World Bank says global '09 growth to slip below one per cent

Global economic growth will grind into a low gear in 2009, according to a new study released Tuesday by the World Bank.

The multilateral development bank said the world economy will expand by only 0.9 per cent next year after seeing a global GDP expansion of 2.5 per cent in 2008. The bank noted that world GDP grew by 3.7 per cent in 2007.

Developing countries, such as sub-Saharan Africa, will enjoy a faster economic expansion than most industrialized countries in 2009, but are still at risk from a slowdown in export sales and as commodity prices drop, the World Bank said in releasing its forecast.

"Growth prospects for both high-income and developing countries have deteriorated substantially, and the possibility of a serious global recession cannot be ruled out," the organization said.

Spreading economic stain

The ongoing financial credit crunch has been felt in more countries than merely those that had a preponderance of banks and other lending institutions, the bank noted.

While the richer nations have been hammered by falling equity markets and faltering consumer demand, the developing countries have seen export sales to these same economies begin to dry up.

Developing countries in areas like Africa and East Asia have also faced troubles raising money as borrowing tightens up around the globe, the bank said.

Even so, the World Bank now predicts that the countries that constitute of the Organization of Economic Co-operation and Development will shrink in economic terms.

The United States, for instance, will see its GDP shrivel by 0.5 per cent next year before recovering to post growth of two per cent by 2010.

Developing regions will enjoy better growth prospects, partly because of their lack of exposure to exotic — but ultimately riskier — financial derivative markets.

East Asia, for instance, grew somewhere in the range of 10.5 per cent in 2007, a figure that will slide to 8.5 per cent this year and 6.7 per cent in '09.

Latin America and the Caribbean region will see a similar stumble in economic growth albeit at a lower level.

Central America grew by 3.6 per cent in 2007, which will slip to 2.2 per cent by the end of December. Next year, these countries will grow by a middling 1.4 per cent, still better than the negative rate expected in the high-income countries, the bank said.

Canada's growth rate was not outlined separately in the report.