World entering slow-growth era: World Bank
23 Jun 2009
The World Bank has warned that the world is entering an era of slower growth that will require tighter and more effective oversight of the financial system.
In its Global Development Finance Report 2009, the bank warned that global growth is also expected to be negative, with an expected 2.9 per cent contraction of global GDP in 2009.
Global GDP growth is expected to rebound to 2 per cent in 2010 and 3.2 per cent by 2011. In developing countries growth is expected to be higher, at 4.4 per cent in 2010 and 5.7 per cent in 2011, albeit subdued relative to the robust performance prior to the current crisis.
''The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction,'' Lin said.
''Developing countries can become a key driving force in the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit.''
While the authors note that extraordinary policy responses by a number of big economies have prevented systemic collapse, they stress the importance of concerted global action while the crisis is still underway.
''To prevent a second wave of instability, policies have to focus rapidly on financial sector reform and support for the poorest countries,'' said Hans Timmer, director of the Bank's prospects group.
