The developing nations should be prepared for a slowdown in growth stemming partly from Europe's debt woes, as the World Bank scaled back on its estimates for expansion. Bank officials have opined that Europe appears to have entered recession and growth in several major emerging nations has slowed considerably. It predicted the global economy will expand by 2.5% in 2012 and by 3.1% in 2013, estimates well behind the 3.6% growth for each year that the bank had projected in June.

Developing countries' economies will continue to outpace those of richer, developed countries but the World Bank also lowered its forecasts for growth in these countries to 5.4% in 2012 and 6% in 2013. The figure was down from previous estimates of 6.2% and 6.3% respectively for growth in developing countries. The World Bank also foresees rising threats to growth.  

The financial chaos in Europe coupled with the weaker growth in developing countries raises the risk that the two developments reinforce one another, resulting in an even weaker outcome. It also cited failures so far to resolve high debts and deficits in Japan and the United States and slow growth in other high-income countries, and cautioned those could trigger sudden shocks. To add to the growing problems on both sides of the Atlantic, political tensions in the MENA region  could disrupt oil supplies and add another blow to the global prospects. It said that while Europe was moving towards a long-term solution to its debt problems, market still remain skittish.

On balance, the World Bank said global economic conditions were fragile and there remains a great mystery as to how the markets will evolve over the medium term. Against the backdrop, it said developing countries were even more vulnerable than they were in 2008 because they could find themselves facing reduced capital flows and softer trade. In addition, many developing countries have weaker finances and would not be able to respond to a new crisis as vigorously.

The World Bank has warned the global economies that 2012 may indeed be a year of financial turmoil since most of the countries are facing economic problems which are blowing out of proportion. The time to act is now!