Developing countries should see an uptick in growth this year, said the World Bank Group's Global Economic Prospects (GEP) report.

These countries will be boosted in part by soft oil prices, a stronger US economy, continued low global interest rates, and receding domestic headwinds in several large emerging markets, according to the report.

After growing by an estimated 2.6 per cent in 2014, the global economy is projected to expand by three per cent this year, 3.3 per cent next year and 3.2 per cent in 2017, predicts the bank's twice-yearly flagship, said a report in the Gulf Daily News (GDN), our sister publication.

Developing countries grew by 4.4 per cent last year and are expected to edge up to 4.8 per cent this year, strengthening to 5.3 and 5.4 per cent in 2016 and 2017, respectively.

“In this uncertain economic environment, developing countries need to judiciously deploy their resources to support social programmes with a laser-like focus on the poor and undertake structural reforms that invest in people,” said World Bank Group president Jim Yong Kim.

“It's also critical for countries to remove any unnecessary roadblocks for private sector investment.

“The private sector is by far the greatest source of jobs and that can lift hundreds of millions of people out of poverty,” he added.

Underneath the fragile global recovery lie increasingly divergent trends with significant implications for global growth.

Activity in the US and the UK is gathering momentum as labour markets heal and monetary policy remains extremely accommodative.

But the recovery has been sputtering in the euro area and Japan as legacies of the financial crisis linger.

China, meanwhile, is undergoing a carefully managed slowdown with growth slowing to a still-robust 7.1 per cent this year (7.4 per cent in 2014), seven per cent next year and 6.9 per cent in 2017.

And the oil price collapse will result in winners and losers.

Risks to the outlook remain tilted to the downside due to four factors.

First is persistently weak global trade.

Second is the possibility of financial market volatility as interest rates in major economies rise on varying timelines.

Third is the extent to which low oil prices strain balance sheets in oil-producing countries.

Fourth is the risk of a prolonged period of stagnation or deflation in the euro area or Japan.

“Worryingly, the stalled recovery in some high-income economies and even some middle-income countries may be a symptom of deeper structural malaise,” said World Bank chief economist and senior vice-president Kaushik Basu.

“As population growth has slowed in many countries, the pool of younger workers is smaller, putting strains on productivity.

“But there are some silver linings behind the clouds,” he said.

“The lower oil price, which is expected to persist through the year, is lowering inflation worldwide and is likely to delay interest rate increases in rich countries.

“This creates a window of opportunity for oil-importing countries, such as China and India.

“We expect India's growth to rise to seven per cent by next year.

“What is critical is for nations to use this window to usher in fiscal and structural reforms, which can boost long-run growth and inclusive development.

“Lower oil prices will lead to sizeable real income shifts from oil-exporting to oil-importing developing countries,” he added.

For both exporters and importers, low oil prices present an opportunity to undertake reforms that can increase fiscal resources and help broader environmental objectives,' said World Bank director of development prospects Ayhan Kose.

“Amongst large middle-income countries that will benefit from lower oil prices is India, where growth is expected to accelerate to 6.4 per cent this year (from 5.6 per cent last year), rising to seven per cent in 2016-17.

“In Brazil, Indonesia, South Africa and Turkey, the fall in oil prices will help lower inflation and reduce current account deficits, a major source of vulnerability for many of these countries.

“However, sustained low oil prices will weaken activity in exporting countries.

“For example, the Russian economy is projected to contract by 2.9 per cent this year, getting barely back into positive territory next year with growth expected at 0.1 per cent.’ - TradeArabia News Service