Global economy to shrink by 3 percent in 2009

The global economy is set to contract by close to three percent this year, worse than the previous estimates for a 1.75 percent decline, World Bank President Robert Zoellick said on Thursday.

In a statement ahead of the Group of Eight finance ministers meeting in Italy at the weekend, Zoellick said poor countries were the hardest hit by the global crisis.

Although growth is expected to revive during the course of 2010, the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks, Zoellick said ahead of the Group of Eight finance ministers meeting in Italy.

He said most developing country economies will contract this year and face increasingly bleak prospects unless the slump in their exports, remittances, and foreign direct investment is reversed by the end of 2010.

There is much more we need to do in the coming months to mobilize resources to ensure that the poor do not pay for a crisis that is not of their making, said Zoellick.

The World Bank estimates the overall financing gap for developing countries will be between $350 billion to $635 billion in 2009.

Low-income countries that have limited borrowing capacity due to low reserves and drained national budgets will face particular difficulties in getting sufficient finance in the next few years, Zoellick said.

Because of this, lending from the World Bank, the IMF and other sources will become increasingly important as the crisis rolls across low-income countries.

(Reporting by Lucia Mutikani)