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Okonjo-Iweala Forum 2009

Okonjo-Iweala Forum 2009

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Published by: InterAction on Sep 29, 2009
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InterAction 25th Anniversary Forum: The Next 25 Years Start Today

July 9, 2009
Closing Address
Dr. Ngozi Okonjo-Iweala, Managing Director, World Bank

Dear Friends, Ladies and Gentlemen,
Good afternoon.
Let me first thank InterAction for inviting me to the 25th Anniversary Forum. What a

special occasion! It is a great honor for me to be here. A quarter-century of service is a
milestone, a worthy cause for celebration. Congratulations, members of InterAction!
[Impact of the global crisis on developing countries]

We celebrate this occasion at a sobering time in global economic history. We are
experiencing the \u201cmost serious financial crisis since the Great Depression\u201d. It is not just a
financial crisis. Across the globe, we have all seen how the economic situation has
deteriorated sharply over the last year. What began with turmoil in some segments of
financial markets in advanced economies has turned into one of the sharpest global
economic contractions in modern history. Global output is now expected to shrink by 2.9
percent in 2009, the first contraction since World War II. Borrowing a term coined by the

1 This is a prepared draft. Please check against delivery.

IMF, the world has entered a \u201cGreat Recession\u201d. Whilst there are recent bits and pieces
of sign of green shoots that may or may not have roots, these shoots are mostly in the
financial sector, but there is a lag in the real sector which is still showing signs of excess
capacity with unemployment figures going up everywhere.

The crisis exacts a heavy toll on developing countries. Our latest forecasts suggest that
developing country growth will slow sharply moving from 8.1% in 2007 and 5.9% in

2008 to only 1.2% in 2009. When China and India are excluded, GDP in developing countries is projected to fall by 1.6%. Sub-Saharan Africa will grow only by 1%, and Eastern Europe, Central Asia, Latin America and the Caribbean are likely to end 2009 with negative growth. This slowdown threatens the enormous gains in

incomes and living standards that have occurred across the developing world over the last
Developing countries are faced with rapidly deteriorating economic conditions.The

reversal of capital flows, collapse in stock markets, and general deterioration in financing
conditions have brought investment growth in the developing countries to a halt. Net
capital flows into developing countries fell sharply to $700 in 2008 from $1.2 trillion in
2007, leaving a large gap to fill. International capital flows are projected to fall further in
2009 to US$363 billion.

In Africa, capital markets have dried up in many countries. African stock markets have fallen by an average of 40 percent. In my country Nigeria, the capital market, which had been an investors\u2019 delight in the last two years, has now become a source of anxiety. The

market capitalization of the 303 listed equities, suffered its highest fall in the 48-year
history of the Nigerian Stock Exchange, depreciating by 32 per cent by the year end.

This is also the first global crisis that started in remittance sending countries and it\u2019ll be
developing countries who suffer the fallout. For countries where remittance inflows are
large relative to GDP a decline could be devastating. This is true for countries like
Tajikistan (45 percent), Tonga (35 percent), and Lesotho (29 percent).

People are losing jobs in developing countries. Already 100,000 people in the DRC are out of work because of mine and smelter closures. In Cambodia, the garment industry has laid off 30,000 workers\u2014mostly women. The International Labor Organization (ILO) estimates that global job losses could hit 51 million.

In these developing countries, especially the low-income countries, the economic
crisis is morphing into a severe human and development crisis. The crisis-related

growth slow down is causing immediate adverse knock-on effects on the pace of poverty reduction. Adding to the poverty impact of the food crisis, we estimated that there would be 55-90 million more extremely poor people in 2009 \u2013 living on less than $1.25 a day \u2013 than expected before the crisis. In Sub-Saharan Africa and South Asia, where the bulk of the world\u2019s poor are located, the growth slowdown virtually eliminates any prospect for continued reductions in the poverty count in 2009.

As you all know because you are there on the ground, to people in poor countries,
the impact of the crisis is literally a life-and-death matter. Poor people usually have
very thin livelihood cushions to tide them over bad times and are forced to run down their

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