World Bank issues 'perfect storm' warning for 2016

Simultaneous slowdown in Brics economies would jeopardise chances of pick-up in global growth this
year, report says the risk of the global economy being battered by a perfect storm in 2016 has been
highlighted by the World Bank in a flagship report that warns that a synchronized slowdown in the biggest
emerging markets could be intensified by a fresh bout of financial turmoil.
The Bank said the possibility that Brazil, Russia, India, China and South Africa the socalled Brics economies could all face problems simultaneously would put in jeopardy the chances of a
pick-up in growth in the coming year.
It added that the impact would be heightened by severe financial market stress of the sort triggered in
2013 by the announcement by the Federal Reserve that it was considering reducing the stimulus it was
then providing to the US economy.
Launching its annual Global Economic Prospects, the Bank said activity in 2015 had failed to live up to its
expectations the fifth year in a row that growth has undershot the forecasts made by the Washingtonbased institution, which lends to the worlds poorest countries.
The Bank said growth had slowed to 2.4% in 2015, from 2.6% in 2014, but added that a stronger
performance in developed countries should lead to 2.9% growth this year.
Downside risks dominate and have become increasingly centred on emerging and developing countries,
it said.
The Bank is predicting that recessions in Brazil and Russia will bottom out in 2016, that China will
experience only a modest growth slowdown from 6.9% to 6.7% and that India will continue to expand at a
robust pace.
The report said that, in a development unmatched since the 1980s, most of the largest emerging market
economies were slowing at the same time. Sharp declines in commodity prices, subdued global trade,
weaker capital flows and currency pressures had combined last year to create a particularly challenging
external environment for commodity exporters, where most of the growth slowdown had occurred.
The Bank has estimated that growth in developing countries reached a post-crisis low of 4.2% in 2015,
down from 4.9% in 2014, and warned that 2016 could be another difficult year.
In the event that growth in the Brics economies fell one percentage point short of expectations, the Bank
said this would knock 0.8 points off growth in other emerging markets and reduce growth in the global
economy by 0.4%.
But the Bank also highlighted the risks of what it called a perfect storm. Spillovers could be considerably
larger if the Brics growth slowdown were combined with financial market stress.
If, in 2016, Brics growth slows further, by as much as the average growth disappointment over 2010-14,
growth in other emerging markets could fall short of expectations by about one percentage point and
global growth by 0.7 percentage points.
If such a Brics growth decline scenarios were to be combined with financial sector turbulence, emerging
market growth could slow by an additional 0.5 percentage points and global growth by an additional 0.4
percentage points.

Jim Yong Kim, the Banks president, said: More than 40% of the worlds poor live in the developing
countries where growth slowed in 2015. Developing countries should focus on building resilience to a
weaker economic environment and shielding the most vulnerable. The benefits from reforms to
governance and business conditions are potentially large and could help offset the effects of slow growth
in larger economies.
The Bank said it expected the growth rate in the Middle East and North Africa region to more than double
as a result of the ending of sanctions against Iran and an end to declining oil prices. Growth is forecast to
accelerate to 5.1% in 2016 from 2.5% in the year just ended, as the expected suspension or removal of
economic sanctions against the Islamic Republic of Iran will allow that country to play a larger role in
global energy markets. Growth is expected to pick up in other oil exporters as well, predominantly on the
assumption that oil prices will stabilize.
More stable commodity prices should also help Africa, the Bank added, predicting growth to pick up from
3.4% in 2015 to 4.2% in 2016.

REACTION:
It still puzzles how we systematically interconnected every piece of everything is in this world. Its crazy
that changes made in other countries can have an effect on us. In this particular case its sad that the
growth of economy is slow because of these so called Bric economies that its affecting the economies of
other countries including the Philippines.

