World Bank Cuts Growth Forecasts as Developed Nations Lose Steam

The World Bank cut its global growth forecast for this year as austerity measures, high unemployment and low business confidence weigh on economies in developed nations.

The Washington-based bank on 15 January projected the world economy will expand 2.4 percent, down from a June forecast of 3 percent, after growing 2.3 percent in 2012. It halved its forecast for Japan, cut the U.S. projection by 0.5 percentage point and predicted a second year of contraction in the euro region. It also lowered projections for emerging markets led by Brazil, India and Mexico.

“Overall, the global economic environment remains fragile and prone to further disappointment, although the balance of risks is now less skewed to the downside than it has been in recent years,” the World Bank said in its twice-yearly report.

Developed economies failed to gain steam in 2012 even after measures to stem the European debt crisis helped boost financial markets around the world. Uncertainties surrounding a U.S. political agreement on spending cuts and Japan’s diplomatic tensions with China may weigh further on the global economy just as emerging markets recover from one of their slowest growth rates of the past decade.