The World Bank is urging the Caribbean and other developing countries to “double down” on domestic reforms, saying that first quarter weakness in 2014 has delayed an “expected pick-up” in economic activity.
According to the Washington-based financial institution’s Global Economic Prospects (GEP) report, the region is headed for a year of disappointing growth. The report says bad weather in the United States, 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 five percent 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 percent,” 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 World Bank has lowered its forecasts for developing countries, now eyeing growth at 4.8 percent this year, down from its January estimate of 5.3 percent.
It said signs point to strengthening in 2015 and 2016 to 5.4 and 5.5 percent, respectively.
The bank said China is expected to grow by 7.6 percent this year, “but this will depend on the success of rebalancing efforts.”
“Activity in the Latin America and the Caribbean region has been weak, reflecting stable or declining commodity prices, the drop in first quarter U.S. GDP (Gross Domestic Product) growth and domestic challenges,” it said.
“The regional weakness carries over from 2013, weighing on merchandise exports in a number of countries,” it added.
The World Bank, however, said regional exports, including tourism receipts in the Caribbean, “are expected to firm due to stronger growth in advanced countries, and improved competitiveness following earlier currency depreciations.”
“This, coupled with continued robust investment growth along the Pacific coast of South America, and strong capital inflows should overcome first quarter weakness and generate a modest 1.9 percent increase in regional GDP in 2014, with growth accelerating to 2.9 percent in 2015 and 3.5 percent in 2016,” the bank said.
Overall, the World Bank said the global economy is expected to pick up speed as the year progresses and is projected to expand by 2.8 percent this year, strengthening to 3.4 and 3.5 percent in 2015 and 2016, respectively.
It said high-income economies will contribute about half of global growth in 2015 and 2016, compared with less than 40 percent in 2013.
The World Bank said the acceleration in high-income economies will be an “important impetus” for the Caribbean and other developing countries.
It said high-income economies are projected to inject an additional US$6.3 trillion to global demand over the next three years, “which is significantly more than the US$3.9 trillion increase they contributed during the past three years, and more than the expected contribution from developing countries.”
The bank said developing country bond yields have declined, and stock markets have recovered, in some cases surpassing levels at the start of the year, “although they remain down from a year ago by significant margins in many instances.”