The Paris Attacks And The Economic Impact Of Terrorism

As the denizens of Paris returned to work on Monday displaying an remarkable degree of fortitude
following the series of terrorist attacks on Friday investors were equally stoic. Frances CAC-40 index
opened on a weak note, but was never down much more than 2%, ending just 0.1% lower for the day.
Londons FTSE-100 index slipped by a larger, but still-measured, 1%, while Germanys DAX index
actually inched 0.1% higher.
A sad sign of the times, perhaps. Experienced investors have learned that, unlike the human toll, the
financial ramifications of a terrorist attack can be short lived. While travel and tourism related stocks like
airlines, booking sites and cruise line operators were reeling across global markets Monday. In the U.S.,
the S&P 500s weakest performers Monday included the likes of Priceline, Expedia EXPE -0.94%, Delta
Air Lines DAL +0.00% and American Airlines Group AAL -2.56%.
While a downturn in travel stocks is a common, and typically transitory, reaction to threats and acts of
terrorism, a more lasting effect could come from the economic impact of fearful consumers and tighter
borders.
Consider the fragility of both European economies and the institutions underpinning the European Union.
The euro zone grew by a meagre 0.3% in the third quarter, well below expectations. And last weeks
attacks may do some real damage to current spending, keeping shoppers away from from crowded retail
parks in the lead-up to the busiest month of the year.

Its not just France that will suffer. The ability of the Islamic State to strike indiscriminately, and at will,
means that consumers across Europe could pull in their horns. Anecdotal evidence suggests that British
shoppers remained home over the weekend, unnerved by reports that additional security personnel had
been assigned to patrol shopping areas in Londons busy West End and in popular shopping malls.
That fear may fade in the absence of another attack, as it often does in the lulls between such horrors, but
the damage to Europes Schengen zone, which allows freedom of movement amongst 26 European
countries, may be longer lasting. A number of nations had already erected temporary border controls in
the face of the unprecedented wave of migrants fleeing the Middle East and Africa. Reports that one
suspected assailant in the Paris attacks had entered the European Union through Greece on a Syrian
passport could prompt member countries to restore travel checks in a hurry. Once installed, new
restrictions could prove difficult to dismantle.
Yet the efficient transfer of goods across national boundaries has been crucial in creating pan-European
supply lines. Witness Airbus, which sources components from Spain, Germany and the UK (admittedly,
not party to the Schengen agreement) for assembly at hangars in southern France. Gone are the days
when manufacturers consistently shipped completed units for sale abroad. Border bottle necks could
profoundly affect manufacturing industries across Europe, at a time when industrial production is barely
expanding.
But it may be political risk that poses the greatest threat to European economic prosperity. Nationalist
parties have been gaining ground across Europe, not least Frances own National Front, which faces
regional voters in a mere three weeks. In Spain, the radical left Podemos party has become an electoral
force with little more than a month to go before a general election. Podemos lacks the racist hue that has
historically dogged the National Front, but its anti-austerity message may resonate with voters keen to
register discontent with all policies emanating from EU headquarters in Brussels, economic or otherwise.
And these novice political parties have no experience in steering already-traumatised economies to
safety. Look no further than Greece for an example of a new political grouping grappling with the
implementation of financial reform, to the detriment of its people. The human cost of the Paris tragedies is
incalculable; a measurable economic toll is bound to follow.

REACTION:
The terrible incident that happened in Paris, even though unwanted and unwelcomed had taken away
lives, livelihood and peace of mind from people who live in France. The economic effect of this terrorism
had hit mainly tourism, airlines and accommodation businesses in Paris. Even those countries near
France would also be affected by this. For people would be afraid to travel anywhere near Paris when it
had just been attacked by terrorists.

Labour-market woes
THE International Labour Organisations latest World Employment and Social Outlook expects recent
labour-market growth to slow in the coming years amid uncertain economic prospects. In the aftermath of
the financial crisis in 2008-09 many countries suffered heavy job losses and soaring unemployment,
especially in the West. The ILO thinks that unemployment will rise again in the coming years, and it is
also anxious that the progress made in reducing the number of those who work but remain in poverty will
stall. In the past two decades, earnings in emerging and developing countries have improved significantly.

