World Bank Cuts Economic Growth Forecast, Says Risk Aversion to Continue

The World Bank cut its economic growth forecast, saying global GDP will shrink -2.9% in 2009 versus forecasts of a -1.7% decline reported in March. The forecast for 2010 was also lowered, with the Bank calling for the world economy to add 2% versus previous estimates of a 2.3% expansion. The report accompanying the revisions said that “While the global economy is projected to begin expanding once again in the second half of 2009, the recovery is expected to be much more subdued than might normally be the case.” Bank President Robert Zoellick and company also seem to think that risk aversion remains a factor in financial markets, saying “investors’ flight from perceived danger [is a] trend that is very likely to persist through the end of 2009.” Such a dynamic stands to benefit safety-linked currencies, particularly the US Dollar and the Japanese Yen.