The economic crisis that started with junk mortgages in the United States is causing havoc for poorer countries around the world, not only stifling their growth but choking off their access to credit as well, the World Bank said on Sunday.
By Edmund Andrews
The New York times
In a bleaker assessment than those of most private forecasters, the World Bank also predicted that the global economy would shrink in 2009 for the first time since World War II. The bank did not provide a specific estimate, but bank officials said its economists would be publishing one in the next several weeks.
Until now, even extremely pessimistic forecasters have predicted that the global economy would eke out a tiny expansion but had warned that even a growth rate of 5 percent in China would be a disastrous slowdown, given the enormous pressure there to create jobs for its rural population.
The World Bank also warned that global trade would shrink for the first time since 1982, and that the decline would be the biggest since the 1930s.
The report, released on Sunday, was prepared for a meeting next week of finance ministers from the 20 industrialized and large developing countries. It warned that the financial disruptions are all but certain to overwhelm the ability of institutions like itself and the International Monetary Fund to provide a buffer.
The bank, which provides low-cost lending for economic development projects in poorer countries, pleaded for wealthy governments to create a “vulnerability fund” and set aside a fraction of what they spend on stimulating their own economies for assisting other countries.
“This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis,” said Robert B. Zoellick, the World Bank’s president. “We need investments in safety nets, infrastructure, and small and medium size companies to create jobs and to avoid social and political unrest.”
The bank said that developing countries, many of which had been growing rapidly in recent years, are being devastated by plunging exports, falling commodity prices, declining foreign investment and vanishing credit.
Vietnam beomes more poor: