World Bank: Gloomy Days Ahead in 2012

By: EW News Desk Team   Date: 18 January 2012

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EW News Desk Team

Always on the look out for the latest news to monitor the state of the world economy.

EconomyWatch, News Desk Team

 

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18 January 2012

After a tough year, the World Bank has cut their growth forecast for 2012, acknowledging that the global economy is still in a precarious situation and not poised for recovery yet.

The World Bank is predicting a modest 2.5 percent growth this year, down from a June 2011 estimate of 3.6 percent. For the United States, the world’s largest economy, the Bank predicts a 2.2 percent growth, down also from a previous 2.9 percent forecast.

Related Statistics: World Economy Forecast 2012

In the World Bank’s Global Economic Prospects report, it wrote:

The world economy has entered a very difficult phase characterized by significant downside risks and fragility.

Describing the worst-case scenario, the bank warned that "the risk of a much broader freezing up of capital markets and a global crisis similar in magnitude to the Lehman crisis remains."

While the bank doesn't expect the worst case to come true, "we are examining the possibility that things could go worse," said Andrew Burns, manager of Global Macroeconomic Trends, and lead author of the report.

Related Story: Think 2011 Was Bad? 2012 Will Be Even Worse: Joseph Stiglitz

Related Story: A Fragile And Unbalanced Global Economy In 2012: Nouriel Roubini

For China, the largest emerging market economy, it is expected to grow at a rate of 8.4 percent. While the World Bank doesn't expect China to implement any central bank led stimulus like it did in 2008/09, an increase in Chinese consumption would boost other commodity exporters like Brazil, South Africa and Argentina.

According to China’s statistics office, the country’s economy grew at 8.9 percent in the last quarter – the slowest in 10 consecutive quarters, largely on the back of cooling inflation and property prices.

"Developing countries will have to search increasingly for growth within the developing world, a transition that has already begun but is likely to bring with it challenges of its own," the report said.

Already, for major developing countries, especially the BRIC countries, growth has stalled following tighter domestic policies. Burns added:

Developing countries should hope for the best and prepare for the worst.

Related: Economic Statistics of Emerging and Developing Economies

Related Story: The 12 Fastest Growing Economies For 2012


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