World Bank Forecasts Slower Growth for 2006

The World Bank says economic growth in developing countries is slowing down because of higher oil prices and rising interest rates.

The forecasts are contained in the World Bank's Global Economic Prospects Report for 2006 released by the Washington-based institution Wednesday.

According to senior World Bank economist Anthony Burns, economic growth in developing countries will average about 5.9 percent this year, a decline of nearly one percentage point from the 2004 figure of 6.8 percent.

Mr. Burns told a London news conference the forecast for 2006 is for 5.7 percent growth in the world's emerging economies, and he blames much of the slowdown on higher oil prices.

"We are worried that the pain from high oil prices is only beginning to be felt now and into 2006. For the most vulnerable of countries, they have to cut into their non-oil imports in order to pay for the higher oil prices and that means reductions in domestic demand and in general that hits the poorest people living in those countries most severely," he said.

In terms of the world's poorest people, those living on less than one dollar a day, Mr. Burns says the bulk of them are Africans and the trend will only get worse.

"By 2015, we expect that more than one-half of the extremely poor will be living in Africa. And, despite the fact that the incidence of poverty is going to decline in Africa from about 46 percent now to about 38 percent in 2015, we actually think the absolute number of people living in this very extreme level of poverty will increase because of rapid population growth," he said.

Another section of the report focuses on the benefits and problems associated with migration and the impact of remittances, whereby expatriate workers from poor countries send money back home to relatives.

The director of the bank's Development Prospects Group, Uri Dadush, says hundreds of billions of dollars cross borders this way, having a huge affect on the world economy.

"Remittances represent more than 10 percent of GDP in the 20 largest developing country recipients," explained Mr. Dadush. "They are larger than all capital flows in 36 developing countries. They are actually bigger than merchandise exports in 12 developing countries. So we are talking here about a phenomenon of very great magnitude.

The report recommends that developing countries concentrate on better public service jobs and more research and development ventures to curb what is called the "brain drain" of skilled workers with university degrees.

As for low-skilled workers, the bank calls for managed migration programs, including temporary work visas. And, it suggests more competitive financial services so poor families can cut the fees that can run as high as 20 percent for sending remittances across borders.

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