World Bank’s Kim Says Debt Crisis May Curb Global Growth
Jim Yong Kim, the new World Bank president, said the European debt crisis could reduce growth in most of the world’s regions by as much as 1.5 percent even if it is contained, pledging to boost aid to developing nations if needed.
“What’s happening in Europe today affects the fisherman in Senegal and the software programmer in India,” Kim said in a speech at the Brookings Institution in Washington, his first since taking the helm of the bank this month. “Therefore, it is urgent that European countries take all necessary measures to restore stability.”
The 17-country euro region’s turmoil led the International Monetary Fund this week to reduce its 2013 forecasts for emerging markets from China to India, which were already facing slowing domestic demand. Kim said that a major crisis in Europe could reduce gross domestic product in developing economies by 4 percent or more and “trigger a deep recession everywhere.”
Still, he said he was encouraged by an agreement by leaders from the euro region last month that goes toward a fiscal and banking union.
The 52-year-old Kim, the former president of Dartmouth College, succeeded Robert Zoellick this month at the helm of a poverty-fighting institution that made about $53 billion worth of loans last year. He said that the bank has “adequate resources” to increase lending and investment and can work with clients to make fast disbursements.
“The World Bank needs to take fast action to protect developing countries from Europe’s debt crisis” Elizabeth Stuart, a spokeswoman for aid group Oxfam International, said in an e-mailed statement after the speech. The International Monetary Fund “ is bailing out Europe; the World Bank needs to step up efforts to assist poor countries.”
Kim, who said earlier this month that he was open to providing technical expertise to advanced economies such as Greece, said lessons from emerging markets’ past financial crises could be useful to Europe.
He vowed to improve the bank’s engagement in fragile states shaken by conflict and instability, which he said needs the lender to be “far more responsive than it is today, and capable of delivering the right financial and technical support at the right time.”
Kim, who grew up in the U.S. and was born in Korea, called on emerging markets to take on a greater role in financing development as they account for a growing share of global growth.
Developed economies “have made significant contributions through aid” and must continue that engagement, he said. “Emerging economies must increase their contributions, commensurate with their growing economic weight.”
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