Global economy to slow to modest growth this year:WB
Updated: 2008-01-09 14:40
The GDP growth in Sub-Saharan Africa grew 6.1 percent in 2007, and would rise by 6.4 percent in 2008.
But the report also warned that "several serious downside risks cast a shadow over this soft landing for the global economy."
External demand for the products of developing countries could weaken much more sharply and commodity prices could decline if the faltering US housing market or further financial turmoil were to push the United States into a recession, according to the report.
Alternatively, monetary authorities might overreact to the current climate of uncertainty and overstimulate the economy.
"This would be particularly dangerous for developing countries if the bulk of the resulting liquidity were to move into rapidly growing developing regions, provoking the same kind of over-investment conditions that arose in the US housing market," said the report.
Further sharp declines in the US dollar were also a potential threat, despite the boost provided to US exports.
"A recession in the US or an excessive easing of US monetary policy could contribute to further sharp declines in the dollar," said the report. "A weaker dollar would benefit developing countries with dollar debt, but impose losses on those that hold dollar-denominated assets."
"The main impact of a precipitous decline of the dollar would likely derive from the increased uncertainty and financial-market volatility it would provoke, which would increase trading costs, and spreads on developing country debt - resulting in weaker export and investment growth throughout the global economy," the report added.
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