Thursday, December 18, 2008

The impact of the global financial crisis on developing countries - background analysis by the World Bank

The world economy has changed dramatically since September 2008. What began as a downturn in the US housing sector is now a global crisis, spreading to both rich and poor economies. Developing countries-at first sheltered from the worst elements of the turmoil-are now much more vulnerable, with dwindling capital flows, huge withdrawals of capital leading to losses in equity markets, and skyrocketing interest rates. GDP growth in developing countries, recently expected to grow by more than 6 percent, is now likely to be only 4.5 percent. The paper notes that weaker growth, combined with the credit crunch, means that governments will have less money to invest in education, health and women's empowerment. With every one percent decline in developing country growth rates, approximately 20 million more people are added to this rapidly swelling number.

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