Is the era of industrialization and manufacturing exports growth miracles – a period of rapid economic growth exceeding expectations, last seen in East Asian countries, most notably in China – over? If you listen to Harvard’s Dani Rodrik, the answer seems to be: pretty much! Does that mean, Africa, the only continent which hasn’t seen rapid export-led manufacturing growth, would not have many growth miracle stories?
“Tell me where you live, and I can predict how well you’ll do in life.”
Does welfare vary largely across space?
Although I don’t have a crystal ball, I do know for a fact that location is an excellent predictor of one’s welfare. Indeed, a child born in Togo today is expected to live nearly 20 years less than a child born in the United States. Moreover, this child will earn a tiny fraction—less than 3%—of what his or her American counterpart will earn.
Income growth is not the sole aim of economic development. An equally important, albeit harder to quantify objective is a sense of progress for the entire community, and a confidence that prosperity is sustainable and shared equitably across society for the long term.
Last week, a tanker truck, one of many roaming the streets of Kabul, navigated through bumper-to-bumper traffic, going past government buildings and embassies, to Zanbaq Square. When stopped at a checkpoint, more than 1,500 kg of explosives that had been hidden in the tank were detonated. It was 8:22 am and many Afghans were on their way to work and children were going to school. The explosion killed 150 commuters and bystanders, and injured hundreds more. This is just one of many incidents that affects Afghans’ lives and livelihoods.
Conflict has constantly increased over the past years, spreading to most of Afghanistan, with the number of security incidents and civilian casualties breaking records in 2016. According to the Global Peace Index, Afghanistan was the fourth least peaceful country on earth in 2016, after Syria, South Sudan, and Iraq. The intensification and the geographical reach of conflict has increased the number of people internally displaced. According to the latest United Nations Office for the Coordination of Humanitarian Affairs (OCHA) data, over 670,000 people were internally displaced in 2016 alone.
Against this backdrop, our recent World Bank report, the “Afghanistan Poverty Status Update: Progress at Risk”, shows that not surprisingly violence and insecurity pose increasing risks to the welfare of Afghan households. Approximately 17 percent of households reported exposure to security-related shocks in 2013–14, up from 15 percent in 2011–12 according to data from the Afghanistan Living Conditions Survey (ALCS). This is largely in line with the actual incidence of conflict incidents as reported by the United Nations Department of Safety and Security (UNDSS).
Developing countries made considerable gains during the 2000s, resulting in a large reduction in extreme poverty and a significant expansion of the middle class. More recently that progress has slowed—and the prognosis is for more of the same, given an environment of lackluster global trade, a lack of jobs coupled with skills mismatches, greater income inequality, unprecedented population aging in richer countries, and youth bulges in the poorer ones. As a result, developing countries are unlikely to close the development gap anytime soon.
Inequality can be both good and bad for growth, depending on what inequality and whose growth. Unequal societies may be holding back one segment of the population while helping another. Similarly, high levels of inequality may be due to a variety of factors; some good, some bad for growth.
Ugandan’s access to financial services has improved dramatically in recent years. More than half of Uganda’s adult population now has access to an account at a formal financial institution. This is almost twice as many as in 2009. The entry and fast penetration of mobile money is the main reason for the increase, having allowed 8 million Ugandans to conduct financial transactions.
Investment growth in emerging market and developing economies has tumbled from 10 percent in 2010 to 3.4 percent in 2015 and was below its long-term average in nearly 70 percent of emerging an developing economies in 2015. This slowing trend is expected to persist, and is occurring despite large unmet investment needs, including substantial gaps in infrastructure, education, and health systems.
The year 2016 was difficult for many countries. We estimate that global economic growth slowed from 2.7% in 2015 to 2.3% in 2016. High-income economies struggled with subdued growth and low inflation amidst increased uncertainty about policy direction in light of rising populism. Among emerging markets and developing economies, commodity exporters were most affected by the end of the commodity price boom, growing by only 0.3%—much in line with our estimate of 0.4% growth for South Africa, the lowest growth rate since the 2009 recession after the global financial crisis. By contrast, commodity importers carried the torch of global growth in 2016, expanding by 5.6%.