Developing countries hardest hit

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Wednesday, 01 July 2009 16:15

Developing countries hardest hit by global financial crisis

The financial crisis that triggered the global recession started in the developed countries, but it is the developing nations that have suffered most. While billions have been spent in the hope for ‘green shoots’ in the richer economies, more is needed to avert poorer countries falling into extreme poverty.

“For a large number of countries, there are no ‘green shoots’ of recovery,” UN Secretary-General Ban Ki-moon said on 24 June. His observation was part of his opening remarks to the New York-held Conference on the World Financial and Economic Crisis and Its Impact on Development.

“There are only fallow fields. The real impact of the crisis could stretch for years,” Ban said. As the economic turmoil spread around the world, the developing world has borne the brunt of the crisis. The emerging economies have suffered from outflows of capital, increased borrowing costs, a massive fall in world trade, lower commodity prices and decreased remittances from overseas workers.

In its latest annual Global Development Finance report the World Bank forecast that in the developing countries growth will reach only 1.2% in 2009, compared to 7.7% in 2007. Excluding economic powerhouses like China and India, the remaining developing economies are expected to shrink by 1.6%. One of the hardest hit areas is the investment drain, the bank observed.

The bank’s figures indicate that ever since peaking in 2007 with $1.2 trillion, the foreign investment in developing countries has been falling, with a total of $707 billion in 2008 and a probable $363 billion this year. Less than one third of the amount of foreign investment that they had two years ago would in turn exacerbate the debt-building situation of the poorer countries, the World Bank warned.

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