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May 27, 2017

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Fed taper may slow global economic recovery: World Bank

WASHINGTON -- The World Bank on Tuesday raised its growth forecasts for the global economy, but warned of potential volatility in capital flow as the United States withdraws its stimulus.

In its latest Global Economic Prospects report, the World Bank said that both high-income and developing countries appeared to be "finally turning the corner five years after the global financial crisis."

Global economic growth was estimated to hit 3.2 percent this year, accelerating from a 2.4-percent annual pace in 2013.

Growth was picking up in developing countries, supported by the more robust growth in advanced economies and China's continued strong expansion.

"However, growth prospects remain vulnerable to headwinds from rising global interest rates and potential volatility in capital flows, as the United States Federal Reserve Bank begins withdrawing its massive monetary stimulus," the development lender said.

The World Bank highlighted that growth in developing countries will pick up at a slower pace than previously anticipated. But that was "not a cause for concern" because the slowdown largely reflects a cooling off of "the unsustainable turbo-charged pre-crisis growth."

Gross domestic product growth in developing countries was projected to rise to 5.3 percent this year from 4.8 percent in 2013.

High-income countries were expected to see GDP growth of 2.2 percent, following a sluggish 1.3 percent last year.

The 10-quarter U.S. recovery is the most advanced. The world's largest economy was projected to expand 2.8 percent in 2014, a full percentage point higher than last year.

The 17-nation eurozone was seen exiting two years of contraction at a 1.1-percent growth pace this year.

"The performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead," World Bank President Jim Yong Kim said in a statement.

China's growth was seen maintaining a 7.7-percent pace for the third year in a row this year as the government engineers a restructuring of the economy.

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