Those deemed to be poor (earning less than $5 per day at 2011 prices) have dropped from 78% of the
world's working population (excluding already-rich countries) in 1991 to an estimated 46% this year. The
reduction in the "extremely poor" has been even more pronounced, with a fall from around a half to just
11.5%.
Even so, because of the increase in the working population, 1.2 billion people in emerging and developing
countries are considered to be in relative poverty. That is only 200m fewer than in 1991. For those at the
very bottom, earning less than $1.90 a day, the reduction is steeper, from 890m to 320m people. There
are noticeable differences between regions. The biggest improvement has been in eastern Asia, where
the number of those in poverty has fallen from 600m to 190m, while its workforce has grown by 155m.
Other Asian regions have made good progress too. Latin America, though having a much smaller
workforce, is also much improved. Sadly, though Africa has made some headway, a third of its working
people are still extremely poor.

REACTION:
This certain issue scares me a lot, being a graduating student and all I want to be able to choose a job
that I love and not settle for a job because there are no opportunities out there for me. Although this is the
sad reality of life, I just want to somehow be in charge of how Ill run my life. I dont want to be tied to the
idea that I have to work in order to pay for everything. I want to be able to do what I want to do for a living.

K-to-12 is vital to the Philippine economy

A couple of weeks ago, one of my colleagues phoned me from an event she was attending. My name had
apparently come up in a conversation she had with an official of the Department of Education (DepEd).
DepEd is a little disappointed youve been so hard on them concerning the K-to-12 program, she
informed me, going on to explain that while the official understood that I am not against the goal, my
criticism of the manner in which it is being implemented was, from his point of view, a little unfair.
If I had a dime for every time someone thought I was being unfair, Id have to hire a truck to carry them all.
At least the unnamed DepEd official (I know who it was, of course, but his identity is not vital to the point
of this story) correctly understood my position: K-to-12 is an excellent initiative, one that is long overdue
here, but the manner in which it is being converted from a good idea to a reality seems inept and
unnecessarily stressful, and has caused a great deal of confusion among education stakeholders
students, educators and parents.
That stress and confusion has been further aggravated by the histrionics of those who are against
expanding the basic education programthe so-called progressives whose ironically conservative
perspective is that allowing the Philippine education system to remain below unquestioned global
standards is preferable to moving out of an unimpressive comfort zone. The greater implications to the
quality of the Philippine workforce, the countrys economic potential, and its ability to take advantage of
knowledge transfer matter not at all, so long as jobs are not lost and families do not have to devote
temporal and material resources to two extra years of school for their children.
Being dumb, apparently, is preferable to growing up.
Earlier this week, Education Secretary Bro. Armin Luistro paid a visit to The Manila Times offices, and
shared with us a frank assessment of the K-to-12 implementation.

While I am still not entirely satisfied that the DepEd has handled what has been a five-year effort to bring
the new paradigm to life in the most efficient way, Secretary Luistro did clarify many of the apparent
problems, and in doing so eased most of my and my editorial teammates concerns about whether the Kto-12 program will be a success.
Any major change in a fundamental institution like the countrys basic education system is going to create
some discomfort; that is unavoidable. Education in particular has a tremendous influence on the countrys
social make-up, and any significant change to the education system risks pushing some people out of the
way. Despite the best efforts of the government and the education sector to ensure K-to-12 benefits
everyone, some are going to be left behind. Secretary Luistro acknowledged that, but also pointed out
that eliminating or reducing the negative effects of K-to-12 implementation requires a little effort on the
part of other education stakeholders besides the DepEd. The effort to implement K-to-12 has been
ongoing for five years, Luistro pointed out, and for all practical purposes begins on Mondayany rational
challenge to it should have been presented and resolved long before now.
Resistance to K-to-12 is foolish, although sober discussion of problems encountered along the path to
implementation is not; Luistro stressed that he would rather be informed of the problems sooner rather
than later. While there is likely some room for improving the manner in which the program is being rolled
out, stopping it completely would be disastrous. If the Philippines wishes to even approach the lofty goal
of becoming a first-world country, as President B.S. Aquino 3rd suggested last week, it absolutely must
meet conventional global standards of education. As just one example of how the current system
handicaps the Philippines human capital, professional certificate holdersengineers, accountants,
healthcare workers and othersoften encounter resistance for the sole reason that their education is two
years shorter than everyone elses.
K-to-12 may be a challenge, it may create practical difficulties for some, but it is an absolute necessity.
Any effort applied by anyone that is not an effort to make it happen more effectively is an effort that is
wasted, and ultimately harmful to the country and its livelihood.

