WB lowers economic growth forecast in developing world

PanARMENIAN.Net - The World Bank has revised down its forecast for economic growth in the developing world this year - from 5.3% down to 4.8%. If right, it would be the third consecutive year of growth below 5% for this group of countries, according to BBC News.

The Bank says that developing nations need to make economic reforms to promote growth. But the new report does predict that growth in these countries will accelerate in 2015.

"Disappointing" is the word the Bank uses to describe the developing world's likely performance this year.

The organization’s president, Jim Yong Kim said these growth rates are "far too modest to create the kind of jobs we need to improve the lives of the poorest 40 per cent."

However, there are some optimistic elements to the report. The downgraded forecast reflects the impact of the Ukraine crisis, bad weather in the United States and other factors. Some of these will be temporary and the Bank expects the developing world to record growth of around 5.5% next year and in 2016, which the report says is "broadly in line with potential," which means the rate of growth that they could sustain. They will be helped by the stronger growth coming through in many rich countries, notably the U.S. and the euro area, the BBC says.

But Andrew Burns, a senior economist at the Bank and one of the authors of the report, acknowledged that a period of three consecutive years of indifferent performance raises questions about whether the developing world is in for a long period of sub-par performance.

"It's one thing to have one year where one-off factors explain why growth wasn't quite as strong as you anticipated. To have three years in a row where growth disappoints does have to start begging exactly those kinds of questions," he says.

Even the World Bank's new lower forecast for this year would constitute a very strong performance in a developed nation. But poorer countries can grow faster by adopting established technology and, in many cases, putting an increasing working age population to work.

Burns says these countries should focus on things they can control. So rather than hope for further help from the developed economies, they should push ahead with economic reforms of their own.

The report says: "The structural reform agenda needs to be reinvigorated in order to sustain rapid income growth".

It mentions energy and infrastructure, labor markets and the business climate as areas where some countries would benefit from reform.

Among the countries it names, India and South Africa are said to need to make efforts in all these areas.