The World Bank delivered an ominous growth report over the weekend, saying it expects the South African economy to contract 1.5 percent this year, with growth rebounding to 2.6 percent in 2010.

Global growth is also expected to be negative, with an expected 2.9 percent contraction of global GDP in 2009.

Developing countries are expected to grow by only 1.2 percent this year, after 8.1 percent growth in 2007 and 5.9 percent growth in 2008. When China and India are excluded, GDP in the remaining developing countries is projected to fall by 1.6 percent, causing continued job losses and throwing more people into poverty.

In March the World Bank had forecast the SA economy to grow one percent in 2009 and 3.1 percent in 2010.

In its Global Development Finance 2009: Charting a Global Recovery report, the World Bank said that sub-Saharan Africa has been hit hard by reduced external demand, plunging export prices, weaker remittances and tourism revenues, and sharply lower capital inflows, notably FDI.

Growth in SSA is thus expected to decelerate sharply this year to one percent, down from 5.7 percent on average over the past three years. By 2010, growth is forecast to rise by 3.7 percent.

"Sharp cuts in remittances and official aid flows also represent a risk for the region, because many sub-Saharan countries rely on aid flows for budget support and because remittances are a vital cushion against poverty," said the Bank.

"Amidst global economic recession and financial-market fragility, net private capital inflows to developing countries fell to $707-billion in 2008, a sharp drop from a peak of $1.2-trillion in 2007. International capital flows are projected to fall further in 2009, to $363-billion," said the World Bank.

The report warns that the world is entering an era of slower growth that will require tighter and more effective oversight of the financial system.

Global GDP growth is expected to rebound to two percent in 2010 and 3.2 percent by 2011. In developing countries growth is expected to be higher, at 4.4 percent in 2010 and 5.7 percent in 2011, albeit subdued relative to the robust performance prior to the current crisis.

"The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction," said Justin Lin, World Bank chief economist and senior vice-president, development economics.

"Developing countries can become a key driving force in the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit," he concluded.