World Bank suspects US recession

by Richard Kilner

Story link: World Bank suspects US recession

Robert Zoellick, World Bank president, has stated that although the US could be heading for recession, emerging economies are showing little sign of being damaged by the subprime mortgage crisis.

The financial crisis caused by subprime mortgages led to a tightening of credit across the globe, forcing British bank Northern Rock to be nationalised and US bank Bear Stearns to seek emergency funding.

Zoellick believes that further financial damage is to come, affecting both the US and Europe.

The World Bank’s head also said that the nature of the problem was more widespread than initially thought, due to greater distribution of the financial instruments wrapped up in subprime debt.

Unlike previous economic crises, Zoellick considers the lack of impact upon emerging economies striking.

Both China and India have revised growth forecasts downwards, but their growth is nevertheless expected to be impressive.