Rising food and fuel prices are taking the wind out of the global economy’s recovery this year, the World Bank said on Tuesday, cutting its forecast for global growth.
The bank projected said global growth will only be 3.2 percent this year, one-tenth of a point lower than its January estimate and sharply off the 3.8 percent pace of last year.
The Washington-based development lender expected in its biannual Global Economic Prospects report that the world economy would rebound next year.
“But further increases in already high oil and food prices could significantly curb economic growth and hurt the poor,” said Justin Lin (林毅夫), the bank’s chief economist.
High-income countries at the nexus of the 2008-2009 global financial crisis were still struggling to recover. Growth would slow from 2.7 percent last year to 2.2 percent this year, slower than the previous 2.4 percent estimate.
The rich countries “have the largest amount of restructuring to do,” said Andrew Burns, lead author of the report, at a news conference at the bank’s Washington headquarters.
Burns said the US was in “a growth pause,” but a double-dip recession was “not likely” — echoing US President Barack Obama’s statement earlier on Tuesday that he was “not concerned about a double-dip recession.”
The world’s biggest economy was expected to grow a feeble 2.6 percent this year and accelerate to 2.9 percent next year, the bank said.
Japan’s March 11 earthquake-tsunami disaster and unrest in the Arab world, while cutting sharply into domestic growth, would make only a modest dent in global growth, the 187-nation institution said.
The recovery in Europe continues to face “substantial headwinds” from uncertainty about debt crises in several eurozone members. The 17-nation eurozone is expected to expand at last year’s pace of 1.7 percent this year, with growth only edging up to 1.8 percent next year.
By contrast, developing countries relatively sailed through the global downturn, providing the impetus for the global recovery.
However, at the same time their robust growth was creating the demand for commodities that has spurred prices higher.
“Most developing countries have returned to their precrisis levels of production,” Lin said at the news conference. “Now they have to shift their macroeconomic policies from countercyclical, inflationary monetary and fiscal policies to a more neutral policy stance.”
As developing countries neared full capacity, collective GDP growth was projected to slow from 7.3 percent last year to about a 6.3 percent pace each year from this year to 2013.
Many were operating above capacity and were at risk of overheating, especially in Asia and Latin America, the bank warned.
Burns called on developing countries to focus on structural reform in order to use their resources efficiently and to change their “mindset” of pursuing “growth at all costs.”
For China, the second-biggest economy and the world’s main growth driver, expansion is projected to slow from last year’s pace of 10.3 percent to 9.3 percent this year and around 8.7 percent in each of next year and 2013, “as the effects of government’s policy tightening take stronger effect.”
Crude oil prices, after averaging about US$79 a barrel last year, were now projected to hit US$107.20 a barrel this year before easing back slightly.
“Oil prices are expected to remain elevated as long as physical supplies are disrupted and fears persist of larger disruptions from political unrest in oil-producing countries,” the bank said in the new report.
Burns said that higher oil prices would underpin rising food prices, particularly pressuring the poor who spend a high proportion of their income on food.
Food production is “actually four times more energy-intensive than manufacturing,” he said.
“The pass-through will continue in 2012” and the consequences for the poor “will be with us for some time,” Burns said.
‘BIG LOSS’: This year might see the last generation of Huawei’s Kirin chips, as their production would stop next month because they are made using US technology Chinese tech giant Huawei Technologies Co (華為) is running out of processor chips to make smartphones due to US sanctions and would be forced to stop production of its own most advanced chips, a company executive has said, in a sign of growing damage to Huawei’s business from US pressure. Huawei, one of the biggest producers of smartphones and network equipment, is at the center of US-Chinese tension over technology and security. Washington last year cut off Huawei’s access to US components and technology, and those penalties were tightened in May, when the White House barred vendors worldwide from using US
’WHITE BOX’: The open platform would give local firms access to Cisco’s cloud-based mobile network to develop 5G telecom equipment and tap into the global market The Ministry of Economic Affairs (MOEA) yesterday introduced a new 5G “open lab” in collaboration with US-based information technology and networking giant Cisco Systems Inc to address the rapidly growing “white box” 5G networking equipment market. The open lab will be a platform where Taiwanese manufacturers can access Cisco’s cloud-based mobile network to develop their own 5G telecom equipment, such as small-cell base stations, network switches, modems and Internet of things (IoT) devices, a ministry statement said. The open platform would allow Taiwanese manufacturers to tap into the lucrative 5G telecom equipment market, which was previously monopolized by Nokia Oyj, Ericsson AB
CORPORATE SCANDAL: Cathay Life has invested NT$13.3 billion in Bank Mayapada since 2015, but the latest loss of NT$8.8 billion has completely written off its investment Cathay Life Insurance Co (國泰人壽) yesterday said it would recognize an investment loss of NT$8.8 billion (US$298.1 million) in Indonesia’s Bank Mayapada Internasional Tbk PT due to concerns about the lender’s operations amid a corporate scandal. The company said it would revise its earnings result for June, from a net profit of NT$6.52 billion to a net loss of NT$520 million, its first monthly loss over the past 17 months. After booking an investment loss of NT$5.2 billion in Bank Mayapada earlier this year, Cathay Life has so far recognized total investment losses of NT$14 billion in the lender, executive vice president
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported that revenue last month expanded 25 percent annually, but fell 12.8 percent month-on-month to NT$105.96 billion (US$3.59 billion). In the first seven months of this year, the chipmaker’s revenue surged 33.6 percent to NT$727.26 billion, compared with NT$544.46 billion a year earlier. TSMC has said it aims to grow its revenue by more than 20 percent this year. The company has since May 15 stopped taking new orders from Huawei Technologies Co (華為), its second-biggest customer after Apple Inc, due to the US’ restrictions on exports containing US technologies. TSMC has no plans to