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World Bank slashes forecasts for growth and trade

The World Bank now predicts that global GDP growth will now contract by 1.7% in 2009, which means that world output will contract for the first time since the 2nd World War.

 

According to Hans Timmer, Manager, Global Trends in the World Bank’s Development Prospects Group: “Even if global growth turns positive again in 2010, we are not yet out of the woods. We expect that the level of GDP will remain well below potential, and so economic distress will remain acute for the next two years.”

 

Last November, the World Bank forecast a growth of 4.4% in the developing world this year, but this has now been more than halved down to 2.1%. A weak recovery is now expected next year but the pace and timing remain highly uncertain.

The forecast growth for developing countries has been reduced, and countries such as Lesotho, shown here, will be hard hit because of their dependance on trade

The forecast growth for developing countries has been reduced, and countries such as Lesotho, shown here, will be hard hit because of their dependance on trade

 

 

The World Bank notes that the crisis was preceded by eight years of extraordinary growth in developing countries which was supported by double-digit growth in investments, pointing out that investments have now been especially hard hit by the tough financial conditions. As industrial production has declined a sharp fall in commodity prices has followed, with oil prices down more than 50% and non-oil commodity prices showing a 40% fall.

 

The World Bank also now expects a 6.1% contraction in the volume of world trade in goods and services this year, and notes that the value of world trade will collapse much more because of the fall in commodity prices.

 

All this has had serious repercussions on developing countries as government revenues have been hit hard. In countries such as Lesotho, Swaziland and Cote d’Ivoire, for example, between 40% and 50% of fiscal revenues come from trade.

 

Finally, the World Bank forecasts that world GDP growth is likely to increase by 2.3% in 2010, although there are still significant downside risks.

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Posted in Development, GDP, International, Investment, Low-income countries, recession, World Bank, World Trade

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