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Global Monitoring Report 2010. The MDGs after the Crisis

Materiale didattico per il corso di Diritto internazionale dello sviluppo della Prof.ssa Cristiana Carletti utile alla stesura degli elaborati finali. Trattasi del rapporto 2010 della Banca Mondiale e del Fondo monetario internazionale all'interno del quale sono analizzate le conseguenze della crisi economica globale sulle possibilità... Vedi di più

Esame di Diritto internazionale dello sviluppo docente Prof. C. Carletti

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L E S S O N S F R O M PA S T C R I S E S GLOBAL MONITORING REPORT 2010

54 BOX 2.7 Gender diff erences in impacts of the crisis: Evidence from East Asia

rapid qualitative assessments (including focus group

Although the effects of the crisis have clear gender discussions), ex ante simulations using precrisis

dimensions, it is not clear that women in East Asia household survey data, analysis of labor force sur-

have been disproportionately affected. Gender- vey data as available, and triangulation across data

specifi c impacts would be expected because of the sources.

gender division of labor in the labor market and in Data indicate that unemployment in East Asia

the home, gender disparities in access to produc- has barely changed during the crisis, for men or

tive resources, and gender dimensions of household women, but that women’s participation has tended

resource allocation. But precise impacts are unclear to rise. In some countries unemployment has fallen

because they depend on multiple factors including more for women than for men, while increases in

the size of the shock, the economic structure of the labor force participation have been more marked for

country, the nature of government responses, and the women than for men (see the fi gures below), par-

speed of economic recovery. Identifying the gender ticularly in poorer countries, where female labor

impacts of the crisis is thus an empirical issue. has shifted from unpaid work to self-employment.

Empirical analysis is complicated by a lack of Both quantitative and qualitative data indicate lon-

data. High-frequency data on the social impacts of ger working hours as men and women take on addi-

the crisis is generally not available, and the lack is tional jobs to compensate for falling earnings from

particularly intense for gender-disaggregated data. primary jobs.

Thus multifaceted approaches are needed, such as

Labor force participation by gender in selected East Asian countries, 2007–09

Cambodia Philippines

90 85

men men

85 80

80 75

women

75 70

percent percent

70 65

65 60

60 55

55 women

50

50

45 45

2007 2008 2009 2007 2008 2009

Indonesia Thailand

90 85 men

85 80

men

80 75

75 70

percent percent

70 women

65

65 60

60 55

55 women 50

50

45 45

2007 2008 2009 2007 2008 2009

Source: World Bank staff calculations.

GLOBAL MONITORING REPORT 2010 L E S S O N S F R O M PA S T C R I S E S 55

(continued)

BOX 2.7 that women’s total work burden (paid plus unpaid

The impact of labor market shocks is driven by domestic work) has increased over the past year. In

several factors, of which gender is only one. Both urban Thailand, women explain that their time on

quantitative and qualitative findings suggest that unpaid domestic work has declined a little but not

simple interpretations of labor market data may be enough to offset rising labor market hours. In rural

misleading. As an example, well-publicized data Cambodia and the Philippines, research teams noted

show layoffs from enterprises producing garments that an increased dependence on common property

and other products for export to shrinking markets, resources, including fi rewood, has increased women’s

sectors where female employment tends to dominate. time on domestic chores.

Less well-documented is the contraction in hours and The welfare impacts of the crisis, by gender,

earnings in sectors serving domestic markets, where also appear to be nuanced. Microsimulations of the

purchasing power is closely linked to the health of poverty impacts of the crisis in Cambodia suggest

the export sector. These sectors may be dominated that male-headed households were more affected in

by men. Women laid off from formal sector work urban areas, while female-headed households were

may be better off than men facing highly restricted more affected in rural areas (see the fi gure below).

earnings in informal sector jobs. Quantitative and For urban male-headed households, this finding

qualitative evidence from Cambodia suggests that likely refl ects the impacts of the crisis on male jobs

more male workers in the construction sector have in construction and tourism. The effects for rural

been affected by the crisis than female workers in the female-headed households appear to refl ect the loss

garment sector. Moreover, male construction work- of remittance income in addition to more direct cri-

ers are more likely to be poor and have fewer eco- sis impacts on household earnings. Findings from

nomic fallbacks than female garment workers. rapid assessments in rural Cambodia indicate that

There is no consistent cross-country pattern in female-headed households commonly cut back con-

differences in hours of paid work by gender. In some sumption sharply and increased their indebtedness to

countries, such as Cambodia, both men and women cope with loss of income as remittances from urban

have greatly increased their hours of paid work. In areas fell. Male migrant workers—often migrant

other countries, such as Indonesia, women have spouses—reported being unable to return home as

overtaken men in hours of paid work in the past two often as before because of increased transportation

years. And in other countries, such as the Philippines, costs and reduced earnings, meaning less male labor

men and women appear to work the same number of on the farm during peak periods.

paid hours. However, focus group discussions suggest

Impacts of the global fi nancial crisis on male- and female-headed households in Cambodia

Poverty headcount

8 7.1

7

changes 6

impact 5 4.6

4.3

point 4.0

crisis 3.7

4 3.6

percentage

to 3

due 2

1 0.5 0.4

0 Phnom Penh other urban rural Cambodia

female head of household

male head of household

Source: Bruni and others forthcoming.

L E S S O N S F R O M PA S T C R I S E S GLOBAL MONITORING REPORT 2010

56 FIGURE 2.12 Spending cutbacks in crisis-aff ected households are jeopardizing future welfare in

Armenia, Montenegro, and Turkey a. Armenia 64 70

less use of entertainment 59

fewer meetings with friends 60

58

cheaper instead of more expensive food items 47

reduced or stopped visits to healthcare centers 50

41

reduced or stopped buying medicines 41

reduced amount of food consumed 40 stopped visiting

percent

40

stopped buying some nonfood items health centers

33

increased use of public transport or walking 30

13

work odd jobs stopped buying

12

increased own food production medicine

20

migration for work 10 decreased

bought second-hand items 9 food

10

other mitigation measures 3 consumption

2

withdrew or postponed admission to school 0

40 50 60 70

0 10 20 30 1 2 3 4 5

(poorest) (richest)

percent income quintile

Source: Armenia Integrated Living Conditions Survey 2009. See Ersado, forthcoming.

b. Montenegro 30

delayed purchase of durables 49

replaced expensive items with cheaper ones 44

less use of communication services 40 25

stopped buying some nonfood items 34 crisis reduced

made less use of information services 33 by 20 training

decreased total food consumption 31 affected

restricted vacations 30 reduced

met friends less 23 15 preventive

changed means of transportation 17 households care

replaced private medical care with public care 16

reduced playing sports/exercising 15 canceled

10

increased agricultural production for own use 13 insurance

took a job although not working before 12 % 5

started to buy second-hand products (more) 12

reduced visits to doctor for preventive care 9

left or postponed training 8 0

0 10 20 30 40 50 60 1 2 3 4 5

(poorest) (richest)

percent asset quintile

Source: Montenegro Crisis Monitoring Survey 2009. See Hirshleifer and Azam, forthcoming.

downturn. Even if the deterioration in human Early evidence in 41 middle-income countries

development indicators has not been as severe indicates that the impact on the labor market

as in previous crises (as speculated above), the has been severe, especially in wealthier middle-

human suffering will be considerable. income countries of the Europe and Central

Although many people in middle-income Asia region. Although the number of jobs and

countries are above the threshold of the poverty their growth have been negatively affected,

MDG, they are also the hardest hit by adjust- the impact has been mostly on the quality and

31

ments in wage earnings and employment. earnings of employment (fi

gure 2.13).

