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World Bank cuts 2013 global economic growth outlook to 2.4 pct

Beijing, Jan. 16 (Xinhua-ANI): The World Bank has predicted that the global economy would grow at a rate of 2.4 percent in 2013 before strengthening to 3.1 percent in 2014.

In its newly-released flagship report Global Economic Prospects (GEP), the World Bank said the world economy remains fragile and prone to further disappointment, although the balance of risks is now less skewed to the downside than its has been in recent years.

Global economic growth is expected to be at a relatively weak 2. 3 percent and 2.4 percent in 2012 and 2013 respectively and gradually strengthen to 3.1 and 3.3 percent in 2014 and 2015, the Washington-based Bank noted in the report.

In its last forecast in June, the World Bank projected global growth to reach 3.0 percent in 2013.

The U.S. economy is forecast to grow by 2.2 percent for 2012, and the growth will slow to 1.9 percent in 2013 due to fiscal consolidation.

Growth in euro area is projected to only return to positive territory in 2014, with economy expected to contract by 0.1 percent in 2013, before edging up to 0.9 percent in 2014 and 1.4 percent in 2015.

The Bank lowered its 2012 growth estimate for China to 7.9 percent from 8.2 percent in June projection, and expected the growth to accelerate to 8.4 percent in 2013.

“The weakness in high-income countries is dampening developing- country growth, but strong domestic demand and growing South-South economic linkages have underpinned developing country resilience – to the point that, for the second year in a row, developing countries were responsible for more than half of global growth in 2012,” said Hans Timmer, director of Development Prospects at the World Bank.

At an estimated 5.1 percent, economic growth in developing countries during 2012 was among the slowest in a decade. Improved financial conditions, a relaxation of monetary policy, and somewhat stronger growth in high-income countries are likely to gradually raise developing country growth to 5.5 percent in 2013, according to the report.

The global development organization said although progress has been made in improving fiscal sustainability and crisis-management institutions in the euro area, much more needs to be done before the risk of further crises can be taken off the table.

For the United States, the Bank warned that uncertainty continues to surround the future path of fiscal policy although the major fiscal contraction threatened by the “fiscal cliff” has passed, and political brinkmanship over the debt-ceiling is also a source of external risk for developing countries.

The Bank also argued that in addition to headwinds from overseas, the developing countries also face home-grown challenges, including China’s need to switch to a more balanced pattern of investment and a still-present possibility of an oil-price spike.

“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,” said Kaushik Basu, chief economist of the World Bank. (Xinhua-ANI)