Global GDP is expected to expand between 2.9% and 3.3% in 2010 and 2011, reversing the 2.1 percent decline in 2009, the World Bank said in its latest report issued on Thursday. "Even as the world economic recovery continues to advance, it faces fresh headwinds on the road to sustainable medium term growth," the World Bank's Global Economic Prospects 2010 said. World Bank experts project the recovery in real GDP in Europe and Central Asia in 2010 at 4.1% in 2010, which is 3.2 percentage points slower than the region's pre-crisis five-year average.
"The recovery largely reflects the strong growth rebound in the region's two largest economies (Russia and Turkey), which account for 62 percent of regional GDP and are projected to grow at 4.5% percent and 6.3%, respectively," the report said. Economic growth in other regional countries will remain slow "because of the intense domestic adjustments that some countries have had to undergo as a consequence of their dependence on debt-creating flows and associated large current account imbalances with which they entered the crisis."
Another factor that hampers economic recovery in the region is "heightened uncertainty" linked to the "sovereign-debt crisis in some of the high-income European countries (Greece, Ireland, Italy, Portugal, and Spain) and their related diminished growth prospects," the report said. "The World Bank's projections assume that efforts by the IMF and European institutions will stave off a default or major European sovereign debt restructuring. But even so, developing countries with close trade and financial ties to highly-indebted high-income countries may feel serious ripple effects," it said.
Developing economies are expected to grow between 5.7% and 6.2% each year from 2010-2012, the World Bank said. Economic growth in high-income countries is projected between 2.1% and 2.3% in 2010, "not enough to undo the 3.3 percent contraction in 2009." In 2011, GDP is expected to grow by 1.9% in high-income countries. Over the medium term, the World Bank said, the recovery is likely to be hampered by "reduced international capital flows, high unemployment, and spare capacity exceeding 10 percent in many countries."
Global trade turnover has risen sharply in recent months and is expected to increase by 21% in 2010. In 2011-2012, the growth is projected at about 8%. Strong import demand from developing countries is expected to be responsible for half of the acceleration in global import volumes in 2011-2012.