Saturday, July 18, 2009

World Bank: 2009 global growth forecast

by M. Ulric Killion

Overview: A new report from the World Bank warns that the globe is entering a new era of slower growth. The World Bank’s new Global Development Finance Report, for 2009, looks at the prospects for an end to the world-wide downturn…and the long-term effects it will leave behind; Source: World Bank.

According to the new analysis by the World Bank, which is the annual Global Development Finance (GDF 2009) report, as concerns the global economy: "Global output falling by 2.9 percent and world trade by nearly 10 percent; accompanied by plummeting private capital flows, likely to decline from $707 billion in 2008 to an anticipated $363 billion in 2009." As the world enters what appears to be an era of markedly slower economic growth, according to the World Bank's GDF 2009 report, released today or on June 22, 2009, which "updates the outlook for the global economy, and explores the broad approach that will be necessary to chart a worldwide recovery."

"Extraordinary measures by governments around the world have helped save the global financial system from complete collapse, but the economic recession in the real sectors persists," said the World Bank's Justin Lin, Chief Economist and Senior Vice President, Development Economics. "To break the cycle, we need bold policy measures, including restoration of domestic lending and global capital flows."

[The World Bank, as announced in its GD 2009 report, also found that] "Governments have, in general, 'walked their talk' through monetary policy changes, fiscal stimulus, and guarantee programs to shore up the banking industry. However, a great many challenges remain, and concerted global action remains critical while the crisis is still underway" (World Bank, 2009; GDF 2009).

The World Bank, as in accordance with its newly released Global Development Finance report, is predicting that the world economy will shrink by 2.9 percent and warning that a drop in investment in developing countries will increase poverty. "Global trade is expected to plunge by 9.7 percent this year, while total gross domestic product for high-income countries contracts by 4.2 percent, the bank said. It said economic growth in developing countries should slow to 1.2 percent — but excluding relatively strong China and India, developing economies will contract by 1.6 percent"(Agencies, 2009).

"Economic damage to developing countries "has been much deeper and broader than previous crises," warned the report, issued Sunday in Washington. . . 'To break the cycle and revive lending and growth, bold policy measures, along with substantial international coordination, are needed,' the World Bank said. Investment and other financial flows to developing countries plunged by an estimated 39 percent in 2008 to $707 billion, the World Bank said. It said foreign direct investment in developing countries is projected to drop by 30 percent this year to $385 billion.

Eastern Europe and Central Asia have been hit hardest and the region's gross domestic product is expected to plunge by 4.7 percent this year, the bank said. . . GDP in Latin America and the Caribbean should shrink by 2.3 percent this year before rebounding to expand by 2 percent in 2010, the report said. In the Middle East and North Africa, growth is expected to fall by half this year to 3.1 percent, while that of sub-Saharan Africa will drop to 1 percent from an annual average of 5.7 percent over the past three years, the bank said. East Asia should post a 5 percent expansion, supported in part by China's stimulus-fueled growth, the bank said" (Agencies, 2009). 

In the specific context of developing countries (or economies), the GDF 2009 projected that developing countries should  grow by about 1.2% in 2009, which is after 8.1% growth in 2007 and 5.9% growth in 2008. If one excludes the economies of China and India, according to the GDF 2009,  then "GDP in the remaining developing countries is projected to fall by 1.6%, causing continued job losses and throwing more people into poverty. Global growth is also expected to be negative, with an expected 2.9% contraction of global GDP in 2009" (Sober Look, 2009).

World Bank cuts 2009 global growth forecast, Agencies, June 23, 2009.

Copyright © Protected – All Rights Reserved M. Ulric Killion, 2009.

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