World Bank cuts growth outlook as advanced nations drag

Tue Jan 15, 2013 9:37pm EST
 
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By Lesley Wroughton

WASHINGTON (Reuters) - A frustratingly slow economic recovery in developed nations is holding back the global economy, the World Bank said on Tuesday, as it sharply cut its outlook for world growth in 2013.

The World Bank forecast that global gross domestic product will inch up 2.4 percent this year, from 2.3 percent in 2012. In its last forecast in June, the bank projected global growth would reach 3.0 percent in 2013.

Andrew Burns, lead author of the bank's Global Economic Prospects report, said that a recovery the bank had anticipated last year was now expected "closer to the end of the first quarter and into the second quarter of 2013, rather than beginning a little earlier."

The Bank warned that a drawn-out political battle in the United States over raising the government's borrowing limit and spending cuts could hit growth, spark a loss of confidence in the U.S. dollar and unnerve financial markets.

The World Bank also cut its forecast for developing countries, which last year grew at their slowest pace in a decade, to 5.5 percent in 2013 from 5.9 percent in the June forecast. It said growth in these countries should slowly pick up, reaching 5.7 percent next year and 5.8 percent in 2015.

Before the global financial crisis hit in 2007, developing countries as a whole were chalking up growth rates of around 7.5 percent, with China growing at an annual rate of 10 percent.

The World Bank forecast that Chinese growth would reach 8.4 percent this year, slowing to 7.9 percent by 2015.

In comparison, growth in advanced economies should reach a very weak 1.3 percent this year, weighed down by spending cuts, high unemployment and weak consumer and business confidence, the World Bank said. Activity should strengthen next year to 2 percent and 2.3 percent in 2015.   Continued...

 
A man is silhouetted against the logo of the World Bank at the main venue for the International Monetary Fund (IMF) and World Bank annual meeting in Tokyo October 10, 2012. REUTERS/Kim Kyung-Hoon