GLOBAL MONITORING REPORT 2010 L E S S O N S F R O M PA S T C R I S E S 57

(continued)

FIGURE 2.12 c. Turkey 80

73

substituted into cheaper food items 65

substituted into cheaper nonfood items 53

decreased the amount of food consumption 60

met with friends less 49

stopped buying non-food products 48 percent

changed transportation type 40

31 32

less use of information services 30

reduced visits to the doctor for prevention control 26 20 14

reduced the use of health services 21

left courses of language, computer, others 10 5

withdrew or postponed the 6

admission to school 0 poorest middle richest

40 60 80

0 20 20% 20% 20%

% households that adopt this asset quintile

coping mechanism (out of decreased food consumption

respondent households) reduced use of health services

reduced education expenditures

Source: TEPAV, UNICEF, and World Bank 2009; Turkey Welfare Monitoring Survey.

• Three-quarters of the labor market adjust- growth. But fi

xed exchange rates worsen the

labor market impact. On average, countries

ment stems from slower growth in take-home with fi

xed currency regimes witnessed a de-

pay, only one-quarter from less job creation. cline in employment of 1.7 percentage points,

• Earnings in most middle-income coun- compared with only 0.4 in countries with

tries are falling mainly because people are fl

oating rates. The slowdown in the wage-bill

working fewer hours. Hourly wages have growth was also less severe for the countries

changed little except in Europe and Central with moderate levels of development.

Asia, where they have declined. The nature of recent labor market adjust-

• The crisis severely affected labor markets, ments in these countries suggests that effective

with few countries spared. It caused a sharp policy packages should also focus on support-

slowdown in wage-bill growth, which fell ing earnings and household income, not just

by an average of 8 percentage points. The generating employment. Responses taken in

exceptions were Argentina, China, and the developed European countries—such as par-

former Yugoslav Republic of Macedonia, tial unemployment insurance, expanded cash

where wage-bill growth accelerated. transfers to poor workers, and temporary

• Employment has shifted away from indus- wage subsidies—may be priority interventions

trial employment into services, where jobs in those countries where hours and earnings

tend to be of lower productivity and offer adjustments dominated.

lower wages.

• For a given decline in GDP growth, the

labor market impact was more severe in Conclusions

upper-middle-income countries and in

countries with fi

xed exchange rates. Because crises have very negative effects on

human development indicators, good poli-

The large impact in Europe and Central cies and institutions are essential in develop-

Asia resulted mainly from sharp drops in GDP ing countries to avert downturns in the fi

rst

L E S S O N S F R O M PA S T C R I S E S GLOBAL MONITORING REPORT 2010

58 FIGURE 2.13 The crisis sharply reduced wage earnings in middle-income countries

a. Wage-bill growth b. Employment growth

Bosnia and Herzegovina

Latvia Latvia

Ukraine Lithuania

Bulgaria

Lithuania Dominican Republic

Russian Federation South Africa

Sri Lanka Russian Federation

Jamaica

Serbia Mauritius

Mexico Ukraine

Egypt, Arab Rep.

Armenia Serbia

Turkey Moldova

Poland

Romania Mexico

Poland Kazakhstan

Peru

Ecuador (urban) Chile

Venezuela, R.B. de Belarus

Colombia (urban)

Bulgaria Indonesia

South Africa China (urban)

Brazil (urban)

Colombia (urban) Venezuela, R.B. de

Belarus Georgia

Romania

Moldova Argentina (Urban)

Indonesia Armenia

Ecuador (urban)

Thailand Kyrgyz Republic

Peru Thailand

Brazil (Urban) Trinidad and Tobago

Macedonia, FYR

Philippines Malaysia

Kazakhstan Philippines

Albania

Chile Tajikistan

China (urban) Montenegro

Sri Lanka

Argentina (urban) Morocco

Macedonia, FYR Turkey

–35 –25 –15 –5 5 15 –20 –15 –10 –5 0 5

percentage point change percentage point change

Source: Khanna, Newhouse, and Paci, forthcoming.

place, dampen their negative effects when they There are some reasons for hope that the

do occur, and reduce the potential for reversal current crisis may be different for low-income

of reforms. Policy failures, particularly in low- countries. A great deal of social spending has

income countries affected by corruption and been protected so far. Policies and institutions

violent confl

ict, have been a major reason for had improved before the crisis. And external

the sharp deterioration in human development shocks, not domestic policy failures, were the

indicators in past crises. main causes of the current crisis. Nonetheless,

GLOBAL MONITORING REPORT 2010 L E S S O N S F R O M PA S T C R I S E S 59

sharp that a long period of strong growth is

the impacts on progress toward the MDGs are needed to undo the damage infl

icted on devel-

already worrisome. opment outcomes. The next chapter examines

While recovery of the global economy the growth outlook and macroeconomic chal-

appears to be stronger than expected, small lenges, including the fi

scal tensions created by

reductions in growth could still have last- temporary stimulus measures and protection of

ing negative consequences for poverty and social spending.

human development. The contraction was so

L E S S O N S F R O M PA S T C R I S E S GLOBAL MONITORING REPORT 2010

60 Annex 2.1 Human and economic indicators during growth cycles

This annex presents more detailed information The conclusion that these indicators tend to

on the asymmetric impact of growth decel- deteriorate more in bad times than they improve

erations on human development indicators, in good times does not stem from composition

macroeconomic variables, and institutional effects. It is important to examine these effects

quality in developing countries. Tables 2A.– because the averages for each period (accelera-

–2A.3 show the average level of each indicator tions, decelerations, and other) do not refl

ect

during growth accelerations, growth decelera- the same number of observations or equal par-

tions, other periods, and across all times. Tests ticipation by different income groups—there

for differences in the means of these variables are more accelerations than decelerations, and

between growth accelerations, decelerations, low-income countries have greater represen-

and all country-year observations show that tation in the sample means during bad times

they are all statistically signifi

cant at the 1 per- because of the higher frequency of decelera-

cent level. tions in these countries (see main text). Because

TABLE 2A.1 Differences between sample averages: Human development and gender indicators

Otherwise

Growth Growth (not in acceleration Sample

Variable acceleration deceleration or deceleration) period

Life expectancy at birth, women (years) 72.1 63.4 69.4 70.0

Life expectancy at birth, men (years) 66.6 58.1 64.2 64.7

Life expectancy at birth, total (years) 69.2 60.7 66.7 67.3

Infant mortality rate (per 1000 live births) 27.7 59.7 39.9 35.9

Child mortality under-five rate (per 1,000) 42.4 96.3 59.3 54.3

Primary completion rate, girls (% of relevant age group) 83.2 49.8 76.3 78.6

Primary completion rate, boys (% of relevant age group) 84.5 59.6 80.2 81.4

Primary completion rate, total (% of relevant age group) 84.4 54.8 78.1 80.2

Ratio of girls to boys, primary enrollment 95.6 86.1 92.5 93.6

Ratio of girls to boys, secondary enrollment 96.9 80.7 94.8 95.3

Ratio of women to men, tertiary enrollment 107.3 65.1 106.2 105.4

Source: World Bank staff calculations based on data from World Development Indicators.

