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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 world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, the Washington-based institution said. The euro area may contract 0.3 percent, compared with a previous estimate of a 1.8 percent gain. The U.S. growth outlook was cut to 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 in Asia and yesterday in the U.S. “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.”
China, the world’s second-biggest economy, reported today that foreign direct investment declined in December by the most since July 2009, underscoring the World Bank’s warning that developing economies should “prepare for the worst.” Home prices fell in 52 of 70 cities in December from November, statistics bureau data showed.
Turmoil in European still has the potential to trigger a global financial crisis reminiscent of 2008, according to the World Bank.
The estimated global expansion would compare with growth of 2.7 percent in 2011 and 4.1 percent in 2010, and a contraction of 2.3 percent in 2009, the World Bank estimates. 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 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," it said.
"While 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," the World Bank said, referring to the U.S. investment bank that went bankrupt in 2008 and helped intensify a global financial crisis.
On balance, the World Bank said global economic conditions were "fragile and there remains great uncertainty as to how markets will evolve over the medium term."
investment bank that went bankrupt in 2008 and helped intensify a global financial crisis.
1) Lower the interest rates to zero! DONE
2) Buy securities from the banks to expand the Feds balance sheet! DONE
3) Increase the money supply! DOING
4) Buy our countries debt! DOING
5) DEVALUE THE DOLLAR 40%! ON THE WAY
Originally posted by boncho
I hate the term growth. The only growth that continues its path is cancer, and eventually it kills the host that it lives off of.
There cannot be growth indefinitely.
AUSTRALIA should brace for a return to the ''ugliest'' of times if the latest World Bank warning of a new financial crisis proves correct, a leading economist says.
The World Bank yesterday signalled a downturn so severe it would eclipse the chaos that followed the collapse of Lehman Brothers in 2008. Deloitte Access Economics director, Chris Richardson, said if there was not a sharp turnaround overseas, Australians were in for a rocky ride through a ''GFC Mark II''.
''If we get a re-run of last time, you get higher unemployment, sharp hits to company profits and a slowdown in the Australian economy without a technical recession, largely due to the momentum in the big mining construction projects,'' he said.
"Countries do not have the fiscal and monetary space to stimulate the global economy or support the financial system to the same degree as they did in 2008-09. While developing countries are in better shape than high-income countries, they too have fewer resources available. No country and no region will escape."
Australia, not specifically mentioned in the report, has a relatively good budget position and a better ability than most to ward off a downturn by interest rate cuts and increased government spending, as it did in 2008.
But the bank says commodity-exporting nations such as Australia will find their budgets hit by much lower prices.
Each of its scenarios are worse than envisioned in the government's December budget update, calling into question the government's forecast of a 2012-13 budget surplus.
The acting Treasurer, Bill Shorten, acknowledged the budget would "obviously be hit".
"The past year was difficult and disappointing for the global economy. The outlook for 2012 looks even more challenging," he said. "But the Australian economy is now around 7 per cent larger than it was prior to the global financial crisis … We have a proven track record having fought off the global recession and the worst the world can throw at us."
The International Monetary Fund is proposing to raise its lending capacity by as much as $500 billion to insulate the global economy against any worsening of Europe’s debt crisis.
The Washington-based lender is aiming to increase its resources after identifying a potential need for $1 trillion in financing in coming years, an IMF spokesman said in a statement. The IMF is studying options and will not comment further until it has consulted its members, the fund said. To incorporate a cash buffer, the lender is seeking a total $600 billion.
Originally posted by surrealist
reply to post by burdman30ott6
Indeed, though that is the International Monetary Fund, not the World Bank. The World Bank has its own framework and reasons for issuing its warnings. Perhaps you can start another thread to argue reasons why the IMF are upping the fear gauge?