Global
Global
Global
Economic
Economic
Economic
Prospects
Prospects
Prospects
Volume 6
Volume 6
Volume 6
| January 2013
| January 2013
| January 2013
The World Bank
Assuring
growth over
the medium term January 2013

4
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The accompanying online publication, Prospects for the Global Economy, was produced by a team comprised of
Sarah Crow, Betty Dow, Muhammad Adil Islam, Vamsee Krishna Kanchi, Sabah Mirza, Katherine Rollins, and
Dana Vorisek, with technical support from David Horowitz, Ugendran Machakkalai, and Malarvishi Veerappan.

Cynthia Case-McMahon, Indira Chand, and Merrell Tuck-Primdahl managed media relations and the dissemina-
tion. Hazel Macadangdang managed the publication process.

Several reviewers offered extensive advice and comments. These included Abdul de Guia Abiad, Ahmad Ahsan,
Jorge Araujo, Merli Baroudi, Deepak Bhattasali, Andrew Beath, Zeljko Bogetic, Oscar Calvo-Gonzalez, Kevin
Carey, Mei Leng Chang, Shubham Chaudhuri, Punam Chuhan-Pole, Tito Cordella, Jose Cuesta, Uri Dadush, Au-
gusto de la Torre, Shantayanan Devarajan, Tatiana Didier, Hinh Truong Dinh, Sebastian Eckardt, Olga Emelyanov,
Pablo Fajnzylber, Manuela V. Ferro, Caroline Freund, Bernard G. Funck, Ejaz Ghani, David Michael Gould,
Guenter Heidenhof, Bert Hofman, Zahid Hussain, Elena Ianchovichina, Satu Kristina Kahkonen, Markus Kitzmul-
ler, Auguste Tano Kouame, David Kuijper, Roumeen Islam, Jeffrey D. Lewis, Connie Luff, Ernesto May, Denis
Medvedev, Juan Carlos Mendoza, Claudia Nassif, Antonio M. Ollero, Kwang Park, Samuel Pienknagura, Miria
Pigato, Mohammad Zia Qureshi, Susan R. Razzaz, Christine M. Richaud, Kaspar Richter, Elliot Riordan, David
Rosenblatt, Sudhir Shetty, Carlos Silva-Jauregui, Yvonne M. Tsikata, Cevdet Unal, Mark Roland Thomas, Axel
van Tortsenberg, Sergei Ulatov, Aristomene Varoudakis, Gallina Vincelette, Ekaterina Vostroknutova, Herman
Jorge Winkler, Soonhwa Yi, Juan F. Zalduendo, and Albert Zeufack.

6
Table of Contents
Main Text 1
Topical Annexes
Financial markets 33
Industrial production. 43
Inflation. 49
Global trade 59
Exchange rates 65

Central Bank (ECB) would be willing to take in
defense of the Euro have resulted in a significant
improvement in global financial markets. Unlike
past episodes of reduced tensions, when market
conditions improved only partially, many market
risk indicators have fallen back to levels last
seen in early 2010 – before concerns about Euro
Area fiscal sustainability took the fore.
The decline in financial market tensions has also
been felt in the developing world.
 International capital flows to developing
countries, which fell by between 30 and 40
percent in May-June, have reached new highs.
 Developing country bond spreads (EMBIG)
have declined by 127 basis points (bps) since
June, and are now 282 bps below their long-
term average levels.
 Developing country stock markets have
increased by 12.6 percent since June (10.7
percent for high-income markets)
but the real-side recovery is weak and business-
sector confidence low
While signals from financial markets are
encouraging, those emanating from the real-side
of the global economy are more mixed. Growth
in developing countries accelerated in the third
quarter of 2012, including in major middle-
income countries such as Brazil and China,
where mid-year weakness contributed to the
global slowdown. Early indications for the

