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WB warns excessive capital into emerging markets
By Wang Yanlin |
January 13, 2011, Thursday
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Online Edition
Online Edition
CONFIRMING a bright outlook for the global economy, the World Bank said today in a report that excessive capital into emerging markets, which have become a major growth engine, may hamper the world's economic expansion in the longer run.
The Washington-based bank estimated that global gross domestic product will stabilize and expand 3.3 percent this year from 3.9 percent in 2010, and reach 3.6 percent in 2012, according to its latest Global Economic Prospects 2011.
Developing countries will continue to contribute almost half of global growth, outstripping high-income countries with an expected growth rate of 6 percent this year and 6.1 percent the next year.
"On the upside, strong developing-country domestic demand growth is leading the world economy," said Justin Yifu Lin, chief economist and senior vice president for development economics at the World Bank. "Yet persistent financial sector problems in some high-income countries are still a threat to growth and require urgent policy actions."
Another menace to global economy is the rapid inflow of capital into emerging markets, said Hans Timmer, director of development prospects at the bank.
"The pickup in international capital flows reinforced the recovery in most developing countries," Timmer said. "However, heavy inflows to certain big middle-income economies may carry risks and threaten medium-term recovery, especially if currency value rise suddenly or if asset bubbles emerge."
Net international equity flows into developing countries rose by a sharp annualized 42 percent in 2010 and international bond flows also jumped 30 percent, the World Bank said, adding that nine countries received the bulk of the increase in inflows.
China, a prime emerging market, was an apparent destination for these capital inflows, and the country was under great pressure for a stronger yuan.
The Washington-based bank estimated that global gross domestic product will stabilize and expand 3.3 percent this year from 3.9 percent in 2010, and reach 3.6 percent in 2012, according to its latest Global Economic Prospects 2011.
Developing countries will continue to contribute almost half of global growth, outstripping high-income countries with an expected growth rate of 6 percent this year and 6.1 percent the next year.
"On the upside, strong developing-country domestic demand growth is leading the world economy," said Justin Yifu Lin, chief economist and senior vice president for development economics at the World Bank. "Yet persistent financial sector problems in some high-income countries are still a threat to growth and require urgent policy actions."
Another menace to global economy is the rapid inflow of capital into emerging markets, said Hans Timmer, director of development prospects at the bank.
"The pickup in international capital flows reinforced the recovery in most developing countries," Timmer said. "However, heavy inflows to certain big middle-income economies may carry risks and threaten medium-term recovery, especially if currency value rise suddenly or if asset bubbles emerge."
Net international equity flows into developing countries rose by a sharp annualized 42 percent in 2010 and international bond flows also jumped 30 percent, the World Bank said, adding that nine countries received the bulk of the increase in inflows.
China, a prime emerging market, was an apparent destination for these capital inflows, and the country was under great pressure for a stronger yuan.
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