Pain amid Asia's
positive growth outlook By Abid
Aslam
WASHINGTON - Developing countries
look likely to be hit less hard than others amid
the downturn in the United States economy,
according to the International Monetary Fund
(IMF). Yet the world's poorest will feel the
impact of slowing global growth as foreign aid
from rich countries stalls, a World Bank report
shows.
The United States will fall into
recession this year, dragging down global economic
performance for the next two years, according to
the IMF. When the fund last updated its
semi-annual World Economic Outlook report, in
January, it predicted the worst global performance
in five years but stopped short of using the word
recession.
On Wednesday, however, it said
the global slump could prove worse than predicted.
There is a one-in-four chance that a
global
recession - seen when world
economic growth falls below 3.0% - will ensue, it
said.
The fund predicted global growth
would slow to 3.7% this year, half a percentage
point lower than its January forecast, amid the
still-deepening financial crisis set off by
rampant speculation on securities backed by shaky
mortgages in insufficiently regulated US financial
markets.
"The financial market crisis that
erupted in August 2007 has developed into the
largest financial shock since the Great Depression
[1929]," it said.
Latin America and
countries linked to the plummeting US dollar will
be hardest hit as the US-led slump spreads around
the globe, the IMF said. Rapidly growing emerging
economies, such as China and India, will suffer
the least pain, it said. However, even they will
feel a sting as rich countries cut their imports.
At the heart of the gathering darkness,
the world's largest economy will stagnate over the
course of this year and much of next as housing
prices continue to drop and credit remains
difficult to obtain. US home prices already have
fallen 10% and the fund anticipated this
deterioration to reach between 14% and 20%.
The US economy will grow by a negligible
0.5% in 2008 despite many billions of dollars in
government spending to aid the financial sector,
shore up consumer and business spending, and save
homeowners from dispossession. This performance
will improve little, to 0.6%, in 2009, the IMF
said. It termed the prospect of two years in which
the economy will fail to keep pace with population
growth - estimated at 0.9% a year - a "mild
recession".
Japan, the world's
second-largest economy, will slow to 1.4% this
year and 1.5% in 2009. The 15-member eurozone will
see its growth slow to 1.4% in 2008 and 1.2% next
year, down 0.2% percentage points and 0.7%
percentage points, respectively, since the IMF's
January forecasts.
By contrast, emerging
and developing economies are likely to post a
relatively robust 6.7% rate of growth this year,
down only 0.2% percentage points from the fund's
earlier forecast. This could slip slightly in
2009, to 6.6%.
China will continue to
lead, growing at 9.3% this year and 9.5% in 2009,
down 0.7 points and 0.5 points, respectively.
India's economy should expand by 7.9% this year
and 8.0% next year, off 0.5 points and 0.2 points,
respectively.
Wednesday's release came in
advance of the coming weekend's annual spring
meetings of the IMF and World Bank. It appeared on
the heels of a report in which the agencies warned
that the so-called Millennium Development Goals
(MDGs), set by the international community in
2000, are unlikely to be met by the target year of
2015.
The World Bank-IMF report, released
on Tuesday, said that most countries are on target
to reach the goal of halving extreme poverty but
will fall short on commitments to reduce hunger
and malnutrition and to improve health and
education. Many reasons lie beneath the likely
failures but prominent among these, said the bank
and fund, foreign aid spending by rich countries
has stalled.
Official development
assistance (ODA) fell in 2006 and 2007 despite a
2005 promise by the G-8 countries to double aid by
2010, they added.
"If current ODA trends
persist, sizeable shortfalls loom, which would
particularly hurt poor countries and fragile
states that offer promising opportunities to scale
up development results," Tuesday's report said.
An aid revival appears unlikely as the
cost of the credit crisis continues to rise. The
IMF, which is charged with maintaining global
financial stability, said in a separate report
Tuesday that worldwide losses from the financial
turmoil could top US$945 billion within two years.
Others also have predicted costs around the $1
trillion mark.
The bank and fund, in their
joint report, said that while soaring commodity
prices have boosted some poor countries' export
revenues, they also have removed staple foodstuffs
from the reach of countless people in developing
countries, where many citizens spend half their
income or more on food alone.
Sub-Saharan
Africa is expected to miss nearly all of the MDGs
but concern also centers on South Asia, home to
most of the world's poor people and the planet's
highest levels of child malnutrition.
Worldwide, the agencies said, 1 billion
people lack access to clean water, 1.6 billion
people have no access to modern energy sources,
and 2.6 billion live without basic sanitation.
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