"Global Development Finance" Projects a Brighter Outlook for Developing Countries

Prospects for developing countries have improved considerably in the past six months finds the World Bank's just-released "Global Development Finance 2000." Industrial country output and world trade growth have become stronger and more broadly based. Although prices for primary commodities have firmed, inflationary pressures in the world economy remain contained. And while interest rates in some industrial countries have risen, spreads on lending to developing countries have fallen sharply--and capital flows to developing countries have stabilized. Developing countries grew an estimated 3.3 percent in 1999, up 0.6 percentage points from the estimate in last fall's "Global Economic Prospects" and more than twice the pace in 1998 (table 1). Developing country growth is expected to rise to 4.5-5.0 percent in 2000-02. During the recent financial crisis 45 developing countries containing 1.6 billion people experienced a drop in per capita income. But in 2000 those numbers are expected to fall to 14 countries with 140 million people. Still, the developing world's adjustment to the recent crisis is far from complete. Growth in 2000-02 will likely remain below trends before the crisis because frailties exposed and exacerbated by the crisis will take time to address. Moreover, the process of recovery varies greatly by country.