By Nick Mann | 19 July 2012
The eurozone crisis could reduce world growth by up 1.5% even if it is contained, the president of the World Bank, Jim Yong Kim, said yesterday.
A ‘major crisis’ in Europe could reduce gross domestic product in developing countries by 4% or more, which would be enough to trigger a deep recession everywhere, Kim told an audience at the Brookings Institution in Washington DC.
‘Such events threaten many of the recent achievements in the fight against poverty,’ he said. ‘To put it starkly, what’s happening in Europe today affects the fisherman in Senegal and the software programmer in India.
‘Therefore, it is urgent that European countries take all necessary measures to restore stability. I am encouraged by the recent steps taken towards fiscal and banking union as well as the additional resources made available by some G-20 countries to the IMF.’
As well as protecting development gains against global economic risks, Kim said the World Bank needed to broader development to countries that are being ‘left out’, and in particular to ‘fragile’ and ‘conflict’ states.
‘These countries need a World Bank that is far more responsive than it is today, and capable of delivering the right financial and technical support at the right time,’ he said.
In ‘successful’ countries further structural changes will be needed to sustain growth such as by diversifying energy sources and modernising economic structures and government programmes. The World Bank needs to act as a ‘more flexible partner’ to help them address deficits in institutions and infrastructure, Kim said.
It must also ensure growth and development are inclusive. Kim said: ‘Even as an unprecedented number of people in the developing world are ascending into the middle class, segments of the poorest populations are being left behind, and other segments of the middle class are at risk of falling back into poverty.’
‘As young people in Egypt and Tunisia have reminded us, even in middle-income countries, development gains have been uneven and incomplete. Demands for respect of individual rights, the rule of law, and the administration of justice go hand in hand with inclusive development, requiring institutions to be more open and accountable,’ he added.
Moving forward, Kim said he hoped the next decade would be marked by a ‘great convergence’ with poverty reduced even further, the creation of an even larger ‘global middle class’ and better living conditions and greater opportunities for all.
