The organisation projected that global gross domestic product would grow by 2.7 per cent this year and 3.2 per cent next year, after a 2.2 per cent decline last year. The decline in 2009 was the first drop, in absolute terms, since World War II.
The new projections, contained in the World Bank’s annual report, “Global Economic Prospects,” were slightly more pessimistic than those of the International Monetary Fund. The IMF Managing Director, Dominique Strauss-Kahn, said that the fund expected global GDP growth this year to slightly exceed its previous projection of 3 per cent.
Within the developing world, the financial crisis has been most acutely felt in Eastern Europe and Central Asia, where output fell by an estimated 6.2 per cent last year, with sub-Saharan Africa also hit hard, the World Bank said. In contrast, the economies of East Asia have been leading the global rebound, with the Chinese economy projected to grow 9 per cent this year.
Even so, the report concluded that the crisis had “provoked large-scale human suffering.”
It estimated that 64 million more people would live on less than US$1.25 a day this year than would have been the case without the crisis. A separate working paper published by the bank estimated that 30,000 to 50,000 children might have died of malnutrition last year because of the crisis.
Justin Yifu Lin, the World Bank’s chief economist, said it would take ‘many years’ for economies to be rebuilt. “The toll on the poor will be very real,” he said. “The poorest countries, those that rely on grants or subsidised lending, may require an additional US$35 billion to US$50 billion in crisis social programmes.”
The report said that a “double-dip recession,” with economies again contracting, was unlikely, but that the recovery could stall, particularly if private consumption and investment did not pick up in response to low interest rates and hefty infusions of government spending.
Over the next five to 10 years, the bank said, the global financial landscape would feature tighter regulation and less risk-taking, making it more difficult and expensive to borrow money. But the costs of less abundant capital might be outweighed by the benefits of greater stability if boom-and-bust cycles became less volatile and frequent, the report found.
The report noted that developing countries were, in the aggregate, net lenders to the high-income economies where the crisis started, and argued that “the domestic savings in developing countries represent an enormous growth potential that is waiting to be released.”
Over all, the developing economies have been “the first to come out of the crisis, especially in emerging Asia, and they have become the engine of recovery for the economy as a whole,” Hans Timmer, the director of the bank’s development prospects group, said at a briefing. However, he added, “Developing countries will have to adjust to a lower growth rate than they were accustomed to.”
The World Bank said the ‘Global Economic Prospects’ report would be the last to be published annually. It is to be replaced by more frequent updates.
