* Global economy on track for worst recession since 1930s
* Central and eastern Europe particularly exposed
* World Bank lending set to rise almost threefold this year
By Christina Fincher
LONDON, March 12 The global economy is on track
for its worst recession since the 1930s with output likely to
shrink by 1-2 percent this year, World Bank President Robert
Zoellick told the Daily Mail newspaper.
Central and eastern European countries were particularly
vulnerable, he said, urging rich nations to do more to fill the
financing gap left by an exodus of capital from the developing
"My guess is that growth will probably fall about 1 to 2
percent," he told the paper in its Thursday edition.
"We haven't seen numbers like that since World War Two,
which really means the Thirties. So these are serious and
The head of the International Monetary Fund, Dominique
Strauss-Kahn, warned the world on Wednesday it would be gripped
by a "Great Recession" and that his earlier forecast for
economic stagnation this year was too optimistic.
Zoellick trade would probably fall at its fastest rate in 80
years. Eastern Europe was especially at risk, he said, noting
that many countries in the region had the problem of assets such
as mortgages denominated in foreign currencies which had leapt
in local terms.
"Central and eastern Europe is particularly exposed because
over the last two decades it moved quickly to integrate with
trade, investment and remittances," he said.
"You also have the problem of domestic assets in foreign
currencies, whether it be euro or Swiss francs."
Zoellick said G20 leaders, due to meet in London on April 2,
should focus on sorting out problems in the banking system
rather than additional fiscal measures to boost demand.
That view may put him at odds with the United States and
Britain which have both urged G20 nations to increase spending
to pull the economy out of recession.
"Stimulus plans will be like a sugar high unless you fix the
banking system," Zoellick said.
The World Bank chief said the financial crisis had greatly
increased demand for his institutions funds.
"Last year we did about $3.5 billion, this year we will
probably do about $35-$36 billion," he said.
"Developed countries understandably focus on their stimulus
packages and bailing out their own banks. But if they could just
devote 0.7 percent of their stimulus to those most in need, it
could help the developing world."
Zoellick says the World Bank was also seeking to raise money
through its private-sector arm, the International Finance
Corporation. "We could probably do $30 billion of IFC lending
for the next three years," he said.
(Editing by Elizabeth Piper)