Economies around the world are still facing a struggle towards recovery, despite improved conditions in financial markets, the World Bank said Wednesday, as it sharply cut its global growth outlook for 2013.
The bank, which mainly lends money at relatively low rates to developing countries, said that "real-side recovery" had yet to materialize. However, it issued a cautiously optimistic forecast for more affluent countries like the U.S. on Wednesday, and predicted "a slow acceleration in growth" between 2013 and 2015.
World Bank economists are now forecasting growth of 2.4 percent for the global economy in 2013, from 2.3 percent in 2012. In its last forecast in June, the bank projected global growth would reach 3.0 percent in 2013.
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Andrew Burns, lead author of the bank's Global Economic Prospects report, said that a recovery the bank had anticipated last year was now expected "closer to the end of the first quarter and into the second quarter of 2013, rather than beginning a little earlier."
The World Bank also cut its forecast for developing countries, which last year grew at their slowest pace in a decade, to 5.5 percent in 2013 from 5.9 percent in a June forecast. It said growth in these countries should slowly pick up, reaching 5.7 percent next year and 5.8 percent in 2015.
The bank projected that growth in advanced economies should reach 1.3 percent this year weighed down by spending cuts, high unemployment and weak consumer and business confidence. Growth should strengthen next year to 2 percent and 2.3 percent in 2015. The World Bank called on the developing countries it helps fund to "emphasize internal productivity-enhancing policies" to try and kickstart growth. Several key fast-growing markets, including Brazil and China, disappointed in the third quarter of 2012.
World Bank economists believe that growth improved in the fourth quarter of 2012 in East Asia & the Pacific, Europe & Central Asia and South Asia; but growth slowed further in Latin America & the Caribbean. They were more confident about Europe's future after the European Central Bank pledged to do "whatever it takes" to save the region.
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However, the World Bank concluded that the global economy is still "fragile" and "prone to further disappointment" – and expressed concerns about "unusual weakness" in investment and industrial activity in the U.S. The world's biggest economy has been blighted by the debate over the "fiscal cliff" and its debt ceiling in recent months.
- Reuters contributed to this report.