The global financial crisis and developing countries: taking stock, taking action

Recent OECD and International Monetary Fund reports suggest that financial conditions in developed countries have improved due to the successful implementation of fiscal stimuli and collective action to support financial markets. However, just as the financial crisis engulfed the world, affecting those who played no part in the original causes, it is crucial that any recovery from the crisis has the same global reach. Research suggests that poor countries have been hit harder than was originally predicted, and 2009 is likely to be worse than 2008.

This briefing paper presents information, analysis and key policy recommendations on important development and humanitarian topics such as:

• The economic impact which suggests that some countries are seeing strong economic growth transformed into negative growth in 2009, others see significant slowdowns of 3-7 percentage points, though some have hardly been affected
  
• The human impact which suggest that more households will fall into poverty than would otherwise have been the case
  
• Possible policy responses which point out that the crisis, grim though it is, could be an opportunity to re-shape the global economic institutions and rethink growth strategies.

Policy recommendations include:

• Ensuring a sustained rainbow recovery for all recognising the fact that good policy is based on good information
  
• Reducing global volatility by solving market and co-ordination failures
  
• A global compact for crisis-resilient growth could help developing countries cushion the impact of crises
  
• The international community needs to provide the global public goods to foster growth that is more
  resilient to crises.

Taken together, proactive measures would provide a new global compact for crisis-resilient growth, providing a better response to today’s global economic meltdown and putting developing countries in a stronger position to address unknown challenges in the future.