The biggest threat to emerging markets growth in coming years could come from the rise of populism and isolationism in developed countries, a World Bank official said on Tuesday.
If such sentiment continues to proliferate in the United States, Europe and elsewhere, it would negatively impact trade and transmission mechanisms in emerging market economies, many of which are heavily dependent on exports, said Axel Peuker, director for the financial advisory and banking department at the World Bank.
And as developed market political leaders pull away from globalisation it could catalyze similar sentiments from political leaders in emerging markets, he said, worsening poverty and income inequality.
“What role models will you find in developed markets as populism becomes more popular?” said Peuker during a global fixed income forum sponsored by ratings agency Standard & Poor’s.
The growth of isolationism has become a worrying development for some market analysts and economists following Britain’s surprise vote to exit the European Union. The growing popularity of isolationist candidates in Germany and other European nations and threats by U.S. Republican presidential candidate Donald Trump's to scrap trade agreements with Mexico and impose trade tariffs on China have stoked fears.
(Reporting by Dion Rabouin; Editing by Andrew Hay)