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Growth remains sluggish in advanced economies: WB Report
Jun '13
Despite improvement in financial conditions, growth remains sluggish in advanced economies, according to a latest report of the World Bank.
The report “Global Economic Prospects - June 2013: Less volatile, but slower growth” says, “The global economy is transitioning into what is likely to be a smoother and less volatile period. However, the recovery is uneven.”
“For high-income countries, fiscal consolidation, high unemployment and still weak consumer and business confidence will continue to dampen growth this year,” says the report.
In developed economies, financial market risk indicators, such as credit default swap rates, sovereign debt yields, and stock-market volatility indicators have all improved significantly since June 2012.
While the challenges faced by high-income countries to restore financial-sector health, reform institutions and get fiscal policy back onto a sustainable path persist, the likelihood that these challenges will provoke a major crisis has declined markedly, states the report.
However, the real-side activity remains sluggish, especially in Europe, where it is being held back by weak confidence and continued banking sector and fiscal restructuring.
On the other hand, the recovery is on more solid ground in the United States, where a fairly robust private sector recovery is being held back, but not extinguished by fiscal tightening.
Meanwhile, in Japan, a dramatic relaxation of macroeconomic policy appears to have sparked an uptick in activity, at least over the short-term, the report states.
Global GDP is expected to expand about 2.2 percent this year and strengthen to 3.0 percent and 3.3 percent in 2014 and 2015, according to the report.
For high-income countries, the report projects a modest 1.2 percent growth this year, followed by 2 percent and 2.3 percent growth in 2014 and 2015, respectively.
The Euro Area is now estimated to contract by 0.6 percent in 2013, compared with the previous forecast of 0.1 percent, and is projected to slowly improve to a modest 0.9 percent in 2014 and 1.5 percent in 2015, states the report.

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