(MENAFN) The World Bank issued a statement on Tuesday, highlighting a significant slowdown in global growth and an escalating risk of financial stress in emerging market and developing economies (EMDEs). The organization expressed concerns regarding the adverse effects of high-interest rates, emphasizing that EMDEs now face perilous circumstances. While these economies have so far experienced limited harm from the recent banking stress in advanced economies, they are entering treacherous waters, according to the World Bank.
Restrictive global credit conditions have led to a situation where one in every four EMDEs has effectively lost access to international bond markets. The tightening of credit and increasingly challenging borrowing conditions pose a severe threat to these economies, as they heavily rely on external financing. Furthermore, economic growth projections for EMDEs in the current year have fallen to less than half of what was forecasted just one year ago. This makes them highly vulnerable to additional shocks, amplifying the risks they face.
The World Bank's President, Ajay Banga, highlighted the crucial role of employment in reducing poverty and spreading prosperity. However, slower economic growth significantly hampers the creation of jobs, posing a major challenge. Banga, who recently commenced a five-year term, emphasized the importance of collective efforts to reverse the current trajectory. He stated that while growth forecasts are not predetermined outcomes, concerted action is necessary to change the course and address the mounting concerns.
The World Bank underscored that multiple factors have contributed to the setback experienced by EMDEs. These include the shocks inflicted by the coronavirus pandemic, the ongoing conflict between Russia and Ukraine, and the sharp economic deceleration amid tight global financial conditions. These events have collectively dealt a lasting blow to the development prospects of emerging economies.
The statement serves as a stark warning to policymakers and stakeholders regarding the pressing challenges faced by EMDEs. It emphasizes the urgency of addressing the restrictive global credit environment and implementing measures to foster economic growth. By working together, there is an opportunity to reverse the current trends and mitigate the potential long-term impacts on the livelihoods and well-being of individuals in these economies.
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