The World Bank has cut its growth forecast by the most in 3 years citing mass recession in the Eurozone debt crisis as a large factor, even affecting emerging markets such as India and Mexico.
Growth figures were cut from 3.6% to 2.5%, with the Eurozone suffering the biggest decline in confidence, falling from a projected 1.8% gain to a prospective 0.3% contraction. US growth was cut from 2.9% to 2.2%.
The Eurozone debt crisis has been increasingly linked with the performance of developing economies; today China announced a decline in foreign investment that is the worst since July 2009. The World Bank has warned that even the revised figures are uncertain given the strong correlation between Eurozone underperformance and world trade figures.
Chief Economist at the World Bank Justin Lin has outlined the importance of the Eurozone to pull through with the new fiscal compact, and stimulate growth in order to avoid a global meltdown, stating that if not, “the downturn is likely to be longer and deeper than the last one, with no country spared.”
The German Government has followed suit and cut their own growth estimates for 2012. They have dropped their initial projection of 1.0% growth down to 0.7%, as a result of diminishing opportunities for exports. German exports expanded by 8.2% in 2011, but the Eurozone debt crises’ knock-on effect has prompted them to reduce their export expansion estimates by over a quarter, down to 2.0%. German Economy minister Phillipp Roesler asserted that “Economic growth in Germany is only possible with sustained growth in Europe,” echoing the sentiments of the World Bank.
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