Worrying too are growing protectionist pressures in the UnitedStates, on which the world increasingly depends to provide theconsumer demand needed to power production and commerce, accordingto Uri Dadush, director of the Bank's Development Prospects Group. World trade growth slowed to 4.6 percent last year, comparedwith 10 percent in 1997, oil prices are down 32 percent and otherprimary commodities fetched 16 percent less on world markets thanthey did in 1997. Investors in bonds, portfolio equity and long-term bank loanshave shunned the Third World's emerging markets. That shows investors' willingness to lend to relatively wealthydeveloping nations with substantial overseas assets. For theirpart, the oil exporters have sought to borrow to limit the impacton their expenditure of the fall in oil prices. ''Many developing countries are trying to borrow more tocompensate for falling exports,'' says Dadush.
Cash is abundant but ''the supply of funds to the countries isconstrained by risk perceptions.
East Asia and Latin America have suffered the most frominvestors' loss of confidence. New lending by capital markets hasfallen by nearly half over the past year. Such loans as are now being made come with much higher interestcharges than in the past. It ''is likely to remain the dominant source of finance fordeveloping countries in the foreseeable future,'' althoughprobably at slightly depressed levels, says William Shaw,principal author of the Bank report. In Thailand and South Korea, FDI actually has increased in theaftermath of financial turmoil, says Shaw.