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Friday, 19 December 2008

'Worldwide problem' in '09

WORLD Bank president Robert Zoellick has warned that the global economic slowdown will weigh on Asia well into the first half of next year.

'I'm afraid that the first six months of 2009 are going to be a problem worldwide, including in Asia and South-east Asia,' said Mr Zoellick on Thursday.

'This is a region that has gained enormously from international trade, and it will feel some of the dangers from the slowdown and actual decline that we're now forecasting in international trade for next year.'

Even in China, leaders who had expected to see a decline in growth were 'struck by the sharpness and the depth of the fall off in exports', Mr Zoellick said. China reported last week that exports fell last month for the first time in seven years.

'We've gone from a financial crisis to an economic crisis, and in early 2009 we'll see an unemployment crisis,' he added, paraphrasing Australian prime minister Kevin Rudd.

Whether the downturn will persist beyond the first half of next year depends on the policy actions now being taken by governments around the world, said Mr Zoellick.

So far, 'no one has a very good prediction for the length and depth of this crisis'.

But the positive news is that countries have acted in a 'co-operative fashion' as they come to the realisation that this is 'a global crisis and it will take global solutions'.

However, there is a danger that government actions to stimulate growth could lead to a trend of protectionism.

'The biggest concern that I have at this point is that some of the second-order ripple effects of various policy actions could lead to other actions by governments that might pull away from cooperation,' he said.

Calling the difficulties in the seven-year Doha round of trade talks 'particularly unfortunate', Mr Zoellick urged governments to 'stay on the offence on trade because protectionist forces will raise their head'.

Mr Zoellick was in town on Thursday to sign a memorandum of understanding with Singapore foreign minister George Yeo. Singapore will collaborate with the World Bank to lend its expertise in urban management to developing countries.

After the signing, Mr Zoellick participated in a dialogue hosted by the Lee Kuan Yew School of Public Policy, where he discussed issues such as common criticisms of the World Bank and the possibility of a shared Asian currency.

He also said he 'never believed in the decoupling logic', but that he believes in 'multiple poles of growth'.

As recently as 1992, no one thought China and India would be growth drivers, he said. 'One of our challenges in the World Bank would also be, can we help Africa become a pole of growth?'

The dialogue was held at the National University of Singapore's Bukit Timah campus, and attended by about 300 people, including Ambassador-at-large Tommy Koh and the Monetary Authority of Singapore's assistant managing director, Dr Khor Hoe Ee.

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