from 2.4 percent in 2013 to 3.3 percent in 2015.

Some of the darkest clouds threatening the global economy have started to lift, according to the World Bank's periodic update to its economic forecasts.

The latest version of the twice-yearly Global Economic Prospects report is one of the development bank's least pessimistic in recent years, though hardly an exercise in optimism. It describes a "dramatic" easing of financial conditions around the world, stemming in part from policy changes to soothe the bond markets in Europe. Still, it warns that global growth will continue to be sluggish for years to come.

In the report, the World Bank estimates that the world economy grew just 2.3 percent in 2012. It expects growth to pick up only modestly in the coming years, from 2.4 percent in 2013 to 3.3 percent in 2015.

Developing countries were responsible for more than half of global growth in 2012, the report says, and they will continue to be an engine of growth. The report estimates that developing countries grew 5.1 percent in 2012 and that the pace of growth will accelerate to 5.8 percent in 2015.

"Four years after the crisis, high- income countries are still struggling," Andrew Burns, the report's lead author, said in an interview. "Developing countries need to respond to that difficult environment not through fiscal and monetary stimulus, but rather by looking to reinforce their underlying growth potential in order to have sustainably stronger growth going forward."

For the past four years, developing countries have remained in something of a defensive crouch, World Bank experts said over the weekend. Their central banks and finance ministries have intently focused on managing the volatile financial and economic conditions emanating from the United States and Europe, and their policy making has focused on the short term.

But credit conditions have eased significantly in Europe, particularly since the European Central Bank, led by Mario Draghi, embarked on a major bond-buying program last year.

Growth has started to pick up in the United States, after taking a hit in the second half of 2012 because of uncertainty stemming from the presidential election and the so-called fiscal cliff, a series of automatic spending cuts and tax increases that Congress mostly averted this month.

Now, developing economies need to focus more on their domestic economic troubles, bank economists said. That might mean making long- term investments in infrastructure, education, public health or regulation, rather than focusing on short-term stimulus measures to counteract economic fluctuations from elsewhere around the globe. …

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