BASSETERRE, St. Kitts – The latest World Bank global outlook report gives gloomy prospects for poor nations as poverty levels are expected to rise further on a “long road ahead” to recovery.
The World Bank’s report “Global Economic Prospects 2010: Crisis, Finance, and Growth” noted that the ongoing financial and economic crisis has serious cumulative impacts on poverty, indicating that by year end some 64 million more people are expected to be thrown into extreme poverty.
Lead economist at the World Bank and the report’s main author, Andrew Burns, acknowledged that while no country has remained untouched by the economic storms of 2009, the poorest remain the most vulnerable. It is his view that if such countries are not given the necessary support in an appropriate timeframe, the situation may be a strain on governments and policymakers.
“An increase in poverty has serious implications for the governments of poor countries, who face shrinking revenues at the very time when demands on them are growing. Just when a bigger effort is needed to protect vulnerable people, some governments may be forced to scale back existing programs,” Burns said.
In fact, according to World Bank chief economist and senior vice-president for development economics Justin Lin, poorer countries may require an additional $35 billion to $50 billion in funding in order to maintain pre-crisis programmes and protect the most vulnerable.
Despite the recent signs of recovery in the world economy, the World Bank report cautions that economic growth may slow in the latter part of this year as the growth impact of stimulus packages wanes. The stark projection from the report was that it will be years before jobs are restored and spare industrial capacity reabsorbed.
“The strength of the recovery will depend on consumer and business-sector demand picking up and the pace at which governments withdraw fiscal and monetary stimulus,” said Burns. “If this is done too soon, it might kill the recovery; yet waiting too long might re-inflate some of the bubbles that precipitated the crisis.”
Developing countries are expected to make a relatively robust recovery, with 5.2 percent GDP growth in 2010 and 5.8 percent in 2011—up from 1.2 percent in 2009. Rich countries, which declined by 3.3 percent in 2009, are expected to grow less quickly—by 1.8 and 2.3 percent in 2010 and 2011.
As it relates to Latin America and the Caribbean, the report spoke highly of the “stronger fundamentals” implemented in response to the crisis that have helped the region to weather this crisis much better than past ones.
The report however stated that the devastating January 12 earthquake in Haiti is “bound to have a huge economic cost for that country, although it is too early to make specific estimates”.
