BRUSSELS, BELGIUM - The World Bank presented the 2014 Winter edition of its flagship report, the Global Economic Prospects at the European Commission’s Directorate for Economics and Finance in Brussels on Friday 17th January. The report was presented by Mr Andrew Burns, World Bank Director for Economic Prospects, and lead author of the document.
Mr Burns provided the audience with a comprehensive summary of the macroeconomic trends that will affect the global economy for the next three years. Specifically, he focused his attention on:
- High income economies growth perspectives and their expected contribution to global GDP growth;
- US monetary policy, with specific regards to quantitative easing tapering and its consequences in terms of global portfolio adjustments and capital inflows in developing countries;
- Country-specific macroeconomic challenges in emerging and developing country markets.
- The base-scenario laid out by Mr Burns' analysis could be summarized as follows:
- The 2014-2016 triennium will be characterised by an acceleration of global GDP growth, driven by the economic recovery of high income countries.
- The withdrawal of quantitative easing prospected by US Federal Reserve and the consequent rise of interest rates will determine a global portfolio adjustment causing a progressive net capital outflow from developing countries, while FDI level should remain unchanged.
He concluded that the strengthening recovery in high-income world will support developing country growth. But the positive effects will be partly offset by tighter financial conditions and lower commodity prices. Furthermore turmoil associated with the phasing-out of quantitative easing will remain a risk, and structural reforms will be needed to boost productivity
In the ensuing discussion audience questions focused on the following topics:
- The elasticity of trade to GDP, comparing the pre-financial crisis situation to the future outlook in terms of trade growth. In response, Mr Burns pointed out the changes in the composition of demand that have occurred since 2009, and the opportunities of growth that the recovery of high income economies will provide to developing countries.
- The economics prospects of India and Brazil. On this Mr Burns underlined how the future recast of the Brazilian political landscape undermines the structural reforms needed to enhance Brazilian economic development. As for India, the forecast is imputable to the economic cycle.
- How policies contribute to the WB forecasting process. Here, Mr Burns stressed that policy analysis’s contribution to the economic forecasting is often more subjective than model-driven approaches. Thus the Bank’s forecasting team has been cautious in giving too much weight to policy analysis in its forecasts.
At the close of the meeting both World Bank and European Commission expressed their appreciation for the discussion, and agreed to continue these exchanges, as both institutions monitor the global economy.