Economists challenge World Bank outlook

In its Global Economic Prospects Report, the World Bank said the global economy would grow at 2.3 per cent this year, down from the 3 per cent predicted in June.

“Four years after the onset of the global financial crisis, the worst appears to be over. However, the global economy remains fragile, as high income countries continue to suffer from volatility and slow growth,” the Bank said.

Lead author of the report Andrew Burns said developed countries were experiencing the slowest rates of growth.

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“What we are looking at... is another difficult year,” he said.

“We expect growth in high-end countries to be very weak – 1.3 per cent. That’s the same growth we had last year... for developing countries also relatively weak growth... but that’s something likely to strengthen over the course of the next couple of years.”

But Andrew Kenningham, senior global economist at Capital Economics, said this data lagged the economy.

“There have been some improvements in the past two or three months. The Purchasing Managers’ Index has been slightly stronger in the US and China and indicate things are slightly less gloomy in the eurozone than they were,” he said.

“The biggest risks have been diminished in the short term. The fiscal cliff has been partly addressed, a Greek exit or break-up of the eurozone is less likely and China seems to be avoiding a hard landing”

Simon Ward, economist at Henderson, agreed there were better ways to test the health of the global economy.

“The downward revision reflects the disappointing second half of last year. These forecasts are only every six months and can be unreliable – I would rather look at lending and money supply, which have been picking up in recent months.”