Oil, food prices brake global growth: World Bank
Rising food and fuel prices are taking the wind out of the global economy's recovery in 2011, the World Bank has said, cutting its forecast for global growth.business Updated: Jun 08, 2011 08:14 IST
Rising food and fuel prices are taking the wind out of the global economy's recovery in 2011, the World Bank has said, cutting its forecast for global growth.
The Bank projected said that global growth will only be 3.2% in 2011, a 10th point lower than its January estimate and sharply off the 3.8% pace of 2010.
The Washington-based development lender expected in its biannual Global Economic Prospects report that the world economy would rebound in 2012.
"But further increases in already high oil and food prices could significantly curb economic growth and hurt the poor," said Justin Lin, the Bank's chief economist.
High-income countries at the nexus of the 2008-2009 global financial crisis were still struggling to recover. Growth would slow from 2.7% in 2010 to 2.2% in 2011, slower than the previous 2.4% estimate.
The rich countries "have the largest amount of restructuring to do," said Andrew Burns, lead author of the report, at a news conference at the Bank's Washington headquarters on Tuesday.
Burns said that the US was in "a growth pause" but a double -dip recession was "not likely" - echoing US President Barack Obama's statement earlier on Tuesday that he was "not concerned about a double-dip recession."
The world's biggest economy was expected to grow a feeble 2.6% in 2011 and accelerate to 2.9% in 2012, the Bank said.
Japan's March 11 earthquake-tsunami disaster and unrest in the Arab world, while cutting sharply into domestic growth, would make only a modest dent in global growth, the 187-nation institution said.
The disaster interrupted Japan's supplies of key parts and materials to global industries, especially the auto and electronics industries, while political turmoil in the Middle East and North Africa region affected those economies and pushed oil prices higher.
Libyan oil output, which has dwindled to a trickle amid a pro-democracy revolt, accounted for about $15 to $20 of the roughly $30 increase in oil prices from December to their February peak, Burns said.
The recovery in Europe continues to face "substantial headwinds" from uncertainty about debt crises in several eurozone members. The 17-nation eurozone is expected to expand at the 2010 pace of 1.7% this year, with growth only edging up to 1.8% in 2012.
By contrast, developing countries relatively sailed through the global downturn, providing the impetus for the global recovery.
But at the same time their robust growth was creating the demand for commodities that has spurred prices higher.