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Strong growth: World Bank
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December 5, 2000: 3:56 p.m. ET
Sees global economic growth of 3.4% in 2001, higher than earlier predictions
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NEW YORK (CNNfn) - The global economy appears poised for solid growth in the coming years as technological advances and globalization have helped boost growth prospects, the World Bank said in a report Tuesday.
In its annual Global Economic Prospects report, the bank said that while many developing countries could see the fastest growth in a decade, some of the world's poorest countries are hampered by industrial nations' trade barriers, further widening the gap between rich and poor.
The report forecasts world economic growth of 3.4 percent in 2001, up from a March forecast of 3.1 percent, and predicts growth of 3.2 percent in 2002, up from an earlier 3.1 percent prediction.
It also projects U.S. economic growth of 3.2 percent in 2001, down from a rapid 5.1 percent in 2000, before slowing further to 2.9 percent in 2002. In March, the bank forecast U.S. growth of 2.7 percent and 2.8 percent for 2001 and 2002, respectively.
Regional forecasts
Growth is expected to be strongest in developing countries, where the bank sees economic expansions of 5.0 percent in 2001, up from an earlier 4.8 percent estimate, and 4.8 percent in 2002.
The report also contained the following regional growth forecasts:
- East Asia and Pacific of 6.4 percent in 2001 and 6.0 percent in 2002.
- Europe and Central Asia of 4.3 percent and 3.9 percent in 2001 and 2002.
- Latin America and the Caribbean of 4.1 percent and 4.3 percent in 2001 and 2002.
- Middle East and North Africa of 3.8 percent and 3.6 percent in 2001 and 2002.
- South Asia of 5.5 percent in both 2001 and 2002.
- Sub-Saharan Africa of 3.4 percent and 3.7 percent in 2001 and 2002.
The bank credited the positive prospects for developing countries to many nations' adoption of reforms to cut inflation, increase global integration and improve the health and education of their citizens. But, despite those improvements, further inroads into poverty reduction face significant risks, the report warned.
Positive reforms
"The prospect for growth in the next 10 years are better than they have been; in the developing world, than they have been over the past 30 years," World Bank Chief Economist Nick Stern told a news briefing at the bank's headquarters in Washington.
But he warned developing countries still face significant risks, including the potential for further financial market volatility, an abrupt slowdown in U.S. growth, sharp changes in oil prices and a failure to deepen domestic reform.
While greater growth has helped many regions grow per capita incomes faster than in industrial countries, Stern said raising incomes in Africa remains a major challenge if poverty is to be significantly reduced in the years ahead.
The report suggested the world economy, forecast to grow 4.1 percent this year, likely approached a cyclical high in 2000, boosted by strong U.S. growth, a recovery in Japan and Europe and a sharp rebound of emerging economies.
Liberalized trade
The report forecasts that global trade volumes will post a 12.5 percent increase in 2000, the largest such jump since before the first oil shock of the 1970s. And while trade volumes are predicted to grow by 8.0 percent in 2001 and 6.8 percent in 2002, many of the world's poorest countries have not kept pace.
While most developing economies significantly liberalized their trade regimes during the 1990s, trade barriers among rich nations for agricultural products, textiles and other products remain high. Stern estimated the cost of those trade barriers at about $100 billion annually, twice as much as aid flows to poor nations.
"These trade barriers act as a major roadblock for developing countries wanting to get greater quantities of their textiles and agricultural goods into the lucrative import markets of industrial countries," said Uri Dadush, director of the bank's Economic Policy and Prospects Group.
Stern said that industrial countries have encouraged developing nations to liberalize trade while maintaining their own trade barriers. He called such actions "hypocrisy."
Oil prices seen falling
The report also forecasts the price of oil falling from the highs seen earlier this year to $28 a barrel for 2000, $25 a barrel in 2001 and $21 a barrel in 2002. But the report warns that worst case scenarios, such as an unusually cold winter, could temporarily spike prices as high as $50 a barrel.
 "Prices are expected to average about $18-19 per barrel for the rest of the decade, as technological improvements boost energy production and conservation efforts continue," the report said.
The report characterized the effect of the Internet on the world economy as "globalization on steroids." While the information age promises enhanced global growth, it brings with it the risk of economic marginalization for developing nations that cannot access it effectively.
"The challenge for developing countries is to realize the remarkable promise of the Internet in driving economic growth, and to prevent the digital divide from widening," the report said, adding that a well-educated work force and a strong telecommunications sector are needed to fully realize gains from the Internet.
-- from staff and wire reports 
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