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World Bank predicts economic growth
Report says global economy to grow by 2.7 per cent in 2010 but warns against fallback.
Last Modified: 21 Jan 2010 16:10 GMT
The US is proposing tighter limits on financial institutions' risk taking [AFP]

The World Bank has forecast increased global economic growth for the coming year after the passing of the "acute phase" of the world recession.

A report released on Thursday by the Washington-based group predicted 2.7 per cent world economic growth this in 2010 and 3.2 per cent for 2011.

This follows a 2.2 per cent contraction in 2009.

However, the World Bank warned that the recovery was "fragile", with the rebound expected to slow at the end of the year "as the impact of the fiscal stimulus wanes".

"A great deal of uncertainty clouds the outlook for the second half of 2010 and beyond,'' the report said.

It warned that mishandling of the recovery could lead to a double-digit contraction in 2011, with a great deal depending on the managing and timing of withdrawals of large stimulus programmes and adjustments to monetary policy.

Justin Lin, World Bank chief economist, said: "Overall, these are challenging times.

"The depth of the recession means that even though growth has returned, countries and individuals will continue to feel the pain of the crisis for years to come."

Financial risk-taking

The US - one of the worst-hit nations in the recession - on Thursday proposed greater limits on financial risk-taking as part of the country's financial regulatory system overhaul.

China's leaders have said stimulus
spending will continue
The move could help Washington to gain a hold on Wall Street excesses which have been blamed for causing the economic crash via, amongst other things, the pushing of insecure finance in order to make short term profits.

"The proposal will include size and complexity limits specifically on proprietary trading and the White House will work closely with the House and Senate to work this into
legislation," a senior Obama administration official said.

Washington has blamed reckless gambling on the national property market for the crisis which nearly crippled the US financial system and precipitated a $700bn state bailout.

Unemployment

The United States, the world's biggest economy, is expected to see 2.5 per cent growth in 2010 and 2.7 per cent in 2011, the World Bank report said.

However, Hans Timmer, an author of the report, said that data indicated that unemployment would get worse despite the growth.

"Actually growth this year is not even strong enough to generate the jobs for the new people that are coming on the global jobs market, let alone that you need to create employment for the people who have lost their jobs in 2009," he said.

However, there was good news for Beijing as China said on Thursday that it was out of recession after attaining a 10.7 per cent growth rate in the final quarter of 2009.

Source:
Agencies
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