More than $1 trillion will be lost this year by the world's poorest economies due to the economic downturn, according to figures published June 22 by the World Bank.
The World Bank also predicted that global output will fall by almost 3 percent this year and world trade by 10 percent. Private capital flows are down more than 50 percent to $363 billion from $707 billion in 2008.
"Extraordinary measures by governments around the world have helped save the global financial system from complete collapse, but the economic recession in the real sectors persists," Justin Lin, World Bank's chief economist and senior vice president said Monday in Seoul. "To break the cycle, we need bold policy measures, including restoration of domestic lending and global capital flows."
Lin, who was speaking at the Annual Bank Conference on Development Economics, said losses incurred by developing countries are especially harmful to the global economy, as these economies often drive new growth. Long-term prospects in these economies are also dire.
In addition, developing countries' gross domestic product growth is expected to decrease to 1.2 percent this year from 5.9 percent in 2008.
"Many corporations will be hard pressed to service their foreign currency liabilities with revenues earned in depreciating domestic currencies, at the same time that export demand has plummeted," added Mansoor Dailami, lead author of the "Prospects for the Global Economy" report. "The risk of balance-of-payments crises and corporate debt restructurings in many countries warrant special attention."
Meanwhile, the United Nations Conference on the World Financial Crisis is scheduled to open today in New York. The three-day conference brings together officials from around the world to plan on how to minimize the already deep impact of the financial crisis on the developing world.
The conference is expected to continue the work of the G-20, which pledged $1 trillion in April to help developing countries deal with the economic downturn.
