UNICEF Social Inclusion, Policy and Budgeting

Weathering the Storm: Economic Policy Responses to the Financial Crisis

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AUTHOR Milan Brahmbhatt
ORGANIZATION World Bank
TYPE Policy Brief
DATE 2008
TOPIC Economic crisis and recovery
LANGUAGE English
ABSTRACT

The world economy is entering a major downturn caused by the most dangerous shock in mature financial markets since the 1930s. Current World Bank growth projections for high income countries have been slashed from 2.5 percent in 2007 to a contraction of 0.1 percent in 2009. World trade volumes are expected to actually contract in 2009, the first time since the 1982 recession. A distinctive feature of the coming global downturn is that it is a crisis emanating from advanced economies rather than from bad policies in developing countries. On the contrary, economic policies and macroeconomic positions in developing countries are generally stronger than 10 years ago. Nevertheless, the approaching advanced world recession will pose a severe test for the quality of economic policies and institutions in developing countries and will likely generate a sharp slowdown in their growth in 2009 through a variety of channels. Bank projections are for developing country growth to tumble to 4.5 percent in 2009 from 7.9 percent in 2007.


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