By Mohamed Arshi Mat Daud, NNN-Bernama,
Jeddah : Most member countries of the Islamic Development Bank (IDB) are not expected to suffer from any spillover effects of the United States sub-prime mortgage meltdown because of their relatively limited integration with global capital markets.
The bank said in its 2007-2008 annual report that conversely, the advanced economies were likely to experience economic slowdown because of the continued turbulence in international financial markets triggered by the sub-prime crisis.
“Many of the developing economies have been spared from the first order impact of the US sub-prime crisis, primarily due to relatively low exposure of their financial and banking sector. However, since early 2008, the steep fall in worldwide equity markets has created uncertainties and risks of further slowdown in global economic growth,” said the IDB.
The IDB said following the looming uncertainties in the global economy and sharp spike in energy and food price, the most important challenge facing its members was the urgent need to mitigate inflationary pressure.
“This can be overcome by calibrated balancing between fiscal and monetary stance, on the one hand, and protecting the most vulnerable groups in the society, on the other hand,” it said.
The bank also said that in 2007, its 56 member countries registered an average 6.1 per cent economic growth, higher than the global economy’s 4.9 per cent. The IDB attributed this largely to improved terms of trade, strong domestic demand, favourable business environment and financial conditions.
It said that despite the expected global economic slowdown in 2008, with growth projected at 4.1 per cent, its members were projected to maintain non-inflationary growth at 6.3 per cent.
“The inflationary pressure in its 56 members is expected to subside to 6.8 per cent this year as against 7.8 per cent in 2007,” it said.