Fji Times News
by Margaret Wise
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| Graph: World Bank |
THE World Bank has warned that 2012 will be a bad year for the global economy and Pacific countries including Fiji should expect a slowdown in tourist arrivals and remittance receipts.
No one will be spared and global growth forecasts have been slashed.
Permanent secretary for Finance Filimone Waqabaca said he was aware of the report but was confident that the "main markets would be bracing themselves and taking precautionary measures".
"The focus will be on fiscal policy, they will start working on their interest rates and other policy measures to cushion the impact," he said.
"We on the other hand will have to be vigilant. The two sources of inflows are remittance and tourism and then trade. We will be monitoring the impact on our main tourist markets and trade partners, we will have to monitor arrivals from markets like Europe and Australia."
Mr Waqabaca said a team from the International Monetary Fund had forecasted a slowdown in growth during a visit last year.
"They did a fiscal consolidation and said to watch our fiscal position to ensure that we can absorb any shock, they recommended we reduce the deficit to 2 per cent of GDP but we have done better and forecasted a deficit of 1.9 per cent. We were preparing ourselves, that if the crisis does hit it gives us room to borrow and take the deficit up to 3 per cent."
According to the report remittance receipts are potent drivers for growth of small island economies ù and these flows, as well as tourist arrivals (important for the region broadly) could slow because of sluggish labour market and growth developments. It however noted that migrant remittances held up quite well during the 2008-2009 crisis.
The World Bank said the world economy in 2012 is set to grow by just 2.5 per cent.It urges developing countries to prepare for further downside risks, while there is still time, by assessing their vulnerabilities and prepare for contingencies by pre-financing budgetary deficits, prioritising spending on social safety nets and infrastructure spending to assure longer-term growth, and stress-testing banks to avoid an eruption of domestic banking crises.
The World Bank said the financial turmoil caused by the escalation of the sovereign debt crisis in Europe was spreading to both developing and high-income nations.
It said capital investment to developing nations had fallen by nearly half compared with a year ago.
"The sovereign debt crisis in Europe, which took a turn for the worse in August 2011, coincides with slowing growth in several major developing countries (Brazil, India and, to a lesser extent, Russia, South Africa and Turkey), mainly reflecting policy tightening begun in late 2010 and early 2011 to combat rising inflationary pressures from overly-fast growth," it said.
"Reflecting the growth slowdown, world trade, which expanded by an estimated 6.6 per cent in 2011, will grow by only 4.7 per cent in 2012, before strengthening to 6.8 per cent in 2013.
"Risk aversion stemming from the Euro Area debt crisis has spread to both developing countries and other high-income countries."
FORECAST (Source: WORLD BANK)
East Asia and Pacific regional GDP growth is estimated to have slowed to 8.2 per cent in 2011, and is projected to ease further to 7.8 per cent for both 2012 and 2013. Growth in China was an estimated 9.1 per cent in 2011 and is expected to dip to 8.4 per cent in 2012.
Europe and Central Asia grew by an estimated 5.3 per cent in 2011, slowed regional growth to 3.2 per cent in 2012, before firming to 4.0 per cent by 2013.
Latin America and the Caribbean grew by an estimated 4.2 per cent in 2011, but this is expected to ease to 3.6 per cent growth in 2012, before picking up to 4.2 per cent in 2013.
Middle East and North Africa estimated 1.7 per cent growth in 2011, expected to remain subdued in 2012, at 2.3 per cent, rising to an expected 3.2 per cent in 2013.
South Asia slowed to an estimated 6.6 per cent in 2011, projected to ease further to 5.8 per cent in 2012, before strengthening to 7.1 per cent in 2013.
Sub-Saharan Africa remained robust in 2011 at 4.9 per cent. Excluding South Africa, growth in the rest of the region was even stronger at 5.9 per cent in 2011, making it one of the fastest growing developing regions. Growth for the region is projected to accelerate to 5.3 per cent in 2012 and 5.6 per cent in 2013.
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