13 Jun 2009

World Bank predicts 3% global contraction

1:12 pm on 13 June 2009

The World Bank says the global economy is set to contract more sharply than previously thought this year, underscoring the need to mobilise resources to help poor nations.

The bank predicts a contraction of about 3% in 2009, a significant revision to the bank's prior estimate of a 1.75% contraction.

World Bank president Robert Zoellick said developed economies seem to be contracting at a slower pace but the effects of the global economic downturn are still very much hurting developing countries.

Even with growth expected to return in 2010, Mr Zoellick said most developing countries would continue to be buffeted by the aftershocks and faced increasingly bleak prospects unless the drop in their exports, remittances and foreign direct investment was reversed by the end of 2010.

"There is much more we need to do in the coming months to mobilise resources to ensure that the poor do not pay for a crisis that is not of their making," Mr Zoellick said. "There is a big price to pay if you don't support these countries."

Meanwhile, a G8 source has told the Reuters news agency that the International Monetary Fund had confirmed its 2009 forecast for a 1.3% contraction made in April, and raised its 2010 global growth estimate to 2.4% from 1.95.