Rising food and fuel prices are taking the wind out of the global economic recovery this year, the World Bank has said, cutting its forecast for global growth.
The Bank has projected that the global growth will only be 3.2 per cent in 2011, a 10th point lower than its January estimate and sharply off the 3.8 per cent 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 Mr 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 per cent in 2010 to 2.2 per cent in 2011, slower than the previous 2.4 per cent estimate.
The rich countries “have the largest amount of restructuring to do’’, said Mr Andrew Burns, lead author of the report, at a news conference at the Bank’s Washington headquarters yesterday.
Mr Burns said the US was in “a growth pause” but a double-dip recession was “not likely” — echoing US President Barack Obama’s statement earlier yesterday that he was “not concerned about a double-dip recession’’.
The world’s biggest economy was expected to grow a feeble 2.6 per cent this year and accelerate to 2.9 per cent 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, Mr Burns said.
The recovery in Europe continues to face “substantial headwinds” from uncertainty about debt crises in several euro zone members. The 17-nation euro zone is expected to expand at the 2010 pace of 1.7 per cent this year, with growth only edging up to 1.8 per cent 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 the prices higher.