SHANGHAI: The global economy will suffer the fallout from the financial crisis for years to come, the World Bank said Thursday in a report warning that growth may wilt later this year as stimulus spending fades.
The Washington-based bank forecasts the world economy will grow 2.7 percent this year, and 3.2 percent in 2011. It contracted 2.2 percent in 2009.
“A great deal of uncertainty clouds the outlook for the second half of 2010 and beyond,” the report said.
Though the “acute phase” of the crisis has passed, chronic weaknesses remain. Much depends on the timing of withdrawal from massive stimulus programs and adjustments to monetary policy, the bank said.
Mishandling could result in a “double-dip,” with a return to recession in 2011, it warned.
In the US, growth is projected at 2.5 percent in 2010 and 2.7 percent in 2011. European economies will see a slower recovery, with growth forecast at only 1 percent in 2010.
China’s economy, whose recovery has led the global rebound, will expand by 9 percent this year and the next, after growing 8.4 percent in 2009.
Developing countries will as usual see higher growth rates, at a combined 5.2 percent this year, but will be plagued by shortages of financing and investment that will handicap their progress. Rich countries will grow more slowly, by 1.8 percent in 2010, as fragile financial markets and anemic private demand crimp job creation and investment, the report says.
“Unfortunately, we cannot expect an overnight recovery from this deep and painful crisis, because it will take many years for economies and jobs to be rebuilt. The toll on the poor will be very real,” Justin Lin, World Bank chief economist, said in a statement.
While they will do better than industrial nations, developing economies will have growth rates that fall short of their potential due to the deterioration in conditions for financing and growth, the report said. Unemployment will remain a serious problem.
Given the reduced appetite among both investors and financial institutions for risk, money will remain tight — in many cases penalizing the countries least responsible for the frenzy of speculative investments that led to the crisis.
Global investment fell nearly 10 percent in 2009 and will rise only 4.9 percent this year, the report said.
But the report notes some positive trends that will cushion the blows from the crisis.
Oil prices will remain stable, averaging about $76 a barrel, it says, while other commodity prices will also rise by a modest 3 percent a year in 2010-2011.