Global Economy Looking Up

Forecasts from the World Bank show that the global economy should experience more growth in 2014 than what was expected seven months ago, showing that the world’s economy is finally turning a corner from the recession of recent years. According to a report released on January 14th, the world’s economy should grow by 3.2%, up from the 3% projection made in June. This is good news to many investors and business people around the world, since it is the first time in three years that the World Bank has revised their forecast and predicted improvement.

Leading the charge are the world’s richest nations, who are seeing their economies rebound faster than expected. The United States, helped by growing confidence in the economy, is predicted to see growth of 2.8% in 2014 up one percent from 2013. Along with the US, the Eurozone is anticipated to see growth of 1.1%, after its economy had contracted in the past two years. Helping Europe’s cause are some countries that were hit hard by the world’s economic crisis, such as Ireland, Spain, and Portugal, which are all seeing positive signs of growth. Along with the unexpected growth forecasts for rich nations, a large increase in world trade also is seen as a reason for the World Bank’s optimism.

For developing countries, growth forecasts actually declined by .3%, although the report says this should not be cause for concern since the declines could show that the economies are becoming more stable and not relying on bubbles for growth. The report also stressed that emerging markets such as China and India need to keep pushing for structural reforms in order to maintain high growth.

One area that the report highlighted as a possible problem was the US Federal Reserve and its handling of the stimulus campaign, a significant reduction in the stimulus could raise interest rates throughout the world. This would impact developing countries the most, as capital flows to these countries could decrease rapidly. Even with some worries about a reduction of the stimulus, the World Bank’s forecast shows that the global economy is progressing nicely and we should expect continued growth in the coming years.