World Bank Cuts Global Growth Forecast: "Prepare for the worst", page 1

The World Bank has come out slashing its forecast of global growth by 1.1 per cent, from 3.6 per cent in June to 2.5 per cent. That's a huge cut in the forecast in just seven months. They also raise the possibility of another Lehman type crisis unfolding, but now, with much less capacity and accommodation to deal with it. Their warnings and comments speak for themselves:

Bloomberg

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.

CNBC

"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."

reply to post by surrealist

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Dear surrealist,

Good catch. S&F. Peace.

reply to post by surrealist

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Theres no doubt the economies is in shambles and that we're still to face the worst part as your thread also suggests, but looking at the sources I cant help but think "fearmongering" and preparation for a world currency?

investment bank that went bankrupt in 2008 and helped intensify a global financial crisis.

Before that happens they need to destroy the currencies so lets prompt up the fed so they can bail out some more banks or countries?.....dont forget Bernanke's "goal from 2002" is to inflate the USD enough to force a 40% devaluation. This devaluation would "destroy" the loans(safty) that much of the world lives on. What happens to the USD when the countries holding US treasurebonds go bankrupt?...just a thought.

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

Link to Bernankes speech

Yo Aussies.....

Financial crisis: get ready for next wave

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."

reply to post by surrealist

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Gotta drum up the fear gauge before you propose something like this:
www.bloomberg.com...

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.

The rats are looking for more cheese.

reply to post by burdman30ott6

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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?

Originally posted by surrealist
reply to post by burdman30ott6

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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?

Left hand and right hand of the same theif, my friend. The World Bank gets its money from private institutions via investment (in other words, it is the arm which searches for money from the world's bankers and large stock funds in exchange for profits on said investment) whereas the IMF issues quotas to the member nations (membership fees, in other words), demanding public funds from each country's tax payer funded budgets.

In this scenario, I suspect that the World bank is declaring doom with the knowledge that the IMF can then point to said doom and grab tax dollars from various governments to protect banks from various collapse scenarios in Europe. It's the WB sounding the alarm with the intent of giving the IMF the ammunition they need to demand more $$$ and, possibly, provide leveraged support for the IMF's ever ridiculous demands on the PIIGS nations.

Like I said earlier, the rats are seeking more cheese.

reply to post by CaptainNemo

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Invest in food, water and time with your family!

Gold and silver are a drop in the bucket compared to other simple pleasures. The value of metal can drop easily as well. I will keep my toilet paper!

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