The World Bank has
warned that the global
economy has reached a
potentially dangerous
'turning point' with
the US at risk of
recession if the
housing market
crashes.
In a report called
Global Economic
Prospects, the Bank
also said
globalisation was an
unprecedented
opportunity for
developing nations,
although income
inequality and
environmental damage
could undermine its
benefits.
The twice-yearly
report predicted
growth in worldwide
gross domestic product
(GDP) of 3.2% in 2007,
down from a projected
3.9% this year.
The report said
growth in the US
should ease gradually,
but did not exclude a
recession brought
about by a housing
crash following years
of red-hot growth.
Among other major
risks identified for
the global economy,
the World Bank report
said an economic
'overheating' could
provoke a sharper
slowdown, while
'further inflationary
pressure may yet
emerge'.
A supply shock in
oil markets could also
disrupt world growth,
while a 'disorderly
unwinding' of global
imbalances such as the
US trade deficit
remains possible. In
the medium term, the
risk remains that
investors could
'rapidly lose
confidence in the
dollar' as the US
economy slows and its
current account
deficit mounts.
The World Bank and
International Monetary
Fund have repeatedly
warned that the global
economy is dangerously
out of kilter as
China runs up mammoth
surpluses and the US
devours imported
goods.