/IRBIS, June 10, 2010/ - Restoration of the world economy continues, but the debt crisis in Europe has created new obstacles to sustainable growth in the medium term, indicated in a World Bank report "Global Economic Prospects 2010, released June 9.

As indicated, the World Bank predicts global GDP growth within 2.9-3.3% in 2010 and 2011, capacity within the limits of 3.2-3.5% in 2012. Developing countries will grow within the limits of 5.7-6.2% per year in the period 2010- 2012. High-income countries, however, is projected to increase by 2.1-2.3% in 2010 - that is not enough to reverse the 3.3%-ing decline in 2009 - in 2011, an increase of 1.9-2.4%.

"The best performance of developing countries in the world today is encouraging the growth of multi-polar", - said Mr. Justin Yifu Lin, Chief Economist and Senior Vice President for Development Economics of World Bank. "However, to restore to withstand high-income countries must seize the opportunities offered by faster growth in developing countries."

Recovery faces a number of important problems in the medium term, including a reduction of international capital flows, high unemployment, as well as power reserves in excess of 10% in many countries. According to the report, while the influence of European debt crisis is still ongoing, long-term increase in sovereign debt may make credit more expensive and reduce investment and economic growth in developing countries.

World Bank projections suggest that the IMF and the European institutions will endeavor to prevent failure or major restructuring of sovereign debt. But, in spite of this, developing countries and regions with close trade and financial linkages with the developed countries with high debt can feel the serious ripple effect.

"Stimulation of demand in high-income countries is increasingly becoming part of the problem, not the solution" - says Mr. Hans Timmer, head of forecasting at the World Bank. "Faster spending restraint can reduce the cost of borrowing and stimulate economic growth in countries with high income and developing countries in the long term."

"Regardless of how the debt situation in countries with high income countries in Europe will develop in the second round of financial crisis can not be excluded in some developing countries in Europe and Central Asia, where growth in nonperforming loans due to the slow recovery and significant Short-term debt may pose a threat to the solvency of the banking sector ", - stated in the report.

"Developing countries are not immune from the effects of sovereign debt crisis of the countries with high income," - said Mr. Andrew Burns, head of global macroeconomics of the World Bank.

Many developing countries continue to face serious shortage of financial resources. Private capital flows to developing countries is projected to recover only slightly, from $454 billion (2.7% of GDP in developing countries) in 2009 to $771 billion (3.2% of GDP) by 2012. In general, the financing gap in developing countries is projected at $210 billion in 2010, reducing to $180 billion in 2011.

During the next 20 years in the fight against poverty can be difficult if the country will be forced to cut investment in production and human capital due to the decline of development assistance and reduce tax revenues, the report said. Bilateral reduction of aid flows, as it did in the past can affect the long- term growth in developing countries, potentially increasing the number of extremely poor in 2020 by as much as 26 million

Recovery in Europe and Central Asia World Bank projected at 4.1% in 2010. Recovery reflects strong growth in the two largest countries in the region (Russia and Turkey), which account for three quarters of the regional GDP. Growth in most other regional economies, is expected to be weak enough, or will remain negative. Increased uncertainty is associated with sovereign debt crises in some European countries with high income countries (Greece, Ireland, Italy, Portugal and Spain).

[2010-06-10]