Developing countries stare at weak growth, says report

Weak growth among major emerging markets will weigh on global growth in 2016, but economic activity should still pick up modestly to a 2.9 per cent pace, from 2.4 per cent growth recorded in 2015.

The World Bank 2016 Global Economic Prospects report, however, acknowledges that advanced economies would gain speed despite weakness in most major emerging markets, which remains a concern for achieving the goals of poverty reduction and shared prosperity. These countries, it reckons, have been powerful contributors to global growth for the past decade.

“Spillovers from major emerging markets will constrain growth in developing countries and pose a threat to hard-won gains in raising people out of poverty,” the report warns.

“More than 40 per cent of the world’s poor live in the developing countries where growth slowed in 2015,” said World Bank Group President Jim Yong Kim.

He added, “Developing countries should focus on building resilience to a weaker economic environment and shielding the most vulnerable. The benefits from reforms to governance and business conditions are potentially large and could help offset the effects of slow growth in larger economies.”

The report indicates the global economic growth was less than expected in 2015, when falling commodity prices, flagging trade and capital flows, and episodes of financial volatility sapped economic activity.

Firmer growth ahead, it indicates, will depend on momentum in high-income countries, the stabilisation of commodity prices, and China’s gradual transition towards a more consumption and services-based growth model. Developing economies, it points out, are forecast to expand by 4.8 per cent in 2016, less than expected, but up from a post-crisis low of 4.3 per cent recorded in the year just ended.