The increase in world GDP is projected at 2

The World Bank is concerned. In its annual report on the global economic Outlook, published yesterday, the multilateral institution certainly noted its growth forecasts. The increase in world GDP is projected at 2.7 this year after a decline of 2.2 in 2009. Admittedly, the growth would be higher in developing countries than in rich countries (see chart). Nevertheless. The effects of the 2008-2009 financial and economic crisis are changing the equation for the funding of the growth of developing countries.

"The tightening of the international financial situation will lead to an increase in interest rates, a credit crunch and a reduction in the inflow of foreign capital for companies in developing countries." "In the course of the 5, 6 or 7 years, the rate of growth observed in these countries therefore may be lower by 0.2 to 0.7 percentage point to what they would be if money remained as abundant and cheap than before the crisis", thus considers Andrew Burns, author of the report of the World Bank. Indeed, during the first half of the decade 2000-2010, the expansion of the appropriations available for developing countries was responsible for 40 of the acceleration of the growth of these countries. These cheap funding enabled them to display very high growth rates. But for the World Bank, those days are gone.

The crisis will change the 5 to 10 years funding for growth. The strengthening and extension of the supervision financial markets, the implementation of policies aimed at isolating the developing of the excessive volatility of the markets, the role of local financial institutions, a more cautious attitude of investors to the risks and likely brake to financial innovation are factors for the institution, which modify the gives. This must be added the need for recapitalisation of the banking institutions that will lead to a depletion of the available funding for developing countries. The flow of foreign direct investment (FDI) should be less affected. "However, businesses will face an inflation of their cost of capital which will reduce their ability to finance projects," the report. In these conditions, the IDE should decline by 3.9 of GDP in developing countries to 2.8/3 of GDP. This decline could be serious consequences, the IDE representing up to 20 of the total volume of investments in sub-Saharan Africa, Europe, Central Asia and Latin America.

Reduce the cost of borrowing

Thus, "Although developing countries cannot escape the consequences of a tightening of the international financial situation, they can and must reduce the cost of borrowing and promote local financial markets by developing regional financial centres and in enhancing competition and regulation in their banking sector", argues Hans Timmer, Director of the Group of World Bank's development prospects. This should take some time, recognizes the multilateral institution. All countries will be not be accommodated in the same fashion. The poor are dependent on grants and concessional financing recalled Justin Lin, Chief Economist of the World Bank. "They could have 35 to $ 50 billion of additional resources needed to fund social programs in place before the crisis."

Find the report on lesechos.fr documentslesechos.fr /documents