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Developing countries hit by falling FDI inflows

Developing countries have not been immune from the global recession or the fragile nature of financial markets. In fact, net private capital inflows to developing countries fell to $707 billion in 2008, which was a severe drop from the peak figure of $1.2 trillion in 2007. It is projected that international capital flows will fall further in 2009 to $363 billion. It would appear that acquiring assets in developing countries is seen as higher risk and low priority at the moment by western economies. This is in contrast to the increase in FDI projects which came into the UK during the 2008-2009 financial year as recorded in my blog of 29 June.

 

These figures are included in the new publication from the World Bank entitled, Global Development Finance 2009: Charting a Global Recovery. This briefing also warns that developing countries are expected to grow by only 1.2% this year, which is a serious decline from the 8.1% growth recorded in 2007 and 5.9% in 2008. In fact the situation can be shown to be even worse when India and China are excluded from the calculation. Then, GDP for the remaining developing countries is projected to fall by 1.6% with implications for greater job losses and increased poverty.

The future is less secure for these children in Tanzania

The future is less secure for these children in Tanzania

 

Sub-Saharan Africa has been particularly hard hit by falling demand for exports, plunging export prices, weaker remittances as tourists holiday at home, and sharp falls in FDI growth. So much so that growth is expected to be only 1.0% this year.

 

Forecasts for developing countries as a whole for 2010 and 2011 show GDP growth is expected to pick up to 4.4% and 5.7% respectively, although this will still be slower than the years immediately before the recession.

 

According to Justin Lin, World Bank Chief Economist and Senior Vice President, Development Economics: “Developing countries can become a key driving force in the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit.”

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Posted in Africa, Development, economic growth, Foreign Direct Investment, GDP, International, Low-income countries, World Bank

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