THE global economy is veering towards a recession potentially more debilitating than the financial crisis, the World Bank has warned.

And the Asian growth nations fuelling Australia’s prosperity could be dragged into the mire, the authority says, in a move that would have severe ramifications for the domestic economy, the Herald Sun reported.

The World Bank yesterday slashed its forecast for global growth in 2012 and 2013.

Economists labelled the move a “wake-up call” for nations wrestling with chronic debt woes.

The Washington-based institution says that after six months of slowing economic activity, growth in the global economy is likely to clock in at 2.5 per cent in 2012 and 3.1 per cent in 2013.

Just six months ago it was forecasting 3.6 per cent growth both years.

“An escalation of the crisis would spare no-one,” World Bank global macroeconomics manager Andrew Burns said.

“Developed and developing country growth rates could fall by as much or more than in 2008-09. The world could be thrown into a recession as large or even larger.

“The world has entered a very difficult phase characterised by significant downside risks and fragility.”

CommSec chief economist Craig James said he was reading the report as “overly gloomy” given the solid start to the year for many nations.

“I’d say the report was written in late last year ... I think now it is looking somewhat dated.

“Maybe they are trying to create a wake-up call for countries. But this can also scare investors.

“I think the only message for Australia in this is that we live in challenging times ...”

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