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The World Bank predicts that the global economy will shrink this year for the first time since World War II, intensifying poverty in ‘vulnerable countries.’
In a report published on Sunday, the Washington-based institution warned that the market meltdown could create a $700 billion (£507bn) financial black hole for poor and developing countries as capitalists flee ’emerging markets.’
The US-dominated bank, which doles out loans to 129 developing countries, said in a statement: ‘As private-sector creditors shun emerging markets, only one-quarter of the most vulnerable countries have the resources to prevent a rise in poverty.’
The World Bank also warned that the growing crisis will push world trade into its steepest decline in 80 years.
And industrial output could be as much as 15 per cent lower than 2008.
The sharpest trade losses will be in east Asia, where countries are largely dependent on exports to fuel their growth.
Cambodia, for example, has lost 30,000 jobs in the garment sector, its only significant export industry.
And over half a million jobs evaporated in the last three months of 2008 in India, including in gems and jewellery, cars and textiles.
Japan’s exports to the US were down 52.9 per cent in January and Tokyo reported on Monday that the country had its first trade deficit in 13 years in January, amounting to about $1.8bn (£1.3bn).
World Bank president Robert Zoellick urged governments to invest in ‘safety nets, infrastructure and small and medium-size companies to create jobs and to avoid social and political unrest.
‘We need to react in real time to a growing crisis that is hurting people in developing countries,’ he added.
‘This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis.’
The World Bank report was released before a meeting in London of finance ministers of the G20 group on Friday and Saturday which will focus on the crisis.
European Union finance ministers are expected to back a call from the International Monetary Fund to double its funds to $500bn (£362bn).
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