Caribbean called on to safeguard economic growth

 

The World Bank has urged the Caribbean and other developing countries to safeguard their economic growth, warning that the “road ahead remain bumpy.”

In the Global Economic Prospects (GEP) report, released here on Wednesday, the Washington-based financial institution said 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,” the report says. 

World Bank Group President Jim Yong Kim confirmed that the economic recovery remains “fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth.“Developing countries have remained remarkably resilient thus far,” he added. “But we can't wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, in health, in education. 

“This will set the stage for the stronger growth that we know that they can achieve in the future,” Kim continued. 

The World Bank said last year, developing countries recorded 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, it said financial market conditions have “improved dramatically,” stating that 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. 

The World Bank said 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, while the real-side of the economy has responded modestly,in developing countries has accelerated, it is being held back by “weak investment and industrial activity in advanced economies.

According to the Bank,  the GDP of developing-countries 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. 

The World Bank said although fiscal sustainability in most developing countries is not an issue, government deficits and debt are much higher today than in 2007. 

“To assure resilience to downside risks, developing countries need to gradually rebuild depleted fiscal and monetary buffers, and improve social safety nets and food security,” said Andrew Burns, manager of Global Macroeconomics and lead author of the report.

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Date Posted

January 18 2013