World economy to shrink 1-2%

World economy to shrink 1-2%
12 Mar, 2009

THE global economy could contract by 1-2 percent this year in the toughest environment since the 1930s, World Bank President Robert Zoellick told the Daily Mail newspaper.

'My guess is that growth will probably fall about 1 to 2 per cent,' he told the paper in its Thursday edition.

'We haven't seen numbers like that since World War Two, which really means the Thirties. So these are serious and dangerous times.' Recent economic data have highlighted the severity of the downturn, forcing governments around the world to cut their forecasts.

The head of the International Monetary Fund said on Wednesday the global economy would be gripped by a 'Great Recession' this year.

Mr Zoellick said trade would probably fall the greatest amount in 80 years and protectionist forces needed to be kept at bay.

'Central and eastern Europe is particularly exposed because over the last two decades it moved quickly to integrate with trade investment and remittances,' he said.

'You also have the problem of domestic assets in foreign currencies, whether it be euro or Swiss francs.

Mr Zoellick said the focus for next month's summit of G20 leaders in London should be a coordinated attempt to sort out problems in the banking system. 'Stimulus plans will be like a sugar high unless you fix the banking system,' he said. -- REUTERS