World Bank in warning over flood of capital
By Wang Yanlin |
January 14, 2011, Friday
|
Print Edition
Print Edition
CONFIRMING a bright outlook for the global economy in the short term, the World Bank warned yesterday that excessive capital flowing into emerging markets may hamper economic expansion in the long 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 Global Economic Prospects 2011 report.
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.
Sovereign debt will remain a concern for European countries but the United States may report a better-than-expected performance this year.
"On the upside, strong developing-country domestic demand growth is leading the world economy," said Justin Yifu Lin, the bank's chief economist and senior vice president for development economics.
"Yet persistent financial sector problems in some high-income countries are still a threat to growth and require urgent policy actions."
Another threat to the global economy is the rapid inflow of capital into emerging markets, said Hans Timmer, the bank's director of development prospects.
"The pickup in international capital flow 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 values rise suddenly or if asset bubbles emerge."
Net international equity flows into developing countries rose by an annualized 42 percent last year while the international bond flows jumped 30 percent, the World Bank said, adding that nine countries received the bulk of the increase.
China, a prime emerging market, was an apparent destination among the nine for these capital inflows, and the country was under great pressure to strengthen the yuan.
The World Bank maintained its forecast that China's economy will gain 8.7 percent this year and 8.4 percent in 2012.
The report said domestic consumption contributed about 7.8 percentage points to the overall growth of 10 percent last year, becoming a major driver of development.
"China's demand served as a powerful impetus for exports from East Asia and beyond," the report said in its regional analysis section.
"But the growth may moderate compared to 2010 with domestic demand cooling gradually as stimuli fade and the monetary stance tightens."
China last month announced a shift to a prudent monetary policy from a relatively loose one.
The People's Bank of China raised interest rates twice in the past four months to curb inflation and asset bubbles.
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 Global Economic Prospects 2011 report.
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.
Sovereign debt will remain a concern for European countries but the United States may report a better-than-expected performance this year.
"On the upside, strong developing-country domestic demand growth is leading the world economy," said Justin Yifu Lin, the bank's chief economist and senior vice president for development economics.
"Yet persistent financial sector problems in some high-income countries are still a threat to growth and require urgent policy actions."
Another threat to the global economy is the rapid inflow of capital into emerging markets, said Hans Timmer, the bank's director of development prospects.
"The pickup in international capital flow 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 values rise suddenly or if asset bubbles emerge."
Net international equity flows into developing countries rose by an annualized 42 percent last year while the international bond flows jumped 30 percent, the World Bank said, adding that nine countries received the bulk of the increase.
China, a prime emerging market, was an apparent destination among the nine for these capital inflows, and the country was under great pressure to strengthen the yuan.
The World Bank maintained its forecast that China's economy will gain 8.7 percent this year and 8.4 percent in 2012.
The report said domestic consumption contributed about 7.8 percentage points to the overall growth of 10 percent last year, becoming a major driver of development.
"China's demand served as a powerful impetus for exports from East Asia and beyond," the report said in its regional analysis section.
"But the growth may moderate compared to 2010 with domestic demand cooling gradually as stimuli fade and the monetary stance tightens."
China last month announced a shift to a prudent monetary policy from a relatively loose one.
The People's Bank of China raised interest rates twice in the past four months to curb inflation and asset bubbles.
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