20091221

LONDON (Reuters) - Relief agencies have been hit by the global recession and falling donations, forcing them to cut jobs and to scale back or slow aid projects, and experts warn they may have to take more extreme measures.

The combination of a shortfall in donations, exchange rate pressures, erratic inflation levels overseas and reduced income from interest on reserves has put the squeeze on the aid sector.

Even as markets rebound and the world economy shows signs of recovery, relief groups are braced for tougher times.

Unemployment could rise further and economic growth will bring higher interest rates, cutting donors' disposable income.

"The decline in donations lags behind the worst of the recession," said John Low of the Charities Aid Foundation (CAF), a UK charity that helps other charities manage money.

"History suggests there might be more pain to come."

Charitable giving in Britain fell 11 percent in 2008-9 in inflation-adjusted terms, according to UK Giving, a report by CAF and the National Council for Voluntary Organisations.

In the United States, donations fell by 5.7 percent in real terms, according to Giving USA's 2008 report - the largest drop since the group began tracking U.S. donations fifty years ago.