Global Economic Prospects January 2013:
Assuring growth over the medium term

Overview & main messages

2
Table 1. The global outlook in summary
(percent change from previous year, except interest rates and oil price)
2011 2012 2013e 2014f 2015f
Global conditions
World trade volume (GNFS) 6.2 3.5 6.0 6.7 7.0
Consumer prices
G-7 Countries
1,2
5.3 -0.6 -0.1 0.9 1.0
United States 2.4 2.1 2.4 2.5 2.5
Commodity prices (USD terms)
Non-oil commodities 20.7 -9.5 -2.0 -3.2 -2.8
Oil price (US$ per barrel)
3
104.0 105.0 102.0 102.2 102.1
Oil price (percent change) 31.6 1.0 -2.9 0.2 -0.1
Manufactures unit export value
4
8.9 -1.9 1.9 2.2 1.9
Interest rates
$, 6-month (percent) 0.8 0.5 0.7 1.1 1.4
€, 6-month (percent)
1.6 0.2 0.5 1.2 1.5
International capital flows to developing countries (% of GDP)

Mexico 3.9 4.0 3.3 3.6 3.6
Argentina 8.9 2.0 3.4 4.1 4.0
Middle East and N. Africa
6
-2.4 3.8 3.4 3.9 4.3
Egypt
7
1.8 2.2 2.6 3.8 4.7
Iran 1.7 -1.0 0.6 1.6 2.8
Algeria 2.5 3.0 3.4 3.8 4.3
South Asia 7.4 5.4 5.7 6.4 6.7
India
7, 8
6.9 5.1 6.1 6.8 7.0
Pakistan
7
3.0 3.7 3.8 4.0 4.2
Bangladesh
7
6.7 6.3 5.8 6.2 6.5
Sub-Saharan Africa 4.5 4.6 4.9 5.1 5.2
South Africa 3.1 2.4 2.7 3.2 3.3
Nigeria 6.7 6.5 6.6 6.4 6.3
Angola 3.4 8.1 7.2 7.5 7.8
Memorandum items
Developing countries
excluding transition countries 6.5 5.2 5.8 6.0 6.0
excluding China and India 4.5 3.3 4.0 4.3 4.4
7.
8.

For high-income countries, fiscal consolidation,
high unemployment and very weak consumer
and business confidence will continue to weigh
on activity in 2013, when GDP is projected once
again to expand a mediocre 1.3 percent. Growth
should, however, begin firming during the
course of 2013, expanding by 2.0 and 2.3
percent in 2014 and 2015.
This modest growth outlook is subject to risks.
 Although the likelihood of a serious crisis of
confidence in the Euro Area that would lead
to a bloc-wide freezing up of financial
markets has declined significantly, continued
progress is needed to improve country-level
finances, and enact plans to reinforce pan-
European schemes for a banking union and
sovereign rescue funds. If policy fails to
maintain its reform momentum, some of the
more vulnerable countries in the Euro Area
could find themselves frozen out of capital
markets, provoking a global slowdown that
could potentially subtract 1.1 percent or more
from developing country GDP.
 In the United States, solid progress toward
outlining a credible medium-term fiscal
consolidation plan that avoids periodic
episodes of brinksmanship surrounding the
debt ceiling is needed. Policy uncertainty has
already dampened growth. Should
policymakers fail to agree such measures, a

FN1
and the Middle-East &
North Africa. However, the majority of
developing countries are operating at or close to
full capacity. For them, additional demand
stimulus could be counter-productive – raising
indebtedness and inflation without significant
payoff in terms of additional growth.
In what is likely to remain a difficult external
environment characterized by slow and
potentially volatile high-income country growth
over the next several years, strong growth in
developing countries is not guaranteed. To keep
growing rapidly, developing countries will need
to maintain the reform momentum that
underpinned the acceleration of growth during
the 1990s and 2000s. In the absence of
additional efforts to raise productivity through
structural reforms, investment in human capital,
and improved governance and investment
conditions, developing country growth may well
slow.
Moreover, given the still uncertain global
environment, many developing countries would
be well advised to gradually restore depleted
fiscal and monetary buffers, so as to ensure that
their economies can respond as resiliently as
they did during the 2008/09 crisis should a
further significant external shock arise.