The World Bank has raised its outlook for global economic growth on the promise of an accelerating recovery in advanced economies. The US is set to replace emerging markets as the engine driving global growth, it says.
The World Bank expected global gross domestic product (GDP) to expand by 3.2 percent this year, from 2.4 percent in 2013, the development lender said in its Global Economic Prospects report released Wednesday.
In its current twice-yearly report, the World Bank revised upward the global growth figure which it had predicted to reach 3 percent in its last forecast published in June 2013.
"For the first time in five years, there are indications that a self-sustaining recovery has begun among high-income countries, suggesting that they may now join developing countries as a second engine of growth in the global economy," World Bank chief Economist Kaushik Basu said in the report.
As the global economy had come to a turning point, fiscal authority and policy uncertainty were no longer weighing as heavily on most richer economies, he added.
According to the bank's prediction, growth was expected to pick up most significantly in the US economy, which was forecast to expand 2.8 percent in 2014 from 1.8 percent last year.
In the eurozone, too, economic output was improving from 1.1 percent this year to 1.4 percent and 1.5 percent in 2015 and 2016 respectively.
Emerging economies, however, would experience slower growth rates in the years to come, after expanding by an average of more than 7 percent in the years leading up the financial crisis in 2008. Therefore, the bank cut its June prediction of 5.6 percent to 5.3 percent, saying growth in emerging economies would come down to more sustainable rates of expansion.
Risks remaining but waning
However, despite strengthening economic growth across the world, downside risks will continue to threaten the upswing. Private capital inflows to developing countries remained sensitive to global financial conditions, the report said.
"As high-income monetary policy normalizes in response to stronger growth, global interest rates are projected to slowly rise," it added in a reference to a recent announcement by the US Federal Reserve to wind down its $85-billion-a-month asset purchasing program in support of the US economy.
The World Bank, however, predicted only minimal disruptions for developing countries from reduced capital inflows, arguing the drag would be more than offset by additional export demand from growth in the advanced economies.
Other risks to the global economy such as a sharp rebalancing in China and a protracted recovery in the eurozone had not yet been eliminated but were subsiding, it added.
uhe/mz (Reuters, dpa)