World Bank: Prepare For The Worst-Case “Jim Rogers” Scenario (FXI, ELCPF, SHI, REPYY, VGK)
Jonathan Yates: In its latest economic forecasts, the World Bank is warning of much lower global growth in 2012. According to an article by Chris Giles in the Financial Times, “World Bank warns emerging nations,” if the eurozone is not funded, “global growth would be about 4 percentage points lower” than already-gloomy forecasts.
Andrew Burns, head of macroeconomics at the World Bank, has advised that “developing countries should hope for the best and prepare for the worst.”
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As detailed in previous articles on www.emergingmoney.com, China (NYSEARCA:FXI) has refused to buy euro zone (NYSEARCA:VGK) bonds, seeking to invest in companies and infrastructure projects.
China just bought a 21% stake in EDDP-Energias de Portugal (PINK:ELCPF), the power company in Portugal.
Sinopec Shanghai Petrochemical (NYSE:SHI) recently purchased stakes in Repsol (PINK:REPYY), a Spanish oil company, and Galp Energia SA (GALP), a Portugese oil and gas company.
Financiers such as Warren Buffett and Jim Rogers have also declined to purchase eurozone bonds. Not only has Jim Rogers shunned the debt of the euro zone, he is short both European and American stocks as he expects there to be another financial crisis like 2008.
The World Bank warned that it will be very difficult to grow out of the next crisis as central banks around the world have already expended a great deal of the available resources.
As China, like many other emerging nations, depends on the American and European markets for much of their gross domestic product, any declines will have severe economic ramifications with concomitant internal political consequences.
Even without a new crisis, the World Bank has already lowered global growth forecasts for 2012 to to 2.5% and to 3.1% for 2013. Just six months ago, the World Bank was predicting 3.6% global growth for each year.
Written By Jonathan Yates From Emerging Money
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
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