Note: Tests for diff erences in the means of these variables between growth accelerations, decelerations, and all country-year observations show that they

are all statistically signifi cant at the 1-percent level.

TABLE 2A.2 Differences between sample averages: Sub-Saharan Africa Otherwise

Growth Growth (not in acceleration Sample

Variable acceleration deceleration or deceleration) period

Life expectancy at birth, girls (years) 55.2 52.3 53.4 54.0

Life expectancy at birth, boys (years) 52.2 48.9 50.1 50.8

Life expectancy at birth, total (years) 53.7 50.5 51.7 52.3

Infant mortality rate (per 1.000 live births) 80.7 106.6 97.3 91.9

Child mortality under-five rate (per 1,000) 133.5 161.3 154.3 146.2

Primary completion rate, girls (% of relevant age group) 55.1 33.8 42.1 47.4

Primary completion rate, boys (% of relevant age group) 59.8 48.4 50.9 55.0

Primary completion rate, total (% of relevant age group) 57.4 41.0 46.5 51.1

Ratio of girls to boys, primary enrollment 89.7 77.9 82.4 85.0

Ratio of girls to boys, secondary enrollment 82.3 63.6 76.1 77.7

Ratio of women to men, tertiary enrollment 60.2 32.5 64.4 58.7

Source: World Bank staff calculations based on data from World Development Indicators.

Note: Tests for diff erences in the means of these variables between growth accelerations, decelerations, and all country-year observations show that they

are all statistically signifi cant at the 1-percent level.

GLOBAL MONITORING REPORT 2010 L E S S O N S F R O M PA S T C R I S E S 61

TABLE 2A.3 Differences between sample averages: Economic and institutional indicators

Otherwise

Growth Growth (not in acceleration Sample

Variable acceleration deceleration or deceleration) period

Final consumption (% GDP) 81.45 88.78 83.74 83.30

Government consumption (% GDP) 15.41 16.68 16.61 16.10

Gross capital formation (% GDP) 23.76 18.57 23.35 23.10

Gross domestic savings (% GDP) 18.58 11.23 16.26 16.70

Gross fixed capital formation private sector (% GDP) 16.35 10.43 13.75 14.40

Imports (% GDP) 45.80 37.45 43.85 44.10

Exports (% GDP) 40.43 30.05 36.52 37.60

Trade (% GDP) 86.23 67.50 80.37 81.70

Foreign direct investment. net inflows (% GDP) 4.48 2.07 3.56 4.00

Private capital flows, total (% GDP) 2.99 1.40 2.03 2.40

CPI inflation (%) 14.88 251.32 37.90 43.90

Institutions (–2.5 to 2.5)

Political stability –0.16 –0.65 0.03 –0.10

Voice and accountability –0.07 –0.47 0.09 –0.02

Regulatory framework –0.03 –0.82 0.15 0.01

Rule of law –0.14 –0.90 0.12 –0.07

Government effectiveness –0.04 –0.96 0.14 0.00

Frequency of conflicts (Sub-Saharan Africa) 0.13 0.23

Aid to poor countries (Sub-Saharan Africa)

ODA (% GDP) 13.80 12.10

ODA per capita (US$) 69.50 41.80

Source: World Bank staff calculations. Data for Sub-Saharan Africa from Arbache, Go, and Page (2008). Indicators on institutions are from the

World Bank Institute’s Worldwide Governance Indicators database, which relies on 33 sources, including surveys of enterprises and citizens,

and expert polls, gathered from 30 organizations around the world; they each range from –2.5 (worst) to 2.5 (best).

Note: Tests for diff erences in the means of these variables between growth accelerations, decelerations, and all country-year observations

show that they are all statistically signifi cant at the 1 percent level. ODA = offi cial development assistance.

human development indicators are generally tions with their own sample means when not in

lower in low-income than in middle-income growth decelerations (the column “otherwise”

countries, the greater frequency of low-income in the three tables), decelerations still have an

32

country observations drops the averages for asymmetric effect. Furthermore, the averages

decelerations, which could account for the for periods not in acceleration or deceleration

asymmetric relationship. However, even after (normal times) are close to the averages for the

controlling for the sample composition effects entire sample (the last column in each table),

by comparing the sample means of countries providing evidence that the economic cycles

undergoing growth decelerations and accelera- are being correctly identifi

ed.

L E S S O N S F R O M PA S T C R I S E S GLOBAL MONITORING REPORT 2010

62 Annex 2.2 The special case of HIV/AIDS spending

Large increases in funding have made HIV/ billion in 2008, and then declined to $2.6 bil-

AIDS (human immunodefi

ciency virus/acquired lion in 2009. In the last funding cycle (Round

34

immune defi

ciency syndrome) one of the most 9), demand from countries also fell. The U.S.

important items on the development agenda. In PEPFAR program increased its contributions

less than a decade the international community from $4.5 billion in 2007 to $6.2 billion in

has mobilized talent and fi

nancing to address 2008 and has subsequently increased its annual

HIV/AIDS with new institutions and long-term budgets. The 2010 fi

scal year allocation is just

nancial commitments to countries suffering shy of $7 billion, suggesting that U.S. support

35

from an established and growing epidemic. is continuing.

This attention and fi

nancing have produced Fueled largely by increased donor resources,

data that outstrip that available for health care public health spending in the high-prevalence

generally, allowing a more thorough examina- countries of eastern and southern Africa has

tion of trends. The 2008–09 recession is the risen rapidly in absolute and per capita terms

rst global crisis to affect international support (see map 1.2). As a share of GDP, the increases

for HIV/AIDS spending, and the responses are have gone disproportionately to people with

36

instructive. HIV/AIDS. Government spending in coun-

Roughly 33 million people have HIV/AIDS, tries that formerly had high HIV/AIDS preva-

but only a third of those are on antiretroviral lence, like Brazil and Thailand, has fi

nanced

therapy that will extend their life. There is no both prevention and treatment. Other coun-

cure for AIDS. Discontinuities in treatment tries, such as Ghana, have legally binding

create resistance to the basic (“fi

rst line”) anti- commitments ensuring treatment for people

retroviral treatment, which can lead to broader with AIDS.

Of 77 countries recently surveyed, most

drug resistance. The alternative “second line”

treatment is 10–20 times more expensive. indicated that they had adequate funding

Thus antiretroviral therapy is central to meet- from governments, donors, and other sources

ing the MDG 6A to combat HIV/AIDS. Equally to fi

nance their current HIV/AIDS programs,

37

important to treating those who have con- but they raised concerns about the future.

tracted HIV/AIDS is strengthening preven- Prevention was identifi ed as the likely vic-

tion—the only way to stem the pandemic. tim if funding fell. A further concern was the

increased cost of imported drugs and supplies

resulting from currency devaluations in some

Likely short-term eff

ects of the crisis 38

countries. The Clinton Foundation recently

Funding for HIV/AIDS has risen sharply over obtained price concessions from manufactur-

the past decade. During 2001–05, aid commit- ers that could compensate for the exchange

ments for HIV/AIDS programs rose almost 30 rate penalty.

percent ($4.75 billion), fueled by the establish- The impact of the current downturn is not

ment of the Global Fund and by philanthropic entirely clear, but the uptick in donor spending

efforts by the Clinton Foundation, the Bill & in 2008 and 2009, when the economic crisis

Melinda Gates Foundation, and others. New was accelerating in donor countries, is encour-

sources of funding have come onstream since aging. The Global Fund disburses quickly once

2005 with the U.S. President’s Emergency Plan allocations are decided, but recipient country

for AIDS Relief (PEPFAR) and UNITAID, spending has been slow. Almost 40 percent of

which disburses much of its resources through the Global Fund resources remain undisbursed,

the Global Fund. a possible source of additional resources if there

In 2008 public and private entities allocated is a shortfall or delay in funding fl

ows. Almost

$15.8 billion for global HIV/AIDS programs, half the allocations to Sub-Saharan Africa are

$6.7 billion of it from bilateral and European undisbursed (see fi

gure 2.9). The $900 mil-

33

Union contributions. Pledges to the Global lion allocated in late 2009 under Round 9 is

39

Fund rose from $2.5 billion in 2007 to $3.0 unlikely to have been disbursed yet.

GLOBAL MONITORING REPORT 2010 L E S S O N S F R O M PA S T C R I S E S 63

Although countries may appear to have And what of prevention?

“adequate” funding for HIV/AIDS, the situ- Most international resources are earmarked

ation is more nuanced: Some donor funds for treatment. But the only way to stem the

cannot be applied fl

exibly, leaving countries need for treatment and save lives is to expand

with important gaps even when they appear prevention initiatives.

to be highly funded in aggregate terms. This is An in-depth evaluation of the U.S. PEPFAR

where the unearmarked fl

exibility of the Inter- program concluded that it reduced deaths by 5

national Development Association becomes 40

percent but had no effect on prevention. The

critical. recent multimillion dollar evaluation of the

The highest-prevalence regions of Africa Global Fund noted the organization’s neglect

receive the bulk of external funding (fi

gure 41 A more modest assessment of

of prevention.

2A.1), but fi

nancing per current AIDS patient the programs of the World Bank, Global Fund,

paints a different picture (fi

gure 2A.2). Although and PEPFAR also concluded that prevention

there is a general correlation between the num- 42

was the weak link. The challenge is that for

ber of patients and funding across countries, every HIV/AIDS patient placed on treatment,

nancing available for each patient still lags in two or three newly infected people will need

the highest-prevalence regions of Africa. 43

treatment for life.

Greater effi

ciency is imperative because the Countries that have prioritized preven-

agenda has broadened and the pace of infec- tion—Brazil, Rwanda, and Thailand—have

tion has not slowed. Targeting high-risk groups seen prevalence decline or remain low, despite

and improving management and effi

ciency in spiraling levels in the early 1990s. Prevalence

delivery can raise quality and effi

ciency. The rates in these countries contrast with those in

Bahamas plan greater use of generic drugs, bet- Botswana and Swaziland, which have strug-

ter patient adherence to treatment protocols, gled to initiate effective prevention programs

and a sharper focus on the cost effectiveness of as prevalence reached epidemic proportions.

purchases and service delivery. While not cost- The long-term trends refl

ect lack of attention to

less, such improvements will boost effective-

ness and reduce waste, which are equivalent to prevention 5–10 years ago. But current preven-

reducing costs. They also raise the quality of tion efforts remain inadequate, and the crisis

services including health care services. could further curtail such efforts if constrained

FIGURE 2A.1 Projected Global Fund to Fight AIDS, Tuberculosis, and Malaria and U.S. PEPFAR

HIV/AIDS grants as of April 2009

2,500

2,000

millions 1,500

US$, 1,000

500

0 East Southern West Central

East Asia Europe and Latin America Middle East South Africa Africa Africa

and Pacific Central Asia and the and North Asia

Carribbean Africa Sub-Saharan Africa

Round 8 approved grants Rounds 1–7 active grants not yet disbursed Project fiscal 2009

Source: Lewis 2009.

L E S S O N S F R O M PA S T C R I S E S GLOBAL MONITORING REPORT 2010

64 FIGURE 2A.2 Projected Global Fund to Fight AIDS, Tuberculosis, and Malaria and U.S. PEPFAR

HIV/AIDS grants per AIDS patient as of April 2009

12

10

8

millions 6

US$, 4

2

0 East Southern West Central World

East Asia Europe and Latin Middle East South Africa Africa Africa

and Pacific Central Asia America and North Asia

and the Africa Sub-Saharan Africa

Carribbean

Source: Lewis 2009. schools during covariate shocks. However,

budgets force cutbacks in prevention. It is a some of these more adverse effects may be oc-

dynamic problem; new infections occur daily, curring in confl

ict or disastrous situations with

and so a continuous, uninterrupted response is institutional breakdowns so that microstudies

required. It may take 7–10 years for a person to are not available.

become symptomatic, but even people without 2. For the entire sample of developing countries,

evident symptoms can pass on the virus and 47 percent of the 4,415 country-year obser-

infect others. Actions now will reduce the rate vations are classifi

ed as growth accelerations

at which people with the virus can pass it on, while 11 percent are classifi

ed as growth de-

underscoring the importance of antiretroviral celerations. The remaining 42 percent of ob-

therapy as a prevention measure. servations are for years in which countries

The Bill & Melinda Gates Foundation and experienced neither growth acceleration nor

others are fi

nancing extensive efforts in pre- deceleration episodes.

3. To some extent this pattern may be endoge-

vention technologies, and considerable ongo- nous, because average income per capita tends

ing research is exploring how to discourage to rise in countries with more frequent growth

risky behaviors. But equal attention must go accelerations and fall in countries with more

to actually promoting behavior change and frequent collapses.

rolling out promising approaches where pre- 4. Arbache and Page 2007.

vention lags. Because programs for prevention 5. Arbache and Page 2010.

are dwarfed by those for treatment, the bal- 6. Arbache, Go, and Page 2008. The infl

ation

ance deserves some recalibration to spare those fi

gure would have been higher had Zimbabwe

not yet infected. While neither simple nor easy, been included; it was excluded from the analy-

a push to expand prevention is warranted if sis because of missing data for other variables.

there is to be progress on Goal 6A: halting the 7. The analysis is taken from Lewis and Verhoev-

spread of HIV/AIDS by 2015. en (2010) and relies on data from the Interna-

tional Monetary Fund (IMF), the World Bank,

United National Educational, Scientifi

c, and

Notes Cultural Organization (UNESCO, education

spending), and the World Health Organization

1. Arbache, Go, and Korman 2010. Although

the aggregate fi

gures show girls’ education is (WHO) National Health Accounts (health

affected by growth cycles, there is still a lack spending).

of microstudies that show girls are dispro- 8. The absence of a consistent time series in

portionately more likely to be pulled out of education spending data required the integra-

GLOBAL MONITORING REPORT 2010 L E S S O N S F R O M PA S T C R I S E S 65

34. The Global Fund has initiated a new $2.6 bil-

tion of data from UNESCO, the IMF, and the

World Bank. This is in contrast to the consis- lion funding window for the next two years,

tent and much higher quality data from WHO which it estimates is insuffi

cient. These re-

National Health Accounts. quirements are not addressed here because the

9. Dang, Knack, and Rogers 2009. focus is on fi

nancing HIV/AIDS prevention

10. Gottret and others 2009. and treatment.

11. Grosh and others 2008. 35. Kaiser Family Foundation (2009) and www.

12. Blomquist and others 2002. KKF.org provide updates of spending.

13. Ferreira and Schady 2009. 36. Case and Paxson 2009.

14. World Bank forthcoming. 37. A survey of UNAIDS and WHO country of-

15. IMF 2009. fi

ces by the World Bank, UNAIDS, and WHO

16. High-Level Seminar on Africa Fiscal Policy for (2009) asked about possible issues as the crisis

Growth in Light of the Global Crisis, Maputo, evolved and the likely impact on HIV/AIDS

December 2009, sponsored by the World Bank programs over the next 6–12 months.

and various governments. 38. UNAIDS 2009.

