- Title: THAILAND: World Bank sees risk of recovery losing steam
- Date: 22nd January 2010
- Summary: BANGKOK, THAILAND (JANUARY 21, 2010) (REUTERS) VARIOUS OF JOURNALISTS ATTENDING WORLD BANK NEWS CONFERENCE (SOUNDBITE) (English) HANS TIMMER, DIRECTOR OF THE WORLD BANK PROSPECTS GROUP, SAYING: "The crisis was so widespread and so deep, that will, that it will cause structural changes for years to come in the global economy and especially structural changes in financial markets, as a result of which, it will be more difficult for developing countries and companies in developing countries to borrow very cheaply, that means their potential growth rate will be lower in years to come." JOURNALISTS WRITING VARIOUS OF JOURNALISTS ATTENDING NEWS CONFERENCE (SOUNDBITE) (English) HANS TIMMER, DIRECTOR OF THE WORLD BANK PROSPECTS GROUP, SAYING: "Because across the world, the utilisation of capacity is still very low, and you will need a lot more growth to fully utilise all the capacity that was created but it is possible that with too loose monetary policy for too long, that you will see asset price inflation, too much increases in the prices of assets that then will be self-sustained and might lead to additional bubbles." JOURNALISTS
- Embargoed: 6th February 2010 12:00
- Keywords:
- Location: Thailand
- Country: Thailand
- Topics: Economic News
- Reuters ID: LVAEYIX8RXQ9JHYGXZZFMSDLRKKL
- Story Text: The global economic crisis is largely over and a modest recovery is underway but it could quickly lose steam as governments pull back some of the extraordinary liquidity they pumped into markets, the World Bank said on Thursday (January 21).
The World Bank's annual Global Economic Prospects report for 2010 said the fallout from the crisis will change the landscape for finance and growth over the next 10 years and that a global recovery will be fragile.
The report said the fragile recovery posed special risks for developing countries including stiffer borrowing costs, reduced credit and capital flows.
"The crisis was so widespread and so deep, that it will cause structural changes for years to come in the global economy and especially structural changes in financial markets, as a result of which, it will be more difficult for developing countries and companies in developing countries to borrow very cheaply, that means their potential growth rate will be lower in years to come," said Hans Timmer, Director of the World Bank Prospects Group.
In its forecasts, the World Bank said the global economy was likely to resume growth this year at around 2.7 percent and then strengthen in 2011 to 3.2 percent. This compares to an economic contraction last year of 2.2 percent.
Combined, projected growth this year in developing countries should reach 5.2 percent and rise slowly to 5.8 percent next year, compared to 1.2 percent in 2009.
The Bank said the pattern of growth across the world is likely to be highly uneven, with rich countries showing the weakest recovery at just 1.8 percent this year, versus a contraction of 3.3 percent in 2009. In 2011 their recovery is likely to strengthen by a tepid 2.3 percent.
China is leading the recovery with its economy set to expand by 9.0 percent this year and next, although the World Bank said there were signs that the impact on growth from Chinese fiscal stimulus may already be waning.
The report warned that it will take some time before economies, both rich and poor, recoup their losses from the financial crisis.
It cautioned that the outlook was littered with uncertainties. Principal among them is whether private sector demand will respond to the rebound and pick up from public spending.
If that should happen a double-dip recession was unlikely but growth in developing countries could weaken to as low as 5.1 percent in 2010 and 5.4 percent in 2011, with some countries recording negative growth for one or more quarters.
"Across the world, the utilisation of capacity is still very low, and you will need a lot more growth to fully utilise all the capacity that was created but it is possible that with too loose monetary policy for too long, that you will see asset price inflation, too much increases in the prices of assets that then will be self-sustained and might lead to additional bubbles," said Timmer.
On the other hand, if stimulus measures are not withdrawn quickly enough the risk is that debt levels in countries rise and private sector investment is crowded out, he added.
The World Bank said the financial crisis has taken its toll on achieving the UN-agreed goal of halving poverty by 2015.
Updated estimates by the World Bank show that the crisis will leave an additional 50 million people in extreme poverty and some 64 million in 2010, while the current projection of the percentage of developing country population living below the poverty line of $1.25 a day is 15 percent, well below the target rate of 20.8 percent. - Copyright Holder: REUTERS
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