No region immune to Europe crisis: World Bank Chief

Reuters: World Bank President Jim Yong Kim on Wednesday warned that most regions of the world will be hurt by the debt crisis enveloping the euro zone and said it was vital to protect the strong economic gains of the past decade in the developing world.

In his first public speech since taking the helm of the World Bank on 1 July, Kim said even if the euro zone crisis is contained, it could still reduce growth in most of the world’s regions by as much as 1.5 percent.

A major crisis in Europe could slash gross domestic product in developing countries by 4 percent or more, enough to trigger a deep global recession, he said.

“Such events threaten many of the recent achievements in the fight against poverty,” he said, noting that over the last decade nearly 30 developing countries have grown by 6 percent or more annually.

Outlining challenges for the global poverty-fighting institution, Kim said his priority was to protect development gains from economic risks, such as the euro zone crisis, which has begun to weigh on growth in large emerging economies like China.

For now, the world’s poorest nations appear to be somewhat insulated from the euro zone crisis because they have limited exposure to global financial markets.

But Kim said not everyone would be spared and he urged European policymakers to take necessary steps to restore stability.

“To put it starkly, what’s happening in Europe today affects the fisherman in Senegal and the software programmer in India,” Kim told the Brookings Institution, a think tank in Washington.

He said the bank had a role in broadening development to include fragile states or countries afflicted by conflict so they are not left trailing behind, and ensuring growth in developing regions is lasting and benefits everyone.

He said reforms are needed to sustain high rates of growth even in fast-rising economies. Middle-income countries need to modernize their economic structures and create jobs to meet the growing expectations of their people, Kim added.

The challenge for the World Bank was also to help tackle growing inequality in developing countries, 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,” he said.

Unlike previous heads of the World Bank, Kim is a physician and anthropologist, not a politician, banker or a career diplomat. His work has focused on bringing healthcare to the poor, whether fighting tuberculosis in Haiti and Peru or tackling HIV/AIDS in Russian prisons.

As he makes his rounds of the different parts of the World Bank Group, Kim said he had was focused on what he called “the science of delivering results,” in which the impact of development projects on people can be measured.

“We have to have focus on actually delivering results on the ground,” Kim said. Such ideas are likely to play well among the World Bank’s major donors, such as the United States, which are facing budget constraints and wanting to see tax dollars put to good use.

Kim weighed into the controversial issue of the World Bank funding for energy projects, such as coal. Environmentalists have called on the World Bank, which oversees a clean technology fund for donors, to stop funding projects that increase damaging greenhouse gas emissions and promote clean sources of energy.

Kim said he recognized the trade-offs between the need to protect the environment and ensure that developing countries have access to reliable power.

“I have been trained in science and I have to tell you that the data I’m seeing about the changes (to temperatures and sea levels) ... is extremely disturbing and we have to put the science of climate change in front of all of our member countries and I guarantee you that I will do that,” he said.

He added: “But having said that, you should also know that I believe in energy to lift people out of poverty and prosperity, so we are going to be constantly having to balance those needs and those interests, which is part of my job.”

A lot of climate research shows that rising greenhouse gas emissions are responsible for increasing global average surface temperatures by about 0.17 degrees Celsius a decade from 1980-2010 and for a sea level rise of about 2.3mm a year from 2005-2010 as ice caps and glaciers melt.

More than 180 countries are negotiating a new global climate pact which will come into force by 2020 and force all nations to cut emissions to limit warming to below two degrees Celsius this century -- a level scientists say is the minimum required to avert catastrophic effects.