MercoPress. South Atlantic News Agency

World Bank forecasts modest global growth of 3.3% in 2008

The global economy is expected to slow to a modest 3.3% growth in 2008, but things could worsen if United States slips into recession, the World Bank said this week in a report on “Global Economic Prospects 2008”.

Despite financial turmoil unleashed by a meltdown in the US mortgage market, global growth slowed in 2007 to 3.6% from 3.9% rate in 2006, according to the report. Most of the 2007 slowdown was due to weaker growth in high-income countries. Developing countries cushioned the blow with robust 7.4% growth, virtually unchanged from 2006. The World Bank said the slowdown in the US, the world's largest economy, is being partly offset by the resilience of developing countries, which have powered through four consecutive years of record expansion. After modest growth of 3.3% in 2008, global output should expand by 3.6% in 2009 as the US economy rebounds, predicts the report. US economic growth is expected to have slowed to 2.2% in 2007, from 2.9%. The Bank forecast a 1.9% expansion in 2008 and a 2.3% recovery in 2009. The authors of the 2008 report highlighted the current "period of increased uncertainty" and cited several "serious downside risks" to a projected scenario of a soft landing for the global economy. "External demand for the products of developing countries could weaken much more sharply and commodity prices could decline if the faltering US housing market or further financial turmoil were to push the US into a recession" said the report. Other risk factors mentioned are over-stimulation of developed economies by central banks pumping liquidity in response to the climate of uncertainty which could lead to a further steep decline in the US dollar. "Overall, we expect developing-country growth to moderate only somewhat over the next two years," Uri Dadush, director of the World Bank's Development Prospects Group and International Trade Department, said in an accompanying statement. "However, a much sharper US slowdown is a real risk that could weaken medium-term prospects in developing countries," he said. The 15-nation Euro-zone would suffer in this environment: growth was expected to decline more than a half percentage point to 2.1% in 2008, before rebounding to 2.4% in 2009. Japan is expected to expand 1.8%, bouncing to 2.1% in 2009. The World Bank estimates East Asia and Pacific GDP grew about 10% in 2007, with China leading with over 11%. But the region is expected to recede to 9.7% in 2008 and to 9.6% by 2009.