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World Bank Slashes Growth For Developing Nations

The World Bank slashed its outlook for developing nations' economies, estimating growth at a meager 1.2 percent this year while warning more measures were needed for a recovery to take hold.

"A woman talks on a phone at a shop counter in Beijing on June 18 with a huge logo saying "Made in China" on the wall. The World Bank estimated economic growth in developing countries of 1.2 percent this year, and said that without China and India, output would shrink 1.6 percent."

The forecast amounts to steep drops from the previous two years, with developing countries having seen 8.1 percent growth in 2007 and a 5.9 percent expansion in 2008.

Without China and India, the bank said, output would shrink 1.6 percent this year.

The economic weakness in the developing world after recent years of robust growth heightens the risks of social unrest and deepening poverty, the 185-nation institution said.

"To prevent a second wave of instability, policies have to focus rapidly on financial sector reform and support for the poorest countries," said Hans Timmer, director of the bank’s Prospects Group.

Amid the worst global financial and economic crisis in seven decades, the multilateral institution eight days ago lowered its outlook on global growth to a contraction of 3.0 percent this year.

It slightly revised the global gross domestic product (GDP) figure Monday to a 2.9 percent decline.

The development lender's preceding forecast, published in late March, put developing countries' annual growth at 2.1 percent, and at zero if China and India were excluded.

In 2010, global growth was projected at 2.0 percent and that of the developing countries at 4.4 percent, according to the bank. Excluding China and India, the developing countries would grow 2.5 percent.

China's economy was forecast to expand 7.2 percent in 2009 and 7.7 percent in 2010, while India's forecast was for 5.1 percent followed by 8.0 percent.

The World Bank expressed concern about the thinning flow of private capital into developing countries, which has fallen nearly by half this year -- 49 percent.

"An Indian shopper exits a shop offering heavy discounts in New Delhi on June 16. The World Bank estimated economic growth in developing countries of 1.2 percent this year, and said that without China and India, output would shrink 1.6 percent."

It fell to 363 billion dollars compared with 707 billion in 2008, after a record 1.2 trillion in 2007.

The development lender also projected a 9.7 decline in global trade volume this year, before a 3.8 percent growth rebound in 2010.

"The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction," Justin Lin, World Bank chief economist, said in a statement.

The anti-poverty bank called for "special attention" to "the risk of balance-of-payments crises and corporate debt restructurings in many countries," in order to "avoid another debt crisis as seen in the 1970s and 1980s."

That was particularly the case in the hard-hit developing countries in Europe and Central Asia, where GDP was projected to fall 4.7 percent this year, before a slight recovery to 1.6 percent growth in 2010.

A similar pattern of decline and rebound was seen for Latin America and the Caribbean, where a 2.2 percent GDP contraction in 2009 would be followed by a 2.0 percent expansion the next year.

Other regions of the developing world continued to show growth. In East Asia and Pacific, GDP was expected to rise 5.0 percent in 2009 and 6.6 percent in 2010, while South Asia would expand 4.6 percent, followed by 7.0 percent.

GDP in the Middle East and North Africa was expected to rise 3.1 percent in 2009 and 3.8 percent in 2010.

Sub-Saharan Africa would expand 1.0 percent, then accelerate to a 3.7 percent pace next year.