BASSETERRE, St. Kitts – THE ongoing global economic downturn and the resulting fragility of financial markets have given a real test of strength to developing countries and, according to the World Bank’s Global Development Finance 2009: Charting a Global Recovery, the world economy will experience a 2.9 percent shrink this year.
The recent forecast, published by the Bank today (June 22), reveals a marked reduction in the global outlook compared to the 1.7 percent contraction projected by the financial institution in April of this year.
In its revised projections, the Bank warns that the world is entering an “era of slower growth”, a period which requires more effective oversight of the world’s financial systems. This period of slower growth has been evident in developing countries as they are expected to grow by only 1.2 percent this year, after experiencing 8.1 percent and 5.9 percent growth rates in 2007 and 2008 respectively.
As a result, the world’s unemployment rate continues to skyrocket and is increasing poverty levels in developing countries. At the same time, projections for an economic rebound are less marked than initially predicted. According to the World Bank report, global GDP growth is expected to rebound to two percent in 2010 and 3.2 percent by 2011 while developing countries look forward to growth rates of 4.4 percent in 2010 and 5.7 percent in 2011.
In light of the bleak economic outlook, the World Bank has shifted its focus in an attempt to chart a worldwide recovery. This will require quick implementation of detailed reforms and an eventual shift away from governments having high stakes in the financial system to a resumption of private sector control of the banking system, the report says.
At home, the report stated that Latin America and the Caribbean entered the crisis supported by “stronger fiscal, currency, and financial fundamentals” than in the past. However, it too is feeling the adverse effects of the crisis because of falling commodity prices and also on the financial side as foreign funds were withdrawn quickly.
GDP in this region is expected to decline by 2.3 percent in 2009 and to reach two percent growth in 2010.
