How will developing countries be affected by the global financial crisis?

A new report from the Institute of Development Studies (IDS) looks at the impact of the global financial crisis on the developing world. 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.

In developing policy responses, account must be taken of the following: Countries will be affected differently by the different areas of impact (exports, foreign investment, exchange rate, interest rates, remittances, foreign aid). 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.