Developing countries must prepare for shocks as global economic growth slows, the World Bank has warned.
It has cut growth forecasts and now predicts a 0.3% contraction for the euro zone in 2012.
"Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time," said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics.
Developing countries have less fiscal and monetary space for remedial measures than they did in 2008/09. As a result, their ability to respond may be constrained if international finance dries up and global conditions deteriorate sharply.
Hans Timmer, Director of Development Prospects at the World Bank, said: "Developing countries should pre-finance budget deficits, prioritize spending on social safety nets and infrastructure, and stress-test domestic banks."
Meanwhile, Andrew Burns, Manager of Global Macroeconomics and lead author of the report, said: "An escalation of the crisis would spare no-one. Developed – and developing-country growth rates could fall by as much or more than in 2008/09. The importance of contingency planning cannot be stressed enough."
Article courtesy of Investor Today Sign up for Investor Today newsletter
