World Bank cuts growth forecasts

The World Bank cut its global growth forecast for this year after emerging markets from China to Brazil slowed more than projected, while budget cuts and slumping investor confidence deepened Europe's contraction.

The world economy will expand 2.2 per cent, less than the forecast made in January for 2.4 per cent growth and slower than last year's 2.3 per cent, the bank said in a report released yesterday in Washington.

It lowered its prediction for developing economies and saw the euro region's gross domestic product shrinking 0.6 per cent. In contrast, forecasts were raised for the United States and Japan, which was helped by financial and monetary stimulus.

"Hard data so far this year points to a global economy that is slowly getting back on its feet," the Washington-based lender said in its twice-yearly report. "However, the recovery remains hesitant and uneven."

Efforts by European policymakers to stem the region's debt crisis have alleviated the main risk to global growth and financial-market stability, according to the lender. The bank now sees smaller threats, including lower commodity prices and the impact of unwinding unprecedented monetary stimulus in advanced economies, the talk of which has sent currencies from India to Thailand lower.

Debate among US policymakers over when and how to dial back the Federal Reserve's US$85 billion-a-month programme of asset purchases has shaken financial markets in developing nations. More than US$2.5 trillion has been erased from the value of global equities since the chairman of the Federal Reserve, Ben Bernanke, said on May 22 that the Fed could scale back stimulus efforts if the employment outlook shows "sustainable improvement".