NEW YORK: The global economy will slow this year, with developing countries such as India and China providing a greater share of growth, the World Bank has predicted. The bank estimates that global GDP growth will be 3.3 percent this year against 3.9 percent in 2010, with emerging markets growing by 6 percent. But these rates would not be enough to reduce unemployment in the hardest-hit economies, it said. The bank warned that "serious tensions and pitfalls" persist. These included the eurozone debt crisis and the risk of large amounts of capital flowing from low-interest developed economies to higher-interest emerging markets, which could affect currencies. It also said it was "very concerned about rising food prices". The bank forecasts growth this year in China of 8.7 percent and in India of 8.5 percent. This compares with a forecast of 2.4 percent for rich countries collectively. "If the financial crisis was a kind of stress test for developing economies, then they passed with flying colors," the bank said. It is these economies that will drive global growth in 2011, it said, despite continuing issues in developed economies. These include high household debt, unemployment, weak banking sectors and high government debt levels, particularly in Europe. "Strong developing-country domestic demand growth is leading the world economy, yet persistent financial sector problems in some high-income countries are a still a threat to growth that require urgent policy actions," said Justin Yifu, the bank's chief economist. The bank's analysis reflects some of the concerns raised by the World Economic Forum (WEF) in its Global Risks Report published Wednesday, which warned that economic imbalances, volatile commodity prices and currencies, and governments' budget shortfalls were "unsustainable". The global economy was "in no position to face major new shocks", the WEF said. The World Bank also expressed concern about rising commodity and energy prices. "If international prices continue to rise, affordability issues and poverty impacts could intensify," it warned. "We are very concerned about the rise in food prices. We can see some similarities with the situation in 2008, just before the financial crisis," said Hans Timmer, the bank's director of development prospects. In 2008, sharp rises in food costs led to riots in a number of countries. However, Timmer did say the situation was "slightly different" this time around, not least because grain stocks are much larger. However, the World Bank raised its forecast for economic growth in Sub-Saharan Africa to 5.3 percent in 2011 as the global economy recovers and the outlook improves for oil producers such as Nigeria and Angola. Growth in the world's poorest region will pick up from an estimated 4.7 percent in 2010, the Washington-based lender said in its Global Economic Prospects report on its website. On June 9, the Bank had forecast growth of 5.1 percent this year. "Growth is expected to be driven by continued recovery in the global economy," the World Bank said. "Developments in domestic demand will continue to play a dominant role." South Africa's economy, the biggest on the continent, will probably expand 3.5 percent this year and 4.1 percent in 2012 as the government steps up spending on infrastructure projects and consumer spending rebounds, the bank said. Those are in line with forecasts published by the National Treasury on Oct. 27. The rand's 12 percent surge against the dollar since June 1 is hindering exports, undermining growth in manufacturing, the World Bank said. "South Africa has been and is likely to continue to be affected by the appreciation of the rand," the bank said. Manufacturing "has become increasingly less competitive because of rand appreciation." The World Bank boosted its growth forecast for Nigeria, the region's second-largest economy and the continent's biggest oil producer, to 7.1 percent in 2011, from a previous estimate of 5.7 percent. Government spending on infrastructure projects and growth in non-oil industries should help support the economy, which is expected to grow 6.2 percent in 2012, the bank said.
