The World Bank said that the global economy is likely to shrink for the first time since World War II and trade will decline by the most in 80 years. The World Bank's assessment is more pessimistic than an International Monetary Fund report in January predicting 0.5% global growth this year.

World Bank did not provide a specific estimate in its report. It said that world growth will be 5% below its potential. It added that developing nations will bear the brunt of the contraction. They will face a shortfall of between USD 270 billion and USD 700 billion to pay for imports and service debts.

Mr Robert Zoellick president of World Bank said that "We need to react in real time to a growing crisis that is hurting people in developing countries. Action is needed by governments and multilateral lenders to avoid social and political unrest."

The World Bank said that a surge of debt issuance by rich nations risks crowding out many developing country borrowers, both private and public. It added that emerging nations that can access capital markets will be forced to pay higher rates of interest.

The report said that 94 out of 116 developing countries had experienced a slowdown in economic growth, with poverty increasing in 43. The economic crisis will swell the ranks of the poor by 46 million this year, the report says. The result would be growing dependence on foreign aid.

Mr Justin Lin chief economist at World Bank said that developed nations should funnel part of their stimulus spending to poorer countries where it would be more effective at boosting demand. Channeling infrastructure investment to the developing world can have a bigger bang for the buck.

(Sourced from www.nineoclock.ro)