On Monday the President of the World Bank, Robert Zoellick, warned that the European trend of falling consumer confidence is beginning to also affect developing nations.
Eurozone crisis spreading
Zoellick said that the trouble in advanced economies, such as the lowering of the United States’ triple AAA-rating and the eurozone debt crisis, has resulted in a hit on the stock markets of developing countries.
“The events of August have started to show the signals of contagion to emerging markets,” Zoellick told reporters this week.
He said that World Bank is continually monitoring developments of investment in developing economies, and warns of a looming risk of spreading a falling market: “The drop in markets and confidence could prompt slippage in developing countries’ investment and a pull-back by their consumers too.” Though it is quite early, purchasing manager index data from developing economies already indicates a decline.
The markets of developing nations have been the centres of immense global economic growth since the financial crisis in 2009. Their safety is now of global import, as a setback in economic growth in these areas will affect the entire global economy.
World Bank President Zoellick warned against putting further economic strain on developing countries, as many are “walking a monetary policy tightrope” between inflation pressures and risk. In addition, a rise of 26% in global food prices is causing turmoil in developing countries.
In the face of all this, Zoellick calls for “collective action” from countries with advanced economies. “The world is watching and waiting for Europe, Japan and the United States to address their hard problem,” said Zoellick. He also noted the euro zone must answer some fundamental questions about its sovereign debt, and banking stability and member states.
He continued: “Some developed country officials have sounded like their woes are just their business. Not so.”