WASHINGTON - The World Bank, citing stagnation in Europe and Japan and a slowdown in China, downgraded its forecast for the global economy this year. It also reported that world economic growth came in below expectations in 2014.
The bank predicts the world economy will expand 3% this year, up from 2.6% in 2014. Last June, World Bank economists had forecast 3.4% global economic growth this year and 2.8% last year.
"The recovery has been sputtering in the Euro Area and Japan as legacies of the financial crisis linger ... China, meanwhile, is undergoing a carefully managed slowdown,'' the bank said Tuesday in the first of its twice-yearly Global Economic Prospects reports for 2015.
Plunging oil prices and stronger growth in the United States are expected to help boost global growth in 2015.
The bank expects the US economy to grow 3.2% this year, up from 2.4% in 2014.
Growth among the 19 countries that use the euro currency is expected to pick up modestly - to 1.1% in 2015 from 0.8% last year. Likewise, the Japanese economy is expected to rebound to 1.2% growth this year from 0.2%in 2014.
The bank expects China's economy to expand 7.1% this year, down from 7.4% in 2014. The slowdown reflects in part the Chinese government's effort to rein in excessive lending and wasteful investment.
Overall, the bank expects high-income countries to grow 2.2% this year, up from 1.8% in 2014. Developing countries will grow 4.8%, an improvement from 4.4% in 2014.
The bank sees risks that could spoil its forecast. There's potential for a financial crisis if investors pull money out of emerging markets to take advantage of rising interest rates and improving economic prospects in the US. That could cause emerging market currencies to plummet and squeeze companies that borrowed in US dollars - a partial replay of the Asian financial crisis of 1997-1998.
Conflict in Ukraine and the Middle East could disrupt economic growth. The Chinese economy could tumble into a "disorderly slowdown.'' Sub-Saharan African economies, expected to grow a healthy 4.6% in 2015, could be devastated instead if the Ebola outbreak isn't contained.