World Bank sees even worse slump

The world economy will shrink by much more than previously thought, according to the World Bank.

The world economy will contract by 3% this year, far more than the 1.75% drop it predicted earlier this year.

“Most developing country economies will contract this year and face increasingly bleak prospects,” World Bank president Robert Zoellick said.

The gloomier forecast comes despite recent signs that the worst of the recession is over.

This year is likely to be the first global recession since World War II.

‘Aftershocks’

The revised figure brings it closer in line with the OECD, which represents rich nations, who predicted that the world economy will shrink by 2.7%.

The World Bank’s sister institution, International Monetary Fund (IMF), said in April the world economy will shrink by 1.3% this year.

However, the forecasts are broadly compatible as the World Bank methodology gives a smaller weight to China, still the world’s fastest growing large economy.

Mr Zoellick still predicted a recovery next year.

“Although growth is expected to revive during the course of 2010, the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks,” he said.

The World Bank said the International Development Association (IDA), a division of the World Bank that focuses on the 78 poorest countries, had received a record number of pleas for help.

For the year to 30 June, the number of grants and interest-free loans are expected to be $13bn, the most ever. In the previous year, the figure was $11.2bn.

The World Bank forecast comes before a meeting of the finance ministers from the Group of Eight richest nations on Friday in Lecce, Italy. –BBC News