Martin Luther Oketch
8 July 2009
Kampala — The World Bank has projected that the international capital flows are predicted to fall in 2009 to $363 billion.
The expected slump in global capital inflows is likely to affect economic growth in developing economies because many development projects will suffer. There are fears that this might push millions of people into poverty.
With international capital set to fall by more than a half of the total volume in 2008, the World Bank says it is not yet known how much capital will come to Sub-Saharan Africa in 2009.
The World Bank notes that amidst the global economic recession and financial-market fragility, net private capital inflows to developing countries fell to $707 billion in 2008: a sharp drop from $1.2 trillion in 2007.
In its Global Development Finance Report 2009: Charting a Global Recovery, the World Bank stated that Sub-Saharan Africa has been hit hard by reduced external demand, plunging export prices, sharp cuts remittances and tourism revenues, and much lower capital inflows.
Growth is expected to decelerate sharply this year to 1 per cent, down from 5.7 per cent on average over the past three years. By 2010, growth is forecast to rise by 3.7 per cent.
A decline in official aid also represents a risk for the region, because many Sub-Saharan countries rely on aid flows for budget support.
"The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction," said Mr Justin Lin, World Bank Chief Economist and Senior Vice President of Development Economics.
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