17 January 2013

Nigeria: World Bank Cautions Nigeria, Others On Fragile Global Economy

The World Bank Wednesday advised Nigeria and other developing countries to focus on raising the growth potential of their economies, saying that the global economy was still weak.

The Bretton Woods institution also urged developing economies to continue to strengthen buffers in order to deal with risks from the euro zone as well as fiscal policy in the United States.

The World Bank, which stated these in its newly-released Global Economic Prospects (GEP) report obtained by THISDAY yesterday, also pointed out that four years after the onset of the global financial crisis, the world economy had remained fragile, saying that growth in high-income countries was still weak.

According to the President, World Bank Group, Jim Yong Kim, "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. 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."

Last year, developing countries recorded among their slowest economic growth rates of the past decade, partly because of the heightened uncertainty in the euro in May and June 2012. However, there has been improvement in financial market conditions since then. International capital flows to developing countries, which fell 30 percent in the second quarter of 2012, have recovered some improvement.

The report stated that developing countries stock markets were up 12.6 per cent since June last year, while equity markets in high-income countries climbed by 10.7 percent.

It also showed that output in developing countries accelerated, but was affected by slightly by weak investment and industrial activity in advanced economies.

To the Senior Vice President and Chief Economist at The World Bank, Kaushik Basu: "From hopes for a U-shaped recovery, through a W-shaped one, the prognosis for global growth is getting alphabetically challenged.

"With governments in high-income countries struggling to make fiscal policies more sustainable, developing countries should resist trying to anticipate every fluctuation in developed countries and, instead, ensure that their fiscal and monetary policies are robust and responsive to domestic conditions."

Gross Domestic Product (GDP) growth in sub-Saharan Africa was robust at 4.6 percent in 2012, notwithstanding the slowdown in the global economy. Indeed, excluding the region's largest and most globally integrated economy, South Africa, GDP growth in the region was at strong 5.8 percent in 2012, with one-third of countries in the region growing by at least six percent.

"Nonetheless, besides the drag from a weaker global economy, domestic factors, including earlier monetary policy tightening (Kenya and Uganda), protracted labour disputes (South Africa), and political unrests (Mali and Guinea Bissau) weakened growth in a number of countries in the region," the bank added.

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