15 Jan 2013

WORLD BANK/ GLOBAL ECONOMIC PROSPECTS REPORT

Four years after the onset of the global financial crisis, the world economy remains fragile and growth in high-income countries is weak. 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, says the World Bank in the newly-released Global Economic Prospects report. WORLD BANK

Posted at: January 15, 2013 5:40 pm

Duration: 01:16

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STORY: WORLD BANK/ GLOBAL ECONOMIC PROSPECTS REPORT
TRT: 1.16
SOURCE: WORLD BANK
RESTRICTIONS: EMBARGOED JANUARY 16 1:00 GMT – JANUARY 15 20:00 EDT
LANGUAGE: ENGLISH / NATS

DATELINE: 15 JANUARY 2013, WASHINGTON DC

SHOTLIST:

FILE – 2011, WORLD BANK HEADQUARTERS, WASHINGTON DC

1. Wide shot, World Bank Headquarters

15 JANUARY 2013, WASHINGTON DC/ FILE

2. Wide shot, Jim Yong Kim being interviewed
3. SOUNDBITE (English) Jim Yong Kim, President, World Bank Group:
"What we see is that the economic recovery remains fragile and uncertain, clouding of course the prospect for rapid improvement and a return to more robust growth. And the outlook is weak in both high-income and developing country economies. So despite, promising and sometimes even courageous measures taken in Europe, there, issues remain in the Eurozone and of course we still have fiscal policy issues in the United States. The risks from this situation are substantial, especially for developing countries that remained remarkably resilient thus far."
4. Cutaway, Jim Yong Kim's hands 
5. SOUNDBITE (English) Jim Yong Kim, President, World Bank Group:
"I worry for example, about the low stocks of wheat and maize which could cause once again a crisis in food prices, which we know will affect the poorest the most.  What we are suggesting is that we cannot wait for the return to growth in the high- income countries. We really need developing countries to think about setting the stage for medium and long-term growth.  We have to continue to support developing countries in making investments in infrastructure, in health, in education. This will set the stage, this will set the foundations, for the growth that we know that they can achieve in the future."
6. Wide shot, Jim Yong Kim being interviewed

STORYLINE:

"The economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth," said World Bank Group President Jim Yong Kim.  He added that "the outlook is weak in both high-income and developing country economies. So despite, promising and sometimes even courageous measures taken in Europe, there, issues remain in the Eurozone and of course we still have fiscal policy issues in the United States. The risks from this situation are substantial, especially for developing countries that remained remarkably resilient thus far."

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 in the second quarter of 2012, have recovered and bond spreads have declined to below their long-term average levels of around 282 basis points. Developing-country stock markets are up 12.6 percent since June, while equity markets in high-income countries are up by 10.7 percent. 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.

Yong Kim said that "I worry for example, about the low stocks of wheat and maize which could cause once again a crisis in food prices, which we know will affect the poorest the most."

He also said that what the World Bank was suggesting was "that we cannot wait for the return to growth in the high- income countries. We really need developing countries to think about setting the stage for medium and long-term growth.  We have to continue to support developing countries in making investments in infrastructure, in health, in education. This will set the stage, this will set the foundations, for the growth that we know that they can achieve in the future".

The World Bank estimates global GDP grew 2.3 percent in 2012, compared with last June's expectation of 2.5 percent. Growth is expected to remain broadly unchanged at 2.4 percent growth in 2013, before gradually strengthening to 3.1 percent in 2014 and 3.31 percent in 2015. Developing-country GDP is estimated to have grown 5.1 percent in 2012, and is projected to expand by 5.5 percent in 2013, strengthening to 5.7 percent and 5.8 percent in 2014 and 2015, respectively. Growth in high-income countries has been downgraded from earlier forecasts, at 1.3 percent for 2012 and 2013, firming to 2.0 percent in 2014 and 2.3 percent by 2015. Growth in the Euro Area is now projected to only return to positive territory in 2014, with GDP expected to contract by 0.1 percent in 2013, before edging up to 0.9 percent in 2014 and 1.4 percent in 2015. Overall, global trade of goods and services, which grew only 3.5 percent in 2012, is expected to accelerate, expanding by 6.0 percent in 2013 and 7.0 percent by 2015.

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. However, 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.