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What is the impact of the current economic crisis on developing countries ?
The financial and now economical crisis was born in developed countries, more preciselyin United States of America where it was initially illustrated by a real estate crisis. Rapidly “doubtful assets” from securitization of insolvent US household credits (=sub-primes) spread on thefinancial market, thus spreading the crisis worldwide.
Medias such as television, newspapers or radio often speak about the effects of the crisis on our economy and overall on developed countries'economy. But the financial crisis also affected less developed countries and it could be interesting to see what is the impact of the current economic crisis on developing countries.
I.The effects ofthe crisis on developing countries
The first consequence of the economic crisis for developing countries is that developed countries stop investing in their country so it disrupts their economicgrowth and therefore their development.
According to the World Bank, financing to developing countries decreased by 37% in 2008 and according to the Institute of International finance (IIF) as far asemerging countries are concerned external private capital flows decreased by nearly 65%.
Then global recession made developing countries' outlets fall which resulted in economic and social damagesdue to a substantial reduction in their exports. For the 1.4 billion people who live in or are on the verge of extreme poverty are all in the developing world and given their slim margin for survival,any economic crisis will lead to the most severe human consequences in those countries.
The decline of developing countries' exports lowers the production so that the state's income → the state'sincome depends by nearly 40% of taxes on production, consumption and international trade (in comparison to nearly 30% for developed countries.) If the state has less capital it cannot invest anymore...
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