World Bank says emerging mkts to make up almost half global growth

By bne IntelliNews January 17, 2011

bne -

The world economy is moving from a post-crisis bounce-back phase of the recovery to slower but still solid growth this year and next, with developing countries contributing almost half of global growth, according to the World Bank report, "Global Economic Prospects 2011".

The World Bank estimates that global GDP, which expanded by 3.9% in 2010, will slow to 3.3% in 2011, before it reaches 3.6% in 2012. Developing countries are expected to grow 7% in 2010, 6% in 2011 and 6.1% in 2012. They will continue to outstrip growth in high-income countries, which are projected to grow at 2.8% in 2010, 2.4% in 2011 and 2.7% in 2012.

The World Bank states that in most developing countries, GDP has regained levels that would have prevailed had there been no boom-bust cycle. Even so, while steady growth is projected through 2012, the recovery in several economies in emerging Europe and Central Asia, as well as in some high-income countries, remains tentative. "Without corrective domestic policies, high household debt and unemployment, and weak housing and banking sectors are likely to mute the recovery," it says.

In Europe and Central Asia, output is expected to expand by 4.7% in 2010, following a 6.6% decline in GDP during 2009, as several countries undergo intense restructuring. Output in Bulgaria, Kyrgyz Republic, Lithuania, and Romania stagnated or declined in 2010, and is forecast to expand by only 2% in 2011 and 3.3% in 2012. Excluding these countries, growth in the rest of the region is forecast to ease to 4.2% in both 2011 and 2012. The recovery in the region remains particularly sensitive to the situation in high-income Europe where the sustainability of sovereign debt remains a concern. "On the upside, strong developing-country domestic demand growth is leading the world economy," says Justin Yifu Lin, the World Bank's chief economist and senior vice president for development economics. "On the downside, many developing countries with close financial and trade ties with high-income Europe could see much weaker output if sovereign debt concerns in the Eurozone persist."

Money flows

Net international equity and bond flows to developing countries rose sharply in 2010, rising by 42% and 30% respectively, with nine countries receiving the bulk of the increase in inflows. Foreign direct investment to developing countries rose a more modest 16% in 2010, reaching $410bn after falling 40% in 2009. An important part of the rebound is due to rising South-South investments, particularly originating in Asia. "The pick-up in international capital flows reinforced the recovery in most developing countries," says Hans Timmer, director of development prospects at the World Bank. "However, heavy flows to certain big middle-income economies may carry risks and threaten medium-term recovery, especially if currency values rise suddenly or if asset bubbles emerge."

Most low-income countries saw trade gains in 2010 and, overall, their GDP rose 5.3% in 2010. This was supported by a pick-up in commodity prices, and to a lesser extent in remittances and tourism. Their prospects are projected to strengthen even more, with growth of 6.5% in both 2011 and 2012, respectively.

According to the report, current relatively high food prices are having a mixed impact. In many economies, dollar depreciation, improved local conditions, and rising prices for goods and services means that the real price of food has not risen as much as the dollar price of internationally traded food commodities. "However, double-digit price increases of key staples in the past few months are pressuring households in countries with an already-existing high burden of poverty and malnutrition. And, if global food prices rise further along with other key commodities, a repeat of the conditions in 2008 cannot be excluded," cautions Andrew Burns, manager of Global Macroeconomics in the World Bank's Prospects Group.

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.