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Thursday, June 25, 2009
World Bank revises global Economic Picture Downward
A new World Bank analysis of the
global economy is not pretty, painting an unprecedented and bleak picture:
global output falling by 2.9 percent, world trade falling by nearly 10 percent,
and plummeting private capital flows, likely to decline from $707 billion in
2008 to $363 billion in 2009. As the world enters what appears to be an era of
markedly slower economic growth, the World Bank's annual Global Development
Finance (GDF) report, released on Monday, 22 June, 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."
Lin was speaking at the Annual Bank Conference on Development Economics in Seoul, South Korea, where experts gathered to discuss the financial crisis. He emphasized the key role that developing countries—the engine of future global growth—can play in the global recovery, as well as the grave development emergency posed by the impact of the crisis on poor, vulnerable countries.
According to the new report, as capital became increasingly hard to come by and uncertainty soared about future demand, there was a sharp decline in production of manufactured goods and in global trade in these goods. The level of industrial production in rich countries has dropped by 15 percent since August 2008, and that in developing countries, excluding China, by 10 percent.
GDP growth in developing countries is expected to slow sharply, from 5.9 percent in 2008 to 1.2 percent in 2009. However, their performance surpasses rich countries, whose collective GDP is expected to fall 4.5 percent in 2009. Notably, when India and China are removed from the total, developing countries as a group will experience a contraction in GDP of 1.6 percent, a real setback for poverty reduction.
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, albeit subdued relative to the robust performance before the current crisis. Two regions— Europe and Central Asia, and Latin America and the Caribbean—are likely to end 2009 with negative growth.
"While the global economy is likely to begin expanding again in
the second half of 2009, the recovery is expected to be subdued as global demand
remains depressed, unemployment remains high, and recession-like conditions
continue until 2011," said Hans Timmer (pictured at right),
Director of the World Bank's Development Prospects Group. "To prevent further
damage from a fresh wave of instability, the focus should be on financial sector
reform and support for the poorest countries."
To see the Bank's Global Development Finance report, visit http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/
EXTDECPROSPECTS/EXTG
DF/EXTGDF2009/0,,menuPK:5924239~pagePK
:64168427~piPK:64168435~theSitePK:5924232,00.html
Lin was speaking at the Annual Bank Conference on Development Economics in Seoul, South Korea, where experts gathered to discuss the financial crisis. He emphasized the key role that developing countries—the engine of future global growth—can play in the global recovery, as well as the grave development emergency posed by the impact of the crisis on poor, vulnerable countries.
According to the new report, as capital became increasingly hard to come by and uncertainty soared about future demand, there was a sharp decline in production of manufactured goods and in global trade in these goods. The level of industrial production in rich countries has dropped by 15 percent since August 2008, and that in developing countries, excluding China, by 10 percent.
GDP growth in developing countries is expected to slow sharply, from 5.9 percent in 2008 to 1.2 percent in 2009. However, their performance surpasses rich countries, whose collective GDP is expected to fall 4.5 percent in 2009. Notably, when India and China are removed from the total, developing countries as a group will experience a contraction in GDP of 1.6 percent, a real setback for poverty reduction.
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, albeit subdued relative to the robust performance before the current crisis. Two regions— Europe and Central Asia, and Latin America and the Caribbean—are likely to end 2009 with negative growth.
To see the Bank's Global Development Finance report, visit http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/
EXTDECPROSPECTS/EXTG
DF/EXTGDF2009/0,,menuPK:5924239~pagePK
:64168427~piPK:64168435~theSitePK:5924232,00.html