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Rising Interest Rates Next Big Risk for Asia: World Bank

As investors continue to fret over the tapering off of liquidity in the U.S. and the impact on global markets, a World Bank economist tells CNBC the move poses a particular risk to Asian investors as he expects interest rates to start rising again.

Andrew Burns, a lead economist with the Development Prospects Group at the World Bank, said a less supportive global economic environment will inevitably lead to an end to the "unsustainable" world of lower interest rates, particularly in Asia.

"As liquidity becomes less abundant... there's going to be a less supportive global environment and that's going to show up in higher interest rates," said Burns.

"Loans that have been undertaken at higher interest rates won't be viable... particularly in countries in East Asia and [Asia] Pacific, specifically, where there's been a very significant increase in credit over the last few years," he added.

(Read More: Here's How QE Tapering Could Hurt Asia)

Financial markets around the world have been awash with liquidity in recent years, mainly as a result of the U.S. central bank's expansive bond-buying program. More recently the Bank of Japan followed suit, announcing plans to inject $1.4 trillion into its own flagging economy, boosting investor sentiment worldwide.

However, speculation over the U.S. Federal Reserve starting to unwind its stimulus program, has increased in recent months, prompting concerns over the negative impact for investors worldwide. Meanwhile a lack of action from the Bank of Japan this week has raised further worries about the withdrawal of central bank support.

(Read More: Is the Fed Prepping Markets for the End of QE?)

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Burns said the tapering off of liquidity would put some investors at risk: "What's always tricky is the transition from very loose to tighter policies because some people inevitably have taken positions that won't be robust to that particular change in policy."

"In a sense we've been in a very unusual situation over the past several years with these lower interest rates, that clearly isn't sustainable in the very long term," he added, referring to record low interest rates in developing countries and the recent trend towards cutting rates in Asia.

(Read More: The Race to Cut Rates: Look What Japan Started)

On Thursday the World Bank cut its outlook for global growth, arguing the global economy would expand more slowly this year than last, due to a deeper than expected recession in Europe and a slowdown in emerging markets.

"It's no longer a story of easing monetary policy [in developing countries], as situations in high income countries change, it's more a story of concentrating on the supply side looking to reform... that will help ensure strong growth in the future," said Burns.

(Read More: Indonesia Surprises With a 0.25% Rate Hike)

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