In a careful tone that should best be called stifled pessimism, the World Banks periodic update for global economic prospects reveals some silver lining as far as global economic recovery is concerned.
However, though the WB lauds improving financial market conditions - thanks, in particular, to efforts towards fiscal sustainability by the eurozone - it adds a disclaimer about global growth being sluggish at best in the years to come.
Developing countries - including Brazil and China - critical role in helping achieve the global economic improvement has been duly highlighted at a time when high-income countries were battling with their own economic woes.
"After weakening sharply in Q2 and even turning negative in several regions, economic activity accelerated in virtually every developing region in the third quarter of 2012," said the World Banks Global Economic Prospects January 2013.
Before allowing the developing nations to pat on their backs though, the World Bank points out that most of the growth in these countries has come at the heels of monetary and fiscal stimulus - a defensive stance against the financial and economic risks arising from the US and the eurozone area.
And thats why the Bank is urging developing countries to focus on real growth based on their own domestic economies, in order to ensure that the growth is long-term and sustainable rather than standing on fiscal and monetary stimulus alone.
"They (developing countries) have spent the past four years reacting to whats going on in high-income countries. As a result, almost necessarily, theyve been paying less attention to some of these long-term growth-enhancing reforms that are so necessary," the New York Times quoted Andrew Burns, the GEPs lead author.
In South Asia in particular, economic growth during 2012 was sluggish, thanks to large fiscal deficits, high inflation, delayed monsoon rains and electricity shortages in key economies such as India and Pakistan.
Going forward, global economic growth is expected to improve a bit, though risks from stalled progress in solving the European debt crisis, USs fiscal problems, and declining investment in China will continue to harbor global volatility.
Developing countries are, therefore, urged to prop up efforts to boost real economic growth through supply-side policies rather than demand-management policies.
For South Asia, risks and vulnerabilities from a volatile external environment, high budget deficits in most countries, high headline inflation and agricultural vulnerability due to uncertain climatic conditions will continue to be key challenges.
At the same time, better industrial production, migrant remittances and expectations of stabilizing exports will help lend strength to economic growth in the region over the forecast horizon.
Overall, while modest improvement across the world is expected as far as economic conditions go, phenomenal progress is not in order.
Selected real GDP growth rates
2011 2012 2013e 2014f 2015f
World 2.7 2.3 2.4 3.1 3.3
High Income Countries 1.6 1.3 1.3 2.0 2.3
Developing Countries 5.9 5.1 5.5 5.7 5.8
Euro Area 1.5 -0.4 -0.1 0.9 1.4
US 1.8 2.2 1.9 2.8 3.0
China 9.3 7.9 8.4 8.0 7.9
Brazil 2.7 0.9 3.4 4.1 4.0
Inida 6.9 5.1 6.1 6.8 7.0
Pakistan 3.0 3.7 3.8 4.0 4.2
Source: WB Global Economic Prospects Jan 2013
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