More bad news on the state of the global economy. According to a World Bank study prepared for next Saturday’s meeting of the Group of 20 finance ministers and central bank governors in London:
The global economy is likely to shrink this year for the first time since World War Two, with growth at least 5 percentage points below potential. World Bank forecasts show that global industrial production by the middle of 2009 could be as much as 15 percent lower than levels in 2008. World trade is on track in 2009 to record its largest decline in 80 years, with the sharpest losses in East Asia.
This is especially troubling for those least responsible for the crisis — the extreme poor. The study goes on to warn of financing shortfalls of anywhere between $270-700 billion as commodity prices continue to decline, global trade collapses, trade finance and private capital flows dry up and remittances drop. The poorest countries lack the social safety nets to deal with the crisis and are becoming increasingly dependent on overseas development assistance.
Unfortunately even before the financial crisis hit, rich countries were falling short of their commitments by about $39 billion a year. At least in the U.S., the President’s budget (PDF) goes against the tide. It designated $51.7 billion for the State Department and other International Affairs Programs, a $4.5 billion increase from fiscal year 2009.
As the situation continues to spiral download, some people are looking to the April 2 G-20 summit in London to provide more a pro-poor response. Today the UK government is hosting a major conference with Bob Geldof and Lord Stern, author of the eponymous review on climate change, among others, to look at the future of global development and the impacts of the crisis on achieving the Millennium Development Goals (MDGs). Its Department for International Development (DfID) is putting forth a proposal to lesson the impact of the global economic downturn on poor countries, while still reducing carbon emissions.
- A new “rapid response” fund to provide a safety net for the world’s most vulnerable people. The multibillion-pound fund would help meet basic needs including feeding children, medical care for pregnant women and “food for work” projects.
- A “global poverty alert” system would be set up to link international organizations, aid agencies and research groups into a single network to provide instant updates on the impact of the economic crisis on the poor.
- Action to modernize the World Bank to speed up payments and increase the amounts of cash it releases.
The economic crisis, in particular the impacts on the poorest and must vulnerable, will be on the agenda when the UN Secretary-general Ban Ki-Moon comes to Washington tomorrow.