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.
In 2014, the World Bank issued a highly relevant and timely report titled Risk and Opportunity: Managing Risk for Development. This report analyzed the growing number of heterogenous risks and opportunities affecting developing countries. A clear challenge in finding a consistent risk management strategy stems from the sharp differences in the risks faced by developing countries; for example, commodity price shocks, financial crises, and natural disasters have all different defining characteristics. While we could tailor risk management strategies to each one of these types of risks, not having the benefit of a unifying framework can lead to mistakes and mismanagement of the scarce resources available to developing nations to deal with these potentially disastrous events. Five years after the publication of the report, in a time of growing macroeconomic headwinds for emerging markets and higher exposure to natural disasters, understanding the risks faced by these economies and how to effectively manage them continues to be a key policy challenge.
Download the January 2019 Global Economic Prospects report.
Global growth sputtered in 2018 amid weakening trade and manufacturing, tighter financing conditions, and elevated policy uncertainties.
Growth decelerated in almost 80 percent of advanced economies and in nearly half of emerging market and developing economies in 2018. This year, it is expected to slow further in a majority of advanced economies and in about a third of emerging market and developing economies.
In all, global growth is predicted to moderate from 3.0 in 2018 to 2.9 percent in 2019 and an average of 2.8 percent in 2020-21, below previous forecasts.
Risks of even slower-than-expected growth have become more acute. Financial market pressures and trade tensions could escalate, denting confidence and further setting back growth prospects in emerging market and developing countries.
Here is a look at global economic prospects in five figures:
1. Global growth is moderating as trade and manufacturing lose momentum. The deceleration in global activity was more pronounced than previously expected in 2018, as reflected in softening export orders and industrial production growth. The slowdown in global trade came against the backdrop of ongoing trade tensions involving major economies. A. Global industrial production andnew export orders
A. Global industrial production and new export orders
Tax avoidance by the world’s wealthiest people and largest companies is widespread. The excuse is that such avoidance is legal. Rich individuals and corporations look for jurisdictions that have low or no tax on personal or corporate income, on dividends, on capital or R&D expenditure. They base their business activities there, at least for the purposes of taxation.
After months of early NY Penn Station mornings trying to remember whether to get on the Amtrak north to New Haven or south to DC, I am thrilled to transition from incoming Chief Economist to Chief Economist. We have so many fascinating problems to tackle and I truly hope my experience and humble efforts will contribute to the Bank’s mission.
In 1997, Garry Kasparov, one of the greatest chess players in history, lost a chess match to a supercomputer called Deep Blue. Some years later Kasparov developed “advanced chess,” where a human and a computer team up to play against another human and computer. This mutation of chess is mutually beneficial: the human player has access to the computer’s ability to calculate moves, while the computer benefits from human intuition.
IT’S robots that mostly come to mind when you ask people about the future of work. Robots taking our jobs, to be specific. And it’s a reaction that’s two centuries old, in a replay of Lancashire weavers attacking looms and stocking frames at the start of the first Industrial Revolution. A secondary reaction, among a much smaller group, is the creation of new jobs in the coming fourth Industrial Revolution.
Professor Ed Glaeser at Harvard neatly summarizes this dichotomy in one figure:
Non-energy prices changed little as a 1.4 percent gain in beverages was balanced by a 2 percent loss in raw materials and a 1.1 percent decline in Fertilizers.
Metals prices gained 0.4 percent, led by nickel (+3 percent) and aluminum (+2 percent).
Precious metals prices lost 2.1 percent, led by a similar decline in gold.
The Pink Sheet is a monthly report that monitors commodity price movements.
Source: World Bank.