The World Bank is to more than double its spending on social and economic projects in East Asia to alleviate hardship and poverty caused by the regional crisis. It will also push for an expansion of fiscal policy and increased capital mobilisation to help revitalise economic growth in the region. The bank also admits it misjudged the depth and breadth of the economic crisis and its impact on Asia-Pacific countries. A World Bank report describes East Asia's downturn as a unique combination of currency crisis and regional financial panic causing a 'particularly virulent strand of economic malady'. The bank has pledged almost US$18 billion to crisis-stricken countries and has disbursed $5.5 billion this year. It will more than double spending on damaged economies from $790 million this year to $2 billion next year. Programmes will range from job creation to lending to small enterprises denied credit from bankrupt domestic banking systems. 'Only by restoring capital flows can East Asia resume growth, and only by resuming growth can it reverse the massive income losses that have imperiled the livelihoods of so many people in such a short time.' The current account balances of East Asia's crisis economies have swung from negative $27 billion last year to a projected $50 billion surplus this year at a time when overall output has been falling and domestic consumption has slumped. Recovering sustainable growth would depend on revitalising the banking and corporate sectors while reactivating aggregate demand, maintaining the pace of structural reform and ensuring low-income groups were protected during the crisis, the report said. It warned the number of people living in poverty in the region would jump from 40 million to 90 million if output and income distribution were to fall by a cumulative 10 per cent during the next three years. Countries benefiting from the special programmes would include China, Indonesia, Korea, Malaysia, the Philippines and Thailand.
