In order to avoid higher volatility in exchange rates to avoid pressuring global growth, the World Bank has joined the International Monetary Fund in urging the US Federal Reserve to hold off its interest rate hike. The World Bank's chief economist Kaushik Basu has expressed concern regarding the timing of Fed implementing tighter monetary policies. He has urge countries to prepare for higher US interest rates, which will raise volatility in emerging markets by increasing borrowing costs.
In its twice-yearly released Global Economic Prospects report, the World Bank forecast the world economy would grow 2.8 percent this year, down from its former forecast of 3 percent. The global development lender kept his pessimistic approach for emerging countries as well, and cut its growth forecast to 4.4 percent from 4.8 percent.
"We at the World Bank have just switched on the seat belt sign," said Basu. "We are advising nations, especially emerging economies, to fasten their seat belts," he added.
According to the Bank, while the 40 percent drop in oil prices since last year has hurt commodity exporters, lower prices help global growth - especially in oil importing countries.The bank kept its global growth forecast unchanged for both next year and 2017.
In its report, the World Bank also predicted that India would be the fastest growing economy for the first time, expanding at a rate of 7.5 percent, up from 6.4 percent.
Oil prices fell after the World Bank released its gloomy report, with concerns that global demand might get weaker. Brent crude is trading at $65,19 per barrel, while US crude is at $60,99 a barrel.