Global economy is likely to shrink for the first time since World War II

The World Bank has said that the global economy is likely to shrink for the first time since World War II, with growth at least five percentage point below potential and likely to have long-term implications for developing countries,

The Banks projections now clearly shows that developing countries face a financing shortfall of USD 270 to USD 700 billion this year and only one quarter of the most vulnerable countries have the resources to prevent a rise in poverty.

As many 94 out of 116 developing countries have experienced a slowdown in economic growth. out of these countries, 43 have high levels of poverty. To date, the most affected sectors are those that were the most dynamic, typically urban-based exporters, construction, mining, and manufacturing.

For example,Cambodia, has lost 30,000 jobs in the garment industry. More than half a million jobs have been lost in the last three months of 2008 in India, including in gems and jewelry, autos and textiles, it says.

In a paper for next Saturdays meeting of the Group of 20 finance ministers and central bank governors, the World Bank says that international financial institutions cannot by themselves currently cover the shortfall — that includes public and private debt and trade deficits — for these 129 countries, even at the lower end of the range. PTI