Impact of Economic Crisis on Small Economies "Brutal" - UN

(HN, June 1, 2010) The ongoing economic crisis has dealt a huge blow on Least Developed Countries (LDCs), according to a new study focused on 49 economies that was released today.A global economic downturn often hurts small entrepreneurs, like this woman in Laos

"While overall the LDC group of countries saw improvement in their terms of trade between 2004 and 2008, these were “brutally reversed” in 2009," says the Geneva-based International Trade Centre (ITC).

LDCs have lost 43 per cent of their export earnings with developed nation trade partners and emerging economies such as Brazil and China. The report compares the boom period of 2008 to the bust period of 2009.

During 2009, LDC’s terms of trade had showed average declines ranging from minus 17 per cent to minus 36 per cent, compared to 2006, said Willem van der Geest, Lead Economist of the ITC.

While trade flows with the emerging economies, such as China, had proved more resilient than with developed economies, the LDCs terms of trade had deteriorated significantly with all partners.

 While in 2007 and the first half of 2008, LDCs had made some considerable gains, these had been completely eroded during 2009, said Van der Geest.

Overall, the terms of trade had regressed to levels of 2004. The overall picture for the LDCs remained that they were growing and exporting more but were nevertheless lowering their export-earnings.

The export-levels which might be reached by LDCs in coming years might not afford these countries to buy the same level of imports, said Van der Geest.

ITC Executive Director Patricia R. Francis said: “This important analysis of the trends in terms of trade for LDCs demonstrates how they are suffering from the fall-out of the global financial crisis. It is particularly disconcerting that South-South trade has not resulted in better terms of trade for the group.

Separately, the International Organization for Migration (IOM) issued a report today in Geneva which examines the social and economic impact of remittances sent by Angolans living in Portugal and South Africa.

The report says that for 16 per cent of the households, remittances constitute 100 per cent of monthly income.

About 67 per cent of respondents said remittances are used to meet basic household necessities, buy consumables and pay for utilities. A further 14 per cent say they use a portion of remittances for business purposes; and only 1 per cent of the respondents claim to invest part of the remittance funds in agricultural activities.

The report suggests ways to maximize their development effect in Angola, said the IOM's Jean-Phillipe Chauzy.