World Bank Group released Global Economic Prospects (GEP) Report, January 2015

Jan 15, 2015 14:18 IST

World Bank Group on 13 January 2015 released its bi-annual Global Economic Prospects (GEP) Report, January 2015.

According to the report, global growth in 2014 has been disappointing as in previous three years; however, developing countries should see an uptick in growth in 2015.

The growth in developing countries will get a boost in part by soft oil prices, a stronger U.S. economy, continued low global interest rates, and receding domestic headwinds in several large emerging markets.

The Report has projected that India will be a major beneficiary of lower oil prices and growth is set to accelerate to 6.4 percent in 2015 and 7 percent by 2016.

Highlights of GEP Report, January 2015

  • Global economy grew by an estimated 2.6 percent in 2014 and is projected to expand by 3 percent in 2015, 3.3 percent in 2016 and 3.2 percent in 2017.
  • High income countries are likely to see growth of 2.2 percent in 2015-17, up from 1.8 percent in 2014, on the back of gradually recovering labour markets, ebbing fiscal consolidation, and still low financing costs.
  • Developing countries grew by 4.4 percent in 2014 and are expected to expand up to 4.8 percent in 2015, strengthening to 5.3 and 5.4 percent in 2016 and 2017 respectively.
  • Compared with the June 2014 Global Economic Prospects, global growth was revised down by 0.2 percentage point in 2014 to 2.6 percent, 0.4 percentage point to 3 percent in 2015
  • The recovery gained traction in the United States and the United Kingdom but is struggling in the Euro Area and Japan, while a carefully managed slowdown is underway in China. But the recovery has been sputtering in the Euro Area and Japan as legacies of the financial crisis linger.
  • Growth in the United States is expected to accelerate to 3.2 percent in 2015 from 2.4 percent in 2014, before moderating to 3 and 2.4 percent in 2016 and 2017, respectively.
  • China’s growth is expected to slow down to a still-robust 7.1 percent in 2015, 7 percent in 2016 and 6.9 percent in 2017.

Risks to Global Outlook in 2015-16

  • Risks to this slow-moving global recovery are significant and tilted to the downside. Four factors pose significant risk to the global economic growth in 2014-15. These are
  • Persistently weak global trade.
  • Possibility of financial market volatility as interest rates in major economies rise on varying timelines.
  • Extent to which low oil prices strain balance sheets in oil-producing countries.
  • Prolonged period of stagnation or deflation in the Euro Area or Japan.

India and GEP Report, January 2015

Amongst large middle-income countries that will benefit from lower oil prices is India, where growth is expected to accelerate to 6.4 percent in 2015 from 5.6 percent in 2014, rising to 7 percent in 2016-17. Indian economy had slowed to sub-five per cent growth in the previous two financial years of 2014 and 2013.

After the initiatives like Make in India campaign the economy had started showing signs of revival as it expanded by 5.7 per cent and 5.3 per cent in the second and third quarter of 2014-15.

Regional Highlights of GEP Report, January 2015

East Asia and Pacific region

The East Asia and Pacific region continued its gradual adjustment to slower but more balanced growth. Regional growth slipped to 6.9 percent in 2014 as a result of policy tightening and political tensions that offset a rise in exports in line with the ongoing recovery in some high-income economies.

The report predicted the growth to 6.7 percent in 2015 and a stable outlook thereafter, reflecting a gradual slowdown in China, which will be offset by a pick-up in the rest of the region in 2016-17.

In the rest of the region, excluding China, growth will strengthen to 5.5 percent by 2017 (from 4.6 percent in 2014) supported by firming exports, improved political stability, and strengthening investment.

Europe and Central Asia

The report predicted regional growth rebound to 3 percent in 2015, 3.6 percent in 2016 and 4 percent in 2017 but with considerable divergence.

Recession in Russia holds back growth in Commonwealth of Independent States whereas a gradual recovery in the Euro Area should lift growth in Central and Eastern Europe and Turkey. In contrast, growth in Turkey exceeded expectations despite slowing to 3.1 percent.

Latin America and Caribbean

South America slowed sharply as domestic factors, exacerbated by economic slowdown in major trading partners and declining global commodity prices, took their toll on some of the largest economies in the region.

In contrast, growth in North and Central America was robust, lifted by strengthening activity in the United States.

Strengthening exports on the back of the continued recovery among high-income countries and robust capital flows should lift regional GDP growth to an average of around 2.6 percent in 2015-17.

Middle East and North Africa

Regional growth is expected to pick up gradually to 3.5 percent in 2017 from 1.2 percent in 2014.

Following years of turmoil, some economies in the Middle East and North Africa appear to be stabilizing, although growth remains fragile and uneven.

Growth in oil-importing countries was broadly flat in 2014, while activity in oil-exporting countries recovered slightly after contracting in 2013. Fiscal and external imbalances remain significant.

Sub-Saharan Africa

Growth is expected to remain flat in 2015 at 4.6 percent (lower than previously expected), largely due to softer commodity prices, and rise gradually to 5.1 percent by 2017, supported by infrastructure investment, increased agriculture production, and buoyant services.

In Sub-Saharan Africa, growth picked up only moderately in 2014 to 4.5 percent, reflecting a slowdown in several of the region’s large economies, notably South Africa.

South Asia

In South Asia, growth rose to an estimated 5.5 percent in 2014 from a 10-year low of 4.9 percent in 2013. The upturn was driven by India, the region’s largest economy, which emerged from two years of modest growth.

Regional growth is projected to rise to 6.8 percent by 2017, as reforms ease supply constraints in India, political tensions subside in Pakistan, remittances remain robust in Bangladesh and Nepal, and demand for the region’s exports firms.

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