Developing countries should post their strongest growth in two decades in 2004 as the global recovery firms, but a sudden rise in interest rates could harm the outlook, a new World Bank report says.
In its 2004 Global Development Finance report, the bank warned that governments should prepare themselves for a possible rise in international borrowing rates and avoid overexposure to short-term foreign debt.
It said a rate rise could come quickly if current account imbalances, in particular the US trade and budget gaps, were unwound in a way that disrupted financial markets.
The report forecast gross domestic product growth in developing economies at 5.4% in 2004, up from 4.8% last year. This, it said, could slow to about 5% over 2005 and 2006 as the booming economies of East Asia cooled.
