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World Bank: Developing economies to cushion US slowdown in 2008
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    SINGAPORE — Continued robust expansion in developing countries will help offset a slowdown in the United States this year amid concerns of a possible recession in the world’s largest economy and oil prices will gradually decline, the World Bank said Wednesday.
    The Washington, D.C.-based international bank forecast global growth to moderate to 3.3 percent this year from 3.6 percent in 2007.
    ‘‘Developing countries, if you add them all up now, are basically the same size as the United States,’’ said Hans Timmer, co-author of the bank’s annual ‘‘Global Economic Prospects’’ report.
    ‘‘But they are growing more than three times as fast, and that means that their contribution to global demand is more than three times as important as the contribution of the United States,’’ he said at the launch of the report in Singapore.
    Not only has the resilience of developing economies mitigated the slowdown in the U.S. economy, it has also helped reduce global trade imbalances by sucking up American exports with the help of a cheaper U.S. dollar, he said.
    The bank said there were concerns that a faltering U.S. housing market or further financial turmoil could push the U.S. into recession and weaken demand for the products of developing countries.
    ‘‘We still don’t know exactly how many corpses are there still in the financial markets, and how big, ultimately, the losses will be,’’ Timmer said.
    The bank believes, however, that the spillover from problems in the U.S. housing market on consumer demand will be limited. It expects the U.S. economy to regain momentum and lead to a pick up in world output, which it predicts will expand by 3.6 percent in 2009.
    Gross domestic product growth for developing countries is expected to ease to 7.1 percent in 2008, while high-income countries are predicted to grow by a modest 2.2 percent, the bank said.
    Timmer warned, though, that some developing economies were in danger of overheating, which would be exacerbated if interest rates come down sharply as a result of a U.S. economic slowdown, creating excessive liquidity in the global economy.
    If capital flows turn away from the United States because of the problems there, the funds will end up ‘‘somewhere in the developing world and that mechanism could create new bubbles or expand bubbles already in the making,’’ he said, citing the Shanghai market and stock markets in India as examples.
    The Shanghai Composite index soared 97 percent last year, making it the world’s best-performing major benchmark index. It also became the second most popular place for initial public offerings behind New York.
    ‘‘You can argue that that kind of an increase is probably not sustainable,’’ Timmer said.
    Further sharp declines in the U.S. dollar were also a potential threat, despite the boost provided to U.S. exports. A less robust greenback provokes increased uncertainty and volatility in financial markets and increased trading costs, resulting in weaker export and investment growth worldwide, the report said.
    And while a weaker dollar would benefit developing countries with dollar debt, it would also impose losses on those that hold dollar-denominated assets, the bank noted.
    To alleviate poverty, the report urged developing countries to harness better technology, saying that rapid technological progress in developing nations has helped to reduce the proportion of people living in absolute poverty from 29 percent in 1990 to 18 percent in 2004.
    ‘‘Technological progress increased 40-60 percent faster in developing countries than in rich countries between the early 1990s and early 2000s,’’ said Andrew Burns, lead economist and main author of the report.
    ‘‘Developing countries have a long way to go, given that the level of technology that they use is only one quarter of that employed in high-income countries.’’
    The World Bank also said oil prices are likely to decline gradually this year and next as record crude prices weaken demand.
    A barrel of light, sweet crude surpassed $100 a barrel on the New York Mercantile Exchange for the first time last week.
    The World Bank’s report predicted that a barrel of crude oil will cost $84.10 on average this year and fall by 6.8 percent to $78.40 a barrel in 2009. It estimates that the average price of crude oil last year was $71.20 a barrel.
    ‘‘If you look at the fundamentals, there is scope for lower oil prices,’’ said Timmer. ‘‘We forecast more or less a sustained, gradual decline.’’

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