The World Bank said today the global recession this year will be deeper than it predicted in March and warned that a flight of capital from developing nations will swell the ranks of the poor and the unemployed.
The world economy will contract 2.9 percent, compared with a previous forecast of a 1.7 percent decline, the Washington- based lender said in a report today. Growth will be 2 percent next year, down from a 2.3 percent prediction, the bank said.
The bank, formed after World War II to fund health and development projects in poor countries, said that while a global recovery may begin this year, impoverished economies will lag behind rich nations in benefiting. The lender called for "bold" actions to hasten a rebound and said the prospects for securing aid for the poorest countries were "bleak."
"The recovery is not going to be V-shaped," said Alvin Liew, an economist at Standard Chartered Bank in Singapore. "We may see slower consumer demand over a prolonged period."
The bank is more pessimistic than its sister organization, the International Monetary Fund. The IMF, which is forecasting a global contraction of only 1.3 percent this year and growth of 2.4 percent in 2010, said June 19 that it plans to revise estimates "modestly upward."
The lender's view also contrasts with that of billionaire hedge fund manager George Soros, who on June 20 told Polish television that the worst of the global financial crisis "is behind us."
U.S. stocks fell, extending losses from the first weekly decline for global equities in more than a month. Crude oil fell for a second day and the price of copper fell to a three-week low.
The World Bank cut its forecast for the U.S. this year, calling for a 3 percent drop in the world's biggest economy, after predicting a 2.4 percent contraction in March.
Japan's gross domestic product will shrink 6.8 percent, more than the previous prediction of a 5.3 percent decline, the lender said. The euro area's economy may shrink 4.5 percent, compared with the previous estimate of a 2.7 percent contraction.
Global trade may drop by 9.7 percent, compared with a March forecast of a 6.1 percent decline.
"Unemployment is on the rise, and poverty is set to increase in developing economies, bringing with it a substantial deterioration in conditions for the world's poor," the World Bank said. While the world is set to return to growth in the second half of 2009, a recovery will be subdued, the report said.
