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January 2019

WDR 2020: Sneak preview

Pinelopi Goldberg's picture

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).

Is inflation really gone for good?

Jongrim Ha's picture
Emerging market and developing economies have achieved a remarkable decline in inflation since the mid-1970s. In addition, inflation movement up or down has become increasing synchronized across the countries of the world. These developments have been supported by long-term trends such as countries’ widespread adoption of robust monetary policy frameworks and the strengthening of global trade and financial integration.

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.
 
Median Consumer Price Index (CPI), by country group

Digital technologies allow people to take on risks and explore new opportunities

Xubei Luo's picture

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.

Debt in low-income countries: A rising vulnerability

Patrick Kirby's picture
Download the January 2019 Global Economic Prospects report.

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.
 
Gross low-income countries (LIC) government debt

Staying focused

Pinelopi Goldberg's picture

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.

The Analysis of Household Surveys: Reissue edition with a new preface

David Evans's picture

Angus Deaton’s classic, The Analysis of Household Surveys: A Microeconometric Approach to Development Policy has been re-issued with a new preface by the author. The original publication has been cited more than 6,700 times. When it was first issued, one reviewer characterized it as “a rugged tour through a broad swath of author Angus Deaton’s intellectual countryside… Deaton’s prose and reasoning are uniformly sharp, and I found myself quite willing to study at length whatever he was willing to teach.”

Here are a few of Deaton’s reflections, twenty years after he first published this work.

The challenges of informality

Shu Yu's picture

Download the January 2019 Global Economic Prospects report.

The informal sector — labor and business that is hidden from monetary, regulatory, and institutional authorities — accounts for about a third of GDP and 70 percent of employment (of which self-employment is more than a half) in emerging market and developing economies. While offering the advantage of employment flexibility in some economies, a large informal sector is associated with low productivity, reduced tax revenues, poor governance, excessive regulations, and poverty and income inequality.

Addressing the challenge of pervasive informality will require comprehensive policies that take into account country-specific conditions.  Initiatives to boost long-term development might include measures aimed at reducing regulatory and tax burdens, expanding access to finance, improving education and other public services, and strengthening public revenue frameworks.
 
One-half of the world’s informal output and 95 percent of its informal employment is in emerging market and developing economies. Both informal output and employment have declined since 1990, particularly in countries with higher output growth, rapid physical capital accumulation, and larger improvements in governance and business climates.

Share of informal output and employment

By when would universal social protection be achieved?

Ugo Gentilini's picture

I am 41 years old and, with business as usual, I would be 106 when universal social protection (USP) is realized.

The drive for USP – a definition of which is to  ensure that everyone is covered by some form of social assistance or insurance – lies at the heart of various efforts at country and global levels.

But where are we with attaining such goal, exactly? Here are some back-of-the-envelope calculations.

On risk and black swans in developing countries

Carlos Végh's picture

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.

What do public officials know? Why do some know more than others?

Daniel Rogger's picture

Many people working in development hope to `inform’ public officials.  For example, academic research or the Bank’s own analytical studies often conclude with `policy recommendations’ to be taken on by individuals in charge of translating policies into practice, or public administrators.  Yet what is the baseline level of knowledge of public officials that this work is building on?  What do they already know and not know?
 
We investigated this question in Ethiopia by surveying a representative sample of 1,831 public officials across 382 organizations spanning all three tiers of government. We compared their estimates of key characteristics of their constituents to objective administrative and survey data to create a direct test of their knowledge.  How did they do?
 
We start our blog with a quiz to you, the reader, to assess your priors on the accuracy of public officials in guessing the key characteristics of the local citizens that they serve. 

Take the Quiz
Create your own user feedback survey

Energy prices fell 11 percent in December–Pink Sheet

John Baffes's picture
Energy commodity prices plunged more than 11 percent in December, led by oil (-13 percent), the World Bank’s Pink Sheet reported.

Non-energy prices fell marginally as losses in beverages, fertilizers, and metals were balanced by gains in food and precious metals.

Agricultural prices gained less than one percent—a 3.5 percent decline in the beverage price index was offset by a 3.5 percent gain of the food price index in response to grain price increases.

Oral democracy

Vijayendra Rao's picture

The challenges of electoral democracy are becoming increasingly visible worldwide. Elite capture, corruption and patronage are serious concerns, and the legitimacy of some elections has come under critical scrutiny. This has led to a revival of the idea of direct democracy – giving power directly to groups of people to make collective decisions.



The Global Economic Outlook: Darkening Skies

Carlos Arteta's picture

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

New year’s resolutions

Pinelopi Goldberg's picture
  1. Travel no more than once per month.
  2. Despite number one above, participate in a World Bank mission to see how it really works.
  3. Despite numbers one and two above, get to Africa. It is a shame I have not been there yet.
  4. Master the WBG (World Bank Group) acronyms.
  5. Attend at least one seminar per week.
  6. Dedicate one day per week to research.
  7. Explain to the world why the global growth projections of the WB and IMF sometimes differ.
  8. Despite all of the above, continue to get my eight hours a night of sleep.