17. Turk 2009. 39. Global Fund (www.theglobalfund.org/programs/

18. Global Fund (www.theglobalfund.org/pro- search/?lang=en&round=9).

grams/search/?lang=en&round=9). 40. Bendavid and Bhattacharya 2009.

19. Wodon and Zaman 2010. 41. Sherry, Mookherji, and Ryan 2009.

20. These data do not include safety net and nutri- 42. Ooman, Bernstein, and Rosenzweig 2007.

tion interventions under the World Bank’s 43. Revenga and others 2006.

Global Food Crisis Response Program, which

has funded an estimated $380 million for References

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$95 million). Malnutrition.” Oxford Economic Papers 58

21. See Grosh and others (2008) for detailed (3): 450–74.

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challenges of effective safety nets. Growth Volatility Matter for Development Out-

22. World Bank 2006. comes? An Empirical Investigation Using Global

23. Ratha, Mohapatra, and Silwayl 2009. Data.” Background paper for Global Monitoring

24. World Food Programme 2009. The study ana- Report 2010. World Bank, Washington, DC.

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ve case Arbache, J., D. Go, and J. Page, eds. 2008. Africa

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31. Khanna, Newhouse, and Paci, forthcoming. Internal Medicine 150 (10): 688–95.

32. See Arbache, Go, and Korman (2010) for

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the Impacts of the Economic Crisis: Overview 3

Growth Outlook and

Macroeconomic Challenges

in Emerging Economies and

Developing Countries

T

he recovery of the global economy countries off their track of solid growth?

has been more robust than expected. The question is especially important for low-

Driven by strong internal demand in income countries because poverty is so much

many emerging economies and the recovery more pressing there than in countries with

of global trade, GDP growth in emerging and higher incomes. History does not suggest that

developing countries is projected to accelerate low-income countries can uniformly escape

to 6.3 percent in 2010, from 2.4 percent in global shocks without absorbing long-lasting

2009. Supporting the economic recovery are damage to both growth and welfare. In past

expansionary macroeconomic and, especially, crises, it has often taken several years for low-

scal policies. Fiscal defi

cits in emerging and income countries to bring growth rates back

developing countries, up by almost 3 percent into positive territory. Even so, the turnaround

of GDP in 2009, are projected to remain high in low-income countries this time is projected

in 2010. More than in previous crises, many to be faster than in previous crises, thanks to

countries sustained spending plans and raised countercyclical fi

scal policies and better mac-

social spending to mitigate the effects of the roeconomic fundamentals in place at the be-

downturn on the poorest people, although the ginning of the crisis. Commodity exporters

differences among countries are wide. While are helped by the fairly quick recovery of com-

nancial market conditions for emerging and modity prices. And fi

nancial systems in low-

developing countries are improving and capital income countries have been less affected by

ows are returning, international bank fi

nanc- turmoil than those in advanced economies.

ing and foreign direct investment are projected The recovery is still vulnerable, however,

to remain weak in 2010. and the rapid expansion of fi

scal defi

cits and

Although the short- and medium-term the greater reliance on domestic sources of fi

-

growth prospects for most emerging and de- nancing in many countries may not be sustain-

veloping countries are positive, the question able. External debt ratios in low-income coun-

arises: to what extent does the current shock tries, deteriorating in the short run, should be

have longer-run implications that could knock watched.

GLOBAL MONITORING REPORT 2010 69

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

70 tion and investment, private demand growth

Optimal exit policies from policy support in emerging Europe is expected to remain

should depend on country circumstances. sluggish, and several countries remain depen-

dent on exceptional policy stimulus. Com-

• Countries where private demand is still modity exporters are benefi ting from fi rmer

weak should continue supporting activity if global demand for raw materials and higher

policy space is available. commodity prices. Even so, the recovery re-

• Some countries, however, are facing fi

nanc- mains vulnerable, most notably in advanced

ing constraints—they cannot delay adjust- countries and the economies of Eastern Eu-

ment. Donors should assist them by follow- rope, where high unemployment, moderate

ing up on commitments to increase aid. income growth, and weaker household bal-

• All countries should adopt credible medium- ances are dampening consumption growth,

term fi

scal adjustment plans to bolster con- posing risks for the global outlook. In addi-

dence in macroeconomic policies and un- tion, in the medium–term, growth rates in

dertake policy reforms to secure long-term some groups of countries, especially low-

growth. income countries, are not expected to reach

the high levels recorded before 2008.

The economic recovery Because the recovery is in an early stage and

unemployment rates are still elevated, global

Global economic activity is recovering from the infl

ation has remained low, although some

deepest recession since the Second World War, economies, especially in Asia, are showing the

albeit at a moderate pace. According to the fi

rst signs of price pressures. Infl

ation risks are

International Monetary Fund’s (IMF) World rising in Latin America as well, where output

Economic Outlook, growth of global output gaps in some countries are closing rapidly.

will increase to 4.2 percent in 2010, from a

decline of 0.6 percent in 2009 (table 3.1). The

recovery, supported by improving fi

nancial Commodity prices are recovering

conditions and rising world trade (fi

gure 3.1), Following the sharp drop in commodity prices

is led by emerging economies in Asia, where in late 2008, prices for most commodities re-

growth rates now exceed precrisis levels. The bounded sharply in 2009 and are continuing

prospects for developing countries, including their upward trend in 2010 as the global re-

the poorest, are improving as well, although covery gains momentum (fi

gure 3.2). The in-

growth rates have not yet recovered to the lev-

1 creases are helping to mitigate the impact of

els seen in the years before the crisis. the crisis on commodity exporters. Food prices

The underlying factors driving the expan-

sion differ from country to country. While are the exception, because good harvests in

economies in Asia and Latin America are Sub-Saharan Africa and elsewhere have given

bolstered by a recovery of private consump- an opportunity to rebuild stocks. But food

TABLE 3.1 Global output

percent change Projection

Region 2007 2008 2009 2010 2011–13

World output 5.2 3.0 –0.6 4.2 4.4

Advanced economies 2.8 0.5 –3.2 2.3 2.4

Emerging and developing economies 8.3 6.1 2.4 6.3 6.6

Central and Eastern Europe 5.5 3.0 –3.7 2.8 3.8

Commonwealth of Independent States 8.6 5.5 –6.6 4.0 4.1

Developing Asia 10.6 7.9 6.6 8.7 8.6

Middle East and North Africa 5.6 5.1 2.4 4.5 4.8

Sub-Saharan Africa 6.9 5.5 2.1 4.7 5.7

Western Hemisphere 5.8 4.3 –1.8 4.0 4.2

Source: World Economic Outlook.

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 71

FIGURE 3.1 Short-term indicators of production and trade are recovering

a. Exports and imports (value) b. Industrial production

130 115

110

120 emerging markets

105

110 G3 countries

100) 100) 100

100

= =

2008 2008 95

90 90

G3 countries

(June (June

80 85

index index

emerging markets

70 80

60 75

70

50 Jan. May Sept. Jan. May Sept. Jan. May Sept. Jan. May Sept. Jan. Jan. May Sept. Jan. May Sept. Jan. May Sept. Jan. May Sept. Jan.

2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

Source: IMF International Financial Statistics; Bloomberg; Haver Analytics; central banks.

Note: Data are weighted by PPP-GDP, 2006.

FIGURE 3.2 Commodity price indexes rebounded strongly in 2009

600

500

100) copper

= 400

Q1

(2001 300 fuel

index all commodities

food

200 non-fuel

cereals

100

0 Q1a Q3a

Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011

Source: IMF.

Note: Indexes are in U.S. dollars.

a. Projected

and commodity prices, relatively high by his- ably since the onset of the crisis. Bond spreads

torical standards, are projected to remain so, have declined, stock markets in both emerg-

given the prospects for further medium-term ing and developing countries have recovered

sharply, and exchange rate volatility has come

demand growth and continuing supply con-

straints in many sectors. down considerably (fi gures 3.3–3.5). Some

borrowers—sovereigns and prime corpora-

tions in particular—quickly regained market

Financial conditions are improving, access following a brief interruption at the

but fi nancial fl ows remain below end of 2008. Financial market access for sub-

precrisis levels investment-grade borrowers in emerging and

developing countries has also improved. But

Financial market conditions for emerging and access to international bank fi

nancing remains

developing countries have improved consider-

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

72 FIGURE 3.3 Bond spreads have declined in emerging markets and developing countries

100 1,000

90 900

EMBI Global issues of 800

80 (right axis) international 700

70 bonds (left axis) points

600

60

billions basis

500

50

US$, spreads,

400

40 300

30

20 200

10 100

0

0 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1

Q1 Q1 Q1 2003 2004 2005 2006 2007 2008 2009 2010

2000 2001 2002

Source: Dealogic; Bloomberg.

Note: Bond issues and spreads as of end-March 2010..

FIGURE 3.4 Share prices have recovered sharply

800

700 developing countries

600

100)

= 500

2000 400

(January 300

index emerging markets

200

100

0

Jan. Sept. May Jan. Sept. May. Jan. Sept. May Jan. Sept. May. Jan. Sept. May. Feb.

2000 2000 2001 2002 2002 2003 2004 2004 2005 2006 2006 2007 2008 2008 2009 2010

Source: IMF International Financial Statistics.

Note: Prices are in the local currency.

limited as banks in advanced economies con- such as liquidity support, deposit insurance,

tinue deleveraging. bank interventions, and recapitalizations.

Financial policies, such as improved fi

nan- Banking sectors in many emerging economies

cial sector regulation and crisis measures, have have also benefi

ted from higher fi

nancial mar-

contributed to avoidance of widespread bank- ket resilience, including less volatility in ex-

2

ing crises in emerging and developing coun- change and interest rates, and therefore have

tries. The public response to the fi

nancial crisis avoided negative dynamics from balance sheet

has been broad, covering several instruments, effects.

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 73

FIGURE 3.5 Exchange rates have been less volatile: Daily spot exchange rates

180

160

100) 140

= 120

2008

1, 100

(Jan. 80

index 60

40

Jan. Mar. May July Sept. Nov. Jan. Mar. May July Sept. Nov. Jan. Mar.

2008 2009 2010

Mexico Brazil Indonesia Thailand

South Africa Kenya Poland

Source: Bloomberg.

Note: Exchange rates are in national currency per U.S. dollars.

FIGURE 3.6 The cost of external debt fi nancing has come down

12 900

a. Yields (left axis) b. Spreads (right axis)

11

10 700

9 points

percent 500

8 basis

7

6 300

5 100

4 composite high grade high yield composite high grade high yield

Jun. 30, 2007 Sept. 1, 2008 Apr. 12, 2010

Source: Bloomberg. has also affected bank loan portfolios in many

Even so, concerns about systemic risks to countries, as evidenced by the rising shares of

the solvency of banks and corporations linger. nonperforming loans (fi

gure 3.7).

The cost of external debt fi

nancing remains el- Despite the general improvement in market

evated in some emerging and developing coun- conditions, fi

nancial fl ows to emerging and

tries, where spreads on high-yield external cor- developing countries have not recovered to

porate bonds are still substantially above those those seen in the years preceding the fi

nancial

before the collapse of Lehman Brothers in Sep- crisis (table 3.2). In emerging economies, net

tember 2008 (fi

gure 3.6). In addition, some infl

ows of foreign fi

nancial resources (capital

countries in Eastern Europe and the Common- fl

ows and transfers) are not expected to ex-

wealth of Independent States (CIS) continue to ceed 8.2 percent of GDP this year, down from

face uncertainties as a result of high external

debt refi

nancing needs and private sector for- an average of about 12 percent in 2007–08,

eign currency debt. The fallout from the crisis mainly because of the sharp drop in bank

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

74 recovery of workers’ remittances (table 3.3).

FIGURE 3.7 The share of nonperforming loans to total loans has

been rising Although remittances to countries in Latin

America, North Africa, and the Middle East

12 were weaker than expected in 2009, they ap-

pear to have reached a bottom toward the end

10 of the year. At the same time, remittance fl

ows

8 to South and East Asia, largely originating in

percent 6 the Gulf countries, surprised on the upside

in 2009, with particularly strong increases

4 in Bangladesh and Pakistan. Overall, remit-

2 tances to emerging and developing countries

are projected to increase by 2 percent in 2010,

0 2003–07 2008 2009 following a 6 percent decline in 2009.

Current account imbalances in emerging

emerging markets developing countries and developing countries have been shifting in

advanced countries recent years, mainly as the result of the sharp

swings in world trade and terms of trade since

Source: IMF 2009b. late 2008 (fi

gure 3.9). Fuel-exporting coun-

tries have been most hit by fl

uctuations in

TABLE 3.2 Net fi nancial fl ows

percent of GDP the external accounts, a refl

ection of the high

volatility of oil prices and insuffi

cient export

Flows 2007 2008 2009 2010 diversifi

cation. Nonfuel primary product ex-

Emerging market economies 12.6 11.4 8.7 8.2 porters face strong fl

uctuations as well, but

Private capital fl ows, net 8.0 7.0 3.2 3.1 less so than fuel-exporting countries. Despite

of which: private direct investment 5.4 5.1 3.3 3.3 these fl

uctuations, there have been reductions

Private portfolio fl ows 0.8 –0.5 –0.3 0.1 in external imbalances in the past two years

Private current transfers 4.1 3.7 3.8 3.6

Offi cial capital fl ows and transfers, net 0.4 0.7 1.7 1.6 within the group of emerging and developing

Memorandum item: countries. The number of emerging economies

Reserve assets –3.9 –1.6 –2.5 –1.9 with high balance of payments defi

cits and the

Developing countries number of high surplus emerging economies

14.0 17.7 13.9 13.9

Private capital fl ows, net 6.6 7.7 5.2 5.3 and developing countries declined in 2009

of which private direct investment 6.6 6.2 4.8 4.7 (fi

gure 3.10).

Private portfolio fl ows –0.7 –0.6 –0.4 –0.2 Even with the large differences in external

Private current transfers 5.6 5.8 5.2 5.1 conditions among emerging and developing

Offi cial capital fl ows and transfers, net 1.8 4.2 3.6 3.5 countries, there has been a remarkable simi-

Memorandum item:

Reserve assets –4.0 –2.3 –1.6 –1.0 larity in international reserve developments

across groups of countries and regions. Helped

Source: World Economic Outlook.

