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Developing nations may not see pre-crisis growth rates: WB
15
Jun '13
Growth in several middle income countries has been held back by supply bottlenecks and is unlikely to reach pre-crisis rates unless supply-side reforms are pursued vigorously, says the World Bank in its latest report.
 
In its latest report “Global Economic Prospects - June 2013: Less volatile, but slower growth”, the World Bank says, developing economies have more or less completely recovered from the 2008 crisis and less volatile external conditions are expected to yield a gradual acceleration of activity in developing regions. 
 
The report projects the GDP of developing countries to be around 5.1 percent in 2013, strengthening to 5.6 percent and 5.7 percent in 2014 and 2015, respectively.
 
Growth has slowed in China as authorities seek to rebalance the economy, states the report.
 
Region-wise, East Asian economies are expected to grow by 7.3 percent this year, while the economies of South Asia and Sub-Saharan Africa are likely to post an average growth of 5.2 percent and 4.9 percent, respectively.
 
The report projects growth in Latin America to be at 3.3 percent this year, while it forecasts a 2.8 percent growth for developing Europe and Central Asia. Among the developing world, the Middle East & North Africa (MENA) region is expected to grow at the lowest rate of 2.5 percent in 2013.
 
However, the report adds that developing countries are not a homogenous group, and policy prescriptions need to be tailored accordingly.
 
In particular, it says that several fast growing economies in East Asia, Sub-Saharan Africa and a few in Latin America are at risk of overheating. It suggests that tighter macroeconomic policy stances are warranted to reduce vulnerabilities in these economies.
 
For BIRCS nations, except China, the report says, “Weak growth in the face of capacity constraints in some economies requires supply side structural policy reforms to boost potential growth, notably in Brazil, India, Russia, and South Africa.”
 
The report lists large output gaps in developing Europe and in several MENA economies as a cause of concern. “In the former, limited macroeconomic space necessitates reforms to improve competitiveness, while in the latter, an easing in political tensions and conflicts and urgent structural reforms are needed to boost growth, improve the business environment and create jobs.”
 
Overall, the output gaps in most developing economies are small, and appear to be closing and policy appears broadly to be on track, the report concludes.
 

Fibre2fashion News Desk - India


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