The World Bank slashed its global economic growth forecasts on Tuesday, citing the euro zone’s debt problems and weakening growth in emerging powerhouses.
“The world economy has entered a very difficult phase characterised by significant downside risks and fragility," the twice-yearly Global Economic Prospects report said.
It projected the global economy would expand 2.5% in 2012 and 3.1% in 2013, sharply lowering its June estimate of 3.6% for both years. The global economy grew at an estimated 2.7% rate in 2011, it said.
The World Bank highlighted the euro zone public debt crisis and the resulting contagion in the global financial system.
The World Bank also estimated India’s growth for the current fiscal at 6.8%, lower than the government projection, as the economy faces headwinds of high interest rates and “heightened” uncertainty of policy reforms.
Without naming India, the World Bank said in its report that South Asia’s economies were also confronted with “domestic policy paralysis and uncertainty about regulatory reforms.”
The government has been expecting 7-7.5% GDP growth in the fiscal ending March 2012, against 8.5%in the previous year.