The world economy is set to contract this year by more than previously estimated, and poor countries would continue to be hit hard by multiple waves of economic stress World Bank Group President, Robert B. Zoellick said on Thursday.
He said even with the stabilization of financial markets in many developed economies, unemployment and under-utilization of capacity continued to rise, putting downward pressure on the global economy, a release from the Accra Office of the Bank said on Friday.
According to the latest Bank estimates, the global economy would decline this year by close to 3.0 per cent, a significant revision from a previous estimate of 1.7 per cent.
Most developing countries' economies would contract this year and face increasingly bleak prospects unless the slump in their exports, remittances, and foreign direct investment were reversed by the end of 2010.
"Although growth is expected to revive during the course of 2010, the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks," Mr Zoellick said ahead of the Group of Eight Finance Ministers meeting in Italy.
He said: "Waves of economic pain continue to hurt the developing world's poor, who have less cushion to protect themselves. There is much more we need to do in the coming months to mobilise resources to ensure that the poor do not pay for a crisis that is not of their making."
Mr Zoellick noted that, according to revised Bank estimates, the overall financing gap for developing countries would be between 350 billion dollars to 635 billion dollars in 2009, down somewhat from earlier estimates due to improved current account out-turns, but still huge amounts.
"Low-income countries that have limited borrowing capacity due to low reserves and drained national budgets will face particular difficulties in getting sufficient finance in the next few years and because of this, lending from the World Bank, the IMF and other sources will become increasingly
important as the crisis rolls across low-income countries." Zoellick said, adding: "There is not enough public sector money to solve the global crisis, so the recovery strategy needs to encourage private business and financing too."
The crisis implications for poor countries are stark, and driving expanded use of World Bank resources.
Requests for assistance are up at the International Development Association (IDA), part of the World Bank Group that focuses on the 78 poorest countries.
For fiscal year 2009, which ends on June 30, IDA grants and interest-free loans are expected to total more than 13 billion dollars, a record high, and
an increase on last year's 11.2 billion dollars.
Anticipating the needs of the poorest countries, the World Bank created a fast track facility in December 2008 to provide rapid funding for social safety nets, infrastructure, education, and health, the release said.
Demand has also grown rapidly at the International Bank for Reconstruction and Development (IBRD), the part of the World Bank Group that supports credit worthy low and middle-income countries.
Loan volume is expected to increase to around 33 billion dollars this fiscal year, compared to 13.2 billion dollars last year.
Mr Zoellic said it was important that the G8 meetings this month and in July follow-up on the promises made at the Group of 20 meeting in London in April to restore domestic lending and the international flow of capital, adding that some of the main risks still remaining included the need to clean up the balance sheets and recapitalise banks, address the unique financial risks in Central and Eastern Europe, guard against a rise in protectionism, and roll over large amounts of private sector debt in developing countries.