Research News
How will developing countries be affected by the global financial crisis?
A new 58-page report 'Voices from the South. The impact of the global financial crisis on developing countries' has just been published by the Institute of Development Studies (IDS), which presents snapshots of the financial crisis as seen by 21 thinkers, academics and policymakers in 14 developing countries. IDS invited them to present their views on the likely impacts and possible responses to the crisis.
Results show that developing countries cannot be treated as a homogenous block. Concerns vary significantly across countries, depending on their current economic situation, exposure to specific impacts and capacity to respond. Isolation from world financial markets will not protect the poorest countries, as the indirect impacts are likely to be severe.
Six main areas of impact were identified:
- Exports
- Foreign investment
- Exchange rate
- Interest rates
- Remittances
- Foreign aid
In developing policy responses, account must be taken of the following:
-Countries will be affected differently by the different areas of impact listed above
-Within national economies some people will be more affected than others
-There are governance implications at international and national levels
It is proposed that the following policies are pursued:
-Increase aid flows
-Enhance social protection
-Restructure international financial institutions
Read the summary and full report.