IMF chief Dominique Strauss Kahn has warned of an unfolding third wave of the financial crisis that will hit the world's poorest countries.
Paradoxically, it is the very integration into the world economy that the IMF recommended and that was responsible for recent growth in these countries' prosperity that is at the root of their current problems, Strauss Kahn said
"I start with a very sobering message: after hitting first the industrial countries and then the emerging markets, a third wave of the global financial crisis is now hitting the world's poorest and most vulnerable countries, and hitting them hard. While the global crisis has taken a little longer to reach the low-income countries, the outlook for these economies has deteriorated dramatically. The problem is not their exposure to the toxic assets at the heart of the crisis, of which they hold very little. Rather, it is their increased integration into the global economic and financial system. And while this integration brought many benefits when other countries were growing rapidly, it now means that low-income countries are exposed to the global slowdown. Our most recent growth forecast for 71 countries eligible for concessional IMF lending is just over 4 percent in 2009-more than 2 percentage points lower than what we expected a year ago. But even this forecast is likely to be too optimistic, given the serious downside risks to global growth. And in any case, while this growth rate may seem high compared to the outlook for the economies, in per capita terms, many low-income countries may at best see incomes stagnate next year - and possibly even contract."
(China.org.cn March 5, 2009)
