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Fiji is among developing countries that are expected to face a tougher financing environment as the global economy slowly recovers, a latest World Bank report has revealed.
The World Bank’s Global Economic Prospects 2010 warns that while the worst of the financial crisis may be over, global recovery is still fragile as financial markets remain troubled and private sector demand lags amid high unemployment.
Fiji is grouped in the East Asia and the Pacific region of the World Bank’s assessment and is estimated by the Bank to record a negative 0.3 percent growth last year and a modest 1.8 percent growth this year.
Its external position is expected to worsen, with the World Bank estimating a deficit of 25.4 percent (against GDP) in current account balance last year, this negative trend continuing into this year and next year, with a forecasted deficit of 27.7 percent, painting a bleak picture of Fiji in its ability to service its foreign obligations.
While the World Bank expects world recovery to be driven by economic activities in the East Asia and Pacific region, Pacific economies including Fiji remain troubled with external positions mainly in negative territory.
“As international financial conditions tighten, firms in developing countries will face higher borrowing costs, lower levels of credit, and reduced international capital flows,” said Andrew Burns, lead author of the report.
“As a result, over the next five to seven years, trend growth rates in developing countries may be 0.2 percent to 0.7 percent lower than they would have been had finance remained as abundant and inexpensive as in the boom period,” Burns added.
These countries have been advised to try to reduce local borrowing costs, promote local capital markets and improve competition and regulation in local banking sectors as domestic access may be the only way for their financing needs as international financing conditions tighten.
“Although likely to take time to bear fruit, such steps could expand access to capital and help put them back on the higher growth track from which they were derailed by the crisis,” said Hans Trimmer, director of the World Bank Prospects Group.
