The global economy is likely to grow 2.9 per cent to 3.3 per cent in 2010 and 2011, the World Bank said.
The bank, however, said that “Europe’s debt crisis poses problems for global growth”.
In its latest Global Economic Prospects 2010, it said global economic recovery continued to advance “but Europe’s debt crisis has created new hurdles on the road to sustainable medium term growth”.
The report, made available to the Pan African News Agency (PANA) on Thursday, stated that “after a growth of up to 3.3 per cent this year and next, the GDP is expected to strengthen to between 3.2 per cent and 3.5 per cent in 2012, reversing the 2.1 per cent decline in 2009”.
It also said that developing economies were expected to grow between 5.7 per cent and 6.2 per cent each year until 2012.
It, however, said: “High-income countries are projected to grow between 2.1 per cent and 2.3 per cent in 2010 — not enough to offset the 3.3 per cent contraction in 2009, and between 1.9 per cent and 2.4 per cent in 2011.”
The report noted that the bank’s projections assumed that the International Monetary Fund and European institutions “will stave off a default or major European overeign debt restructuring”.
It also said while the impact of the European debt crisis had so far been contained, prolonged rising sovereign debt could make credit more expensive and curtail investment and growth in developing countries.
The report warned that the global recovery faced “several important headwinds in the medium term, including lower international capital flows, high unemployment and spare capacity exceeding 10 per cent in many countries”.
The report also added that world merchandise trade had rebounded sharply and was expected to increase by about 21 per cent this year, before growth rates taper down to around 8 per cent in 2011-2012.