On Monday, the World Bank cut its economic growth forecast for the East Asia region, due to which, stocks dropped. The World Bank pin pointed concerns regarding corporate profits along with the overall negative global economic outlook as the reasons of cutting the region’s growth forecast.
On the other hand, World Bank also raised concerns about the 2nd largest economy in the world, China, which has been adversely affected due to the ongoing debt crisis in euro zone. According to the international lender, China still faces a potential threat at the hands of the global economy and its economy will continue to slow down more than analysts’ predictions.
The World Bank showed concerns regarding China’s large scale local investment plans as the international lender thinks that there might an issue of financing the projects. Earlier this year, the World Bank had forecasted a GDP growth of 8.2 percent for China in 2012 and GDP growth of 8.6 percent in the coming year.
However, now, it expects East Asia to grow by 7.2% in 2012 and a slightly raised 7.6 percent in the coming year. Previously, World Bank had forecasted 7.6 percent in this year and 8.0 percent in the next year for the region. In the past week, the international lending organization had also cut its forecast for the sub-Saharan Africa, lowering it from 5.2 percent to 4.8 percent.
Investors have become increasingly concerned about corporate profits, especially after big multinational companies including Hewlett-Packard Co, Caterpillar Inc and FedEx Corp highlighted weakness in China and the European region as the reason for their slowdown.
After World Bank cut East Asia’s economic growth forecast and also showed concerns about China, S&P 500 futures dropped by 5.5 points. On the other hand, Nasdaq 100 futures also dropped by 16.25 points whereas Dow Jones industrial average futures dropped by 47 points.
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