The World Bank has slashed its forecasts for global growth, sending stockmarkets plummeting this morning.
The UN organisation cut its prediction for global GDP growth in 2015 from 3.4 per cent to 3 per cent and also cut its 2016 prediction from 3.5 per cent to 3.3 per cent.
The biannual report also warned the main risks to its outlook were on the “downside”, suggesting growth may be even lower than expected.
Markets throughout Europe reacted negatively to the news this morning, with the FTSE 100 falling by nearly 2 per cent in early trading before rebounding slightly.
Mining stocks were particularly badly hit as commodity prices, such as copper, tumbled as speculators predicted lower demand due to weaker global growth.
The World Bank report said the “fragile” recovery from the financial crisis was becoming increasingly “divergent” as the US and the UK were “gathering momentum” but growth in Japan and Europe was “sputtering”.
But it said there were four main risks to the global economy; persistently weak trade, volatility brought on by interest rate rises in major economies, the impact of the low oil prices on oil-producing countries and the risk of prolonged stagnation or deflation in the eurozone and Japan.
