Developing nations to push world growth in 2012 despite fuel prices

Jun 8, 2011, 0:02 GMT

Washington - The global economy will slow down this year but pick up again in 2012, thanks to the booming engine of developing economies, like those in East Asia, even as wealthier nations struggle, the World Bank said Tuesday.

But the international finance agency that helps developing nations also warned that those flourishing countries face the double inflationary challenge of rising fuel and food prices.

'Developing countries have been resilient despite remaining tensions in high-income countries,' said Hans Timmer, director of development prospects for the World Bank. 'But many developing economies are operating above capacity and at risk of overheating, most notably in Asia and Latin America.'

In its twice-yearly update, the World Bank projected that world growth in 2011 would be 3.2 per cent, slower than the estimated 3.8 per cent for 2010. Growth in 2012 and 2013 was projected to rebound at 3.6 per cent.

The figures, when adjusted to purchasing power, were in line with other recent projections. The World Bank's 2011 figure was slightly lower than estimated in January, when global growth was projected at 3.3 per cent.

Taken separately, emerging economies were expected to grow 6.3 per cent in 2011, down from 7.3 per cent in 2010. They were expected to maintain 2011 growth levels in the next two years.

'But further increases in already high oil and food prices could significantly curb economic growth and hurt the poor,' said Justin Yifu Lin, the World Bank's chief economist.

Japan's destruction from the March tsunami and the political turmoil in the Middle East and North Africa have cut into domestic growth in those areas, but were not expected to have major spillover effects on the global scene, officials said.

So-called high income countries continued to languish at 2.2-per-cent growth this year, down from the post-recession recovery rate of 2.7 per cent in 2010.

Unlike wealthier countries, the developing countries have largely 'put the crisis-biting stage' of the recession behind them, said Andrew Burns, who oversees global monitoring for the World Bank. Employment levels there have returned to pre-recession levels.

These countries now need to focus on the 'more boring, more difficult' measures of structural reforms, monetary policies and looming high commodity prices, Burns said.

Domestic food prices in developing countries rose about 7.9 per cent since June 2010, much less than the 40-per-cent rise in international food prices, but still a worry.

Uncertainty over Middle East developments and the oil production lapse during the Libyan crisis have pushed up both fuel and food prices, Burns noted. More use of grains for biofuel have contributed to the upward spiral of food prices, Burns said.

On a geographic basis, East Asia and the Pacific, including China, Indonesia, and Thailand, comprised the world's fastest growing region, with estimated 2011 growth at 8.5 per cent, down from 9.6 per cent in 2010. The World Bank expects growth of 8.1 per cent in the region in 2012 and 8.2 per cent in 2013.

South Asia, including India, Pakistan and Bangladesh, had estimated 2011 growth of 7.5 per cent, down from 9.3 per cent in 2010. Growth for 2012 and 2013 was projected at 7.7 and 7.9 per cent.

Sub-Saharan Africa's 2011 growth was estimated at 5.1 per cent, up from 4.8 per cent in 2010. For both 2012 and 2013, growth of 5.7 per cent is projected.

The Middle East and North Africa have estimated growth of 1.9 per cent this year, down from 3.1 per cent 2010. But growth in the next two years was expected to rise, to 3.5 and 4 per cent.

Europe and Central Asia have estimated growth of 4.7 per cent this year, down from 5.2 per cent in 2010. Growth of 4.4 and 4.6 per cent is expected in the ensuing years.

Latin America and the Caribbean have estimated growth of 4.5 per cent this year, down from 6 per cent in 2010. The World Bank projects growth of 4.1 and 4 per cent in 2012 and 2013.

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