World Bank offers dire forecast for world economy

WASHINGTON: In a bleaker assessment than those of most private forecasters, the World Bank predicted Sunday that the global economy would shrink in 2009 for the first time since World War II.

…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 the country’s rural population.


…The bank said developing countries, many of which had been growing rapidly in recent years, were now being devastated by plunging exports, falling commodity prices, declining foreign investment and vanishing credit.

The effect of the global slowdown varies widely among countries, and the drop in prices for oil and other commodities has created winners and losers, But as a whole, the bank said, emerging-market countries faced a combined financing gap in 2009 of at least $270 billion and as much as $700 billion.

…Lower commodity prices have caused great problems in many African and Latin American countries. The steep slide in oil prices – 69 percent between July and December of 2008 – has spurred growth in poorer oil-importing countries but has caused immense difficulty in poorer oil-exporting countries.

Brazil, an exporter of oil as well as many other commodities and manufactured goods, reported its first trade deficit in eight years as exports dropped 28 percent in 2008.

IHT