The World Bank’s new “Global Economic Prospects 2012” report may the most pessimistic document issued by a major agency about the economic future since the recession ended. One bright spot is the U.S., which, as the world’s largest economy, could be the pillar that braces that rest of the world’s regions as slow GDP growth spreads.

In contrast to its last report, the organization stated:

The global economy is now expected to expand 2.5 and 3.1 percent in 2012 and 2013 (3.4 and 4 percent when calculated using purchasing power parity weights), versus the 3.6 percent projected in June for both years.

The greatest concern in the report is about developing regions. The World Bank has extensive proof for its warning:

Perhaps more importantly, capital flows to developing countries have weakened sharply as investors withdrew substantial sums from developing-country markets in the second half of the year. Overall, gross capital flows to developing countries plunged to $170 billion in the second half of 2011, only 55 percent of the $309 billion received during the like period of 2010.

That trend, along with trouble in Europe, has caused developing-country growth to be revised down to 5.4% and 6% versus 6.2% and 6.3% in June.

While forecasts for Europe and Japan are grim, the projection for U.S. GDP improvement is 2.2% this year and 2.4% next. That contrasts to forecast GDP growth in all developed nations of 1.4% and 2%.

The report warns of a “Lehman-type” shock to the global economic system, particularly if the financial situation in Europe worsens. The developing world’s GDP improvement could be set back by years in the event that such circumstances come to pass.

There is absolutely no way to say that the World Bank’s forecasts are correct. Data is collected and analyzed region by region. If the forecast for one major region is off by even a modest amount, the results of the entire model of global GDP are altered, and the alteration could be significant.

It has been some time since the U.S. was viewed as the anchor of the global economy and the place that forecasters looked for growth significant enough to help world GDP expand. Now, the World Bank has set U.S. GDP at an expansion level that would indicate that America’s $14 trillion GDP engine could offset much of the problems in the EU and Japan. That, in turn, may keep the forecast of disastrous consequences for the developing world from coming true.

Many economists fear that austerity plans Washington may set could sap stimulus from the American expansion. That expansion is already underway, though, and may not need bracing. That is a stark contrast to Japan, damaged badly by the earthquake, and Europe, damaged by high debt, austerity measures already in place — or nearly so — and high unemployment.

The most important revelation from the World Bank report is that in the developed world, the U.S. will stand on its own because of modest but steady GDP growth. That may not entirely reverse the flow of capital into developing markets, but it would mean the demand from U.S. consumers and businesses should help keep a catastrophic contraction at bay.

Douglas A. McIntyre

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