WB projects global economy to grow 3.2% this year

WASHINGTON - The global economy is estimated to expand at 3.2 percent this year from 2.4 percent in 2013, with growth picking up in developing countries and high-income economies, the World Bank said Tuesday.

But growth prospects remain vulnerable to US tapering, the global lender said in its semi-annual Global Economic Prospects report.

The firming of growth in developing countries is being bolstered by an acceleration in high-income countries and continued strong growth in China, it said.

However, global growth outlook will be sensitive to headwinds from rising global interest rates and potential volatility in capital flows, as the US Federal Reserve begins withdrawing its massive monetary stimulus, the report noted.

Growth in developing countries will pick up from 4.8 percent in 2013 to a slower-than-expected 5.3 percent this year, reflecting a cooling off of the unsustainable turbo-charged pre-crisis growth.

For high-income economies, the drag on growth from fiscal consolidation and policy uncertainty will ease, helping to boost economic growth from 1.3 percent in 2013 to 2.2 percent this year.

Among them, the recovery is most advanced in the United States, as it is projected to grow by 2.8 percent this year after expanding for ten quarters.

The eurozone, after two years of contraction, is projected to grow by 1.1 percent this year.

"The strengthening recovery in high-income countries is very welcome, but it brings with it risks of disruption as monetary policy tightens." said Andrew Burns, acting director of the development prospects group and lead author of the report.

"The gradual withdrawal of quantitative easing has gone smoothly. However, if interest rates rise too rapidly, capital flows to developing countries could fall by 50 percent or more for several months - potentially provoking a crisis in some of the more vulnerable economies," he said at the briefing.

However, Kaushik Basu, the World Bank's senior vice president and chief economist, contended that there is no big turbulence ahead as he expected the tapering to happen slowly and smoothly.

"When you get the tapering starting, it usually comes in with the good news of the strength of the economy that is doing that and when that economy is the US, which is a very powerful global economy, and that is good news which tends to outdo a lot of the bad news," he added.