The World Bank has released its annual forecast on the global economy. While it predicts growth in the coming years, the forecast varies sharply between rich and developing countries.
The forecast for developing countries actually is better than that for developed nations. But the report says developing nations should “shift from crisis-fighting to policies that sustain growth.”
Gross Domestic Product
GDP is the value of goods and services produced within a country over a specific period.
“Globally, GDP is expected to grow at about 3.2 percent in 2011. This is a slight fall from the 3.8 percent that was recorded in 2010. And it’s expected to pick up in about 2012/ 2013 to about 3.6 percent,” according to Allen Dennis, World Bank senior economist.
Dennis is the author of the Africa section of the 2011 edition of Global Economic Prospects.
Developing vs. developed
“It’s however important to realize the distinction and strength of growth in both developing countries and high-income countries. While we see growth rates in developing countries at about 7.3 percent in 2010 and maybe dropping slightly to 6.3 percent over the 2011/2012 period, for high-income countries it’s around 2.7 percent in 2010 to about 2.2, firming up just a little bit to 2.7 percent over the 2011/2013 period,” he said.
Simply put, Dennis said, it means growth rates in developing countries are two to three times stronger than those in high-income countries.
When it comes to recovering from the global recession, it’s all about location.
“The better growth in developing countries is partly because the center or the epicenter of the crisis was in high-income countries. And so high-income countries, even though [they] are recovering, they still have some structural issues that have to be dealt with. Unlike developing countries that were not hit as hard as the high-income countries,” he said.
Having less complex economies is not the only reason sub-Saharan African nations are recovering faster.
“The growth story in sub-Saharan Africa is definitely a much more nuanced story than that. Over the past 10 years or so, sub-Saharan Africa has recorded growth rates of about 5 percent on average, which are very high. And for 2010 in particular, growth rates were about 4.8 percent. That is rising from its crisis level of about 2 percent. And our projections are that by 2011 growth in sub-Saharan Africa will restart itself at its pre-crisis average of around 5 percent,” he said.
Not all equal
Over the 2012/2013 period, the World Bank expects sub-Saharan economic growth will increase to about 5.8 percent. But that figure does not apply to all sub-Saharan countries.
“There’s a lot of diversity,” Dennis said, “in growth performance among these countries.”
About a third are expected to grow between 2 and 4 percent. Some others may actually rise about 6 percent, which is considered very high, even among developing countries. Dennis said growth in sub-Saharan Africa is among the fastest of all the world’s developing regions.
“So, that is certainly good news for sub-Saharan Africa,” he said.
Some of the fastest growing economies include resource rich countries, such as the DRC, Nigeria, Ghana and Mozambique.
“But it’s not limited to just the resource-rich countries. There are some non-mineral rich economies, such as Rwanda and Ethiopia, that are also registering growth rates of about 7 percent,” he said.
South Africa, often called the economic engine of the continent, was hit hard by the financial crisis.
“South Africa’s growth path has been slightly different from that of the rest of sub-Saharan Africa. In part, yes, South Africa is much more integrated with the global economy… financially and trade wise and investment wise. So, yes, to some extent it was hit harder than other countries in the region,” he said.
The World Bank senior economist added, “What has been driving growth in South Africa so far has been consumer spending. But business investment has been weak, though one expects that that will pick up this year and perhaps also into 2012 and 2013.”
The Global Economic Prospects report said, “As they put the financial crisis behind them, developing countries need to focus on tackling country-specific challenges, such as achieving balanced growth through structural reforms, coping with inflationary pressures and dealing with high commodity prices.”
“If the structural reforms were not undertaken several years ago, then the investment that’s currently going into some of the services sector, not just telecommunications but also retail services and even the banking sector, would not be occurring,” he said.
Some groups have criticized the World Bank and IMF economic reform policies in developing countries, saying they have actually slowed economic growth.
The World Bank says some other factors that could affect economic growth are high oil prices and production shortfalls and higher food prices due to bad weather.
The full report can be found at www.worldbank.org/globaloutlook.