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January 18, 2012 12:18 PM EST
The World Bank warned Wednesday that the global economy is on the cusp of a new financial crisis, one similar in magnitude to the chaos following the collapse of Lehman Brothers in 2008.
The Washington-based institution slashed its global growth forecast by the most in three years and urged developing countries to prepare for further downside risks as the Eurozone's debt crisis deepens.
"The global economy is entering into a new phase of uncertainty and danger," the bank's chief economist, Justin Yifu Lin, said in a statement. "The risks of a global freezing up of capital markets as well as a global crisis similar to what happened in September 2008 are real."
The bank's latest forecast marks an abrupt downturn in its outlook. Just six months ago, the bank forecast the world economy growing at 3.6 percent in 2012; now it has shaved 1.1 percentage points off of global growth, projecting a 2.5 percent growth this year. Emerging countries are expected to grow 5.4 percent, down from 6.2 percent previously projected, while developed countries will expand 1.4 percent, down from 2.7 percent. For the 17 countries using Europe's single currency, the World Bank forecast a contraction, cutting their growth outlook to negative 0.3 percent from a positive 1.8 percent.
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