Economist outlook! Just good information, and the Word exchange rate!

[LittleMissAsh]

“Globally, GDP [1] is expected to grow 3.2 percent in 2011 before edging up to 3.6 percent in 2012,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics. “But further increases in already high oil and food prices could significantly curb economic growth and hurt the poor."

Recent events in Japan and the political turmoil in the Middle East and North Africa have cut sharply into domestic growth, but spillover effects to other economies are expected to be modest. GDP growth in 2011 will likely be flat in Japan. Among developing Middle-East and North African countries, GDP growth in 2011 will be weakest in Egypt (1 percent), Tunisia (1.5 percent), and Libya [2]. While uncertain, growth in both Egypt and Tunisia is projected to pick up in 2012, reaching close to 5 percent by 2013.

Strong growth in most developing economies has contributed to a new set of global challenges, including higher commodity prices, rising inflation, and the possible return of destabilizing capital inflows as monetary policies tighten and interest rates rise.

“Developing countries have been resilient despite remaining tensions in high-income countries,” said Hans Timmer, director of Development Prospects at the World Bank. “But many developing economies are operating above capacity and at risk of overheating, most notably in Asia and Latin America. Monetary policy has responded, but fiscal and exchange rate policy may need to play a bigger role to keep inflation in check.”

Inflation in developing countries reached almost 7 percent year-over-year in March 2011, more than 3 percentage points higher than the low point in July 2009. Inflation in high-income countries has also picked up reaching 2.8 percent in April 2011. The biggest increases in inflation have been in the East Asian and Middle-East and North African regions, reflecting capacity constraints in the former and food prices in the latter.

High oil prices and production shortfalls due to bad weather have contributed to higher food prices, which has negative consequences for the poor who spend a high proportion of their income on food. Although domestic food prices in most developing countries rose much less than international prices during the 2010/11 spike (7.9 percent since June 2010 versus 40 percent for international prices), local prices may rise further as international price changes slowly pass through into domestic markets. In addition, if the 2011/12 crop year disappoints, food prices may rise further, placing additional pressures on the incomes, nutrition, and health of poor families.

“The financial crisis for most developing countries is over,” said Andrew Burns, manager of Global Macroeconomics and lead author of the report. “Efforts must now focus on returning monetary policy to a more neutral stance and rebuilding the fiscal cushions that allowed developing countries to respond to the crisis with counter-cyclical policies. Increasingly, medium-term prospects will depend on the kind of slow-acting social, regulatory and infrastructural reforms that generate improved productivity and sustainable growth.”

The full report and accompanying datasets are available at www.worldbank.org/globaloutlook.

[unirod]

Thanks LittlemissAsh,

This article is highlighting what the WB was insisting be adjusted in Iraq's 2012 budget. This is good for our medium and long term investment strategy's in Iraq. It all starts with fiscal and exchange rate policy......An R/V maybe?

[LittleMissAsh]

Just a side note all the economist articles I have read seem to end on this 2012 note, on the inflation problems in developing countries. There seems to be a wake in currency in general globally concerning these developing areas, more room for speculation? Now I am not entirely well versed in economics but this goes back to 2010 through 2012, is this typical for a review? Do they usually give estimations just with in a year or do they typically go further out in calender years?