World Bank Revisions on Economic Growth
Two days ago, the forecast for growth for the developing world was revised by the World Bank with a warning that there will be greater pressures on inflation due to the escalation in food and fuel prices. Currently, growth is down from last year’s figures so the advice by the World Bank is that the figure in developing countries needs to average at 6.3 percent until 2013; this figure was changed from the original 6 percent which was suggested in the bank’s January report. Most developing economies are today pretty near to “full capacity activity levels.” On the other hand, the advanced economies are still trying to deal with the impacts of the world’s economic crisis. According to the report put out by the World Bank, in 2010, the low- and middle-income countries were responsible for 46 percent of world growth. Indeed, according to Andrew Burns, an economist from the World Bank, “developing countries are at a point where they have put the crisis-fighting stage behind them and they now need to be reorienting themselves toward establishing conditions that are going to allow them to have strong growth in the years to come.”
Advice for Developing Countries
So what are developing countries meant to do? According to Burns, they need to work towards sustainable economic growth by being tough on domestic policy issues which may involve a tightening of monetary and fiscal policy as a way of “curbing inflationary pressures.” And what to do about rising inflation rates that have been caused by an increase in commodity prices? The news doesn’t look great and even the figure in February 2011 for food inflation in developing countries reached over 9 percent. The World Bank is even indicating that inflation will increase even more in most developing regions, particularly in Africa, the Middle East and South Asia.
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