World Bank cautions on economic stimulus Developing countries should not be tempted to stimulate their economies this year in the face of weak growth, the World Bank warned on Wednesday even though the world faces another challenging year. In forecasts that suggest 2013 will see only marginally stronger growth than last year, the Bank recommends that poor and middle-income countries concentrate on fundamental drivers of prosperity rather than attempt a quick fix. IN World The warning comes as growth rates in large emerging economies including Brazil, Russia and India slowed sharply last year. Four years after the global economic crisis, the world economy is still expected to struggle to expand at the rates seen in the years immediately before 2008. But the international organisation said "the majority of developing countries are operating at or close to full capacity." Jim Yong Kim, the World Bank's new president, said: "The economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth." In its twice-yearly Global Economic Prospects report, the World Bank forecast that global economic growth would pick up from 2.3 per cent last year, measured at market exchange rates, to 2.4 per cent in 2013 although the marginal rise masks an acceleration of activity throughout this year. The recent pattern of decent expansion in developing countries offset by feeble growth in high income countries is expected to persist at least until 2015, with 5.5 per cent expansion forecast for poorer countries and 1.3 per cent in richer countries this year. The expected growth rate of developing countries would have been considered strong in the 1970s, 1980s and 1990s, but falls short of the rates seen since the turn of the millennium, Andrew Burns, the lead author of the report, told journalists in London. "Developing countries" growth is generating through their own activities and refutes the view that it is just a reflection of strong demand in high income countries," he added. The volume of trade between developing countries exceeded that of rich countries for the first time in 2011, Mr Burns said. With risks of a sudden eurozone implosion lower than last year, the assessment is that risks around the central forecast are more balanced this year although the Bank said that the outcome would be weaker if there was another bout of eurozone contagion, the US did not find a solution to its budget this spring, investment in China dipped or oil and food prices rose sharply. But even with risks and slower growth last year, the World Bank was clear that most developing countries should not seek to boost their own economies with short-term monetary or fiscal policy. "Additional demand stimulus could be counterproductive - raising indebtedness and inflation without significant pay-off in terms of additional growth," the report warned. With rich countries still facing difficulties sorting out their financial sectors and public finances, the report warned the developing world not to expect much of a boost from growing exports to these parts of the world. Instead, they should concentrate on emulating the successful productivity-enhancing policies of the 1990s and 2000s in structural reforms, education, improved governance and investment conditions. The improved conditions for poorer countries is underpinned by rising flows of bank lending and equity issuance in 2012 and a recovery of capital flows into middle income country bond markets after the summer.