Why ‘Now is the time to prepare for the next crisis’
As we recently reported, growth in Sub-Sahara Africa is expected to reach nearly 5% in 2014, rising to possibly 6% in 2015. The figures in the African Economic Outlook look even more positive when viewed against the latest figures released for the rest of the world.
The World Bank has issued a Global Economic Prospects report. It shows not only weak progress in many of the largest economies, it also examines what can be done to improve the outlook.
Some of the weaknesses can be put down to a variety of factors around the world, from bad weather in the USA to rebalancing in China; from the crisis in the Ukraine to continued crisis in some parts of the Middle East.
Developing countries are still showing some signs of good growth, overall estimated at 4.8% although this is down from the 5.3% estimated just in January.
But the US economic estimate of growth has gone from 2.8% in January to 2.1% for 2014 after a poor first quarter. The Eurozone is likely to grow by 1.1% in 2014. Overall the report paints a slightly optimistic scenario with growth picking up around the world after a first quarter that had more ‘unknown unknowns’ than usual.
But warnings remain for those countries with high inflation as well as current account deficits, like Brazil, South Africa and Turkey. South Africa is also on the list of countries where the World Bank considers that fiscal policy needs to tighten because of the large deficits. Alongside South Africa on that list is Ghana, India, Kenya and Malaysia.
Andrew Burns, Lead Author of the report, sets out the remedies:
‘Spending more wisely rather than spending more will be key. Bottlenecks in energy and infrastructure, labour markets and business climate in many large middle-income countries are holding back GDP and productivity growth. Subsidy reform is one potential avenue for generating the money to raise the quality of public investments in human capital and physical infrastructure.’
Kaushik Basu, Senior Vice President and Chief Economist at the World Bank, has one over-arcing message after seeing some positive signs for growth around the world: ‘In brief, now is the time to prepare for the next crisis.’
About Graham Scott
Graham is an experienced editor and publisher and an award-winning writer. He has travelled extensively and is interested in world cultures.
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