REACTION:
I agree with this article. I think k-12 may be difficult now but in the long run it would help professionals get
jobs abroad quicker. It would make employment better and It could provide better work force to
companies not only in the Philippines but also to other countries in the world.

Russian economy hit by oil price slide

Russia's economy contracted by 3.7% in 2015, according to preliminary figures published by the
country's statistics service.
Retail sales plunged by 10% and capital investment fell by 8.4% in the economy's worst performance
since 2009.
In contrast, Russian GDP increased by 0.6% in 2014.

The economy has been hit hard by the extraordinary collapse in oil prices, which have fallen by 70% in
the past 15 months.
Sanctions imposed by the West after Russia annexed Ukraine's Crimea region in 2014 have also had an
impact.
Prime Minister Dmitry Medvedev warned earlier this month that the fall could force Russia's 2016 budget
to be revised.
President Vladimir Putin said in December that the budget had been calculated based on oil at $50 a
barrel. Oil is trading at just over $30 a barrel.
"We're not panicking!"
This was one of the headlines in Russian TV's Sunday news review. The words appeared on a giant
video screen behind the anchor, along with a picture of rouble coins.
Russia may not be panicking, but it's clearly worried. Worried enough for the pro-Kremlin media here to
admit there's a problem: a full-blown economic crisis.
The state-controlled media blames the crisis, principally, on low oil prices and, to a lesser extent, on
western sanctions. What you don't hear on TV is anyone blaming President Putin for the problem.
Yet, in the decade and a half that Mr Putin has ruled Russia as president or prime minister, Russia failed
to prepare for the possibility of low oil prices and did little to diversify its economy and reduce its reliance
on energy exports.
Russian citizens are increasingly concerned. Inflation is rising, so is the fear of job losses. Meanwhile,
real incomes in Russia are falling and social benefits are being cut.
Earlier this month senior citizens blocked streets in Sochi and Krasnodar to protest against the scrapping
of free travel passes for pensioners. People power persuaded the local authorities to reverse the decision.
The longer Russia's economic woes continue, the greater the likelihood that social protest here will
spread.
Taxes from oil and gas generate about half the Russian government's revenue.
William Jackson, an economist at Capital Economics, said: "While the worst of Russia's crisis has now
passed, the economy is still extremely weak. The latest fall in oil prices and drop in the rouble mean the
likelihood of a second consecutive year of recession is rising."
Rouble trouble
The rouble fell to record lows against the US dollar last week, before regaining some ground as oil prices
recovered slightly.
The currency was down more than 1% on Monday at 78.87 after oil prices fell about 3%.

Economy minister Alexei Ulyukayev said he expected the Russian central bank to leave interest rates on
hold at 11% when it meets on Friday.
Elvira Nabiullina, the head of the central bank, said last week that authorities had "all the means" needed
to keep the economy stable.
Unemployment in Russia was steady at 5.8% in December, meaning that 4.4m people were out of work,
and real wages fell by 10%.
Despite the gloomy economic news, fast food giant McDonald's said on Monday it planned to open more
than 60 restaurants in Russia this year.
Khamzat Khasbulatov, chief executive of McDonald's Russia, said sanctions and the weak rouble had
forced the US company to make "serious adjustments" to its business model, but focusing on local
suppliers and affordable menus had proved successful.
"We have seen significant growth of our market share as we continued expansion," he said. "The
development of local supply has played a big role in supporting our profitability."

REACTION:
And all this time I thought Russia was very rich and theyre not worried about money. Its good I think, to
know that its not always what meets the eye. The Russian government being worried about the state of
their economy makes it serious.