* Global economic community faces "alarming uncertainty"
* World Bank urges governments to prepare policy responses
* This should include possible "safety nets" to help poor
By Pascal Fletcher
WASHINGTON (Reuters) - Developing countries can
prepare for the threat of a global recession by improving
policies to generate growth and jobs, diversifying economies,
bolstering their banking sectors and readying social safety
nets, the World Bank's top economists said Wednesday.
Bank chief economist and senior vice president Justin Yifu
Lin told a round table in Washington that the sentiment in the
international economic community had abruptly changed from a
feeling of general confidence in global recovery six months ago
to "alarming uncertainty" now facing policy-makers.
"We once again are seeing the financial markets in the
world in turmoil," Lin said, adding that the creditworthiness
of several countries "on both sides of the Atlantic" was now in
question, fueling the general crisis of confidence.
This was a worrying scenario for the world's developing
countries, as investors and consumers across the globe might
now be inclined to hold back out of caution.
"We still hope for the best," Lin said, but he added: "For
the developing countries, it is very important for them to
Lin, and the World Bank's top economists covering regions
from East Asia to Africa and Latin America, warned that while
many regions had weathered remarkably well the 2008-2009
financial crisis, this meant that their economic defenses might
not be as sturdy now to face another global recession.
"The fiscal cushions are not as strong anymore as they were
in 2008," Augusto de la Torre, the bank's chief economist for
Latin America and the Caribbean, told the round table on
"Developing Countries and the Global Economic Outlook".
Lin urged developing countries to gird their economies for
another downturn by identifying new drivers of growth,
overhauling banking regulations to protect their banking
sectors against transmitted financial shocks and fine-turning
policies to sustain productivity and job creation.
Shanta Devarajan, chief economist for Sub-Saharan Africa
for the World Bank, said African governments should ready
"safety net" policies to help cushion the poorest sectors of
their countries against the shortages and hardships that could
result from a global economic downturn.
But they should avoid the temptation to slap on price
controls, he added.
"The big challenge is how to diversify our economies,"
Devarajan said, noting the dependence of many African economies
on primary commodities exports, especially to Europe.
South Asia had suffered only a "glancing blow" from the
previous 2008 crisis, and had recovered quickly, said the
bank's chief economist for that region, Kalpana Kochhar.
But she said the region's countries urgently needed
investment to help absorb the huge numbers of workers entering
the labor force. "They need to focus on capital accumulation to
generate jobs," she said.
Bert Hofman, the World Bank's chief economist for East Asia
and the Pacific, including China, said that while growth
predictions for that region had been ratcheted down a few
notches to reflect the current global uncertainties, they were
still high, close to 8 percent.
"In case really bad weather hits, the region still looks
pretty good in terms of fiscal space," he said.
De la Torre too saw his Latin American region in relatively
resilient form with "improved shock absorbing capacity" to
confront a downturn. However, Central American and Caribbean
economies in the region were weaker.
In the Middle East and North Africa, oil-importing
countries faced risk to their trade and remittances from Europe
if the sovereign debt crisis in that continent worsened.
At the same time, the ability of oil-exporting countries in
the region to respond to an international economic crisis could
be reduced if oil prices declined, said Caroline Freund, the
World Bank chief economist for Middle East and North Africa.
(Editing by Diane Craft))
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