The World Bank, which is based in Washington, D.C., warns that the high cost of borrowing has become a factor that has dramatically changed the need of developing countries to stimulate economic growth that demonstrates such features that can be described as sluggishness and weakness within the framework of the simplified formulation method.
The mentioned financial institution issued its warning at a time when there was a record level of international bond sales from emerging market governments. In January of the current year, the corresponding figure was fixed at $47 billion. In this case, less risky emerging economies, including Romania, Mexico, and Saudi Arabia, are at the forefront of bond sales.
At the same time, some riskier issuers start to tap markets at higher rates. For example, Kenya has paid more than 10% on new international bonds. The specified indicator is a threshold, exceeding what experts often characterize as unaffordable for borrowing.
During a conversation with media representatives in London, Ayhan Kose, Deputy Chief Economist of the World Bank said that the borrowing situation has changed dramatically, which is why emerging economic systems should demonstrate a much more intense dynamic of growth. He did not name the specific countries for which the mentioned recommendation has the highest level of relevance. Ayhan Kose said that for him, a mortgage with a 10 percent rate would be a cause for concern.
The Deputy Chief Economist of the World Bank also noted that faster growth, especially a real growth rate, the pace of which exceeds the real cost of borrowing, could prove elusive.
The Washington-based financial institution stated in its Global Economic Prospects report, released in January, that since 2020 the global economy has demonstrated and still continues to demonstrate the weakest performance in the last 30 years. Separately, it was noted that even a potential scenario of the near future, in which there is no recession, will not change the overall negative situation.
The World Bank predicts that the global economy will grow by 2.4% in 2024. If these expectations become reality, a downturn in a positive economic dynamic will be recorded for the third year in a row. The World Bank also forecasts an increase in the growth rate of the global economy to 2.7% in 2025. It is worth noting that in the 2010s, the average level of the corresponding indicator was 3.1%.
The slowdown in global economic growth is a particularly sensitive factor in the aspect of affecting the situation in emerging market countries. About a third of these states have not recovered from the coronavirus pandemic and record per capita income below 2019 levels. Ayhan Kose says that the mentioned economic situation worsens the prospects for achieving goals in areas such as health, education, and combating climate change. According to him, in some cases, the relevant goals may be on the verge of being possible.
As we have reported earlier, World Bank Says Nations Must Adopt Policies to Boost Growth.
