SEE, Albania hit by global slump, says WB

WASHINGTON D.C., Dec 9 – The world financial crisis has dimmed short-term prospects for developing countries and the volume of world trade is likely to contract for the first time since 1982. The sharp slowdown has caused commodity prices to plummet, ending a historic five-year boom.
Global Economic Prospects 2009, released Tuesday, finds the global economy transitioning from a long period of strong developing-country led growth to one of great uncertainty as the financial crisis in developed countries has shaken markets worldwide. The report projects that world GDP growth will be 2.5 percent in 2008 and 0.9 percent for 2009. Developing countries, in which Albania is also included, will likely grow by 4.5 percent next year, down from 7.9 percent in 2007, while growth in high-income countries will turn negative.
“People in the developing world have had to deal with two major external shocks– the upward spiral in food and fuel prices followed by the financial crisis, which has eased tensions in commodity markets but is testing banking systems and threatening job losses around the world,” said Justin Lin, World Bank Chief Economist and Senior Vice President, Development Economics. “Urgent steps are needed to help reduce fallout from the crisis in the real economy and on the poorest, including through projects that build better roads, railways, schools, and health care systems.”
The World Bank Group is increasing its support for developing countries, including through new IBRD commitments of up to $100 billion over the next three years as well as via its private sector arm, the IFC, in the form of facilities for trade finance, banking recapitalization, and for privately-funded infrastructure projects facing financial distress.
In 2009, it is expected that developing countries will see a large drop in their exports. Tighter credit conditions and increased uncertainty are expected to see investment growth in both developing and high-income countries slow in 2009ءctually falling 1.3 percent in developed countries and rising by only 3.5 percent in developing countries – verses 13 percent in 2007.
“Policymakers in developing countries should monitor their banking sectors carefully and be prepared to enlist external support to shore up currencies and banking systems.” said Uri Dadush, Director of the World Bank’s Development Prospects Group.
Overall, higher food and fuel prices have cost consumers in developing countries about $680 billion in extra spending in 2008 and pushed an additional 130-155 million people into poverty.
Climate change and other green policies may also reduce demand for hydrocarbons and lead to long run productivity improvements in the agriculture sector.
A key finding from the GEP is that commodity exports can promote growth if the right policies are in place.
GEP recommends several measures that could reduce the chance of another food price crisis. These include discouraging export bans, providing more stable funding for food-aid agencies, and improving the coordination and information about global food stocks.