The World Bank has cut its forecast for global growth to approximately 2.2 per cent for 2013, while contraction in the eurozone is also expected to worsen this year.
The latest Global Economic Prospects report from the bank has cut back its outlook for global GDP from its previous forecast of 2.4 per cent in January 2013.
The World Bank now expects “muted growth” in the global economy, with expansion of around 2.2 per cent this year, which should strengthen to 3 per cent and 3.3 per cent in 2014 and 2015.
The report has also increased the forecast for contraction in the eurozone to 0.6 per cent for 2013, compared with the previous projection of 0.1 per cent. Eurozone growth is expected to be a “modest” 0.9 per cent in 2014 and 1.5 per cent in 2015.
As part of the revised outlook, the report says that despite continuing contraction in the eurozone, “risks from advanced economies have eased and growth is firming”.
Fiscal consolidation, high unemployment and still weak consumer and business confidence will keep growth in high-income countries this year to 1.2 per cent, firming to 2 per cent in 2014 and 2.3 per cent by 2015, the report says.
The World Bank expects developing countries to lead the expansion in the global economy. However it also describes this pick-up as “modest because of capacity constraints in several middle income countries”.
Developing country GDP is projected to be around 5.1 per cent for 2013, rising to 5.6 and 5.7 per cent for 2014 and 2015 respectively.
World Bank senior vice president and chief economist Kaushik Basu says: “While there are markers of hope in the financial sector, the slowdown in the real economy is turning out to be unusually protracted.”
“This is reflected in the stubbornly high unemployment in industrialized nations, with unemployment in the eurozone actually rising, and in the slowing growth in emerging economies, with India’s annual growth having dropped below 6 percent for the first time in 10 years.
”Also, there is heightened speculation that the US may withdraw [quantitative easing] and widespread concern about its consequences.”