by Karin Strohecker, Jorgelina do Rosario and Libby George

LONDON (Reuters) – Developing countries will need to boost growth faster to cope with rising borrowing costs, the World Bank has warned.

Emerging markets borrowed a record amount on the markets in January, raising $47 billion thanks in part to borrowing by economies deemed less risky by investors, such as Saudi Arabia, Mexico and Romania.

Issuers deemed riskier have for their part started borrowing at higher rates: Kenya recently paid more than 10% on a new issue, the threshold beyond which the cost of borrowing is considered unbearable.

“In this context, you need to grow much faster,” Ayhan Kose, deputy chief economist at the World Bank, said in an interview with Reuters in London on Tuesday.

“If I had a mortgage with a 10% rate, I would be worried,” he added.

Ayhan Kose acknowledged that faster growth, and a real growth rate higher than the real cost of borrowing, might prove difficult to achieve.

In its report on the global economic outlook, published in January, the World Bank warned that the global economy would slow down between 2020 and 2024, and that the slowdown in growth would be more pronounced in emerging economies. According to Ayhan Kose, this situation calls into question many objectives in education, health and climate spending.

“I think it will be difficult, if not impossible, to achieve these goals,” summarizes Ayhan Kose.

An escalation of conflict in the Middle East poses another risk to growth, with the impact of more restrictive monetary policies and the slowdown in global trade.

“Trade has been a key driver of poverty reduction and is a key source of income for emerging economies,” said Ayhan Kose.

RESTRUCTURING

If growth remains weak, some emerging economies may have to restructure their debt, Ayhan Kose added, by spreading maturities or agreeing haircuts with creditors.

“Sooner or later it will be necessary to restructure the debt and have an operational framework” to do so, he said. “This did not happen as the global community hoped.”

The G20 countries have launched a common framework intended to govern and simplify restructuring processes in 2020.

But the process encountered delays, and Zambia remained in default for more than three years.

“If growth remains weak and financing conditions remain restrictive, there will be no easy solution out of this problem. But if growth magically increases, these

(Reporting Jorgelina do Rosario and Karin Strohecker, with Mark John and Libby George, Corentin Chappron, editing by Kate Entringer)

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