World Bank Warns Developing Countries of Further Economic Slowdown

On Wednesday, the World Bank warned that developing countries should be prepared to brace for a growth slowdown, as it sharply scaled back its estimates for expansion. It stems partly from Europe's debt woes.

It predicts the global economy will expand by 2.5 percent in 2012 and by 3.1 percent in 2013. It’s well behind the 3.6 percent growth for each year that the bank projected in June.

It believes developing countries' economies will continue to outpace those of richer developed countries.

Officials raised further concerns over the already weak capital market in Europe.

[Lin Yifu, Chief Economist, World Bank]:
"In the Euro areas, the capital markets freeze up and the situation there deteriorate. That can trigger some kind of crisis, like what happened in September 2008. That should be the risk that we need to watch about."

The World Bank said global economic conditions are fragile and uncertain in the medium term.

Among other things, developing countries "could help by avoiding entering into trade disputes and by allowing market prices to move freely."

It also said developing-country governments should start contingency planning to identify spending priorities and to try to shore up safety net programs. Those contingencies should take into account possible drops in commodity prices and a fall in capital inflows.