Global economy to shrink first time since war

10 March 2009

WASHINGTON: In its gloomiest prognosis yet, the World Bank has predicted a 2009 shrinkage in both the global economy and the volume of global trade. If correct, it will be the first such contraction in post-war history.

The forecast, put together ahead of a meeting of G20 finance ministers this weekend, is the most pessimistic yet.

Others have thus far given room for minor overall global growth, with newer economies offsetting shortfalls in mature, recession-struck regions like Japan, Europe and the US.

The IMF, for example, announced late January that global growth would register 0.5% through 2009 - itself a 60-year low.

Particularly hard hit, said the bank, would be poorer nations in the developing world dependent on access to credit. It has identified 98 countries that could experience a shortfall in lending of up $700 billion over the next two years.

In addition to Latin America, East Asia and Africa, the Bank identified vulnerable economies in central Europe like Poland, Hungary and Czech Republic, already affected by the short supply of credit from major European banks.

World Bank president Robert B. Zoellick is calling for a "vulnerability fund", for which G20 nations donate 0.7% of what they spend on stimulating their own economies to help the poorest nations.

Data sourced from New York Times; additional content by WARC staff