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Developing
economies to slow
sharply :WB |
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ADDIS
ABEBA(December 11,2008) - The international financial
crisis is set to sharply slow growth in emerging and developing economies
next year, ending a five-year global commodity price boom, the World
Bank said in a report released on Tuesday.
According to the Global Economic Prospects (GEP) 2009 report, the
ongoing world financial crisis has dimmed short-term prospects for
developing countries, and the volume of world trade is likely to contract
for the first time since 1982. Meanwhile, the sharp slowdown has caused
commodity prices to plummet, ending a historic five-year boom.
The spreading economic downturn will dramatically slow the turbo-charged
growth of the past decade in the developing world to 4.5 percent,
down from 6.3 percent in 2008 and 7.9 percent in 2007.
World Bank chief economist Justin Lin said the financial crisis had
caused the most serious recession since the 1930's and a long and
deep contraction cannot be ruled out.
Where possible, developing countries should adopt fiscal stimulus
packages, strengthen social programs and invest in infrastructure
projects, Reutrs cited Lin as saying at a news conference.
Hans Timmer, who is responsible for international economic analyses
and forecasts at the World Bank, said on his part a recession in developing
countries was unlikely but the slowdown was still significant.
"You don't need negative growth in developing countries to have
a situation that feels like recession," Timmer was quoted as
saying.
"We estimate at the moment that potential growth on average in
the developing world is something like 6.5 percent, so that means
when you're growing at 4.5 percent you're growing at 2 percentage
points lower than potential growth, which is a situation where you
see closures of factories and increasing unemployment," he added.
Timmer said it was hard to predict an economic turnaround but strong
underlying growth potential in developing countries is likely to support
a rebound in 2010.
"If you look at all the stimulus that is being contemplated now...then
it is quite possible that a rebound will come in 2010," he added.
The biggest impact to developing countries will be from slowing investment
growth, which is set to decline to 3.4 percent in 2009 from more than
13 percent in 2007, according to the World Bank report.
Meanwhile, international trade volumes will fall by 2.1 percent next
year, the first drop since 1982, the Bank said.
"Export opportunities for developing countries will fade rapidly
because of the recession in high-income countries and because export
credits are drying up and export insurance has become more expensive,"
the report said.
Meanwhile, private debt and equity flows into developing countries
should drop to about $530 billion in 2009 from $1 trillion in 2007.
The Bank also said the global economic recession will cause both commodity
prices and inflation to drop further, with oil prices seen averaging
$75 a barrel in 2009, food prices easing by about 23 percent and metal
prices to decline by 26 percent.
Still, commodity prices will remain well above the low levels of the
1990's because of growth in developing countries, it added. Higher
food and fuel prices in 2008 cost consumers in developing countries
an additional $680 billion in 2008, the Bank added.
Strong demand in large emerging economies like China and India fueled
a sharp increase in oil and metals prices, leading to one of the longest
and strongest price booms in the last century, the report said. |
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