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World Bank slashes growth forecast and warns 'prepare for next crisis'

by James Phillipps on Jun 11, 2014 at 08:09

World Bank slashes growth forecast and warns 'prepare for next crisis'

The World Bank has warned investors to prepare for the next crisis and slashed its global growth forecast from 3.2% to 2.8% amid concerns about bad weather in the US, the Ukraine crisis and future changes to macro policy.

Overall the organisation sees global growth of sub-5% for the third consecutive year with developing countries set to be the biggest disappointment.

The World Bank lowered its January forecast of 5.3% growth from developing nations to 4.8%, although it expects them to rebound sharply over the next two years delivering 5.4% growth in 2015 and 5.5% in 2016.

The organisation forecasts growth of 1.9% from developed nations in 2014, which it anticipates will accelerate to 2.4 next year and 2.5% in 2016.

Kaushik Basu, senior vice president and chief economist at the World Bank, said that short term financial risks have become ‘less pressing’ although stock and bond markets remain vulnerable to changes in monetary policy.

'The financial health of economies has improved. With the exception of China and Russia, stock markets have done well in emerging economies, notably, India and Indonesia. But we are not totally out of the woods yet,' he said.

'A gradual tightening of fiscal policy and structural reforms are desirable to restore fiscal space depleted by the 2008 financial crisis. In brief, now is the time to prepare for the next crisis,'

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