The World Bank is slashing its forecast for global economic growth this year. International trade and private investment remain frozen, the organization said in a report, likely leading to a 2.9 percent contraction in the world economy in 2009.
Expect the world economy to start growing again in the second half of this year, albeit at a pace that's "much more subdued than might normally be the case," the World Bank said.
"The global recession has deepened," the group said in its report.
World Bank economists' outlook is much gloomier than it was just a few months ago. In March, the organization predicted a 1.7 percent decline in global economic output this year and a 2.3 percent increase in 2010 as the world economy begins to improve.
The organization takes a particularly dim view of the state of investment in developing economies. Investment capital flowing into those countries totaled $1.2 billion in 2007, but will fall to just $363 billion this year, a drop that is "troubling for its macroeconomic consequences," the report found.
Meanwhile, international trade will likely see its sharpest decline since World War II, further hurting export-dependent developing economies.
Combined, those influences will limit growth in developing economies to 1.2 percent next year. The World Bank had previously expected two percent growth for those countries.
"Already under severe strain, low-income countries face increasingly grave economic prospects" if current trends in trade and investment don't reverse, the World Bank said.
The big-picture predictions for worldwide economic growth put the World Bank somewhat at odds with the International Monetary Fund, the other big finance organization backed by world governments. IMF economists last week slightly raised their expectations for U.S. economy growth, and on Friday one of the group's senior officials hinted that it might boost its outlook for global economic growth next year, as well.
World Bank: Global recession has deepened