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The darkening outlook for developing countries dominated discussions between the World Bank and International Monetary Fund (IMF) and their shareholders at their annual meeting, held in Washington DC, USA, which ended yesterday. Up until recently, developing countries have been the bright spot of the global economy. They provided around half of global growth while Europe, Japan, and the United States have struggled with high debts and high unemployment. While developed countries stumble, the situation for emerging markets may be changing for the worse. Since August, bond-spreads for emerging markets have increased, their equity markets have declined like in developed markets, and capital flows have declined sharply. Falling exports were already a worry. Now falling markets and declining confidence could prompt slippage in developing countries� investment and a possible pullback by their consumers, too. A fall in developing countries� domestic demand would mean that their economic engines cannot serve as the drivers of global recovery. These were the concerns of the World Bank President, Mr. Robert B. Zoellick, when he met journalists at a news conference in Washington DC during the meeting. He said: �Now the developing countries are not as well-placed as they were in 2007-2008 to withstand another shock. Their budgets are not so robust that they can simply spend their way out of trouble; and some are walking a monetary policy tightrope, balancing price pressures and these new dangers. �Add in volatile and high food prices - a particular burden on the poor in developing countries - and the threat of rising protectionism, and you can see that developing countries face increasing headwinds. �If the situation deteriorates further, then developing countries� growth could turn down; their asset prices could drop and then their non-performing loans could increase. With these pressures and prospects, we will have to anticipate possible protectionist pressures, beggar thy neighbour policies, and the risk of a retreat to populism. �The world is in a danger-zone. In 2008, many people said they did not see the turbulence coming. Leaders have no such excuse now. And dangerous times call for courageous people. �Some developed-country officials sound like their woes are just their business. Not so. �I still think that a double-dip recession for the world�s major economies is unlikely. But my confidence in that belief is being eroded daily by the steady drip of difficult economic news. �A crisis made in the developed world could become a crisis for developing countries. Europe, Japan, and the United States must act to address their big economic problems before they become bigger problems for the rest of the world. Not to do so is irresponsible. �But I know well that acting on them means honest and difficult discussions with parliaments and publics. Delay will narrow choices and make them harder and more costly. All of us across developing and developed economies have a stake in how they handle it.�mWhen she took her turn, the Managing Director of the IMF, Ms. Christine Lagard, said: �If we turn to the various categories of economies, and if we look first of all at the advanced economies, we know that there is this heavy debt of sovereigns, households, and bank risks that could actually suffocate the recovery. This could have serious repercussions from an economic perspective, and from a social perspective as well. �If we turn now to the emerging markets, they are still not doing enough to boost their domestic markets with a view to rebalancing as was advocated and has been advocated by the Fund for a long time. We expect a dual rebalancing to take place; one that goes from public to private demand, and one that goes from the deficit countries to the surplus countries or the other way around. And that is not moving fast enough in the emerging markets. �Now, we turn to what can be done in terms of policies because you have been writing a lot about the state of the world. We have presented our WEO ((World Economic Outlook) about the state of the world economy, and it is not good enough to only comment about the downside risks that we see and the difficulties in the various categories of countries, given the degree of interconnectedness that I mentioned right from the start. �In other words, it is not just a problem that concerns the advanced economies or the emerging markets to a lower degree; it is a problem that concerns each and every country, each and every member of our institutions. We are in this together and we can pull out of this together, because from the Fund's perspective our analysis says that there is a path for recovery. It is narrower than it was three years ago when we first were hit by the financial crisis, but there is a path for recovery. �What I think the Fund can also do, and help with, is try to facilitate comprehensive solutions that are so much needed. As I said, it is going to require political determination and will, the ability to look at the longer-term; and an institution like the IMF can help in that regard. Not with a view to having the spotlight on us. Not with a view to claiming credit. But with a view to encouraging the leaders to actually take action, and take bold and collective action now.