World Bank warns of weak economic growth in emerging markets

The bank urged developing nations to ring-fence their economies ahead of the expected slowdown

Thursday January 7 2016

World Bank President Jim Yong Kim gestures

World Bank President Jim Yong Kim gestures while addressing a press conference in India's capital New Delhi on July 23, 2014. The bank has warned about weak economic growth among emerging markets such as Kenya in 2016. AFP PHOTO | PRAKASH SINGH 

By BRIAN NGUGI
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The World Bank has warned about weak economic growth among emerging markets such as Kenya this year.

It said on Wednesday this threatens the achievement of the goals of poverty reduction and shared prosperity in the developing nations.

In its January 2016 Global Economic Prospects, the Bretton Woods institution said the simultaneous weakness in these markets will also weigh negatively on global growth during the period.

The bank consequently urged developing nations to ring-fence their economies ahead of the expected slowdown amid projections that developing countries will expand by 4.8 per cent in 2016, less than expected earlier but up from a post-crisis low of 4.3 per cent last year.

BUILD RESILIENCE

“More than 40 per cent of the world’s poor live in the developing countries where growth slowed in 2015. Developing countries should focus on building resilience to a weaker economic environment and shielding the most vulnerable.

The benefits from reforms to governance and business conditions are potentially large and could help offset the effects of slow growth in larger economies,” said World Bank Group President Jim Yong Kim.

The group’s vice president and chief economist Kaushik Basu echoed similar sentiments tipping developing nations to adopt a combination of fiscal and central bank policies in “mitigating these risks and supporting growth.”

Threats to the economic outlook, the bank said, include financial stress around the US Federal Reserve tightening cycle and heightened geopolitical tensions.

SLOWDOWN

“There is greater divergence in performance among emerging economies.

Compared to six months ago, risks have increased, particularly those associated with the possibility of a disorderly slowdown in a major emerging economy,” said Mr Basu.

According to the report, firmer global growth going forward will depend on continued momentum in high income countries, stabilisation of commodity prices, and China’s gradual transition towards a more consumption and services-based growth model.

The report said the slowdown is likely to impact on global economic activity which is expected to, however, still pick up modestly to a 2.9 per cent pace, from 2.4 per cent growth in 2015, as advanced economies gain speed.

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