São Paulo – This Wednesday (18) the World Bank issued a report containing forecasts for the world economy performance in 2012, indicating lower growth than expected as of June 2011 for both developed and emerging countries. The Global Economic Prospects survey indicates that the Gross Domestic Products (GDP) of developing countries should grow by 5.4% in 2012. The previous forecast was 6.2%. In turn, developed countries should grow by 1.4% this year and a 0.3% recession is expected in the Eurozone. In the previous forecast, the region’s economy had been projected to grow by 1.8%.
According to the World Bank, there are signs of a slowdown, namely declining prices of basic products and services and the volume of trade worldwide. Goods and services exports grew by 6.6% worldwide in 2011, a 12.4% decline over 2010. This year, exports are expected to grow by 4.7% compared with 2011. The prices of iron ore, energy and agricultural products have also dropped. Food prices decreased by 14% compared with the peak of appreciation, reached in February.
Even though conditions remain favourable to developing countries, the World Bank economists warn that there are less tools available to authorities now than there were in 2008. “Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said the chief economist and senior vice president of the World Bank’s Development Economics department, Justin Yifu Lin.
The director of the World Bank’s Development Prospects Group, Hans Timmer, advised emerging countries to line up financing in advance to cover budget deficits, review the health of their banks and emphasize spending on social safety nets. According to the bank, capital flows into developing countries dropped from US$ 309 billion in 2010 to US$ 170 billion in 2011.
The Latin America and Caribbean region grew by 4.2% in 2011, is expected to grow by 3.6% this year, and by 4.3% in 2013. The growth perspectives for this year are lower because of the Eurozone crisis, of China’s lower growth rate, and because regional governments have lowered domestic demand. The Brazilian economy should grow by 3.4% this year, according to the World Bank forecasts. The report also claims that Latin countries may be badly hit in case commodity prices weaken sharply in 2012.
In the Middle East and North Africa countries, economic activity decreased already in 2011 due to political crises. Furthermore, the “deteriorating external environment” affects sectors such as trade and tourism. The Gulf Cooperation Council countries (GCC) grew by 1.7% in 2011, due to the rise in oil prices. The region should grow by 2.3% this year and 3.2% in 2013. The report claims that the economies of Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Kuwait and Oman are highly vulnerable to oil price fluctuations.
*Translated by Gabriel Pomerancblum
