WORLD BANK's GLOBAL ECONOMIC PROSPECTS REPORT
World Bank lowered its global economic growth forecast to 3.3 percent in Global Economic Prospects (GEP) report, from 3.5 in the June report.
After growing by an estimated 2.6 percent in 2014, the global economy is projected to expand by 3 percent this year, 3.3 percent in 2016 and 3.2 percent in 2017, predicts the Bank’s twice-yearly flagship. Developing countries grew by 4.4 percent in 2014 and are expected to edge up to 4.8 percent in 2015, strengthening to 5.3 and 5.4 percent in 2016 and 2017, respectively.
Following another disappointing year in 2014, developing countries should see an uptick in growth this year, boosted in part by soft oil prices, a stronger U.S. economy, continued low global interest rates, and receding domestic headwinds in several large emerging markets, said the World Bank GEP report.
"DEVELOPING COUNTRIES NEED TO UNDERTAKE STRUCTURAL REFORMS"
"In this uncertain economic environment, developing countries need to judiciously deploy their resources to support social programs with a laser-like focus on the poor and undertake structural reforms that invest in people" said World Bank Group President Jim Yong Kim. "It’s also critical for countries to remove any unnecessary roadblocks for private sector investment. The private sector is by far the greatest source of jobs and that can lift hundreds of millions of people out of poverty."
"THE LOWER OIL PRICE IS LOWERING INFLATION WORLDWIDE"
"Worryingly, the stalled recovery in some high-income economies and even some middle-income countries may be a symptom of deeper structural malaise" said Kaushik Basu, World Bank Chief Economist and Senior Vice President. "As population growth has slowed in many countries, the pool of younger workers is smaller, putting strains on productivity. But there are some silver linings behind the clouds. The lower oil price, which is expected to persist through 2015, is lowering inflation worldwide and is likely to delay interest rate hikes in rich countries."
"LOW OIL PRICES PRESENT AN OPPORTUNITY TO UNDERTAKE REFORMS"
Commodity prices were projected to stay soft in 2015, as had been discussed in a chapter in the report, the unusually steep decline in oil prices in the second half of 2014 could significantly reduce inflationary pressures and improve current account and fiscal balances in oil-importing developing countries, said in the statement on the report.
"Lower oil prices will lead to sizeable real income shifts from oil-exporting to oil-importing developing countries. For both exporters and importers, low oil prices present an opportunity to undertake reforms that can increase fiscal resources and help broader environmental objectives" said Ayhan Kose, Director of Development Prospects at the World Bank.
"THE FALL IN OIL PRICES WOULD HELP LOWER INFLATION"
Amongst large middle-income countries that will benefit from lower oil prices is India, where growth was expected to accelerate to 6.4 percent this year, from 5.6 percent in 2014, rising to 7 percent in 2016-17. In Brazil, Indonesia, South Africa and Turkey, the fall in oil prices would help lower inflation and reduce current account deficits, a major source of vulnerability for many of these countries.
"Risks to the global economy are considerable. Countries with relatively more credible policy frameworks and reform-oriented governments will be in a better position to navigate the challenges of 2015" concluded Franziska Ohnsorge, Lead Author of the report.