The World Bank Has Some Bad News For Developing Countries Expecting An Economic Pick-Up

Harvesting a rice a paddy field near a golf course in Bali, Indonesia. Dimas Ardian/Getty Images

Developing countries are headed for a year of disappointing growth as first quarter weakness in 2014 has delayed an expected pick-up in economic activity, according to the World Bank’s Global Economic Prospects report.

Bad weather in the US, the crisis in Ukraine, rebalancing in China, political strife in several middle-income economies, slow progress on structural reform and capacity constraints are all contributing to a third straight year of sub 5% growth for the developing countries as a whole.

“Growth rates in the developing world remain far too modest to create the kind of jobs we need to improve the lives of the poorest 40%,” said World Bank Group president Jim Yong Kim.

“Clearly, countries need to move faster and invest more in domestic structural reforms to get broad-based economic growth to levels needed to end extreme poverty in our generation.”

The bank has lowered its forecasts for developing countries, now eyeing growth at 4.8% this year, down from its January estimate of 5.3%.

Signs point to strengthening in 2015 and 2016 to 5.4% and 5.5 % respectively.

China is expected to grow by 7.6% this year, but this will depend on the success of rebalancing efforts.

If a hard landing occurs, the reverberations across Asia would be widely felt, the World Bank says.

Globally, growth projections for 2014 as a whole have been marked down from 3.2% in January to 2.8% now.

However, despite the early weakness, growth is expected to pick up speed as the year progresses and world GDP is projected to expand by 3.4% in 2015 and 3.5% in 2016, broadly in line with earlier forecasts.

The bulk of the acceleration will come from high income countries such as the US and the Euro Area.

A reduced drag on growth from fiscal consolidation, improving labor market conditions and a steady release of pent-up demand in these countries are projected to overcome first quarter softness and lift GDP growth to 1.9% in 2014, from 1.3%in 2013, and to 2.4% and 2.5% in 2015 and 2016.

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