Guyana's economy grew in the first half of this year by 1.3% whilst inflation stood at negative point four percent, but the world outlook for the rest of the year and for next year is bleak, given the September 11 terrorist attacks in the US.

The World Bank yesterday estimated that poverty will rise dramatically next year with economic growth in developing countries being set back this and next year.

It is expected that another ten million persons will live in poverty next year, hampering the world's fight against childhood diseases and malnutrition.

"We estimate that tens of thousands more children will die worldwide and some ten million more people are likely to be living below the poverty line of US$1 a day because of the terrorist attacks. This is simply from loss of income. Many, many more will be thrown into poverty if development strategies are disrupted," World Bank President James Wolfensohn said.

Prior to the terrorist attacks, the bank had expected developing countries growth to fall from an average 5.5% in 2000 to 2.9% this year and then rebound to 4.3% in 2002. This was as a result of slowdowns in USA, Japan and Europe.

With the impact of the terrorist attacks on the world capital markets and other markets, the bank is now warning that the developing countries growth could be lower by a half to three-quarters of a percentage points in 2002. This is based on assumptions that businesses will return to normal by mid next year and that consumers will eventually respond to lower interest rates and that there are no new events to shock the global economy.

The bank in a preliminary economic assessment released yesterday said that there were already signs that higher costs and reduced economic activity were putting a damper on global trade. Insurance and security costs and delays at custom clearance were among the main factors pushing up the cost of trade. Shipping lines had increased freight rates.

Tourism related trade flows are hit exceptionally hard with some 65% of the holidays booked for the Caribbean cancelled, the report said. The Middle East is expected to suffer sharp decline in tourism revenues during the coming winter.

"For the poorest countries that stall or fall into recession as a result of a decline in exports, tourism, commodity prices, or foreign investment, the number of people living below $1 a day will rise. [Guyana is one such country.] In countries that experience positive but slower growth, fewer people will be able to climb out of poverty than otherwise would have been the case," the report said.

The bank estimates that the slower growth and recessions will hit hardest the most vulnerable groups in developing countries and that children under five could die from the economic consequences as poverty worsens as a result of the September 11 attack.

The report said that investors fleeing to safer havens would further weaken the capital flowing to developing countries and this will go to countries considered being relatively immune from the risks. The pattern of the 1990s of private capital flows accounting for a greater share of developing countries financial needs is expected to be reversed as both equity and lending activities contract in lower risk countries.

Africa is expected to be the worst hit area with poverty swamping another two million to three million persons as a result of lower growth and incomes. A further two million may be condemned to living below $1 a day due to the effects of falling commodity prices.

"Commodity prices were forecast to fall 7.4 percent on average this year, and are likely to fall even more as a result of the events of September 11. Farmers, rural labourers, and others tied to agriculture will bear a major portion of the burden," the report said.

The 300 million poor in Sub-Saharan Africa are particularly vulnerable because most countries have little or no safety nets, and poor households have minimal savings to cushion bad times. About half the additional child deaths worldwide are likely to be in Africa.

The report said that with oil prices now at $22/bbl, $5/bbl lower than just before September 11, prices of non-oil commodities have also declined. Many agricultural futures have declined by five percent since the attacks and the report said that these declines are likely to set the stage for lower commodity prices.

"For economies that are dependent on commodity exports, particularly for cotton and beverage exporters, this portends a potentially large terms of trade shock over and above the impacts of slower growth in GDP," the report asserted.

The bank's assessment is subject to revision in the coming weeks and depends on how events unfold.

Chief Economist of the Bank, Nicholas Stern, said that policy responses in both rich and poor countries have to be swift and bold to ensure that the global economy rebounds.

The World Bank has begun work to assess the needs of countries on a one by one basis to determine what needs to be done to sustain the fight against global poverty. The possibility of additional debt relief under the HIPC initiative is being reviewed.

In Guyana, the productive sector's performance has declined for the first half of the year compared with the same period last year.

Sugar production stood at 98,224 metric tonnes at the end of June compared with 106,247 metric tonnes for the same period the year before.

Rice production was 173,195 metric tonnes compared with 187,005 metric tonnes; forestry 218,773 cubic metres compared with 224,512 cu mt.

Fish production was 7,982 tonnes compared with 25,562 tonnes and the shrimp haul was slightly higher at 9,882.2 tonnes compared with 8,383 tonnes.

Bauxite output fell to 914,465 tonnes compared with 1,416,727 tonnes for the same period last year. Total raw gold production increased to 1,183.2 kg from 6,585.3 for the corresponding period. Diamonds output increased from 35,070 m/carats to 51,015.2 m/carats. Pharmaceutical output was also down.

Garment manufacturing increased from 95,923 dozens to 103,720 dozens.

Industrial goods production showed mixed results with only stockfeed, corrugated cartons, sanitary napkins, neutral alcohol and detergent increasing. Refrigerators and stoves were not produced whilst laundry soap, paint, putty, oxygen, acetylene, gas nitrogen, liquid nitrogen and heart of palm all declined.

Beverage production increased by 131.2% reaching 6,866.5 llp and the production of edible items also increased.

Meanwhile, the Georgetown Chamber of Commerce and Industry in a statement expressing its grief at the tragedy in the US and on the loss of Guyanese lives noted that Guyana's undeveloped market based economy will be affected adversely as a result of spin off effects of the tragedy.

The chamber said that Guyana's fledgling tourism sector would be affected as it anticipated that tourism to the region, as a whole will decline. The body also noted that many Guyanese dependent on remittances to make ends meet would be affected by the tragedy in the US which has seen many losing their jobs.

"The Guyana government and private sector need now, more than any other time, to develop synergies. Guyana must form smart partnerships with entrepreneurs possessing financial resources and who have the knowledge and skills as well as the required international image," the chamber said. The body said the government has to create the environment for such strategic alliances through mechanisms like joint venture legislation and other forms of tax concessions.