(MENAFN- Khaleej Times) The World Bank raised its global growth forecasts as the easing of austerity policies in advanced economies supports their recovery, boosting prospects for developing markets' exports
The Washington-based lender sees the world economy expanding 3.2 per cent this year, compared with a June projection of three per cent and up from 2.4 per cent in 2013. The forecast for the richest nations was raised to 2.2 per cent from two per cent. Part of the increase reflects improvement in the 18-country euro area, with the US ahead of developed peers, growing twice as fast as Japan
The report by the institution that's trying to eradicate extreme poverty by 2030 indicates a near-doubling of the growth in world trade this year from 2012, as developed economies lift export-reliant emerging nations. At the same time, the withdrawal of monetary stimulus in the US may raise market interest rates, hurting poorer countries as investors return to assets such as Treasuries, according to the bank
"This strengthening of output among high-income countries marks a significant shift from recent years when developing countries alone pulled the global economy forward," the bank said on Tuesday in its Global Economic Prospects report published twice a year. Import demand from the richest nations "should help compensate for the inevitable tightening of global financial conditions that will arise as monetary policy in high- income economies is normalised.
The bank's forecasts hinge on the orderly unwinding of Federal Reserve stimulus, which is starting this month with the trimming of monthly bond purchases to $75 billion from $85 billion. If investors react abruptly in coming months, as they did in May when the central bank mentioned the possibility of tapering, capital inflows to developing economies could drop again, according to the report. The bank sees a global expansion of 3.4 per cent in 2015, compared with 3.3 per cent predicted in June
In the US, where growth is seen accelerating to 2.8 per cent this year, unchanged from the outlook in June, the recent budget compromise in Congress will ease spending cuts previously in place and boost confidence from households and businesses, the bank said
The bank held its forecast this year for Japan at 1.4 per cent.
It raised its prediction for the euro region to 1.1 per cent for this year from 0.9 per cent in June
The 2014 forecast for developing markets was cut to 5.3 per cent from 5.6 per cent
The bank lowered its forecast for China this year to 7.7 per cent from eight per cent
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