World Bank’s latest Global Economic Prospects (GEP) 2012 reports that the world economy in 2012 is set to grow by just 2.5 percent, weighed down by ripple effects from the 2008 financial crisis.
The sovereign debt crisis in Europe, which took a turn for the worse in August 2011, coincides with slowing growth in several major developing countries (Brazil, India and, to a lesser extent, Russia, South Africa and Turkey), mainly reflecting policy tightening begun in late 2010 and early 2011 to combat rising inflationary pressures from overly-fast growth.
As a result, developing country growth for 2012 is now forecast at 5.4 percent, the second lowest over the past 10 years.
Capital flows to developing countries have weakened sharply as investors withdrew substantial sums from developing-country markets in the second half of 2011. Developing-country stock markets have lost 8.5 percent of their value since July-end
The GEP urges developing countries to preparing for further downside risks.
