So much for all those emerging green shoots of economic confidence: all the World Bank had to do was publish a report stating the obvious for markets to go flopperoo, green shoots and all.

The World Bank has announced that the world economy will perform worse than expected in March, a call that wreaked a lot of damage on markets overnight. Wall Street ended down 2% to 3%, or 200 points on the Dow; gold fell, as did copper. Oil lost nearly 4% to end down at $US67.06 a barrel in New York; the US dollar rose on increased nervousness and US interest rates fell sharply with the 10-year bond finishing at 3.70%. European markets also fell sharply and the MSCI Global Index lost 2.7% in value as the stumbling days of January and February were recalled.

Coming after markets last week had their sharpest sell off in a month, with falls of 3% to 5% for most. There was worse in Russia, which fell 7.8% last night and is now down 22% in the past 10 days and is the first market to move into a new bear phase after rebounding strongly since March.

The World Bank was in effect playing catch up with some previous updates from other global groups. It got in two days ahead of an update from the Organisation for Economic Co-Operation and Development (OECD), which is due to release its latest forecasts within the next day (an update that will include Australia). These will include the forecasts for the 30 member nations, plus comments on other major economies outside it, such as China and India. That will come at 6.30pm tomorrow, Sydney time.

The bank’s global outlook is more pessimistic than the forecast by its sister organization, the International Monetary Fund. The IMF forecast for this year calls for a global contraction of 1.3%, with growth returning to 2.4% in 2010.

What the World Bank said in its forecast was hardly earth shattering; it merely confirmed what has been apparent for several months. That is, for all the talk of green shoots and China’s rebounding growth (which the World Bank updated to a 7.2% growth rate forecast last week from the previous 6.5%), the world economy is doing it tough, with Europe, Germany and a number of other economies extremely sluggish.

But many investors, analysts and even economists had mistaken the steadying in the various economies as a precursor to a rebound, when it’s too early to say that. In fact it could be a steadying before another fall, or a steadying that will continue for months because there’s just nothing happening around the world to stimulate demand, China included.

So what did the update reveal that so shocked the markets?

It saw global growth falling by 2.9% (which was a cut, a tiny one from the 3% estimate given by the Bank on June 11). But that was worse than the March estimate of a 1.2% contraction for the global economy in 2009.

World trade will shrink by nearly 10%; accompanied by plunging private capital flows, likely to drop from $US707 billion in 2008 to an around $US363 billion this year.

The World Bank says demand for manufactured goods is still weak and the level of industrial production in rich countries has dropped by 15% since August 2008, and in developing countries, excluding China, by 10%.

GDP growth in developing countries is expected to slow sharply, from 5.9% in 2008 to 1.2% in 2009. (But if China and India are excluded from this forecast, growth in the developing world will contract by 1.6% this year). The March forecast was for 2.1% growth I China and India are included and zero growth if excluded.

But even at the low growth rate forecast for this year will be a lot better than that in the developed economies which is expected to fall 4.5% in 2009. Global GDP growth is expected to rebound to 2% in 2010 and 3.2% by 2011. In developing countries growth is expected to be higher, at 4.4 % in 2010 and 5.7 % in 2011.

But that growth will still be less than what was happening in 2006-2007.