Global growth is projected to remain strong from 2011 through 2013, though the overall growth rate is expected to slow down slightly due to various challenges and uncertainty, according to a report released by the World Bank on Tuesday.
The two-speed growth will continue to dominate the world economy, with developing countries growing more robust and high income countries growing relatively slow, noted the Washington-based international financial institution in its Global Economic Prospects, an updated report of its forecast in January.
"Globally, GDP is expected to grow 3.2 percent in 2011 before edging up to 3.6 percent in 2012," said Justin Yifu Lin, the World Bank's chief economist and senior vice president for development economics. "But further increases in already high oil and food prices could significantly curb economic growth and hurt the poor."
Compared with its January forecast, global growth in 2011 is expected to slower 0.1 percentage point.
The World Bank projects that as developing countries reach full capacity, growth will slow from 7.3 percent in 2010 to around 6.3 percent each year from 2011-2013. High-income countries will see growth slow from 2.7 percent in 2010 to 2.2 percent in 2011 before picking up to 2.7 percent and 2.6 percent in 2012 and 2013 respectively.
The 187-member international lender noted that the some unexpected events, including Tsunami and nuclear leak disasters in Japan and the social unrest in the Middle East and North Africa earlier this year, have limited impact on world economy.
"Recent events in Japan and the political turmoil in the Middle East and North Africa have cut sharply into domestic growth, but spill over effects to other economies are expected to be modest," it said.
It forecasted that GDP growth in 2011 will likely be flat in Japan. Among developing Middle-East and North African countries, GDP growth in 2011 will be weakest in Egypt (1 percent) and Tunisia (1.5 percent).
While uncertain, growth in both Egypt and Tunisia is projected to pick up in 2012, reaching close to 5 percent by 2013, according to the report.
The bank said that prospects for high-income countries and many of Europe' s developing countries remain clouded by crisis-related problems such as high unemployment, household and banking-sector budget consolidation, and concerns over fiscal sustainability among other factors.
For most developing countries, strong growth has contributed to a new set of global challenges, including higher commodity prices, rising inflation, and the possible return of destabilizing capital inflows as monetary policies tighten and interest rates rise.
"Developing countries have been resilient despite remaining tensions in high-income countries," said Hans Timmer, director of Development Prospects at the World Bank. "But many developing economies are operating above capacity and at risk of overheating, most notably in Asia and Latin America. Monetary policy has responded, but fiscal and exchange rate policy may need to play a bigger role to keep inflation in check."
The report revealed that inflation in developing countries reached almost 7 percent year-over-year in March 2011, more than 3 percentage points higher than the low point in July 2009. Inflation in high-income countries has also picked up reaching 2.8 percent in April 2011.
Besides, increasing food prices and high unemployment rate remain the two key concerns for the global economy, the World Bank warned.