The World Bank has warned that the global economy could return to the dark days of the 2008 crisis, with slowing growth and rising commodity prices.
WB said that, after the recession in 2009 and the 2010 rebound, 2011 is expected to be a year of deceleration.
In its latest projections, WB estimates global growth of 3.3% in 2011 following a 3.9% rate in 2010. Emerging and developing countries were expected to expand 6%, down from a 7% pace in 2010. But that was more than double the 2.4% rate expected to be clocked by high income countries this year, slowing from a 2.8% rate in 2010
Growth in both high income and developing countries, however, was expected to pick up toward mid 2011 and settling at rates close to their longer run potential.
The World Bank said that for 2012, growth in the global economy was seen rising at a 3.6% rate. High income countries were expected to expand by 2.7% and developing countries would speed up just a notch, to 6.1%. Still, the overall pace of growth is too weak to give the recovery solid traction. It added that "Unfortunately these growth rates are unlikely to be fast enough to eliminate unemployment and slack in the hardest hit economies and economic sectors. In addition, serious tensions and pitfalls persist in the global economy, which in the short run could derail the recovery to differing degrees."
The World Bank expressed particular concern about rising commodity prices, including food and fuel, driven by loose monetary policies in the developed countries and solid demand in the emerging economies. It said that "Although real food prices in most developing countries have not increased as much as those measured in US dollars, they have risen sharply in some poor countries. And if international prices continue to rise, affordability issues and poverty impacts could intensify."
Mr Hans Timmer director of development prospects at World Bank said that "We are very concerned about the rise in the food prices. We see some similarities with the situation in 2008, just before the financial crisis."
In 2008, oil prices surged above USD 147 a barrel in July, then fell to nearly USD 30 six months later. Currently around USD 92 in New York, oil prices are above the bank''s estimate of USD 85 a barrel on average in 2011 as compared with USD 79 in 2010.
The World Bank said that commodity prices excluding oil were expected to dip 0.1% in dollar terms. The 2008 scenario of soaring food and oil prices amid slowing growth, which had revived the word stagflation, would likely be avoided.