The World Bank predicts the global economy will shrink this year for the first time since World War Two and warns the growing crisis will create a multibillion-dollar financial shortfall for poor and developing nations.
The World Bank's forcecast is gloomier than most other surveys which still foresee some growth
In a report published on Sunday, March 8, the Washington-based institute said the global financial crisis would create a $270-billion (213 billion euros) shortfall for poor and developing nations as creditors flee emerging markets.
The World Bank says East Asian economies will be hit the hardest
The bank, which provides technical and financial aid to 129 developing nations, added that the financing gap could even be as much as $700 billion.
"As private sector creditors shun emerging markets, only one-quarter of the most vulnerable countries have the resources to prevent a rise in poverty," the bank said in a statement.
The sharpest trade losses will be in East Asia, the Bank said, where economies are largely reliant on exports.
Zoellick calls for "global solution"
Since banks and international financial institutions would not be able to shore up developing economies due to the global crisis, World Bank president Robert Zoellick called for "investments in safety nets, infrastructure and small and medium-size companies to create jobs and to avoid social and political unrest."
"We need to react in real time to a growing crisis that is hurting people in developing countries," Zoellick said. "This global crisis needs a global solution, and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis."
The Bank said the crisis will make poor countries more reliant on development assistance because, as richer countries borrow more, it will become more difficult for poorer countries to raise debt.
Zoellick has called for global efforts to prevent "social unrest" in poor and developing nations
The World Bank also warned the growing crisis will push world trade to its steepest decline in 80 years. Industrial output could be as much as 15 percent lower than 2008, it said.
Last month Zoellick called for a fund to which wealthier industrial nations would contribute 0.7 percent of their stimulus package to help poorer countries.
G20 meeting looms
The World Bank report comes ahead of a meeting of finance ministers of the G20 group on Friday and Saturday. The G20 groups the world's richest nations and biggest emerging economies.
The G20 meeting will focus on the global financial and economic crisis which has made several European countries turn to the International Monetary Fund (IMF) for help. The meeting will help prepare for a main G20 summit in London in April.
News agency Reuters reported on Monday that European Union finance ministers are set to back a call from the International Monetary Fund to double its funds to $500 billion to fight the global financial crisis.