The World Bank has issued a dire outlook for the global economy, warning that the world could suffer a recession “as large or even larger than that of 2008-09”.
In its Global Economic Prospects 2012 report, the World Bank said that sovereign debt crisis in the eurozone worsened considerably in August 2011.
“While [the eurozone crisis is] contained for the moment, the risk of a much broader freezing up of capital markets and a global crisis similar in magnitude to the Lehman crisis remains,” said the report.
As a result, the World Bank has revised its global growth forecast for 2012 down to 2.5 per cent, and 3.1 per cent in 2013. This is down from June forecasts of 3.6 per cent growth for both 2012 and 2013.
Breaking the 2012 growth prediction down to regions, the developing world is expected to grow by 5.4 per cent and high-income countries are predicted to grow by 1.4 per cent. The eurozone will contract by 0.3 per cent, according to the report.
Emerging markets are not as well placed for a second global downturn as they were in 2008, warned World Bank director of development prospects Hans Timmer.
“Developing countries should pre-finance budget deficits, prioritise spending on social safety nets and infrastructure, and stress-test domestic banks,” Timmer said.
