Feb 20, 2009 (LBO) – While developed countries are facing economic contraction, developing nations are facing increases of absolute poverty, with some countries like Sri Lanka having little fiscal room to maneuver, economists have said. A global economic crunch from a collapsing housing, financial and commodity bubble was slowing ‘economic growth’ worldwide, with world growth expected to be just 0.5 percent in 2009, the lowest in 60 years.
Saman Kelegama, head of the Institute of Policy Studies in Colombo told an economic forum organized by his think tank, that the crisis is getting much worse than originally envisaged, though a recovery was still expected in 2010.
The International Monetary Fund (IMF) had in April 2008 projected a growth of 0.6 percent for the USA for 2009, which was downgraded to a negative 0.7 percent in October and to a negative 2.0 in January this year.
The Euro area which was projected to grow 1.2 percent in an April assessment was subsequently downgraded to -0.5 in October and later -1.6 percent.
Developing countries were getting battered from the crisis with early expectations of being ‘de-coupled’ from the global crisis proving to be a myth, Kelegama said.