Wednesday, January 18, 2012

World Bank paints a grim picture

The World Bank's latest Global Economic Prospects paints a grim picture of the world economy, FT reports.  It rightly sees the Eurozone crisis as being contained, not resolved. It allows for the possibility of the crisis getting out of hand in 2012. And it makes clear that emerging markets will be hit hard by any financial crisis centred on the Eurozone.

Emerging markets growth is projected at 5.4% in 2012, down from 6% in 2011. If the Eurozone erupts, it could shave 4.2% of growth off emerging markets. One of the channels through which emerging markets will be impacted is deleveraging of banks in high-income countries. Emerging markets in which these banks operate in a big way could see foreign subsidiaries being sold off or a sharp reduction in wholesale funding. Indeed, this is one argument against an enlarged foreign bank presence in India.

Mercifully, India is not among the 30 emerging markets with large funding requirements that would be hit hard.


Anonymous said...

There are quite a few such portents being made, on and off, by different agencies - local & international. And all are giving mixed perspectives. While one common line that can be drawn is that the days are not going to be easy. But is it going to be Grey picture with more of black or white, remain unclear.

Things have become so complicated that understanding present has become impossible - future prediction is distant aspiration.

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