World Bank Forecasts Disappointing Growth for Developing Countries
Kaushik Basu, senior vice president and Chief Economist at the World Bank said the financial health of economies has improved. "With the exception of China and Russia, stock markets have done well in emerging economies, notably, India and Indonesia. "But we are not totally out of the woods yet," he said. "A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis. In brief, now is the time to prepare for the next crisis," Basu said.
In a conference call with reporters, Andrew Burns, lead author of the World Bank report and the head of the team in the Macro Group told reporters the forecast has been revised downwards relatively substantially. "So, for global growth, we're calling for 2.8 percent growth now. It was 3.2 percent in January. “High-income countries marked down from 2.2 to 1.9 percent, and developing country growth marked down from 5.3 to 4.8 percent," he said. On the debt-to-GDP ratios, he said, there are a number of economies- including Ghana, South Africa, Kenya and Malaysia, arguably India, where the Bank feels that monetary-or fiscal policy, rather, remains quite expansionary where debt-to-GDP ratios have been rising and where this recommendation for some tightening in policy going forward seems to be particularly relevant.
"In the case of Brazil, Brazil is a country like Turkey, like India, which has, over the past couple of years, had disappointing growth, in part, we think, because of the strength of the rebound in the immediate post-crisis period that reopened positive output gaps, generated domestic imbalances, that really force growth to slow down in order to remove those imbalances, and I'm talking inflation, high current account deficits in that regard," Burns said.
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