Note: Equally weighted. by the recovery in international trade and cap-

ital fl

ows, and the allocation of IMF special

nancing (fi

gure 3.8), especially in Asia and drawing rights, almost all countries rebuilt

Latin America, and foreign direct investment. international reserves (as measured by reserve

Developing countries are facing weak foreign coverage in months of imports) in 2009, after

direct investment activity as well, because a decline in 2008 (fi

gure 3.11). At the end of

overcapacity in extractive industries remains 2009, 80 percent of emerging markets and 75

considerable despite rising global demand for percent of developing countries had reserves

commodities. Overall, net fi

nancial fl

ows are that could be considered adequate (equivalent

projected to decline to 13.9 percent of GDP in to three months of imports of goods and ser-

2010, from 15.9 percent in 2007–08. vices). For emerging economies, reserves as a

The drop in foreign direct investment in share of short-term debt also increased, and at

the end of 2009 about 70 percent of emerg-

developing countries is partly offset by the

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 75

FIGURE 3.8 Bank fi nancing to emerging markets dropped sharply in 2009

20

15

quarter 10

5

previous 0

from –5

change –10

% –15

–20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Q1 Q2 Q3 Q4 2007 2008 2009

2006 Asia emerging Europe Latin America Middle East/Africa

Source: Bank for International Settlements (BIS).

Note: Adjusted for exchange rate changes. Changes are calculated as fl ow adjusted for exchange rate changes as a share of the stock in the previous quarter.

TABLE 3.3 Infl ows of international remittances

US$billions Annual average Annual average a b c

2010 2011

1992–2002 2003–07 2008 2009

Emerging market economies 58.9 177.2 283.3 266.0 271.7 279.1

Developing countries 8.4 26.1 47.1 46.4 47.5 48.8

Fragile states 2.2 5.1 9.7 8.6 8.8 9.1

Source: World Bank remittances data.

a. Remittances include workers’ remittances, compensation of employees, and migrant transfers.

b. Estimate.

c. Forecast base case scenario.

ing economies had reserves that exceeded the often not an option in previous crises. Further,

3

stock of short-term debt. stronger balance sheets and continued access

to fi

nancing, especially for prime borrowers,

helped private corporations in emerging and

Thanks to good policies, the recovery is developing countries to deal better with ad-

stronger than in past crises verse conditions than they had in the past. Lo-

Overall, emerging and developing countries cal bond markets have also benefi

ted some of

weathered this global crisis better than past these countries, with larger enterprises in Asia

ones. Their fi

nancial markets and exchange and Latin America able to rely on local mar-

rates have not shown the sharp fl

uctuations kets for their refi

nancing needs.

of past crises, and the rebound in economic

activity is stronger than expected. Healthier Nonetheless, the crisis has depressed

scal accounts, reduced debt, better debt ma- disposable incomes in many countries

turity structures, low infl ation, and higher

international reserves gave many countries The crisis and the pace of recovery have deeply

room for countercyclical policies that were affected disposable incomes in many coun-

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

76 have differed. In general, most emerging and

FIGURE 3.9 Changes in terms of trade have swung sharply since

2008 developing countries fi

rst focused on address-

ing weakening confi

dence and containing the

25 2009 impact of the fi

nancial market crisis on the

20 real economy. In a second stage, these policies

2008

15 2006 have been followed by comprehensive efforts

10 2008

2006 to support domestic demand and growth in

2008

2010

5 2006

change 2010 2010

2007 2009 the medium term—mainly through expansion-

0 2007

2007

–5 ary macroeconomic policies. In most countries

% –10 these policies are still in place, and the start

–15 of the third stage—exiting from extraordinary

–20 2009 policy support—has been gradual thus far.

–25 lowest-quintile highest-quintile all countries

countries countries Monetary policy provided support in

most countries

Source: IMF staff calculations.

Note: Quintile groups are based on the average of terms-of-trade changes in 2008–09 and 2009–10. Aided by moderate infl

ation trends and less

volatile exchange rates, central banks in most

emerging and developing countries reduced

tries, where a contraction in real activity was policy interest rates in 2009. About 70 percent

sometimes reinforced by a deterioration in the of emerging economies and close to 60 percent

terms of trade (fi

gure 3.12). In 2008–10, about of developing countries followed a path toward

a third of emerging and developing countries lower rates last year. In some countries, higher

were experiencing declines in disposable in- policy interest rates were initially needed to

comes, with potentially serious adverse effects preserve market confi

dence. These increases

on poverty. Central and Eastern Europe has were more modest than in previous crises,

been particularly hard hit, with nine countries however, and in many cases were quickly re-

facing cumulative income declines, in total av- versed. In most countries, lower interest rates

eraging more than 8 percent. were associated with depreciations of nominal

effective exchange rates. As a result, monetary

Macroeconomic policy trends conditions in most emerging and developing

countries—as measured by a simple summary

Refl

ecting cross-country differences in initial indicator incorporating nominal interest rates

conditions and the international transmission 4

—ap-

and nominal effective exchange rates

of the crisis, macroeconomic policy responses

FIGURE 3.10 External imbalances have come down in emerging and developing countries

b. Current account surplus > –5% of GDP

a. Current account deficit > –5% of GDP

70 16

14

60 12

countries countries

50 10

40 8

of of

30

number number 6

20 4

10 2

0 0 emerging markets developing countries

emerging markets developing countries

2009 2010 2009 2010

2008

2008

Source: World Economic Outlook.

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 77

FIGURE 3.11 Almost all countries rebuilt their international reserves in 2009

2.5

7

6 2.0

debt

of

imports 5 stock

short-term 1.5

4 the

of of

3

months 1.0

terms

external

2 0.5

in

1 0

0 2006 2007 2008 2009

2006 2007 2008 2009 developing countries

emerging markets

Source: World Economic Outlook.

Note: The median ratio is shown. “Stock of the external short-term debt” = outstanding (on remaining maturity basis) plus amortization scheduled on

medium- and long-term debt.

pear to have become more accommodating in FIGURE 3.12 Deteriorating terms of trade sometimes reinforce

contraction in economic activity

5

2009 (fi

gure 3.13).

The fi

nancial crisis resulted in a sharp de- 30

cline in money growth in emerging and devel- 8

25

oping countries (fi

gure 3.14). The decline was 20

largest in countries that had seen the strongest 15 10 14

change

growth in the precrisis years. But as a result 28

10 5

17

of the even stronger decline in nominal GDP 5

% 0

growth rates, measures of excess liquidity, –5 2

such as the nominal money gap, increased. 9 4 4

11

–10 9

This suggests that despite the fall in money –15

growth, additional liquidity remained avail- Africa Middle East Asia Western Central CIS

and North Hemisphere and

able to support corporations and households Africa Eastern

during the crisis period. Europe

positive terms of trade effects negative terms of trade effects

Expansionary fi scal policies support

the recovery Source: IMF Staff calculations.

Note: The fi gure shows, by region, average real per capita GDP growth rates adjusted for the per

capita value of net terms-of-trade changes. The numbers above and below the bars show the

Measured by the median general govern- number of countries.

ment balance, fi

scal defi

cits in emerging and

developing countries expanded by almost 3

percent of GDP in 2009 (fi

gure 3.15) and are corporate tax revenue as the contribution of

projected to increase further in 2010 in more key sectors in the economy (such as natural

than one-third of the countries, despite some resources and other export sectors) declined.

decline in the median balance. Some coun- Moreover, tax administrations may be facing

tries, especially emerging economies, have put bigger enforcement challenges during the cri-

stimulus plans in place. But in most countries sis and its aftermath as tax planning becomes

the widening defi

cit is the result of weaken- more aggressive. Many countries are more

ing revenue, including the disproportionate exposed to such challenges because of their

impact of the crisis on trade—and thus on weak administrative capacity, large informal

revenues from import tariffs—and on con- sectors, and the constrained cash positions of

sumption taxes. Some countries have also lost taxpayers.

