International long-term private finance to developing countries has changed dramatically in the wake of the global financial crisis. Caught in “post-crisis blues”, as my World Bank colleagues Jeff Chelsky, Claire Morel and Mabruk Kabir called it in a recent Economic Premise, some traditional sources of long-term finance are strained, and alternatives have not been able to adequately compensate. Private financing of infrastructure has been particularly hurt.
Spring in DC draws more than just tourists. Last week, government officials, policy makers, civil society representatives and other thought leaders converged to take stock of the global economy during the IMF-World Bank spring meetings. The tone in the hallways was optimistic, but cautious. Growth in advanced economies still remains tepid, weighed down by lingering effects of the global financial crisis, demographic challenges, as well as weakening innovation and productivity growth. At the same time, there are encouraging signs that developing countries are in good shape, thanks to fiscal buffers that helped them to weather the storm.
Nevertheless, we must be mindful of the work ahead: the IMF warned of a ‘3-speed recovery’, where emerging markets are growing rapidly, the United States is recovering faster than most other advanced industrial countries, but Europe continues to struggle. Where does this leave developing countries? At a meeting with the G24 – a group of developing countries - I had the privilege of discussing the prospects for growth, and policies needed to achieve productivity growth essential for eliminating extreme poverty and for creating shared prosperity.
Decentralization in many countries has given subnational governments certain spending responsibilities, revenue-raising authority, and the capacity to incur debt. Furthermore, rapid urbanization in developing countries is requiring large-scale infrastructure financing to help absorb influxes of rural populations. Not surprisingly, the subnational debt market in some developing countries has been going through a notable transformation.
Thomas Friedman’s bestseller The World Is Flat highlights the strong forces pushing the world towards a single economic platform. The technology-fueled globalization in the provision of services, and the widespread organization of production processes as global value chains are part of his narrative.
Brazil’s success in reducing poverty and income inequality has been widely reported in recent years.
As the Carnival in Brazil kicked off last weekend, Brazilians were ready for a party. They have reasons to celebrate. Despite a lackluster GDP performance in the last two years, unemployment rates remain at record low levels.