The global economy will remain in effective recession this year as governments withdraw stimulus measures and private sector demand remains muted, the World Bank warned today.
In its latest economic forecast, the Bank said that the global economy would grow by 2.7 per cent this year. The International Monetary Fund has previously said that any global growth of less than 3 per cent is equivalent to a recession.
The World Bank said that, despite the reversal of last year’s 2.2 per cent drop in global GDP, the rate of growth this year would not be enough to cut the output gap left by the global recession. Andrew Burns, the lead economist in the World Bank’s development economics group, said: “We are now at a critical juncture in the world economy. The recovery [which has] started ... hasn’t overcome the hole that we managed to dig ourselves into with the crisis itself.”
The Bank estimates that the financial crisis and the resulting global downturn have plunged 64 million people into extreme poverty. Justin Lin, the chief economist of the World Bank, said: “The toll on the poor will be very real.”
Developing economies, which are forecast to grow by 5.2 per cent this year and 5.8 per cent next year, will continue to suffer from the impact of the financial crisis as they struggle to access capital, which was so abundant between 2002 and 2007.
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“As a result, trend growth rates in developing countries may be 0.2 to 0.7 per cent lower than they would have been, had finance remained as abundant and inexpensive as in the boom period,” Mr Burns said.
The World Bank also highlighted the tendency of some countries to hoard massive reserves, saying that its research suggested that, although countries with reserves were cushioned from the worst of the recession, those with bigger reserves did not enjoy a more modest downturn than those with smaller reserves.
Forecasts
Global economy
2009 -2.2%
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2010 2.7%
2011 3.2%
Developing countries
2009 1.2%
2010 5.2%
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2011 5.8%
Wealthier countries
2009 -3.3%
2010 1.8%
2011 2.3%