World Bank: Poor Face Long Recovery
Wednesday, September 16, 2009; 12:19 PM
The global recession is expected to push 89 million more people into extreme poverty by the end of 2010, the World Bank said Wednesday as it called on the leaders of the 20 largest economies to engage in "responsible globalization."
Although economic data show the worst recession of the post-World War II era might have ended in the United States, and global trade has begun to pick up again, low-income countries are still reeling from the effects of a financial crisis created by their wealthier counterparts.
In a paper prepared for the meeting of the Group of 20 nations next week in Pittsburgh, the bank said the sharp drop in trade, remittances, tourism and capital flows caused by the global downturn has forced governments in the poorest nations to cut spending in such critical areas as education, health and infrastructure.
"We are entering a new danger zone not of free fall but complacency," World Bank Group President Robert B. Zoellick said Wednesday during a conference call with reporters. "You have pledges, you have people who have intentions, but it's not operationalized yet."
Leaders of the G-20 are expected to spend much of the upcoming summit assessing the state of the global economy and the need for further stimulus measures. They are also grappling with how to improve oversight of the global financial system by placing restrictions on executive compensation and increasing the amount of capital banks must have on hand to cover potential losses. A larger concern that has emerged from the crisis is that global economic growth was too dependent on U.S. consumer spending and led to imbalances in trade and capital flows that helped fuel the housing and stock bubbles and subsequent busts.
Zoellick said developing nations could play a vital role in helping the global economy achieve more balanced and sustainable growth by becoming another source of demand. However, to do that, they need help from developed nations with access to financing.
"The April summit was for the financial sector," he said referring to the last G-20 gathering in London. "This summit needs to be for responsible globalization."
The World Bank, which is based in Washington and was created to finance development in the world's poorest countries, called on the leading eight industrialized nations to act on a pledge made at a summit earlier this year in Italy to distribute $20 billion in agricultural development aid. It also called on the larger Group of 20 top industrialized nations to do more to help finance small and medium-size businesses, which it said were key to economic growth.
The bank also called on the G-20 to set up an emergency loan program to help poor countries so they "won't be left defenseless in the face of shocks" not of their own making. In addition to the financial crisis, Zoellick also cited the run-up in food and fuel prices in 2008 as examples.