World Bank cuts growth forecast for developing, high-income countries in 2012

The World Bank on January 18, 2012 lowered its growth forecast for 2012 to 5.4% for developing countries and 1.4% for high-income countries as well as -0.3% for the Euro Area.

According to the Bank’s newly-released Global Economic Prospects (GEP) 2012, the cut is down from its June 2011 estimates.

The June edition estimated a growth of 6.2% for developing countries, 2.7% for high-income countries and 1.9% for the Euro Area.

Growth in sub-Saharan Africa, according to the GEP remained robust in 2011 at 4.9% and growth with increased investment flows, rising consumer spending, and the coming on stream of new mineral exports in a number of countries should accelerate sub-Saharan Africa’s growth to 5.3% in 2012 and 5.6% in 2013.

Global growth is now projected at 2.5% and 3.1% for 2012 and 2013 respectively, said the Bank.

According to the Washington-based lender, slower growth is already visible in weakening global trade and commodity prices. “Global exports of goods and services expanded an estimated 6.6% in 2011 (down from 12.4% in 2010), and are projected to rise by only 4.7% in 2012” while “global prices of energy, metals and minerals, and agricultural products are down 10%, 25% and 19% respectively since peaks in early 2011.”

It added that the declining commodity prices have contributed to an easing of headline inflation in most developing countries.

The World Bank has therefore cautioned developing countries to prepare for further downside risks, as the Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects.

“Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics.

By Ekow Quandzie