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CFEPH China Financial & Economic Publishing House
No. Jia 28, Fucheng Rd
Haidian District
100036 BEIJING
PEOPLE'S REPUBLIC OF CHINA
Website: http://www.cfeph.cn
This report explores both the short- and medium-term impacts of the
financial crisis on developing countries. It presents evidence that the
financial boom played a critical role in the growth boom experienced by
developing countries between 2003 and 2007, but that tighter conditions
in the future are expected to result in weaker growth over the next 5
to 15 years.
Although global growth has resumed, the recovery is fragile, and
unless business and consumer demand strengthen, the world economy could
slow down again.
Even if, as appears likely, a double-dip recession is avoided, the
recovery is expected to be slow. High unemployment and widespread
restructuring will continue to characterize the global economy for the
next several years. Already, the crisis has provoked large-scale human
suffering. Some 64 million more people around the world are expected to
be living on less than a $1.25 per day by the end of 2010, and between
30,000 and 50,000 more infants may have died of malnutrition in 2009 in
Sub-Saharan Africa, than would have been the case if the crisis had not
occurred.
Over the medium term, economic growth is expected to recover. But
increased risk aversion, a necessary and desirable tightening of
financial regulations in high-income countries, and measures to reduce
the exposure of developing economies to external shocks are likely to
make finance scarcer and more costly than it was during the boom
period.
In the longer term, however, developing countries can more than
offset the implications of more expensive international finance by
reducing the cost of capital channeled through their domestic financial
markets.
“The crisis has deeply impacted virtually every economy in
the world, and although growth has returned, much progress in the fight
against poverty has been lost. More difficult international conditions
in the years to come will mean that developing countries will have to
place even more emphasis on improving domestic economic conditions to
achieve the kind of growth that can durably eradicate
poverty.”
- Justin Yifu Lin, Chief Economist and Senior Vice President
The World Bank
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