World Bank warns of strained growth in emerging markets
A road under construction in Kisumu County. A section of experts had earlier warned that risks to the Kenyan economy remain even as Treasury Cabinet Secretary Henry Rotich exuded optimism. FILE PHOTO | JACOB OWITI
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The Bank is urging developing countries to ring fence their economies ahead of an expected slowdown amid projections that developing economies will expand by a less than expected 4.8 per cent in 2016.
A section of experts had earlier warned that risks to the Kenyan economy remain even as Treasury Cabinet Secretary Henry Rotich exuded optimism that it will be robust in 2016.
The World Bank on Wednesday warned of weak economic growth among major emerging markets like Kenya this year, a situation it said threatens the achievement of poverty reduction and shared prosperity goals in developing nations.
In its January forecast, the Bretton Woods institution said the simultaneous weakness in most major emerging markets will also weigh negatively on global growth prospects in 2016.
The Bank is therefore urging developing countries to ring fence their economies ahead of the expected slowdown amid projections that developing economies will expand by 4.8 per cent in 2016, less than expected earlier but up from a post-crisis low of 4.3 per cent in 2015.
"More than 40 per cent of the world's poor live in the developing countries where growth slowed in 2015. Developing countries should focus on building resilience to a weaker economic environment and shielding the most vulnerable. The benefits from reforms to governance and business conditions are potentially large and could help offset the effects of slow growth in larger economies," said World Bank Group President Jim Yong Kim.
World Bank Group Vice President and Chief Economist Kaushik Basu echoed similar sentiments tipping developing nations to adopt a combination of fiscal and central bank policies in “mitigating these risks and supporting growth.
Risks to the economic outlook include financial stress around the US Federal Reserve tightening cycle and heightened geopolitical tensions.
"There is greater divergence in performance among emerging economies. Compared to six months ago, risks have increased, particularly those associated with the possibility of a disorderly slowdown in a major emerging economy," said Mr Basu.
Global economic growth was less than expected in 2015, when falling commodity prices, weak international trade and capital flows, and episodes of financial volatility sapped economic activity.
In 2016, growth is projected to slow further in China, while Russia and Brazil are expected to remain in recession in 2016. The South Asia region, led by India, is projected to be a bright spot.
Kenya's economy grew to 5.8 per cent in the third quarter ended September 2015 compared to 5.2 per cent in the same period in the previous year.
While the growth was powered by robust activity in the construction, agricultural and financial and insurance sectors, the expansion could fall short of Treasury's annual target of between 5.5 and 6.0 per cent. A section of experts had earlier warned that risks to the Kenyan economy remain even as Treasury Cabinet Secretary Henry Rotich exuded optimism that it will be robust in 2016.
“Looking ahead in 2016 and near-term, our economy will remain resilient and we should see our economy growing by at least over 6 per cent on the back of favourable weather, recovery in tourism, and continued strong investment as the business environment improves," Mr Rotich said, adding that the completion and progress of several infrastructure projects including the Standard Gauge Railway should accelerate growth.
