Financial News

  • 16 January 2014, 6:14

German Economy Slips As World Forecast Raised

The World Bank raised its forecast for global growth for the first time in three years just as Germany reported its worst economic performance since 2009.

The bank's latest Global Economics Prospects report predicts world output will firm from 2.4% in 2013 to 3.2% this year and 3.4% in 2015.

The growth would be led, the study said, by advanced economies starting to pick up pace following the financial crisis.

But just hours after the upbeat report was released, Germany confirmed its economy - Europe's biggest - slowed more than expected last year.

GDP output growth was measured at just 0.25% in the fourth quarter.

Germany, unlike many other countries in the 18-nation eurozone, avoided recession as the continent struggled to put its debt crisis behind it but the effects of the downturn hit demand as exports weakened.

Nevertheless, the Bank's rosier outlook suggests the wider world economy is finally breaking free of the shackles caused by the credit crunch and resulting depression - led by improving growth in the United States.

Its chief economist Kaushik Basu said: "For the first time in five years, there are indications that a self-sustaining recovery has begun among high-income countries - suggesting that they may now join developing countries as a second engine of growth in the global economy."

The bank again shaved its forecasts for developing countries, to 5.3% for 2014 from the 5.6% it predicted in June.

Emerging markets have grown at their slowest pace in a decade for the past two years, after chalking up growth rates of around 7.5% before the financial crisis hit.

However, the report warned that growth prospects remain vulnerable.

It cited the threat from rising interest rates and potential volatility in capital flows as the US Federal Reserve eases up on the extraordinary stimulus it has been providing to the US economy.

However, the bank said it expected the Fed and other major western central banks to keep their core interest rates low for at least another year.

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.

Advertisement