The World Bank has slashed its outlook for developing nations' economies, estimating growth at a meagre 1.2% this year while warning more measures were needed for a recovery to take hold.
The forecast amounts to steep drops from the previous two years, with developing countries having seen 8.1% growth in 2007 and a 5.9% expansion in 2008. Without China and India, the bank said, output would shrink 1.6% 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% this year.
Today, it slightly revised the global gross domestic product (GDP) figure to a 2.9% decline.
The development lender's preceding forecast, published in late March, put developing countries' annual growth at 2.1%, and at zero if China and India were excluded.
In 2010, global growth was projected at 2% and that of the developing countries at 4.4%, according to the bank. Excluding China and India, the developing countries would grow 2.5%.
China's economy was forecast to expand 7.2% in 2009 and 7.7% in 2010, while India's forecast was for 5.1% followed by 8%.
The World Bank expressed concern about the thinning flow of private capital into developing countries, which has fallen nearly by half this year. It fell to $363 billion 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% 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.
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% this year, before a slight recovery to 1.6% growth in 2010.
A similar pattern of decline and rebound was seen for Latin America and the Caribbean, where a 2.2% GDP contraction in 2009 would be followed by a 2% expansion the next year.
However, other regions of the developing world continued to show growth. In East Asia and Pacific, GDP was expected to rise 5% in 2009 and 6.6% in 2010, while South Asia would expand 4.6%, followed by 7%.
GDP in the Middle East and North Africa was expected to rise 3.1% in 2009 and 3.8% in 2010. Sub-Saharan Africa would expand 1%, then accelerate to a 3.7% pace next year.
