As I wondered which of the many fascinating ideas from the World Bank’s inaugural annual Data Day to recap in a blog, it occurred to me that there was likely selection bias in those who chose to attend. Presumably, some skeptics of big data chose to skip the day entirely. So this blog is aimed first and foremost at the skeptical.
The blog draws on joint ongoing and published work with several IMF staff, including Leo Bonato, Aliona Cebotari, Julian Chow, Alejandro Guerson, Franz Loyola, Sònia Muñoz, Uma Ramakrishnan, Ippei Shibata, Krishna Srinivasan and Karim Youssef.
Five years since its launch, the key messages of the World Development Report on Risk and Opportunity (WDR 2014) remain as pertinent as they were back then. WDR 2014 argued that risk management can be a powerful instrument for development, as mismanaged risks can destroy lives, assets, and economic and social stability, with the poor often hit the hardest. Managing risk plays an important role in increasing resilience to adverse shocks. It needs to combine the capacity to prepare for risk with the ability to cope afterward, considering how upfront costs of preparation compare with its potential benefits.
Social media has flourished with increasing digital connectivity. Internet users in the Philippines, Brazil, Mexico, Argentina and the United Arab Emirates spend more than 3 hours per day on social media. Global social media platforms such as YouTube and WhatsApp as well as local ones such as Mxit, an instant messaging application in South Africa, and Odnoklassniki, the Russian version of Facebook, are attracting people's attention. The social interaction aspect of those communication initiatives redefines how individuals, business and government engage with each other.
Energy commodity prices increased nearly 2 percent in January, led by oil (+5 percent), the World Bank’s Pink Sheet reported.
Non-energy prices gained marginally, with rises in agriculture balanced by losses in fertilizers and (less so) metals and minerals.
Agricultural prices climbed more than one percent, with pickups in all sub-indexes, beverages (+0.7 percent), food (+1 percent), and raw materials (+1.8 percent).
The next World Development Report (WDR) on Global Value Chains: Trading for Development is well under way. Check out our website for a sneak preview.
Since the Bank’s last report more than thirty years ago on Industrialization and Foreign Trade, the world has been transformed, mostly in positive terms from a development perspective. Several low and middle income countries can now participate globally thanks to global value chains (GVCs).
However, continuation of low and stable emerging market and developing economy inflation is by no means guaranteed. If the wave of structural and policy-related factors that have driven declines in inflation loses momentum, elevated inflation could re-emerge.
Furthermore, if the global inflation cycle turns up, emerging market and developing economy policymakers may find that keeping inflation low and stable may become as a great a challenge as getting there in the first place. To insulate economies from the impact of global shocks, options include strengthening institutions, including central bank independence, and establishing complementary fiscal policy frameworks.
Read more on the topic in the January 2019 Global Economic Prospects.
Emerging market and developing economies have achieved a significant decline in inflation since the mid-1970s, with median annual national consumer price inflation down from a peak of 17.3 percent in 1974 to about 3.5 percent in 2018. Declines in inflation over recent decades have been broad-based across regions and country groups.
In the era of digital technology, the structure of production as well as the interaction between humans and machines is being redefined. The diffusion and application of digital technology can increase productivity in an unprecedented manner, with potential to reshape the role of humans in the function of production. Jobs are the drivers of development and pillars of resilience for people. Five years ago, the World Development Report (WDR 2014), Risk and Opportunity – Managing Risk for Development, highlighted the role of enterprises in supporting people’s risk management by absorbing shocks and exploiting the opportunity side of risk. There have been heated debates on how technology may lead to risks, such as job loss and structural changes of employment. While the risks are real, the estimates of the impact of digital technology on employment vary widely, from substantial job loss for both skilled and the unskilled workers, to potential job gains thanks to the complementarity of humans and machines, as well as the income and wealth effect derived from higher productivity.
Since 2013, median government debt in low-income countries has risen by 20 percentage points of GDP and increasingly comes from non-concessional and private sources. As a result, interest payments are absorbing an increasing proportion of government revenues in these countries.
This increase in public debt exposes low-income countries to greater currency, interest rate, and refinancing risks. At present 11 low-income economies are in debt distress or at a high risk of debt distress, up from six in 2015. Even those low-income countries that are at low or moderate risk of debt distress face eroding safety margins.
To shield themselves from the risks associated with high debt, low-income countries urgently need to strengthen the effectiveness of domestic resource mobilization, public investment and other spending, and debt management.
Debt relief under the Heavily Indebted Poor Countries initiative and the Multilateral Debt Relief Initiative (MDRI) helped to reduce public debt among low-income countries from a median debt-to-GDP ratio of close to 100 percent in the early 2000s to a median of just over 30 percent in 2013. This downward trend reversed sharply thereafter, with the median debt ratio rising to above 50 percent by 2017. The rise was especially sharp for commodity exporters.
Rising debt raises fewer concerns about debt sustainability if it is used to finance investment that raises countries’ potential output, and therefore their ability to repay loans in the future. In some low-income countries, wider fiscal deficits were matched by higher public investment. For most low-income countries, however, a substantial part of the borrowing has been used to finance a rise in current consumption.
Amidst all the noise of the 24-hour news cycle and current events competing for our attention there lurks a danger that we lose sight of our mission: the fundamental issues in development that we are committed to solve remain urgent and obviously relevant. Now more than ever, the World Bank and DEC (home to the Bank’s research unit) in particular should focus on core research questions whose answers can help end poverty and improve countless lives. These questions rise above the ebb and flow of the political tide and are deeply important to the millions of people that we strive to raise up.