The World Bank is offering a very pessimistic economic forecast.
In a bleaker assessment than those of most private forecasters, the World Bank predicted Sunday that the global economy would shrink in 2009 for the first time since World War II.
The bank did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks.
Until now, even extremely pessimistic forecasters have predicted that the global economy would eke out a tiny expansion but had warned that even a growth rate of 5 percent in China would be a disastrous slowdown, given the enormous pressure there to create jobs for the country’s rural population.
The World Bank also warned that global trade would contract for the first time since 1982, and that the decline would be the biggest since the 1930s.
The G10 Banks, by contrast, point out that dire forecasts aren’t “pricing in” positive eocnomic developments, and that a turnaround is on its way.
The global economy is “approaching” a pick-up point as positive elements that could fuel growth have yet to be priced in, G10 central bankers said Monday.
“We have a number of elements that are suggesting that we are approaching the moment where you would have a pick up,” European Central Bank head Jean-Claude Trichet said in his capacity as spokesman for the G10 central bankers meeting at the Bank for International Settlements (BIS).“I would say that we are at a level where the positives are not necesarily fully priced in,” he added.
As far as I can determine, the World Bank’s view comes from observing patterns in a cup after drinking a nice spot of tea. The G10, I’ll wager, went the more traditional route of butchering an animal and reading its entrails.
Image credit: mtsofan’s photostream under a Creative Commons License.
