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World Bank Upgrades Global Growth Forecast

The World Bank on Tuesday raised its forecast for global growth for the first time in three years as advanced economies started to pick up pace, led by the United States.

The rosier outlook suggests the world economy is finally breaking free from a long and sluggish recovery after the global financial crisis.

The poverty-fighting institution predicted global gross domestic product will expand 3.2 percent this year, from 2.4 percent in 2013, according to its twice-yearly “Global Economic Prospects.” In the bank’s last forecast in June, it expected global growth to reach 3 percent in 2014.

The bank said the global economy had come to a “turning point,” as fiscal austerity and policy uncertainty no longer weighed as heavily on most richer economies. The bank expected stronger growth in the United States in particular, of 2.8 percent in 2014, from 1.8 percent last year.

“For the first time in five years, there are indications that a self-sustaining recovery has begun among high-income countries – suggesting that they may now join developing countries as a second engine of growth in the global economy,” the bank’s chief economist Kaushik Basu said in the report.

The bank again shaved its forecasts for developing countries, to 5.3 percent for 2014, from the 5.6 percent it predicted in June.

Emerging markets have grown at their slowest pace in a decade for the past two years, after chalking up growth rates of around 7.5 percent before the global financial crisis hit in 2008.

Andrew Burns, the report’s lead author, said frothy growth before the crisis reflected cyclical factors.

“We’re moving into a new phase where developing countries are growing at a rate much closer to their underlying sustainable rate of growth,” he told reporters.

via Reuters [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza