World Bank figures show growth rate cut by half

The main economic impact of the current world crisis will be felt in 2002, according to statistics released by the World Bank as recession is predicted for Euroland and the USA.

The World Bank report “East Asia Regional Review, 2001” is the first to be produced by the World Bank since September 11th. It predicts that growth rates for 2002 will be half of the figures predicted previously. Before September 11th, the growth rate for the world economy was forecast at 1.5% for 2001 and 2.6% for 2002. Now, one month later, the figures have been revised at 1.3% for 2001 and 1.6% for the next year.

For the industrialised nations (OECD) the figure is revised down from a growth rate of 2% to 1% for 2002, and for world trade from 6.1% to 4.0% after September 11th.

The report states that the main effect of September 11th on the world economy will be a climate of greater insecurity and indefinition, depressing consumer confidence levels considerably. The World Bank report points out that other knock-on effects will depend upon the scale and duration of the campaign in Afghanistan, which does not rule out a further downward revision of the growth rates or trade figures.

The data show a decline in the second half of 2001, but the greatest impact will be felt in the following year. How long it will last is impossible to predict at present, however the Governor of the Bank of England, Eddie George, stated in an interview with the Financial Times that “the world economic slowdown could still last for three years”. This position appears to be compounded in the World Bank report, which indicates a trend for lesser growth rate until 2003.

Brighter days are predicted for 2004, with the USA in front at a predicted 3.9%, Euroland at 3.6%, Japan finally out of recession at 2.4% and world growth rates at 3.4%. Federal Reserve Chairman Alan Greenspan is also optimistic about the long-term setting, as he confirmed at a meeting of the Economic Committee at the US Congress on October 17th, but regarding the short-term, he also defends the position that there are difficult days to come.

“The sharp increase in uncertainty has reduced consumer spending and capital investment. Homes and companies, confronted with uncertainty, withdraw from the marketplace, despite this withdrawal having been partial and presumably temporary”, he said in an interview with Reuters.


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