The World Bank in its newly-released Global Economic Prospects (GEP) shows that economic growth in Africa remained robust in 2011 at 4.7 percent.
Excluding South Africa, growth in the rest of the region was stronger, at 5.6 percent, making it one of the fastest growing developing regions.
The report says that higher commodity prices and improved macroeconomic and political stability in recent years has supported increased private investment flows to the region, with promising prospects in the medium term.
“As global demand firms and domestic demand remains robust, regional growth is expected to strengthen to 5 percent in 2012, 5.3 percent in 2013 and 5.2 percent in 2014,”
Meanwhile, the World Bank also counsels that developing countries should prepare for a long period of volatility in the global economy by re-emphasizing medium-term development strategies, while preparing for tougher times.
“A resurgence of tensions in high-income Europe has eroded the gains made during the first four months of this year, which saw a rebound in economic activity in both developing and advanced countries and an easing of risk aversion among investors,” says the report.
So far, conditions in most developing countries have not deteriorated as much as in the fourth quarter of 2011.
Outside of Europe and Central Asia and the Middle-East and North Africa, developing country credit default swap (CDS) rates, a key indicator of market sentiment, remain well below their maximums from the fall of 2011.
“Global capital market and investor sentiment are likely to remain volatile over the medium term – making economic policy setting difficult.
In this environment, developing countries should focus on productivity-enhancing reforms and infrastructure investment instead of reacting to day-to-day changes in the international environment,” says Hans Timmer, Director of Development Prospects at the World Bank.”
The World Bank projects that increased uncertainty will add to pre-existing headwinds from budget cutting, banking-sector deleveraging and developing country capacity constraints.
As a result, the World Bank projects that developing country growth will slow to a relatively weak 5.3 percent in 2012, before strengthening somewhat to 5.9 percent in 2013 and 6.0 percent in 2014.
Growth in high-income countries will also be weak, 1.4, 1.9 and 2.3 percent for 2012, 2013 and 2014 respectively – with GDP in the Euro Area declining 0.3 percent in 2012. Overall, global GDP is projected to rise 2.5, 3.0 and 3.3 (1) percent for the same period.