World Bank Cuts Global Growth Outlook
The World Bank cut its global growth forecast by the most in three years, saying that a recession in the euro region threatens to exacerbate a slowdown in emerging markets such as India and Mexico.
The Washington-based institution said the world economy this year will grow 2.5 percent, down from a June estimate of 3.6 percent. The World Bank sees the euro area contracting 0.3 percent in 2012, compared with a previous estimate of 1.8 percent growth. The U.S. outlook was cut to an expansion of 2.2 percent from 2.9 percent.
“Even achieving these much weaker outturns is very uncertain,” the World Bank said in its Global Economic Prospects report released today. “The downturn in Europe and weaker growth in developing countries raises the risk that the two developments reinforce one another, resulting in an even weaker outcome.”
The World Bank urged developing economies to “prepare for the worst” as it sees a continued risk for the European turmoil to turn into a global financial crisis reminiscent of 2008. Euro-area industrial production declined for a third straight month in November, a report last week showed, adding to signs the economy failed to expand in the fourth quarter as leaders struggled to quell the region’s fiscal crisis.
The revision is the largest since January 2009, when the World Bank cut its global estimate for that year by 2.1 percentage points. The World Bank sees a global expansion of 3.1 percent in 2013, 0.5 percentage point lower than previously forecast.