Singapore: The global economy is likely to worsen in the first half of next year with rising unemployment adding to the woes of governments, World Bank president Robert Zoellick said on Thursday.
He said an upturn in 2009 would depend on how governments cooperated among themselves to implement monetary and fiscal policy and whether they refrained from protectionism.
“I’m afraid that in the first six months of 2009, there are going to be problems worldwide, including in Asia,” he said when asked about the outlook for the world economy.
“This financial, economic and unemployment crisis is serious enough. If we trigger a round of protectionism as we saw in the 1930s, it (the crisis) could deepen,” he said.
The World Bank is trying to help Indonesia and Mexico tackle their budget deficits as a rush by governments in developed countries to guarantee bank debt made it harder for the developing countries to raise funds in global markets, he said.
The World Bank is working with Australia, Japan and the Asian Development Bank to provide a funding package worth $5-$6 billion for Indonesia, he said. A similar package is also being considered Mexico.
Indonesia, hard hit by the global financial turmoil, said last week that it would return to the global capital markets early next year, selling a landmark global sukuk bond that was previously set to raise $1 billion.
He also said China’s leaders, whom he met while on a visit to the country earlier in the week, had “been struck by the depth and fallout in exports”.
But China, armed with its huge foreign exchange reserves and government surpluses, was well positioned to cope with the crisis, he added.
Zoellick said the financial and economic problems that emerged this year could turn into an employment crisis in 2009, and pledged that the World Bank would make funds available to help poorer countries cope with the economic downturn.
He was in Singapore to sign an agreement for the city-state to help the World Bank train people in urban development.