World Bank Cuts GDP Predictions

Sara Patterson

By: Sara Patterson

In a report published today, the World Bank dramatically reduced its global economic growth expectations for the coming years, a sign signaling to both investors and global leaders that the Bank expects another global economic crisis. The report recorded predictions of world economic growth of only 2.5% in 2012 and 3.1% in 2013, expectations which are notably lower than the number predicted in June 2012, which was 3.6% growth.

Even countries that are not currently facing significant financial struggles were met with low expectations for financial expansion in the coming year, with an expected expansion of high-income countries restricted to only 1.4% in the coming year. The forecast for developing countries in 2012 was reduced to 5.4%, down from the earlier 6.2% growth that was anticipated only a few months ago.

World Bank – Outlook Bleak, Caution Required

The World Bank report also warned of the risks of the deepening debt crisis in Europe, and how this could cause global economic predictions to be reduced further. It pointed out that risk aversion to Europe has increased dramatically since August 2011, a sentiment which affects developing countries as well as members of the EU. The immediate result has been that borrowing costs for developing countries rose sharply and the funds to developing countries decreased, thereby hindering development potential not just in the immediate time frame, but potentially well into the future as well. The report expressed further concerns that developing countries would not be able to handle changing conditions should things continue to deteriorate, and that these countries would suffer immeasurably from any further escalation in the Eurozone debt crisis.

Finally, the World Bank report cited continuing political strife in the Middle East and continued high debts in Japan and the United States as reasons to feel uncertain about global economic conditions.

Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.

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