World Bank Cuts 2009 Global Growth Forecast

The World Bank cut its global growth forecast, stating that they believe the world economy will shrink by 2.9%, according to reports Monday.

"The global recession has deepened," The World Bank said in a report. “Unemployment is on the rise, and poverty is set to increase in developing economies.”

Global trade is expected to plummet by 9.7 percent this year, while total gross domestic product for high-income countries plunges by 4.2 percent, the bank said. It said economic growth in developing countries should slow to 1.2 percent. Excluding relatively strong China and India, developing economies will contract by 1.6 percent.

The bank's latest forecast is a stark reduction from its March prediction of a 1.7 percent global shrinkage. March’s initial prediction was said to have been the worst on record, according to the Associated Press.

"To break the cycle and revive lending and growth, bold policy measures, along with substantial international coordination, are needed," the World Bank said.

Investment and other financial flows to developing countries plunged by an estimated 39 percent in 2008 to $707 billion, the World Bank said. It said foreign direct investment in developing countries is projected to drop by 30 percent this year to $385 billion.

Eastern Europe and Central Asia have been hit hardest and the region's gross domestic product is expected to plunge by 4.7 percent this year, the bank said. It said growth should recover next year to 1.6 percent.

GDP in Latin America and the Caribbean should shrink by 2.3 percent this year before rebounding to expand by 2 percent in 2010, the report said.

In the Middle East and North Africa, growth is expected to fall by half this year to 3.1 percent, while that of sub-Saharan Africa will drop to 1 percent from an annual average of 5.7 percent over the past three years, the bank said.

East Asia should post a 5 percent expansion, supported in part by China's stimulus-fueled growth, the bank said.

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