Business
World Bank, IMF forecast slower growth for CARICOM states in 2012
The World Bank is urging the Caribbean nations to start planning for a major slowdown in global growth this year.
The Washington-based financial institution, in a report released Tuesday, lowered its growth forecasts for high-income and low-income countries, saying it expected the world economy to expand an aggregate 2.5 percent in 2012, down from about 2.7 percent in 2011.
In its previous estimate, in June, it forecast growth of 3.6 percent in 2012.
The bank also warned of the continued threat of a global financial shock “similar in magnitude to the Lehman crisis,” because of the possibility that a major European economy could be shut out of the global debt markets.
In that case, the bank estimated the damage to the world’s economic growth would rival the recession of 2008 and 2009.
“The largest economy in the world is weakening,” said Justin Yifu Lin, the bank’s chief economist, referring to the European Union.
“The message for Caribbean countries is to start preparing now.”
The report was issued as forecasters warned of slower growth in the United States. Estimates of the nation’s annual pace of growth reached as high as four per cent in the final months of 2011.
But economists contend the strength came in part from temporary measures, including wholesalers restocking their inventories and consumers saving less and spending more over the holidays.
Economists say they expect many headwinds in early 2012: rising oil prices as the United States and European countries confront Iran; the risk of a tax cut for American wage earners expiring; a strong dollar rendering American exports less competitive; and continued repercussions from the soverign debt crisis in Europe.
In the report, the biannual “Global Economic Prospects,” the bank predicted that high-income countries, including the United States, France, Japan and Germany, would grow 1.4 percent in 2012.
It forecast a mild contraction of 0.3 percent in the 17 countries that use the Euro. Developing countries will grow 5.4 percent, down from a forecast of 6.2 percent in June, the bank said.
The World Bank said Latin America and Caribbean countries grew by an estimated 4.2 per cent in 2011.
But it said this is expected to ease to 3.6 per cent growth in 2012, before picking up to 4.2 per cent in 2013.
“Weaker global growth, uncertainty arising from the Euro Area debt crisis, slower growth in China, and a policy-induced deceleration in domestic demand are weighing on growth prospects,” it said about the region.
“Several countries in the region could be hard hit, if international commodity prices were to weaken sharply,” it added.
The International Monetary Fund, the World Bank’s sister organization, echoed its warnings about the dangers slowing trade and uncertainty about Europe pose to emerging markets.