World Bank Cuts Forecast for Developed Economies

(New York Times – Bettina Wassener)

Companies in Japan and Germany may have become less gloomy about their prospects in recent months, as surveys showed Monday, but neither they nor businesses elsewhere have much to cheer about as the world economy remains mired in a recession that could see it shrink by about 2.9% this year. Forecasts from the World Bank on Monday highlighted just how painful the recessions will be in various regions, despite mounting signs that the very worst of the downturn may be over.

The bank earlier this month said it expected a deeper global recession, forecasting a 2.9% contraction in gross domestic product for this year, rather than 1.7%, as it projected as recently as March. More detailed forecasts released Monday showed that much of this pain will be in high-income areas like the euro zone, the United States and Japan. The bank said that it expected economies in high-income nations to contract a total of 4.2% this year.

It expects the U.S. economy to shrink 3% and the euro zone 4.5%, rather than the 2.4% and 2.7% it forecast in March. For Japan, the World Bank now projects contraction of as much as 6.8% this year – significantly higher than the 5.3% it forecast three months ago. Read more here.