The World Bank: World Economy Remains Unstable

In the Report of the World Bank: “The Global Economic Prospects” published in January 2013, it is said that four years after the beginning of the global financial crisis the world economy is still unstable.

Economic growth in countries with a high level of income is still insignificant. The main drivers of global growth are developing countries, but their economic growth rates are slowing down:  last year the lowest economic growth rates in the past decade were registered in all the developing countries.

It is stated in the Report that there are still risks which can slow down development of the world economy. The euro area is a main risk to the global economy.  If debt problems get worse, minimum two countries may be deprived access to the capital market and, as a result, global GDP will decrease by 1.3 p.p.

Another source of risks to the world economy is the US recession which may take place if the Congress fails to agree upon the acceptable level of state expenditures, which situation may result in a fiscal cliff   and automatic sequester of the budget by all the items. In such a case, the US GDP will decrease within a year by 0.4% and that situation will contribute to further aggravation of the economy of the euro area and a decrease of another 1.4 p.p. in global GDP, the World Bank warns. If the US government succeeds in finding a solution which permits to stop further  debt accumulation, the US GDP will grow by 1.9%  which is still below the 2012 results when the US economy grew by 2.2%.

Also, according to experts of the World Bank a possible sharp slowdown of the influx of investments to China and irregularities in supplies of primary and oil products may involve a serious threat to the global economy.

However, it is stated in the Report that despite the fact that the risks still prevail the possibility that they will materialize has decreased together with their potential negative effect, while the prospect of recovery of economies with a high level of income faster than it was earlier expected has increased.

According to the estimates of the World Bank, in 2012 growth in global GDP amounted to 2.3%, though in June 2012 it was expected to amount to 2.5%.  It is expected that in 2013 the growth rates will remain virtually unchanged and amount to 2.4%, while later they gradually increase to 3.1% and 3.3% in 2014 and 2015, respectively. In 2012, the developing countries’ GDP   rose by 5.1%. According to the forecast of the World Bank, in 2013 it will increase by 5.5%, in 2014 – by 5.7%, while in 2015 – by 5.8%. Growth evaluations in countries with a high level of income were revised downward as compared to earlier forecasts and amount to 1.3% both in 2012 and 2013 with subsequent growth to 2.0% and 2.3% in 2014 and 2015, respectively.  In 2013, in countries of the euro area GDP is expected to decrease by 0.1%. Return of growth to positive values is forecasted only in 2014 when growth of 0.9% is expected. In 2015, growth of 1.4% is expected to take place.

The authors of the Report left the previous forecast of GDP of the Russian Federation in 2013 unchanged at the level of 3.6%, having admitted that in 2014 that index may rise to 3.9%, while in 2015 it falls again to 3.8%. On the basis of the 2012 results, growth in the Russian GDP amounted to 3.5%.

In 2012, the volume of the global trade increased by the mere 3.5%; it is to be noted that pre-crisis average annual growth rates of global trade amounted to 6.2%. According to the forecast of the World bank, in 2013 the growth rates of the global trade in goods and services are to amount to 6.0%, while in 2014 and 2015, to 6.7% and 7.0%, respectively.

N.P. Volovik , Head of the Foreign Trade Department