The World Bank issued a somber reportMonday on world economic growth.
Itwarns that the world is entering an era of slower growth that will requiretighter and more effective oversight of the financial system. The World Bank report, , saysthe downturn is having a major negative effect on developing nations.
AndrewBurns, Acting Manager of the World Bank's Global Trends Team, spoke to VOA aboutthe drop in net private capital flows to developing countries.
"Capitalflows are basically?the sum of investments that are made by foreign companiesin other countries?. But also investments that individuals make in the stockmarkets in developing countries?. And finally, it's also bonds," he says.
"Inthe context of this global financial crisis?developing countries have been hitvery hard. These capital flows, which in 2007 were about a trillion dollars,have declined to about $707 billion in 2008. And we expect them to come down even furtherto around $360 billion in 2009," he says.
Chinaand India are included in the figures for developing countries.
"Ifyou're to exclude them, then obviously?the initial numbers, but also the morerecent numbers are going to be lower," he says.
However,he says, "We have seen a huge surge of these capital flows to these developingcountries over the last four or five years. So, although that's a very big decline, it's really bringing us back tothe levels that we were observing around 2003."
"Sub-Saharan Africa is fairly poorly,as is everybody in the world. We expect GDP (Gross Domestic Product) growth?tocome in at about one-point-zero percent in 2009. That's following growth rates around fivepercent of the last several years, four-point-eight percent in 2008. So that's a big step down," he says.
TheWorld Bank expects things to improve with time.
"Onthe plus side, of course, is the fact that that's still a positive growth rate?.There's a bit of a silver lining in here, but it's going to be a very difficultyear and even in 2010, 2011," he says.
Burnssays much of what needs to be done to reignite the world economy must happen inthe rich nations where the crisis began. The United States and other nations have put policies in place to try todo that.
"Wedon't expect this episode to be as serious, as say, the Great Depressionwas. It's nevertheless one of the deepestrecessions that we've ever observed," he says.
"The real challenge is going to be tomanage going through this period of very slow growth, to keep governmentprograms that are critical for longer term growth (infrastructure, health andeducation policies)?. That's why the bank is stepping up lending to the region.Overall, we're going to lend about $33 billion this year and next year," hesays.
Hesays that's a doubling of lending compared to 2007. The IMF, International Monetary Fund, is alsogetting a big infusion of funds from rich nations to lend to developing nationsin need.
However,some watchdog groups have raised concerns that the potential exists for a newround of poor nations becoming heavily indebted due to the loans. Burns thinks the risk for that is low fornow.
"Globally,we find that most developing countries in Africa and elsewhere have improvedthe quality of their fiscal spending. Sothey aren't going year on year with these very high deficits. This is going to be a year of high deficits,but it's clearly and directly attributable to this economic cycle," he says.
"The expectation is that growth will comeback somewhat more slowly than normal, but nevertheless be positive for Africa. Where we're expecting growth of about three-point-sevenpercent in 2010 and five-point-two percent in 2011," Burns says.