The World Bank Groups on Wednesday warned developing countries to prepare for further downside risks, as European Area debt problems and weakening growth in several big emerging economies were dimming global growth prospects.
The Bank in the newly-released Global Economic Prospects (GEP) 2012, made available to Ghana News Agency in Accra, said it had lowered its growth forecast for 2012 to 5.4 per cent for developing countries and 1.4 per cent for high-income countries (-0.3 per cent for the Euro Area), down from its June estimates of 6.2 and 2.7 per cent (1.8 per cent for the Euro Area), respectively.
Global growth is now projected at 2.5 and 3.1[1] per cent for 2012 and 2013, respectively.
The Bank said slower growth was already visible in weakening global trade and commodity prices as global exports of goods and services expanded an estimated 6.6 per cent in 2011 (down from 12.4 per cent in 2010), and are projected to rise by only 4.7 per cent in 2012.
Meanwhile, global prices of energy, metals and minerals, and agricultural products are down 10, 25 and 19 per cent respectively since peaks in early 2011.
The GEP 2012 report also identified a declining commodity prices which have contributed to an easing of headline inflation in most developing countries.
According to the report, although international food prices eased in recent months, down 14 per cent from their peak in February 2011, food security for the poorest, including in the Horn of Africa, remains a central concern.
The Bank said developing countries needed to evaluate their vulnerabilities and prepare for further shocks, while there was still time, stressing that developing countries had less fiscal and monetary space for remedial measures than they did in 2008/09.
As a result, their ability to respond might be constrained if international finance dries up and global conditions deteriorated sharply.
To prepare for that possibility, the Bank said 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.
According to the Bank, already, developing country sovereign spreads have increased 45 basis points on average and gross capital flows to developing countries plunged to $170 billion in the second half of 2011, compared with $309 billion received during the same period in 2010.
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