Posted on Saturday, January 15, 2011
WASHINGTON - Economic growth in the world's wealthier nations is still too slow to create enough jobs for the tens of millions who lost their during the worst global recession since World War Two, the World Bank said on Wednesday.
In a report detailing its outlook for 2011, the multilateral lender forecast the global economy would expand 3.3 percent this year, softer than the 3.9 percent expansion seen during 2010.
Growth in the developing world will sharply outstrip growth in mature economies. The World Bank forecast growth in emerging economies of 6 percent in 2011, weaker than last year's 7 percent rate. Rich countries, in contrast, will grow only 2.4 percent, down from 2.8 percent for 2010.
"The recovery in many high-income countries has not been strong enough to make major inroads into high unemployment in spare capacity," the report said.
The United States, the world's largest economy, is a case in point. The economy exited its worst recession in generations in the summer of 2009. But at 2.6 percent on latest count, growth has been too soft to put a meaningful dent in a stubbornly high jobless rate -- now at 9.4 percent.
The World Bank predicts the U.S. economy will grow 2.8 percent in 2011, largely in line with a median forecast of 2.7 percent in a Reuters poll of private sector economists.
In Europe, recovery has been hampered by persistent worries about highly-indebted countries like Greece and Portugal, which have kept borrowing costs high and led to severe market disruptions.
Euro zone growth is expected to slow to 1.4 percent this year from 1.7 percent in 2010, the World Bank said. Indeed, the report cited the continent's ongoing debt debacle as a key risk to the global recovery.
Given a backdrop of uncertainty, monetary authorities on both sides of the Atlantic have adopted a policy of extremely low interest rates, which the World Bank blamed for rising currency exchange rates in parts of the developing world.
"Capital inflows into some middle-income countries have placed undue and potentially damaging upward pressure on currencies," the World Bank said.
The U.S. Federal Reserve, in particular, has come under intense criticism from officials in emerging economies for its policy of purchasing government bonds to keep long-term rates down.
The U.S. central bank argues it must focus on the domestic economy, saying other countries have their own ways of dealing with rising capital inflows.
A range of countries have adopted measures such as tariffs and capital controls in order to stem the influx, which some fear could reverse quickly if conditions shift.
By Pedro Nicolaci da Costa