Attacks Take Heavy Toll on World's Poor

Times Staff Writer

Developing nations are seeing their fragile economies undermined by the Sept. 11 terror attacks that have worsened endemic poverty and famine half a world away from the U.S., the World Bank reported Monday.

In one of the first looks at the economic ripples from the attacks, the World Bank warned that as many as 10 million people could lose their chance to escape poverty, and tens of thousands more could starve to death as a direct consequence of the attacks.

The effects will be felt in all regions of the world, especially in countries dependent on tourism, foreign investment, remittances from citizens living abroad and exports of agricultural commodities, according to a preliminary assessment by World Bank economists.

The World Bank did not cite specific nations, but economists said the list would include countries in the Middle East, South Asia and Northern Africa.

Sub-Saharan Africa will be particularly hard hit because of continuing falling prices for cocoa, cotton and coffee, reduced income from tourism and the lack of significant personal savings or social safety nets, the World Bank said. With increased demands on funds to rebuild industrialized economies, others could lose out on money needed for economic development.

The nearly 7,000 people believed to have perished in the Sept. 11 attacks include citizens of about 80 nations, but "there is another human toll that is largely unseen, and one that will be felt in all parts of the developing world," World Bank President James D. Wolfensohn said.

Some analysts said they regarded specific calculations in the bank's analysis as highly speculative. But even skeptics said the fundamental conclusions appear sound.

"The notion that this is going to increase the vulnerability of already vulnerable populations seems to me to be unassailable," said Marcus Noland, senior economist at the Institute for International Economics, a Washington think tank.

The world economy already was in trouble before terrorists crashed hijacked airliners into the World Trade Center and the Pentagon. Other industrial nations were succumbing to the economic malaise afflicting the United States. Global economic growth was expected to slow to 2.6% this year, the worst performance since 1993, according to a report issued last week by the International Monetary Fund, which considers anything below 2.5% a global "growth recession."

The World Bank expects the attacks to reduce economic growth in the industrialized world by 0.75 of a percentage point to 1.25 percentage points next year, and in developing nations by 0.5 of a percentage point to 0.75 of a point.

Some assessments of the global aftershocks are even more pessimistic. JPMorgan Securities said Monday that it expects world economic growth to slow to 0.2% this year, rising to 2.7% in 2002.

Alan Gelb, World Bank senior economist for the Africa region, noted that population growth in Africa is about 3% a year. Unless economic growth averages 3% or better, incomes are actually falling on a per-capita basis. In countries where poverty and malnutrition are already rampant, even a slight decline in income can be devastating.

The World Bank said the attacks will increase the number of people who subsist on less than $1 a day--its global benchmark for poverty--by 10 million next year. Currently, an estimated 1.2 billion people fall below that threshold.

In a particularly chilling calculation, the World Bank said an estimated 20,000 to 40,000 children younger than 5 could die from the economic consequences of the terrorist attacks as poverty increases the toll of childhood disease and malnutrition.

The economic effects in Africa will be severe because the region is vulnerable on several counts. Some countries are highly dependent on income from tourism and travel, including Egypt, Tunisia and Morocco. Some receive substantial income from citizens living abroad, such as Cape Verde and Eritrea.

But the blow will fall particularly hard on sub-Saharan countries that derive much of their income from exports of commodity crops, such as cocoa in Ghana and Ivory Coast, cotton in Mali and coffee in Uganda.

Commodity prices were forecast to fall 7.4% this year even before the attacks, and prices for some agricultural products have fallen on futures markets by 5% or more since then.

The World Bank said leading nations should take steps to limit the human toll, such as boosting foreign aid, reducing trade barriers, coordinating monetary easing and fiscal stimulus, and building consensus for economic reforms.

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