Emerging countries expected to do more economic heavy lifting
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Bob Moon: It’s crystal-ball gazing time at the World Bank again. They’re forecasting what may happen in the global economy over the next couple of years. Yeah, somebody’s got to do it.
Marketplace’s Scott Tong joins us from Washington. Good morning, Scott.
Scott Tong: Good morning Bob.
Moon: I see the headline forecast — global economic growth: 3.2 percent this year, then up to 3.6 percent the next couple of years? What’s the thinking behind these global thinkers?
Tong: Well the thinking is the main engine is the developing countries. The view from the World Bank is the emerging countries are past the financial crisis; they’ve rolled the rock up to the top and now it’s back, kind of, to business as usual in a lot of these countries. That stands in big contrast to the rich countries, growing at 2 to 2.5 percent compared to maybe 6 percent in the emerging countries, because we the rich countries have the biggest hangover from the financial crisis.
Here’s economist Andrew Burns of the World Bank.
Andrew Burns: High-income countries — having been at the nexus of the financial crisis, having been most involved in the excesses, if you wish, of the boom period — have the largest amount of restructuring to do.
And Bob, here’s the euphemism alert: the rich country problems, according the Bank, include fiscal sustainability questions. In other words: deficits.
Moon: OK, I’ll take that. What’s the biggest risk they see going forward? Middle East, other financial forces?
Tong: For now, the Middle East crisis, they say, has been contained as far as impact in the world economy. But they’re really watching oil prices. If there’s any kind of supply shock and oil goes up to $50 a barrel, then for us, our gas might go up to $4.75, $5, and the same effect would be felt around the world. So far, a relatively containable impact — small effect on the world.
Moon: I didn’t hear any mention of record food prices, we’ve heard a lot about that. Are they worried about that?
Tong: They think about it a lot. The big question is the relationship between food and energy. You need fertilizer, which is petroleum. You need to transport food, which is also petroleum. And that adds to the input cost, and the World Bank is worried that we could see this prolonged inflation push, as they call the higher prices, unless farmers can be more productive going forward.
Moon: Marketplace’s Scott Tong giving us a glimpse of the future. Thanks.
Tong: You’re welcome.
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