Thursday, January 13, 2011

World Bank says two factors could plunge us back into recession

The World Bank is throwing out some warnings today in its latest report titled Global Economic Prospects. The Bank says that a couple of factors could plunge the world economy back into a recession much like the hard one we experienced in 2008.

The factors that could hurt include the slowing of growth for individual nation economies; especially in the developed world. The bank is also worried about rising commodity prices for gas and food. If growth slows down enough, and food and gas prices rise enough, the Bank says we could fall back into a recession.

From RTE News, we read more about the latest World Bank report.

After the recession in 2009 and the 2010 rebound, the multilateral institution said, 2011 is expected to be a year of deceleration. In its latest projections, the bank estimates global growth of 3.3% this year, after 3.9% in 2010.

Emerging and developing countries were expected to expand 6%, down from a 7% pace in 2010, the bank said in its latest Global Economic Prospects report. But that was more than double the 2.4% rate expected to be clocked by high-income countries this year, slowing from a 2.8% rate in 2010.

Threats that could derail the recovery include the euro zone financial market crisis, volatile capital flows and the rising prices of commodities, including food and fuel, the 187-nation institution said.

The World Bank expressed particular concern about rising commodity prices, including food and fuel, driven by loose monetary policies in the developed countries and solid demand in the emerging economies.

'Although real food prices in most developing countries have not increased as much as those measured in US dollars, they have risen sharply in some poor countries,' the World Bank said. 'And if international prices continue to rise, affordability issues and poverty impacts could intensify,' it added.

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