If it weren't for the economic performance of China, Brazil and other emerging markets, the global economic slump following the 2008 financial crisis would have been much worse. Not by chance, prospects for the global economy became gloomier this year when those economies showed signs of decreasing resilience against the downward pull from advanced countries.
Macroeconomics and Economic Growth
Financial Markets…US treasuries gained and the benchmark 10-year bond yield edged down 1 basis point to 1.66%, after rising as high as 1.7% earlier, while the 30-year bond yield slid by 2 bps to 2.83% in early Friday session after a government report on wholesale price in September showed domestic inflation remained muted.
Global spotlights are on jobs. Headlines last Friday highlighted the US jobless rate, which fell to 7.8 percent, the lowest level in four years.
This blog post was co-authored with Dino Merotto, Tihomir Stucka, and Tau Huang.
The benefits of debt relief have persisted, although some countries may now be borrowing too quickly.
Remember Jubilee 2000 and the HIPC Initiative? Remember the “Drop the Debt” and “One” movements in 2005? Live 8? Bono on the White House Lawn? Those white “make poverty history” wristbands?
Seven years on, debt is now making headlines in the rich countries. In Europe and the US the news is of sovereign debt downgrades amid speculation about capacity to rollover debts, and countries’ long-term fiscal capacity to repay.
As a fan of numerology, let me focus on a special number that captures a global trend: call it the lucky number seven. Since the end of last year, we are seven billion people in the world. We produce a total GDP of US$70 trillion (which means that globally per-capita income is US$10,000 on average) and the average life expectancy worldwide is--you guessed it--70 years.
Let’s extend the seven thread: if the world economy grew at seven percent per year, it would double within a decade (because ten years of seven percent growth don’t amount to 70, but 99 percent, due to the compounding effect). Now with population growth at one percent (thankfully not seven), average per capita incomes would increase from US$10,000 to about 18,000. That is quite a jump, and a level of prosperity that few of our parents and grand-parents would never have imagined.
Sadly though, averages will continue to mask wide disparities, both between countries and within societies.
As part of their response to negative shocks coming from advanced economies after Lehman's collapse in 2008, most developing countries resorted to countercyclical fiscal policy.
Financial Markets…European stocks slipped on Friday with the benchmark index falling to a three-week low as early optimism on Spain’s new austerity measures was short-lived.
Spanish 10-year bond yield rose back above 6% amid uncertainty over its troubled banks before stress test results, fading optimism on the country’s debt cutting plan, and a looming Moody’s rating review which may cost the country its investment grade rating.
- Congo, Democratic Republic of
- Dominican Republic
- Korea, Republic of
- South Africa
- East Asia and Pacific
- Europe and Central Asia
- Latin America & Caribbean
- Middle East and North Africa
- Financial Sector
- Macroeconomics and Economic Growth
- Central banks
- financial markets
- retail sales
- consumer price inflation
- Industrial Production
- monetary policy measures
The latest bout of G3 monetary stimulus is likely to increase capital flows to developing countries, but may be limited by lingering economic uncertainty, and lower interest rate spreads. Notwithstanding the recent easing of financial market tensions, the anticipated rebound in real-side activity is lagging behind.
Increased cross-learning and cooperation among developing countries has been a remarkable feature of the global economy in recent decades. It's been some time now since knowledge and technology flowed only from advanced economies ("North") to developing ones ("South").
Every year, the World Bank’s country teams and sector experts assess the quality of IDA countries’ policy and institutional framework across 16 dimensions to measure their strenght and track progess.
The latest country policy and institutional assessment (CPIA) results show that despite difficult global economic conditions, the quality of policies and institutions in a majority of Sub-Saharan African countries remained stable or improved in 2011.
For several countries the policy environment is the best in recent years. Of the 38 African countries with CPIA scores, 13 saw an improvement in the 2011 overall score by at least 0.1. Twenty countries saw no change, and five witnessed a decline of 0.1 or more. The overall CPIA score for the region was unchanged at 3.2.
In short, despite a challenging global economic environment, African countries continued to pursue policies aligned with growth and poverty reduction.