Developing countries should prepare for further downside risks, as EuroZone debt problems and weakening growth in several big emerging economies are dimming global growth prospects, the World Bank said in a statement on Thursday.
In its newly-released Global Economic Prospects (GEP) 2012, the bank has lowered its growth forecast for 2012 to 5.4% for developing countries and 1.4% for high-income countries (-0. 3% for the Eurozone), down from its June estimates of 6.2 and 2.7% (1.8% for the Eurozone).
Global growth is now projected at 2.5% and 3.1% for 2012 and 2013 respectively.
It said slower growth was already visible in weakening global trade and commodity prices.
Global exports of goods and services expanded an estimated 6.6% in 2011 (down from 12.4% in 2010), and are projected to rise by only 4.7% in 2012.
Global prices of energy, metals and minerals, and agricultural products are down 10.25% and 19% since peaks in early 2011.
Declining commodity prices have contributed to an easing of headline inflation in most developing countries.
Although international food prices eased in recent months, down 14% from their peak in February 2011, food security for the poorest, including in the Horn of Africa, remains a central concern.
“Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said Justin Yifu Lin, World Bank’s Chief Economist and senior vice president for development economics.
To prepare for that possibility, Hans Timmer, director of development prospects at the World Bank, said that developing countries should pre-finance budget deficits, prioritise spending on social safety nets and infrastructure, and stress-test domestic banks.
While prospects in most low-and middle-income countries remain favourable, the ripple effects of the crisis in high-income countries are being felt worldwide.
Meanwhile on Wednesday, the International Monetary Fund (IMF) said it would raise $500 billion in additional resources to beef up its firewall amid mounting worries over the on-going Eurozone debt crisis.
“Based on staff’s estimate of global potential financing needs of about $1 trillion in the coming years, the Fund would aim to raise up to $500 billion in additional lending resources,” a Fund spokesman said in a short statement Wednesday.
“This total includes the recent European commitment of about $200 billion in increased Fund resources. At this preliminary stage, we are exploring options on funding and will have no further comment until the necessary consultations with the Fund’s membership have been completed,” added the spokesman.
“Fund management and staff will explore options for increasing the Fund’s firepower, subject to adequate safeguards. I welcome Executive Directors’ collective interest in resolving the crisis and securing global economic stability,” IMF chief Christine Lagarde said on Tuesday. – BuaNews-Xinhua