Four years after the onset of the global financial crisis, the world economy remains fragile and growth in high-income countries is weak.
Developing countries need to focus on raising the growth potential of their economies, while strengthening buffers to deal with risks from the Euro Area and fiscal policy in the United States, says the World Bank (WB) in the newly-released Global Economic Prospects (GEP) report.
The report which was made available to the Ghana News Agency on Wednesday, said last year developing countries recorded one of their slowest economic growth rates of the past decade, partly because of the heightened Euro Area uncertainty in May and June of 2012.
It said since then, financial market conditions have improved dramatically, while international capital flows to developing countries, which fell 30 percent in the second quarter of 2012, have recovered and bond spreads have declined to below their long-term average levels of around 282 basis points.
It said developing-country stock markets are up 12.6 percent since June, while equity markets in high-income countries are up by 10.7 percent; however, the real-side of the economy has responded modestly.
The report reiterated that output in developing countries has accelerated, but is being held back by weak investment and industrial activity in advanced economies.
The WB estimates global Gross Domestic Products (GDP) grew 2.3 percent in 2012, compared with last June's expectation of 2.5 percent.
It projected that growth is expected to remain broadly unchanged at 2.4 percent growth in 2013, before gradually strengthening to 3.1 percent in 2014 and 3.3 percent in 2015.
It said developing-country GDP is estimated to have grown 5.1 percent in 2012, and is projected to expand by 5.5 percent in 2013, strengthening to 5.7 percent and 5.8 percent in 2014 and 2015, respectively.
The report said overall, global trade of goods and services, which grew only 3.5 percent in 2012, is expected to accelerate, expanding by 6.0 percent in 2013 and 7.0 percent by 2015.
It said the downside risks to the global economy include: a stalling of progress on the Euro Area crisis, debt and fiscal issues in the United States, the possibility of a sharp slowing of investment in China, and a disruption in global oil supplies.
The report said the likelihood of these risks and their potential impact has diminished and the possibility of a stronger-than-anticipated recovery in high-income countries has increased.
It said although fiscal sustainability in most developing countries is not an issue, government deficits and debt are much higher today than in 2007.
The report said growth in Sub-Saharan Africa remained robust at 4.6 percent in 2012; excluding South Africa, the region's largest economy, GDP output expanded 5.8 percent in 2012, with a third of countries in the region growing by at least 6 percent.
It held that robust domestic demand is still high commodity prices, increased export volumes (due to new capacity in the natural resource sector) and steady remittance flows supported growth in 2012.
It however maintained that the expansion was curtailed by domestic factors, including earlier monetary policy tightening (Kenya and Uganda), protracted labor disputes (South Africa), and political unrest (Mali and Guinea Bissau).
The report said the region is projected to grow at its pre-crisis average of 5 percent during 2013-15.