Developing countries such as the Philippines should prepare for further downside risks, as eurozone debt problems and weakening growth in several large emerging economies are dimming global growth prospects, according to the World Bank.
In its newly released Global Economic Prospects 2012, the World Bank lowered its growth forecast for 2012 to 5.4 percent for developing countries and 1.4 percent for high-income countries, down from earlier estimates of 6.2 and 2.7 percent, respectively.
Global growth is now projected at 2.5 and 3.1 percent for 2012 and 2013, respectively.
In East Asia and Pacific region, World Bank said key indicators suggest growth “has started moderating” with most member-economies operating at or near full capacity, dampened monetary and fiscal stimulus, and slower growth of high-income member-countries. Real gross domestic product (GDP) growth of 8.3 percent a year is anticipated over 2011-2013 for East Asia at the rate of 8.5, 8.1, and 8.2 percent, respectively.
This follows growth of an estimated 9.6 percent in 2010 in East Asia and Pacific, World Bank said. Excluding China, the rebound was even more pronounced, increasing from 1.5 percent in 2009 to 6.8 percent in 2010, but growth is expected to stabilize at slightly lower rates of around 5.5 percent over 2011-2013, the World Bank said.
In 2010, “In the Philippines, a surge in consumer and business optimism, in part due to the presidential elections, and stronger and more robust growth in worker remittances were additional factors that underpinned the country’s fastest growth in more than three decades,” the World Bank said.
“Developing countries need to evaluate their vulnerabilities and prepare for further shocks while there is still time,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics.
Lin said developing countries have less fiscal and monetary space for remedial measures than they did in 2008 to 2009. As a result, their ability to respond may be constrained if international finance dries up and global conditions deteriorate sharply.
To prepare for risks, Hans Timmer, WB director of development prospects, said, “Developing countries should prefinance budget deficits, prioritize spending on social safety nets and infrastructure, and stress-test domestic banks.”