Global economy to grow by 2.2 percent this year

The World Bank has lowered its growth forecasts for the global economy, as the recession in the eurozone will be deeper than expected and the growth of some developing countries has slowed down.

In its semi-annual report Global Economic Prospects, published on Thursday, the Bank estimates that the global economy will grow by 2.2 percent this year, down from last year’s 2.3 percent and lower than the 2.4 percent it estimated in the previous report published in January.

The slowdown in global economic growth is due, among other things, to the deepening recession in the eurozone. In its January forecasts, the World Bank estimated that the eurozone economy would decline by 0.1 this year, while it now expects a decline of 0.6 percent.

The Bank also warns that the growth of large developing economies, which have driven global economic growth in recent years, will not be as strong as before the global financial crisis, so these countries will need to focus on structural reforms to maintain high growth rates.

As a result, the Bank has lowered its forecasts for these countries, which already grew at the slowest pace in the last decade last year. In the new estimates, it expects growth in developing economies of 5.1 percent, while it forecasted 5.5 percent in January.

Before the global financial crisis in 2008, developing countries generally achieved growth rates of around 7.5 percent, while China grew at an annual rate of 10 percent.

Meanwhile, the growth of the Chinese economy, the second largest in the world, has significantly slowed down, and it could amount to 7.7 percent this year, while in January the Bank expected growth of 8.4 percent.

In the new forecasts, it has also lowered estimates for other BRIC countries. It expects India to record growth of 5.7 percent this year, not 6.1 percent as expected in January, while Brazil’s economic growth could slow from the initially estimated 3.4 percent to 2.9 percent. Russia’s growth could slow from last year’s 3.4 percent to 2.3 percent, the Bank estimates.

Among the few developed countries for which the World Bank has raised growth estimates are the USA and Japan, thanks to the extremely loose monetary policy of their central banks, which are literally printing fresh, cheap money to stimulate economic growth.

The World Bank estimates that this year the US economy, the largest in the world, will grow by 2 percent, while in January it expected growth of 1.9 percent.

Japan’s gross domestic product, the third largest economy in the world, could grow by 1.4 percent, while in the January forecasts the Bank expected growth of 0.8 percent.

Presenting the “Global Economic Prospects,” Andrew Burns, the chief author of the report, stated that the global economy should be less volatile in the future, but that growth could be slow.

“Growth has not slowed due to weaker demand but because, in our opinion, the very strong growth in the period before the financial crisis was inflated. Now growth is more in line with economic potentials,” said Burns, emphasizing that the global economy is on the path to new normal post-crisis growth rates.

While it expects a slowdown in global economic growth this year, in the coming years the Bank forecasts acceleration. Thus, next year the global economy should grow by 3 percent, and in 2015 by 3.3 percent.

At the same time, the Bank estimates that the greatest risks will continue to be uncertainty regarding the eurozone and fiscal policy in the USA, while developing countries will need to be cautious of the side effects of massive monetary expansion in developed countries such as the USA and Japan.