Recession hitting poorer nations hard, report says

Financial Crisis Posted on

The world is falling into the first global recession since World War II as the crisis that started in the United States engulfs once-booming developing nations, confronting them with massive financial shortfalls that could turn the clock back on poverty reduction by years, the World Bank warned Sunday.


The World Bank also cautioned that the cost of helping poorer nations in crisis would exceed the current financial resources of multilateral lenders. Such aid could prove critical to political stability as concerns mount over unrest in poorer nations, particularly in Eastern Europe, generated by their sharp reversal of fortunes as private investment evaporates and global trade collapses.

In its report, released ahead of a major summit of finance ministers in London this week, the World Bank called on developed nations struggling with their own economic routs to dedicate 0.7 percent of the money they spend on stimulus programs toward a new Vulnerability Fund to help developing countries.

The report predicted the global economy will shrink this year for the first time since the 1940s, reducing earlier estimates that emerging markets would still propel the world to positive growth even as the United States, Europe and Japan tanked. The dire prediction underscored what many are calling a mounting crisis within a crisis, as the downturn that started in the wealthy nations of the West washes over developing countries through a pullback in investment, trade and credit.

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