Global Development Finance 2009: Outlook summary

A recent World Bank analysis of the global economy paints an unprecedented picture: global output falling by 2.9 percent and world trade by nearly 10 percent; accompanied by plummeting private capital flows, likely to decline from $707 billion in 2008 to an anticipated $363 billion in 2009.

The World Bank’s annual Global Development Finance (GDF) report, released earlier this week, updates the outlook for the global economy, and explores the broad approach that will be necessary to chart a worldwide recovery.

GDP growth in developing countries is expected to slow sharply, from 5.9 percent in 2008 to 1.2 percent in 2009. However, their performance surpasses rich countries, whose collective GDP is expected to fall 4.5 percent in 2009. Notably, when India and China are removed from the total, developing countries as a group will experience a contraction in GDP of 1.6 percent, a real setback for poverty reduction.

The updated Prospects for the Global Economy website that accompanies the GDF report contains detailed projections, including for developing regions and countries. Two regions— Europe and Central Asia and Latin America and the Caribbean—are likely to end 2009 with negative growth.

Developing countries are likely to face a dismal external financing climate in 2009, according to the GDF. With private capital flows declining dramatically, many countries will find it difficult to meet their external financing needs, estimated at $1 trillion.

Private debt and equity flows will likely fall short of meeting the external financing needs of developing countries by a wide margin, amounting to a gap estimated to range between $350 billion and $635 billion. Capital flows from official sources, plus tapping foreign reserves, will help fill the gap in some countries, but in others, there will—of necessity—be sharp and abrupt macro adjustments.

Finally, there is a very urgent need to recognize that poor countries that were already under strain—notably from suffering through the food and fuel crisis—should receive attention quickly. These countries have little or no access to private foreign capital even in good times, and are largely dependent on donors for the resources needed to meet the Millennium Development Goals, which have a due date of 2015.

What does this mean for Africa specifically?
Output and incomes in the region have been negatively affected by falling commodity prices, falling volume demand for metal and mineral exports, and declining remittances and tourism.



And the regional note for sub-Saharan Africa here: http://web.worldbank.org/external/default/main?theSitePK=659149&pagePK=2470434&contentMDK=20396439&menuPK=665605&piPK=2470429

Data for each region is available here in table form: http://web.worldbank.org/external/default/main?contentMDK=20381640&menuPK=659183&theSitePK=659149&pagePK=2470434&piPK=2470429