Developing world faces domestic challenges, as global economy stabilizes

The world economy appears to be getting back on its feet as risks from advanced economies ease.

Growth in the developing world will remain solid, albeit slower than the frenetic growth rates seen during the pre-crisis boom period, as developing countries grapple with home-grown challenges brought on by capacity constraints in many middle income countries, says the World Bank’s latest Global Economic Prospects, issued today.

Global GDP is expected to expand about 2.2 percent in this year and strengthen to 3.0 percent and 3.3 percent in 2014 and 2015.

Developing-country GDP is now projected to be around 5.1 percent in 2013, strengthening to 5.6 percent and 5.7 percent in 2014 and 2015, respectively, with growth in Brazil, Russia, India and South Africa projected to remain weak.

Looking at broader region-wide trends, the East Asia & Pacific region is expected to grow by 7.3 percent this year; Europe & Central Asia by 2.8 percent; Latin America & the Caribbean by 3.3 percent; Middle East & North Africa by 2.5 percent; South Asia by 5.2 percent; and Sub-Saharan Africa by 4.9 percent.

For high-income countries, fiscal consolidation, high unemployment and still weak consumer and business confidence will keep growth this year to a modest 1.2 percent, firming to 2.0 percent in 2014 and 2.3 percent by 2015.

Economic contraction in the Euro Area is estimated to be 0.6 percent for 2013, compared with the previous projection of 0.1 percent. Euro Area growth is expected to be a modest 0.9 percent in 2014 and 1.5 percent in 2015.

Global trade, after contracting for several months, is expanding once again, but trade is expected to expand only 4.0 percent in 2013, well off the pre-crisis pace of 7.3 percent.

Part of the resilience of global trade, despite the weakness in high-income economies, has been due to rapid expansion in South-South trade. More than 50 percent of developing country exports now go to other developing countries.

Even when China is excluded, South-South trade has been growing at an average rate of 17.5 percent a year over the past decade, with manufacturing trade expanding as rapidly as commodities trade.

The World Bank