Amidst the escalation of the global trade wars and protectionist policies, the World Bank has observed that countries that are highly at risk are emerging and developing economies.
The World Bank observes that emerging markets and developing economies over the years have immensely benefited from global trade, and hence the recent global trade tensions have come as a big blow.
The Bank is therefore urging emerging markets and developing economies (EMDEs) to act swiftly and strategically to avoid being overwhelmed by the ripple effects.
In its latest Global Economic Prospects report, the Bank recommends new pathways that EMDEs can deploy to avoid the vagaries of the trade tensions.
World Bank’s Deputy Chief Economist, M. Ayhan Kose, calls for renewed trade partnerships, deeper structural reforms, and bolstered fiscal resilience as the best shields against an increasingly unpredictable global trade landscape.
“Emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict,” M. Ayhan Kose, who is also the Director of the Prospects Group, noted.
EMDEs in regions like sub-Saharan Africa, Southeast Asia, and parts of Latin America, where growth is heavily dependent on commodity exports and open markets, the report says, may have a pronounced impact.
Kose warns that the smartest and most sustainable path forward lies not in retreat but in doubling down on trade integration, with new and diverse partners, while simultaneously embracing pro-growth reforms that boost productivity, competitiveness, and investor confidence.
“The smartest way to respond is to redouble efforts on integration with new partners, advance pro-growth reforms, and shore up fiscal resilience to weather the storm. With trade barriers rising and uncertainty mounting, renewed global dialogue and cooperation can chart a more stable and prosperous path forward,” he proposed.
This means EMDEs, in practical terms, must reduce overreliance on a few traditional trade allies, invest in regional trade agreements like the African Continental Free Trade Area (AfCFTA), digitize customs processes, and promote value-added exports.
The World Bank also stresses the need for fiscal discipline and buffers, which can provide room for stimulus and policy support during downturns.
The Bretton Woods institution fears that without decisive actions, the hard-won gains in poverty reduction, employment, and macroeconomic stability could be eroded.
However, it is optimistic that with renewed global dialogue and cooperation, EMDEs can not only withstand current shocks but also emerge more resilient and competitive in the long run.
