Africa’s population grew at an average annual rate of 2.6 percent between 1950 and 2014, much faster than the global average of 1.7 percent as estimated from UN population projection data. During this time, the region experienced a demographic transition, moving from a period of high mortality and fertility rates to one of lower mortality, yet still high fertility rates. Other regions, most notably East Asia, took advantage of their transitions to accelerate growth, and reap a so-called ‘demographic dividend’. Africa is now being presented a similar opportunity.
From my house in northern Quezon City, I drive more than two hours every day to get to the office in Bonifacio Global City, which is about three cities away where I come from, and two cities away from the capital Manila. It’s a journey that should only take around half an hour under light traffic. That is a total of four hours on the road a day, if there is no road accident or bad weather. It takes me an hour longer whenever I use the public transport system. Along with hundreds of thousands of Metro Rail Transit (MRT) commuters, I have to contend with extremely long lines, slow trains, and frequent delays due to malfunctions. This has been my experience for several years. Many of us might be wondering: why have these problems persisted?
Concerns about the so-called “middle-income trap” have recently emerged among many middle-income countries, particularly after the term was coined in 2007 by two World Bank economists. Worried that they may become “trapped” at the middle-income level, these countries are seeking a set of policies that can help them achieve strong and sustained growth and eventually help them join the league of high-income countries.
In our recent paper, we try to shed some light on both issues. First, we do not find that countries are trapped at middle income. “Escapees” – countries that escaped the middle-income trap and obtained a per capita income higher than 50% of the U.S. level – tend to grow fast and consistently to high income, and do not stagnate at any point as a middle-income trap theory would suggest. In contrast, “non-escapees” tend to have low growth at all levels of income. In other words, while the existence of a middle income trap implies that growth rates systematically slow down as countries reach middle-income status, no such systematic slowdown is apparent in the data. Second, we provide some descriptive and econometric evidence for a different set of “fundamentals” that enable middle-income countries to grow faster than their peers. We find that faster transformation to industry, low inflation, stronger exports, and reduced inequality are associated with stronger growth.
- Middle Income Trap
- Middle Income Countries
- Global Economy
- South Asia
- Middle East and North Africa
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- Korea, Republic of
- Hong Kong SAR, China
- Taiwan, China
- Puerto Rico
- United States
G20 Leaders concluded their summit over the weekend in Brisbane, Australia. G20 summits represent the culmination of a process of preparatory work and discussion that lasts a whole year. Concerns about weak prospects for global growth and job creation took center stage in the G20 agenda this year. Economic recovery in advanced economies has been slow and uneven and growth in the faster-growing emerging economies also has slowed. There is a growing recognition that restoring more robust global growth requires not only addressing the legacies of the global financial crisis but also implementing deeper, structural reforms to raise potential growth.
Against this background, all G20 countries were asked to prepare medium-term growth strategies to provide a systematic framework for addressing policies and priorities in the growth agenda. The strategies that have been prepared are comprehensive in scope, spanning macroeconomic policies and structural reforms to promote strong, sustainable, and balanced growth. They have a particular focus on four policy areas that the Australian G20 Presidency emphasized as key elements of the growth agenda, namely, investment and infrastructure, employment, competition and business environment, and trade. The emphasis in the strategies on investment and structural reforms is appropriate: while the proper calibration of macroeconomic policies is important to support aggregate demand in the short term, in the medium term it is the productivity-enhancing structural reforms and investments that will drive strong and sustainable growth. The strategies have benefited from an extensive process of discussion and peer review within the G20, supported by technical assessments prepared by international organizations. Final versions of these strategies were released yesterday together with the Leaders’ Communiqué and the Brisbane Action Plan (which provides an overview of these strategies).
Half the world’s energy subsidies are in the Middle East and North Africa Region. These subsidies have been criticized on grounds that they crowd out public spending on valuable items such as health, education and capital investment. Egypt for instance spends seven times more on fuel subsidies than on health. Furthermore, the allocation of these subsidies is heavily skewed towards the rich, who consume more fuel and energy than the poor. In Yemen, the portion of fuel subsidies going to the richest quintile was 40 percent; the comparable figure in Jordan was 45 percent and in Egypt, 60 percent.
Across all recorded history, 99% of humanity has never invented a single thing. Yet, it is a truth universally acknowledged that long-run sustained progress in economic well-being arises from human creativity and innovativeness. In this regard, the average human and indeed the great majority of humanity over the last seven million years provide a completely misleading guide to what is possible.
Misapplied, the Law of Averages misinforms.
The inaugural Annual Bank Conference on Africa examined strategies for converting economic growth into poverty reduction. Taking an economic historian’s perspective, the prospects are complicated by long-term shifts in fundamental patterns, specifically from land abundance to land scarcity and, relatedly, from labor repression to landlessness as the principal source of poverty.
For 2014, we project that Russia’s economy will grow at an estimated 0.3-0.5 percent. This is the lowest growth rate since the global financial crisis but higher than the high-risk case scenario which was expected since the geopolitical tension started and the sanctions of the EU and the US took hold. This means that Russia’s expected economic performance in 2014 will be similar to that of the Euro-zone, even though Russia is much more dependent on the European market than the EU is on Russia.
2015 forecasts for sales of technology devices indicate global stability as the market remains at around one trillion USD, where it has hovered for the last three years. However, the forecasts also predict shifts at the country level as the top ten largest growth markets will increase by over $10 billion. Emerging markets, in which both volume and pricing contribute to positive sales, will dominate this growth.
India will experience the highest growth rate, primarily driven by smartphones sales, followed by China. China's technology device market represents an interesting case study because it is predicted to grow by just $1.8 billion in 2015-- a mere 1% increase over the estimated 2014 total-- but that is still large enough for second place.
Inequality is of concern for at least three reasons. First, lower inequality per se is an objective for a decent society. Second, lower inequality improves the efficiency of economic growth in achieving poverty reduction. Third, high inequality impedes growth itself, through its impact on social cohesion and the investment climate.