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prospects for growth and the impact on poorer countries
When Alistair Darling presented his budget in April his forecasts for UK economic growth were treated with scepticism. Yet by the summer, his estimate that GDP would fall 3.5% in 2009 was not out of line with many independent forecasters. Some City analysts believed GDP would grow faster in 2010 than Darling’s 1½% estimate.
Both the Chancellor and the Bank of England cautioned against predicting a quick end to the downturn. The high levels of debt in the economy, held both by government and the banking system, may dampen future economic growth.
The world economy faces significant challenges this year. The World Bank forecast in June that world GDP would fall 2.9% in 2009. High income countries will see sharp drops in GDP but low income countries will also be affected. Those in Eastern Europe and Latin America are expected to be particularly affected. The developing world is forecast to see GDP fall when India and China are removed from the forecast.
The World Bank noted that developing countries find falling GDP growth particularly difficult and often have to cut social spending: “The implications for poverty reduction and the Millennium Development Goals of a failure to maintain social spending could be far-reaching.” It warned that “very young children who are seriously affected by poor nutrition may endure permanent cognitive impairment and never catch up to their peers who were born in more fortunate times.”
Stephen Beer.
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