The world economy in 2016 is in a fragile state, with growth likely to dip below that registered in both 2014 and 2015. The mediocre performance of developed countries since the 2008–2009 economic and financial crisis is set to continue, with the added threat that the loss of momentum in developing countries over the past few years will be greater than previously anticipated.With investors exiting developing and transition economies, net capital flows turned negative in the second quarter of 2014, and amounted to -$656 billion in 2015 and -$185 billion in the first quarter of 2016. Even though there was a respite in the second quarter of 2016, there remains a risk of deflationary spirals in which capital flight, currency devaluations and collapsing asset prices would stymie growth and shrink government revenues, and cause heightened anxiety about the vulnerability of debt positions.[...]