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Wednesday, 17 October, 2001, 06:58 GMT 07:58 UK
World Bank sees Asian and US slump
World Bank HQ in Washington DC
The World Bank report is just the latest in a long line of gloomy surveys
The rate of expansion in Asia's tiger economies will slump by 40% this year, while the US will see its growth rate drop by two thirds, World Bank economists have said.

The terror attacks have, through hitting tourism and consumer confidence and prompting investment delays, in effect extended the current slump by nine months, the World Bank report showed.

This delay will mean fewer jobs and less household income... This outcome will certainly be bad news for the world's poor

Hosni Kharas, World Bank chief economist for East Asia
Output in East Asia, a region including Hong Kong, Japan, Singapore and Taiwan, will grow by 4.6% this year, compared with 7.3% in 2000, Wednesday's report said.

Japan's economy will be one of the worst performers, contracting by 0.8% this year.

The world, meanwhile, is on course for growth of 1.3% in 2001, down from 4% last year.

Global economic growth could pick up to 3.9% by 2003, the bank said.

Worst hit

Those standing to lose most through the downturn are Asia's "open, middle and upper income economies" including Singapore, Taiwan, Hong Kong and South Korea, Thailand, the Philippines and Malaysia.

China will prove the region's main engine of growth, achieving 7.1% expansion this year and 6.8% in 2002, the bank said.

Although the region's poorer economies may not suffer quite as badly, the implications for individual citizens of the growth slide could nonetheless prove severe.

"This delay will mean fewer jobs and less household income," said Hosni Kharas, the bank's chief economist for East Asia and the Pacific.

"This outcome will certainly be bad news for the world's poor."

The bad news has made the process of reforming financial systems and banking more urgent, not less, Mr Kharas said.

US woes

The bank highlighted the influence on Asia of policy in the US, the world's biggest economy,

Poor lady in Hong Kong
Poor people across the globe will be hit

Rapid cuts in US interest rates, coupled with tax cuts and increased government spending, could help Asian economies back on their feet, Wednesday's report said.

But the US itself will see growth slow to 1.1% this year, dipping to just 1.0% the year after.

Growth could rise to 3.9% in 2003, the bank added.

The effects were "hard to gauge with any precision - other than that they are likely to be large".

The US economy was verging on recession before the 11 September, while Japan was already in recession, the bank said.

Poor will suffer

The report follows bank predictions that the world's poor will be the worst hit by the global slowdown, made much worse by the terror attacks.

About 10 million more people will be pushed into poverty around the world as healthcare advances grind to a halt and inward investment is frozen at best, the bank has said.

Ahead of the attacks, the bank had already predicted that economic growth in the developing world would fall from 5.5% in 2000 to 2.9% this year before bouncing back to 4.1% in 2002.

This prediction has now been changed.

The Bank's now forecasts growth in developing world of 3.35-3.6% next year.

Nicholas Stern, Chief Economist World Bank
"We need an international response to international problems of poverty."
See also:

01 Oct 01 | Business
Poverty warning after US attacks
01 Oct 01 | Business
Survey raises Japan recession fears
26 Sep 01 | Business
IMF warns on global economy
26 Sep 01 | Business
US economy in freefall
25 Sep 01 | Business
Business gurus warn of US recession
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