The rosier outlook suggests the world economy is finally breaking
free from a long and sluggish recovery after the global financial
The poverty-fighting institution predicted global gross domestic
product will expand 3.2 percent this year, from 2.4 percent in 2013,
according to its twice-yearly "Global Economic Prospects." In the
bank's last forecast in June, it expected global growth to reach 3
percent in 2014.
The bank said the global economy had come to a "turning point," as
fiscal austerity and policy uncertainty no longer weighed as heavily
on most richer economies. The bank expected stronger growth in the
United States in particular, of 2.8 percent in 2014, from 1.8
percent last year.
"For the first time in five years, there are indications that a
self-sustaining recovery has begun among high-income countries — suggesting that they may now join developing countries as a second
engine of growth in the global economy," the bank's chief economist
Kaushik Basu said in the report.
The bank again shaved its forecasts for developing countries, to 5.3
percent for 2014, from the 5.6 percent it predicted in June.
Emerging markets have grown at their slowest pace in a decade for
the past two years, after chalking up growth rates of around 7.5
percent before the global financial crisis hit in 2008.
Andrew Burns, the report's lead author, said frothy growth before
the crisis reflected cyclical factors.
"We're moving into a new phase where developing countries are
growing at a rate much closer to their underlying sustainable rate
of growth," he told reporters.
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As advanced economies strengthen, countries may begin pulling back
from the massive monetary stimulus launched at the height of the
crisis. The U.S. Federal Reserve has started winding down its
monthly asset-purchase plan this month, though it expects to keep
interest rates low for at least another year.
The World Bank said it expects rates around the world to inch up
gradually, causing minimal disruptions for developing countries as
capital inflows slow down.
"Whatever drag this implies for developing country growth is more
than offset by the additional export demand due to stronger
high-income country growth," the report said.
However, if rates jump suddenly, countries with high debt levels or
large current account deficits such as Thailand and Malaysia would
be most vulnerable.
The bank said that while risks to its global outlook, including a
sharp rebalancing in China, a protracted recovery in the euro zone,
and fiscal policy uncertainty in the United States, have not been
eliminated, they have subsided.
(Reporting by Anna Yukhananov; editing
by Andrea Ricci)
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