Global decline to accelerate

The World Bank says the world economy will shrink fast than previously expected this year.

The global economy will shrink faster than previously expected this year, presenting a particular threat to the fragile economies of developing countries, the World Bank said today. The bank lowered its forecast for global growth from -1.7 per cent to -2.9 per cent, on signs that the international repercussions of the global financial crisis are continuing to worsen. The GCC will fare slightly better than the global average, with a projected growth rate of -0.5 per cent.

"Prospects for recovery in the developing countries in the Middle East and North Africa will depend importantly on the strength of the eventual revival of growth in Europe and in the GCC countries," the World Bank said in its Global Development Finance report. The World Bank's global growth prediction is more pessimistic than the most recent from the International Monetary Fund, which predicts a -1.3 growth rate this year and a -0.6 per cent growth rate for the UAE. The World Bank did not publish a forecast specifically for the UAE economy.

It called for increased international co-ordination on efforts to combat the effects of the global crisis, saying that the newly integrated nature of the world economy will diffuse local stimulus attempts and potentially threaten the finances of individual states. "Any country that acts alone?even the United States?may reasonably fear that increases in government debt will cause investors to lose confidence in its fiscal sustainability and so withdraw financing," the report said.