GLOBAL growth will not get seriously under way until 2015, with industrialised countries stagnant until then, the World Bank’s chief economist, Kaushik Basu, said on Tuesday.
There was a "moral urgency" for emerging countries to think of ways to keep their growth rates up during this period of sluggish economic expansion, he said at a public lecture in Johannesburg during a visit to South Africa.
"I do feel that there will be a certain period of global slowdown up to 2015 ... the global recovery will be small until then," Mr Basu said.
His view is in line with consensus. Old Mutual Investment Group South Africa economist Johann Els said on Tuesday that loose monetary policy in many countries would not offset tight fiscal policy, keeping global growth tepid for a couple of years.
Mr Basu said he did not expect to see "strong" negative effects on the world economy from the $85bn of US "sequester" spending cuts that kicked in on Friday.
Further, he said he expected the eurozone to remain intact, describing it as a "good thing and a direction in which the world has to go."
"It will continue to go through a difficult phase but is here to stay."
In an outlook published in January, the World Bank estimated that growth in global gross domestic product would amount to 2.4% this year, barely changed from an estimate of 2.3% for last year. It saw the pace picking up gradually to 3.1% next year and 3.3% in 2015.
The World Bank believes developing countries will grow 5.5% this year, and rise 5.7% and 5.8% in 2014 and 2015, respectively.
The World Bank was aware of a greater need for infrastructure spending in developing economies, and was "looking at ways of attending to this," Mr Basu said.
He said the lending institution would also welcome the proposed establishment of a new development bank for the Brics group of emerging economies, which includes Brazil, Russia, India, China and South Africa.
The size of lending "space" occupied by the World Bank and International Monetary Fund was much smaller than it was some years ago, which meant there was room for other multilateral lending banks, Mr Basu said.
He said South Africa should "pay a lot of attention" to efforts to increase savings and investment, which would boost its pace of economic growth.
South Africa’s savings rate is low compared with many other countries and is seen as a big challenge for the country. During the second and third quarters of last year it amounted to just 13.3% of gross domestic product, its lowest level since 2007.
Investment picked up last year, with gross fixed capital formation growing 7,2% in the third quarter, compared with 7% in the second, according to data from the Reserve Bank. The figures are seasonally adjusted and annualised.
But the private sector is reluctant to expand in what many companies still see as an uncertain policy environment.
Investment by private business enterprises grew 2.8% in the third quarter of last year compared with 2.7% in the second quarter.
Mr Basu said labour regulations generally needed to be flexible, to allow countries to compete in the global market.
South Africa’s labour regulations have been criticised as some of the most rigid in the world.