latest on global crisis from UN: poverty to rise by 73-103 million by end 2009

June 8, 2009

     By Duncan Green     

The UN issued an update of its ‘World Economic Situation and Prospects 2009’ last week, with some pretty gloomy downward revisions. Headlines:

At least 60 developing countries (out of 107 for which they have data) will suffer a fall in per capita incomes this year, while only 7 will grow fast enough to reduce poverty (compared to 69 countries in 2007 and 51 in 2008)

Absolute growth (i.e. not per capita) will be negative in sub-Saharan Africa (-0.1%) and Latin America (-1.9%) – see table. The Africa figure in particular is a lot worse than the IMF’s projection a month earlier of +1.7%. When the initial UN report came out at the start of the year, it was still predicting +4.8% growth for SubSaharan Africa for 2009.

What does all this mean for poverty? By the end of this year, between 73 and 103 million more people will remain poor or fall into poverty compared to what pre-crisis growth would have produced. Most of these will actually be in South Asia (see table). The UN says this figure is likely to be an underestimate, as it does not take into account the impact of the crisis in increasing inequality within countries.

So forget all that stuff about green shoots, when it comes to poor countries, every revision is still downwards – when will they turn the corner?

The report calls for action in four major aras:

– sort out the banks in developed countries

– coordinating the size and timing of the various national fiscal stimuli better will produce significant benefits for global recovery, especially for the poorer countries

– the report’s authors¬†back much of the Stiglitz Commission’s recommendations on reforming the international financial architecture, (no surprise as some of them served on the Commission!) including action on tax havens, ¬†an international mechanism for sovereign debt restructuring, and a new global reserve system to replace the dollar.

– ‘fundamental reform’ of the Bretton Woods institutions (IMF, World Bank etc) and a greater role for the UN