Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-The World Bank Tuesday said four (4) years after the onset of the global financial crisis, the world economy remains fragile and growth in high-income countries is weak.

This is contained in a Press Release on the Global Economic Prospects (GEP) Report by the World Bank and made available to www.investadvocateng.com.

According to the Report, developing countries need to focus on raising the growth potential of their economies, while strengthening buffers to deal with risks from the Euro Area and fiscal policy in the United States.

Jim Yong Kim, World Bank Group President said that economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth.

“Developing countries have remained remarkably resilient thus far. But we can’t wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, in health, in education. This will set the stage for the stronger growth that we know that they can achieve in the future” Kim said.

He said that last year developing countries recorded among their slowest economic growth rates of the past decade, partly because of the heightened Euro Area uncertainty in May and June of 2012.

“Since then, Financial Market conditions have improved dramatically. International capital flows to developing countries, which fell 30 percent (30%) in the second quarter (Q2) of 2012, have recovered and Bond spreads have declined to below their long-term average levels of around 282 basis points” he noted.

Kim affirmed that developing-country Stock Markets are up 12.6% since June, while Equity Markets in high-income countries are up by 10.7%. “However, the real-side of the economy has responded modestly. Output in developing countries has accelerated, but is being held back by weak investment and industrial activity in advanced economies” Kim said.

In the same vein, Kaushik Basu, Senior Vice President and Chief Economist at The World Bank said from hopes for a U-shaped recovery, through a W-shaped one, the prognosis for global growth is getting alphabetically challenged.

Basu said with Governments in high-income countries struggling to make fiscal policies more sustainable, developing countries should resist trying to anticipate every fluctuation in developed countries and, instead, ensure that their fiscal and monetary policies are robust and responsive to domestic conditions.

According to the Report, the World Bank estimates global GDP grew 2.3% in 2012, compared with last June’s expectation of 2.5%. “Growth is expected to remain broadly unchanged at 2.4% growth in 2013, before gradually strengthening to 3.1% in 2014 and 3.31% in 2015” the Report said.

The Report further affirmed that in developing-countries GDP is estimated to have grown 5.1% in 2012, and is projected to expand by 5.5% in 2013, strengthening to 5.7% and 5.8% in 2014 and 2015, respectively.

Also, growth in high-income countries has been downgraded from earlier forecasts, at 1.3% for 2012 and 2013, firming to 2.0% in 2014 and 2.3% by 2015.

The World Bank said growth in the Euro Area is now projected to only return to positive territory in 2014, with GDP expected to contract by 0.1% in 2013, before edging up to 0.9% in 2014 and 1.4% in 2015. “Overall, global trade of goods and services, which grew only 3.5% in 2012, is expected to accelerate, expanding by 6.0% in 2013 and 7.0% by 2015” the World Bank said.

Also, Hans Timmer, Director, Development Prospects Group, the World Bank said the weakness in high-income countries is dampening developing-country growth, but strong domestic demand and growing South-South economic linkages have underpinned developing country resilience – to the point that, for the second year in a row, developing countries were responsible for more than half of global growth in 2012.

The Report noted that downside risks to the global economy include: a stalling of progress on the Euro Area crisis, debt and fiscal issues in the United States, the possibility of a sharp slowing of investment in China, and a disruption in global oil supplies.

The World Bank said the likelihood of these risks and their potential impacts has diminished, and the possibility of a stronger-than-anticipated recovery in high-income countries has increased.

“Although fiscal sustainability in most developing countries is not an issue, government deficits and debt are much higher today than in 2007” the Report said.

On his part, Andrew Burns, Manager of Global Macroeconomics and lead author of the report said to assure resilience to downside risks, developing countries need to gradually rebuild depleted fiscal and monetary buffers, and improve social safety nets and food security.