Global economic crisis set to worsen

The global recession is continuing to deepen and starting to threaten people’s lives as well as their livelihoods, according to a report from the International Monetary Fund (IMF) and the World Bank.

The report suggests that between 55 and 90 million people worldwide will be trapped in extreme poverty in 2009 due to the worldwide recession.

It predicts that more than half of all developing countries will suffer extreme poverty this year, with the proportion rising up to three quarters of countries in Sub-Saharan Africa.

Economic slowdown will see growth in the developing world fall to 1.6% in 2009, down from an average of 8.1% in 2006 to 2007, according to the IMF.

This will be the result of contracting export volumes, lower prices, slowing domestic demand, declining remittances and foreign investment, reduced access to financing, and shrinking revenues.

Overall global output is projected to contract by 1.3% this year.
 
“Worldwide, we have an enormous loss of wealth and financial stability,” said Justin Yifu Lin, World Bank chief economist.

“Millions more people will lose their jobs in 2009, and urgent funding must be provided for social safety nets, infrastructure, and small businesses in poor countries, for a sustainable recovery.”

Most of the eight globally agreed Millenium Development Goals (MDG) are unlikely to be met, including those related to hunger, child and maternal mortality, education, and progress in combating HIV/AIDS, malaria and other major diseases, the report adds.
 
Global Monitoring Report 2009: A Development Emergency  says the number of chronically hungry people is expected to climb to over one billion this year, reversing gains in fighting malnutrition and making the need to invest in agriculture especially urgent.

 
•Net private capital flows to developing countries are in steep decline and could be more than $700bn lower in 2009 compared to their 2007 peak.
 
•To fill the growing financing gaps in developing countries, G-20 leaders agreed on April 2, 2009 to support a tripling of resources for the IMF to $750bn. The IMF’s concessional lending capacity for poor countries will be doubled.

•The G-20 supported an increase in multilateral development bank lending of $100bn to a total of $300bn over the next three years. They will support the World Bank’s Vulnerability Framework, which funds infrastructure projects, safety nets programs, and financing for small and medium enterprises.

•Developing countries need about $900bn (seven to nine percent of their GDP) a year to maintain infrastructure and start new projects, yet only half this amount is actually spent.

•The crunch in international trade finance will be addressed through the April 2009 G-20 agreement to ensure the availability of at least $250bn of trade finance over the next two years.

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