World Bank: Growth in developing world slowing

[March 31, 2009]  WASHINGTON (AP) -- The deepening recession means growth in the developing world will slow to 2 percent this year, according to the World Bank, which predicts that economic activity will remain depressed for the next two years.

Back in November, the World Bank estimated that the gross domestic product -- a total output of goods and services -- in the developing world would grow by 4.4 percent this year. Rapidly deteriorating financial and economic conditions around the world, however, prompted the World Bank on Tuesday to revise its estimate sharply lower to 2.1 percent. That's down from 5.8 percent last year.

"Across the developing world, we see that conditions of recession are affecting the poorest people, making them even more vulnerable than before to sudden shocks, but also reducing opportunities available to them and frustrating their hopes," said Justin Yifu Lin, a chief economist at the World Bank in Washington. "This could reverse years of progress and is nothing less than an emergency for development."

In its report, the bank also noted that overall growth across the globe is expected to shrink by 1.7 percent this year, the first decline in world output since World War II. Even if global growth turns positive again next year, output will remain depressed, fiscal pressures will mount and unemployment levels will rise even further in nearly every nation well into 2011, the bank said.

Economies that specialize in making capital goods, such as Japan, Germany, Taiwan, China and the United States, have been hard hit by the downturn in investment spending. But the bank said the deceleration in economic growth in low- and middle-income nations matches the declines in the richer nations.

And developing countries, which hope their concerns are heard when leaders from the world's richest countries meet this week in London, are suffering from withdrawal of lending by risk-averse banks, the flight of foreign investment and skyrocketing interest rates. The poorest of the poor are being hit by falling prices for agricultural and mining commodities and by shrinking foreign aid.

[Associated Press; By DEB RIECHMANN]

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