UPDATE: World Bank: Financial Crisis Obstructs Global Trade

FRANKFURT -- The global financial crisis obstructs international trade as banks are cautious about financing deals, the President of the World Bank Robert Zoellick said Thursday.

"Trade is largely financed by credit," Zoellick said in Frankfurt at the 10th German World Bank Forum, but you can't finance trade in the wake of the credit crunch.

Zoellick said the World Bank was in discussion with the U.S. and China as well as other partners to work on the problem of financing trade.

"This will be critical," in fighting the global economic slowdown, Zoellick said. The head of the International Finance Corporation Lars Thunell said the IFC was providing banks with guarantee facilities to back loans for trade.

The World Bank has established a facility of around $3 billion for developing countries, Zoellick said, "but that's rather small and we have to continue working on that."

The World Bank forecast a decline of about 0.1% in the developed world in 2009. At the same time, the developing world is expected to show lower growth than previously forecast.

Zoellick said these countries were expected to grow by 4.5% next year, compared with a previously forecast 6.5%.

Global growth will therefore be only "modest," he said.

Web site: www.worldbank.org

-By Roman Kessler, Dow Jones Newswires, +4969 2972 5514, roman.kessler@dowjones.com