Global slowdown likely in 2008
According to the World Bank’s Global Economic Prospects 2008 (GEP 2008) report real GDP growth is likely to fall to 3.3% in 2008, down from 3.6% in 2007, as GDP in developing countries is expected to slow slightly to 7.1%, while high-income countries are predicted to grow by only 2.2%, as the threat of recession in the USA could lead to a cut in export revenues and capital investment in developing countries.
“Overall, we expect developing-country growth to moderate only somewhat over the next two years. However, a much sharper United States slowdown is a real risk that could weaken medium-term prospects in developing countries,” said Uri Dadush, director of the World Bank’s Development Prospects Group and International Trade Department.
However, despite the risks of a slowdown, the report claims that it is the developing countries that will ultimately soften the blow of lower GDP in the ‘old world’ nations. “Looking at trade, strong import demand across the developing countries is helping to sustain global growth. As a result and given a cheaper US dollar, American exports are expanding rapidly. This is helping shrink the US current account deficit and is contributing to a decline in global imbalances,” said Hans Timmer, co-author of the report.
