World Bank economists expect the global economy to strengthen this year, with growth continuing to pick up in developing countries and advanced economies appearing to leave behind their five years of slow or no growth during the global financial crisis, according to the World Bank’s Global Economics Prospects report released Tuesday.
Continued strong growth in China and accelerating growth in high-income countries is bolstering growth in developing countries, a departure from recent years when developing countries alone pulled the global economy forward.
“For the first time in five years, there are indications that a self-sustaining recovery has begun among high-income countries – suggesting that they may now join developing countries as a second engine of growth in the global economy,” Kaushik Basu, chief economist and senior vice president of The World Bank, wrote in the report’s foreword.
But rising global interest rates and potential volatility in capital flows, as the U.S. Federal Reserve begins withdrawing massive monetary stimulus, will keep growth prospects vulnerable, according to the report.
Global GDP growth is projected to grow from 2.4 percent in 2013 to 3.2 percent this year, stabilizing at 3.4 percent in 2015 and 3.5 percent in 2016.
"The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead,” World Bank Group President Jim Yong Kim said in a statement. “Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets."
World Bank economists expect high-income countries’ GDP growth to strengthen from 1.3 percent in 2013 to 2.2 percent this year and 2.4 percent in both 2015 and 2016. The stronger growth reflects progress in both the public and private sectors and is expected to boost demand for exports of developing countries, contributing to a modest acceleration of their growth.
Developing country GDP is estimated to have grown about 4.8 percent in 2013, about the same pace as 2012. But growth accelerated in the second half of 2013 and is expected to carry over into 2014, expanding GDP by 5.3 percent.