World Bank lowers 2012 growth view

The World Bank has lowered its 2012 growth forecast for both developing and high income countries.

Citing the impact of the Euro Zone debt crisis and weakening growth in developed economies, the bank projects that developing countries will grow at an average rate of 5.4 per cent while high income countries will expand at only 1.4 per cent during the year.

Mid last year, the bank estimated a growth of 6.2 per cent for developing economies and 2.7 per cent for developed countries.

Latest projections put the global economy performance for 2012 at 2.5 per cent and 3.1 per cent for 2013.

According to economists at the bank, the projected slowed growth is due crisis in the developed world that is already being felt worldwide through weakening of global trade and commodity prices.

“Developing countries need to evaluate their vulnerabilities and prepare for further shocks while there is time,” said Mr Justin Yifu Lin, World Bank’s chief economist and senior vice president for development economies.

Reports from the bank show that global exports of goods and services increased at an estimated 6.6 per cent last year down from 12.4 per cent in 2010 and are expected to rise by only 4.7 per cent in 2012.

The Economic Survey 2011 shows that tea and horticulture were the highest export earners for Kenya in 2010.

Earnings from the tourism sector, one of the key sources of foreign exchange rose from Sh62.5 billion in 2009 to Sh73.7 billion in 2010 as the economy recovered from a downward growth rate caused by the political crisis after the 2007 general elections.

Locally, economists warn that should the Euro crisis persist, there could be a decrease in earnings from horticulture and tourism sectors, which may bear negative impact in overall economic growth.