World Bank Warns of Global Economic Slowdown

08 April 2005

Last year saw the world's economy expand at 3.8%, its fastest for three years, according to the Global Development Finance report, released this week by the World Bank.

Led by the United States, China, India and Russia, global prosperity was also driven by a raft of developing nations, whose economies averaged an increase of 6.6% - the swiftest growth in thirty years.

But as is inevitable with unfettered economies, the cycle is about to go into reverse. Warns World Bank development prospects director Uri Dadush: "[Last year] was an exceptional year for developing countries. This is the best environment that [they] have seen in a very long time.

Switching to Cassandra mode, Dadush continued: "It is not going to be as good in the future. Interest rates are going to rise. World growth is likely to slow somewhat from the very high levels of the last year or two."

Growth in developing countries will see a sharp slowdown to 5.2% in 2006, while across the world expansion will slide from 3.8% to 3.1%. According to the bank, the global economy will be hit by a rise in US interest rates, lower public spending and the effects of a strong euro.

Urges Dadush: "The US has to engage in more aggressive fiscal consolidation than it is currently."

His exhortation reminds those with longer memories of the treasury secretary to former US president Nixon, who famously told the rest of the planet: "Our dollar, your problem."

A philosophy that many fear will be perpetuated by the appointment of new World Bank chairman, Paul Wolfowitz.

Data sourced from; additional content by WARC staff