More countries needing help: Zoellick

By Lesley Wroughton

WASHINGTON (Reuters) - In recent weeks, more developing countries are turning to the World Bank to help ease the effects of the global credit squeeze, World Bank President Robert Zoellick said on Tuesday, a sign that a larger number of countries are being hit by the financial crisis.

Zoellick said the World Bank is now estimating that global trade, the lifeblood of economies, will drop next year for the first time since 1982 as the world-wide credit crisis cuts into trade financing.

"It is our estimate that trade could actually fall, not grow more slowly or have growth fall, but actually fall next year, for the first time since 1982," Zoellick said in an interview with Reuters ahead of a meeting of world leaders.

"What we are seeing is that the falloff is not just due to slip in demand, although that will happen, but our rough estimate is that some 80 percent of the decline is due to problems of credit," he added.

He pointed at the Baltic Dry Index, a good gauge for supply and demand for basic shipping materials, including commodities, has fallen some 90 percent to 92 percent since the summer.

"These are striking decreases," Zoellick said, adding that the Bank would increase funding for trade financing.

Emerging market economies have come under pressure in recent months as investors unwind funding positions amid worries about a global recession. The problem for many of them is they cannot quickly access the credit they need because banks are hoarding money and refuse to lend to each other.

The bleaker outlook for growth in the developing world is reflected in the World Bank's sharp cut in its growth forecast for developing countries to 4.6 percent for next year, from 6.4 percent projected in June.

It also forecast that advanced economies will contract 0.1 percent next year, cutting its previous forecast, which projected growth of 2 percent. It said the world economy would not likely slow to 1 percent in 2009.

Zoellick said the World Bank expected its lending this year to increase sharply to $35 billion compared to $13.5 billion last year.

"We're trying to provide resources, but we're trying to target them at particular needs, whether it be infrastructure, social development, trade finance, and that is also a way of drawing in donors," he added.

Asked whether he'd seen signs of more borrowing, Zoellick replied, "Hugely. We probably would have increased our $13.5 billion lending by a few billion dollars before ... but what we have seen over the course of the last month, literally over the last few days, is that we're having big countries come to us."

He said countries such as Mexico, Indonesia and Colombia,

worried about access to credit to finance development projects, were tapping the World Bank's contingency financing fund.

The World Bank's improved Deferred Drawdown Option, also known as the DDO, provides borrowers with greater certainty that the funds will be available when needed.