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The Great Recession and the Developing Countries


Dec 2, 2010 - 'The Great Recession and the Developing Countries: Economic Impact and Growth Prospects’ assesses the likely impact of the recent global crisis on medium term growth prospects of 10 diverse developing countries -- Brazil, China, Ethiopia, India, Malaysia, Mexico, Philippines, Poland, Turkey, and Vietnam. The 12-chapter book, which features a diverse set of authors and commentators, is being presented in its final form on Thursday, December 2 at the World Bank’s InfoShop.

Key messages are that: 1) post-crisis growth is likely to be multi-polar and diverse; 2) a real-time analysis of country policies allows a greater likelihood that crises can be averted in future; 3) lessons from the most successful emerging markets – whether giants like China or smaller nations like Malaysia – are vital to securing an enduring economic recovery.

Other findings are that countries tend to fare better when they have a well managed current account balance and a track record of fiscal prudence. Also, the use of reserves as buffers was a much more important tool during this crisis than in the past, although there are worries that over-use of reserves could lead to reputational problems.

Clearly, differential productivity will be very important to an enduring recovery and concerns will persist about output gaps in developing countries.

Average growth of potential output for the 10 countries is, on average, expected in the medium-term (2011-2015) to be 5.7% versus 6.1% in the pre-crisis (2003-2007) period. But a great diversity of expected changes in GDP growth potential compared to pre-crisis levels is also likely:

- Countries with no negative impact expected are Brazil, India, Mexico and Vietnam
- Those with significant but moderate negative impact (-0.4 to -1.1 percentage points) are Turkey, Poland, Ethiopia, the Philippines, and Malaysia
- A large negative change is expected in China (-2 percentage points)

By 2015 the output gap for the 10 countries would average around -6 to -8 percent of GDP. Within that there is large variance: from big for Turkey (-18 percent) to negligible for Brazil, Ethiopia, India and Vietnam.

Video clips from the InfoShop event will be featured soon on this site…..

Read Full Text (pp. 1-301 and pp. 301-634)

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