World Bank: Economy worst since Depression

World Bank says global economy to shrink for first time since World War II, dragged down by sharp decline in industry, trade.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

NEW YORK (CNN) -- The world economy is on track to post its worst performance since the Great Depression, with developing countries bearing much of the economic pain, the World Bank said Monday.

Those countries face a credit shortfall of up to $700 billion, the bank said.

"The global economy is likely to shrink this year for the first time since World War II," the bank said, noting that global industrial production, by the middle of 2009, could be as much as 15% lower than in 2008.

Based on those projections, world trade is on track to record its largest decline in 80 years, with the sharpest losses expected in East Asia.

The World Bank, which helps finance the debt of developing nations, says the financial crisis will have long-term implications for them.

"Many institutions that have provided financial intermediation for developing country clients have virtually disappeared. Developing countries that can still access financial markets face higher borrowing costs, and lower capital flows, leading to weaker investment and slower growth in the future," the bank said.

"When this crisis began, people in developing countries, especially those in Africa, were the innocent bystanders in this crisis, yet they have no choice but to bear its harsh consequences," World Bank Managing Director Ngozi Okonjo-Iweala said in remarks prepared for a development conference in London on Monday.

According to the World Bank: "The most affected sectors are those that were the most dynamic, typically urban-based exporters, construction, mining and manufacturing. Cambodia, for example, has lost 30,000 jobs in the garment industry, its only significant export industry. More than half a million jobs have been lost in the last three months of 2008 in India, including in gems and jewelry, autos and textiles."

The World Bank says stimulus packages for the major economic powers will limit money for the developing world, hindering their economic growth.

"Clearly, fiscal resources do have to be injected in rich countries that are at the epicenter of the crisis. But channeling infrastructure investment to the developing world, where it can release bottlenecks to growth and quickly restore demand, can have an even bigger bang for the buck and should be a key element to recovery," Justin Yifu Lin, World Bank chief economist and senior vice president, said in remarks prepared for Monday's development conference in London.

Yin thinks developed countries will enhance their own recoveries if they spend some of their fiscal stimulus in developing countries. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
These 10 food trends could dominate 2015 So long, kale. Here's what's expected to shake up the food industry next year. More
Beyond Russia: Geopolitical hot spots in 2015 Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More
These 20 antique guns could fetch big bucks Morphy Auctions in Pennsylvania is putting nearly 1,000 old guns on the block. Here are just a few. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.