The United Nations has downgraded its economic forecast for 2009, from an already pessimistic estimate made five months ago, and said the poorest countries would be hit the hardest.
“The world economy is expected to shrink by 2.6 per cent in 2009, down from a decline by 0.5 per cent according to the pessimistic scenario of the forecast presented in January,” according to a press release on the mid-year report “World Economic Situation and Prospects 2009,” by the UN Department of Economic and Social Affairs (DESA).
Rob Vos, Director of DESA’s Development Policy and Analysis Division, told a news conference in New York, “We are less sanguine than some observers about possible green shoots emerging. If they are there they don’t give much sign of being spring time. It is still very wintry landscape.”
With its increasing impact both in scope and depth worldwide, the global financial crisis poses a significant threat to world economic and social development, including the fulfilment of the Millennium Development Goals and other internationally agreed development goals, according to DESA.
Although the crisis originated in developed countries, “it is now evident that developing countries are being hit disproportionately hard through capital reversals, rising borrowing costs, collapsing world trade and commodity prices, and subsiding remittance flows,” it stated.
During the first quarter of this year, world trade dwindled at a “dramatic” annual rate of more than 40 per cent, with the deepest impact felt by the exporting countries of Asia.
Growth in Africa’s gross domestic product (GDP) is expected to slow to 0.9 per cent, down from 4.9 per cent in 2008. South American economies are expected to shrink by almost one per cent on average in 2009, while Mexico and the Central American economies are projected to fall by more than 4 per cent.
The report estimated that between 73 and 105 million more people will remain poor or fall into poverty in comparison with a situation in which pre-crisis growth would have continued.
“Most of this setback will be felt in East and South Asia, with between 56 and 80 million people likely to be affected, of whom about half are in India. The crisis could keep 12 to 16 million more people in poverty in Africa and another 4 million in Latin America and the Caribbean,” it said.
The report added that at present the stimulus is very unbalanced. “Eighty per cent of the stimulus is concentrated in developed countries, while most developing countries lack the fiscal space to provide social protection and counteract the consequences of the crisis.
“In a more balanced global response, about $500 billion in additional development finance would be made available for countercyclical responses by developing countries.”
The report predicted that with a coordinated, development-oriented policy scenario, the world economy would recover to an annual growth of 4-5 per cent in 2010-2015, led by a robust growth of 7 per cent per year in developing countries. This is in contrast to the uncoordinated scenario in which developing countries would recover at only half that rate,” DESA said.