World Bank: Recovery Under Way, but Clouded by Debt Crisis

The global economy is recovering from recession but <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Europe's debt problems have created new hurdles on the road to sustainable medium-term growth, said the World Bank in its latest global economic prospect report.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

The bank predicts the global economy will grow between 2.9 percent and 3.3 percent this year and next, and between 3.2 and 3.5 percent in 2012, beating the bank's January-forecast of 2.7 percent in 2010 and 3.2 percent in 2011.

The report also says that developing economies continue to lead the global recovery, with an annual increase of 5.7 and 6.2 percent from 2010-2012.

Meanwhile, the advanced economies are projected to grow by 2.1 and 2.3 percent in 2010 and 1.9-2.4 percent in 2011. However, only in 2009, economies in high-income countries had shrunk by 3.3 percent.

Merchandise trade was growing more briskly, said the bank, targeted at 21 percent in growth and more than half of the global demand is expected to come from developing countries.

Although the bank's baseline forecast calls for global growth over the next three years, it says the outlook darken if European uncertainty persists, and a second slum could not be ruled out.

Chief economist Justin Yifu Lin at the World Bank said high-income countries should seize the opportunities offered by stronger growth in developing countries to boost their economic activity.