China, India and other major developing countries have reportedly started showing signs of declining economic growth in the wake of the Euro crisis and a sluggish US recovery.
Over the last few decades, the term ‘Third World’ has been used interchangeably with the Global South and Developing Countries to describe poorer countries that have struggled to attain steady economic development.
According to the International Monetary Fund (IMF), it highlighted the intensification of concern about the developing world, nations that had helped prop up global growth but which are now beginning to slow, and may be nearing crises of their own.
The IMF sounded cautious about a situation where rounds of government stimulus spending and low interest rates have failed to take hold, and left developing and as well as developed countries saddled with debt and other problems that give them little room to maneuver if conditions get worse, the Wall Street Journal reports.
Overall, the world economy is still expected to expand by 3.5 percent in 2012 and 3.9 percent next year, only slightly less than fund economists had forecasted in April, the report cited.
However, the research found that the trend is in the wrong direction, in which the growth in the first months of the year was stronger than expected, and the slowdown in developing countries means the world is losing one of its few economic bright spots.
The Developing 8 are a group of developing countries with large Muslim populations that have formed an economic development alliance.
Now the opposite concern has taken hold as investors pull back in light of the slowdown.
But the IMF said it is worried that some of the world’s previous star performers could face a quick turnaround if conditions deteriorate.
“If and when a large downside shock ultimately materializes, these combined vulnerabilities could quickly come to the fore, putting financial stability to a serious test,” the fund concluded.
But “expanding credit significantly at the current juncture would heighten asset quality concerns and potentially undermine GDP growth and financial stability in the years ahead,” the fund said.
Amy Unwin is a business journalist based in Sydney, Australia. Amy has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Amy spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.