November 1, 2001	Thursday	Shaba’an 14, 1422

WASHINGTON, Oct 31: The global economy is slipping toward recession, with growth in trade undergoing one of the most severe decelerations in modern times, the World Bank warned in a report released on Wednesday.

In its annual Global Economic Prospects report, the bank said that while the evidence points to a probable recovery in the middle of next year, the risks that the recovery will not happen are the “gravest in a decade”.

Poor countries are suffering as a terrorist-triggered slide towards global recession is compounded by barriers to trade with the rich, the report warned.

Trade growth plummeted to one per cent in 2001 from 13 per cent last year and demand for poor countries’ exports had dropped 10 per cent, the report said.

Rich nations spent a billion dollars a day on agricultural subsidies alone, the World Bank said, six times more than all development assistance to the developing world.

The report chided the developed world for failing to topple barriers to trade in the goods most exported by the developing world — especially agriculture, textiles and clothes.

“As 2001 draws to a close, the global economy is slipping precariously towards recession,” it said. “Developing countries have seen their economic growth rates plunge.”

The September 11 terrorist attacks in the United States unleashed new and unpredictable forces that substantially raised the risk of a global downturn, the World Bank said.

“What makes this situation unusually risky is that this is the first time since 1982 that the United States, Europe and Japan have all turned down at the same time,” said the report’s principal author, Richard Newfarmer.

Gross Domestic Product (GDP) growth in developing countries was expected to slide to 2.9 per cent this year from 5.5 per cent in 2000, the Bank said. It was tipped to rise to 3.7 per cent next year.

Worldwide, GDP growth was set to slump to 1.3 per cent this year from 3.8 per cent in 2000. Global growth was forecast to recover slightly to 1.6 per cent next year.

Ministers of the World Trade Organization could improve prospects if they succeed in launching a new trade liberalization round at their November 9-13 meeting in Doha, Qatar, the WTO said.

It called for a special development round of the WTO to cut tariffs on agriculture and textiles, the developing countries’ key exports.

“A reduction in world barrier to trade could accelerate growth, provide stimulus to new forms of productivity-enhancing specialization and lead to a more rapid pace of job creation and poverty reduction around the world,” the report said.

“However, the fate of new trade talks is as uncertain as the global outlook.”

Developing countries accounted for more than one-third of merchandise trade and had increased their weight in the WTO to 70 per cent of the 142 members, it said.

But they worried that the world trade system was leaving up barriers to trade in the goods they export most while focusing on rules that had little relevance to the poor.

Support for new trade initiatives was divided, the World Bank said, with the anti-globalization movement questioning the premise that more open markets can enrich the poor.

The World Bank urged the industrialized countries to go beyond the WTO in helping poor countries’ trade.

Richer nations should unilaterally open up duty free and quota-free access to their markets to the poorer countries, it said. “Secondly, high-income countries could also demonstrate good faith by reining in anti-dumping cases.”

Developing countries also should cut barriers to trade, especially in services, the Bank said.

Poor countries in East Asia and the Pacific were expected to suffer a slide to 4.6 per cent GDP growth this year and 4.9 per cent in 2002 from 7.5 per cent last year.

In South Asia, economic growth would fall to 4.5 per cent this year before rebounding to 5.3 per cent in 2002, following an expansion of 4.9 per cent last year, it said.

For Latin America and the Caribbean, GDP growth was likely to slump to 0.9 per cent this year from 3.8 per cent in 2000, then recover to 2.5 per cent next year.

And in sub-Saharan Africa, GDP growth was set to ease to 2.7 per cent this year and next, after growth of 3.0 per cent last year.

“A probable consequence of the simultaneous downturn in the industrial world is that a broad range of developing countries will face an abrupt ending to the strong recovery that followed the financial crises (such as the Asian crisis that erupted in July 1997),” the World Bank said.

Big exporters such as East Asia and Latin America were the first to feel the slump, it said.

Debt loads also affected the severity of the impact, the Bank added.

“The more difficult external environment is especially worrisome for highly-indebted countries relying on private capital flows, such as Argentina, Brazil, Turkey and Argentina.”—Reuters/AFP