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

78 FIGURE 3.13 Monetary policy conditions became more accommodating in 2009

b. Other developing countries with

a. Emerging markets with monetary monetary policy loosening

policy loosening

90 80

80 70

70 60

60 50

percent percent

50 40

40 30

30 20

20 10

10 0

0 MCI discount rate exchange rate

MCI discount rate exchange rate

2008 2009 2008 2009

Source: IMF International Financial Statistics.

Note: Monetary policy loosening is based on Monetary Conditions Index (MCI) calculations.

FIGURE 3.14 Average year-on-year growth in money and the money gap in emerging markets

30

25

20 M2

%

rate, 15

growth 10 money gap

5

0

–5 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

2003 2004 2005 2006 2007 2008 2009

Source: IMF International Financial Statistics; Haver Analytics.

Note: The money gap is the diff erence between year-on-year growth rates of the M2 money supply and nominal GDP. The sample includes emerging-

market countries that have data on both for the whole sample period shown.

Despite falling revenues, emerging and de- exporting countries that faced sharp terms-of-

veloping countries as a group have allowed trade deteriorations after the collapse of oil

automatic stabilizers to work and have main- prices in the second half of 2008. Expendi-

tained previous spending plans during the tures were less affected in other emerging and

nancial crisis. To some extent they have in- developing countries, especially nonfuel com-

creased social spending related to the crisis, modity exporters. Thanks to higher oil prices,

supporting domestic demand and sustain- many fuel-exporting countries will be able to

ing the recovery. But the overall numbers on reverse these policies in 2010.

spending conceal wide differences in policy

stances and conditions. About half of emerg- But many countries are not on a

ing and developing countries cut spending in sustainable fi scal path

2009 in reaction to the crisis, a pattern likely

to be repeated to some extent in 2010 (fi

gure Widening government defi cits pose fi nanc-

3.16). The steepest spending cuts were in fuel- ing challenges for many countries, especially

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 79

those with limited access to capital markets.

FIGURE 3.15 Fiscal defi cits expanded in 2009 Emerging markets rapidly regained access to

0.0 sovereign debt markets following the collapse

of Lehman Brothers in September 2008, but

–0.5 developing countries with limited or no mar-

–1.0 ket access are more constrained in their op-

–1.5 tions. A country-by-country analysis of bud-

–2.0

GDP get fi

nancing shows that most countries in this

–2.5

of group were able to fi

nance rising defi

cits with

–3.0

% increased domestic and foreign fi

nancing. On

–3.5 average, budget fi

nancing needs of develop-

–4.0 ing countries increased by about 3 percentage

–4.5 points of GDP in 2009, about half from do-

–5.0 mestic sources (mainly domestic bank loans

emerging markets developing

countries and the drawing down of government deposits

a in the banking system) and the rest from for-

2008 2009 2010 eign sources (mainly aid). In some countries,

however, governments could not mobilize sig-

Source: World Economic Outlook.

a. Projected. nifi

cant additional foreign resources despite

FIGURE 3.16 Growth in real primary spending, 2010 projections

a. Fuel exporters b. Nonfuel primary products exporters c. Other countries

Madagascar

Guinea-Bissau

Equatorial Guinea Niger

Burkina Faso Malaysia

Chad Hungary

Suriname Colombia

Azerbaijan Lithuania

Zambia

Angola Mexico

Mali Turkey

Russian Federation Romania

Guyana India

Libya Chile Thailand

Rwanda

Algeria Sierra Leone Moldova

unweighted average

Venezuela, R.B. de unweighted average Latvia

Peru

unweighted average Poland

Brazil

Burundi

Ecuador South Africa

Mozambique Indonesia

Yemen, Rep. Bangladesh

Mauritania China

Nigeria Ghana

Uzbekistan

Kazakhstan Pakistan

Guinea-Bissau Kyrgyz Republic

Sudan Argentina

Malawi Uganda

Gabon Congo, Dem. Rep. of Ethiopia

–30 –20 –10 0 10 20 30 40 50 60 –20 –15 –10 –5 0 5 10 15 20 25 30

–30 –20 –10 0 10 20 30 40

% change % change

% change

Source: World Economic Outlook.

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

80 MAP 3.1 How the crisis undermined GDP growth in 2009

GDP real growth rate: Green

% change (2009) (De

< –6

–6 ≤ < –3

–3 ≤ < 0 Canada

0 ≤ < 3

< 7

3 ≤

7 ≤ no data United States Bermuda

(UK)

The Bahamas

Cayman Is. (UK) Turks and Caicos Islands (UK)

Cuba

Mexico Haiti C

Belize Jamaica

Guatemala Honduras

Nicaragua

El Salvador Panama

Costa Rica R.B. de Guyana

Venezuela Suriname

Colombia French Guiana (Fr)

Ecuador

Kiribati Brazil

Peru

Samoa Cook Is. (NZ) French Polynesia (Fr)

American Bolivia

Samoa (US)

Fiji Tonga Paraguay

British Virgin

Dominican Puerto Islands (UK)

Republic Rico (US) Anguilla (UK)

Antigua and Barbuda

U.S. Virgin

Islands (US) Uruguay

Guadeloupe (Fr)

St. Kitts Chile

and Nevis Argentina

Dominica

This map was produced by the Netherlands Montserrat (UK) Martinique (Fr)

Map Design Unit of The World Bank. Antilles (Neth)

The boundaries, colors, denominations St. Lucia

St. Vincent and

Aruba

and any other information shown on Barbados

The Grenadines

(Neth)

this map do not imply, on the part of Grenada

The World Bank Group, any judgment

on the legal status of any territory, or Trinidad

any endorsement or acceptance of and Tobago

R.B. de Venezuela

such boundaries.

Source: World Economic Outlook.

pressing needs. As budget defi

cits remain el- by higher private saving or reduced invest-

evated in 2010, many governments will con- ment. That may occur if consumers and inves-

tinue to borrow heavily in domestic markets. tors adapt their behavior to take into account

This is not sustainable. While fi

scal stimulus higher future tax liabilities.

in many developing countries has supported

the recovery, there are risks of crowding out The macroeconomic policy mix

through higher interest rates. Recent Interna-

tional Monetary Fund (IMF) research shows Most emerging and developing countries as

signifi

cant effects of fi

scal defi

cits on interest a group appear to have supported economic

rates, which could dampen private investment activity in 2009 with a combination of expan-

and force governments to spend more on debt sionary fi

scal and monetary policies (fi

gure

6

service payments and less on social programs. 3.17 and box 3.1). In some countries, expan-

These effects will be stronger when initial defi

- sionary fi

scal policies were combined with less

cits or debts are high. Expansionary fi

scal poli- accommodating monetary conditions. Such a

cies may also become counterproductive if the policy mix is not necessarily incoherent. In fact,

positive demand effects are more than offset it may be useful in countries facing large capital

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 81

IBRD 37736

APRIL 2010

nland

en) Faeroe Norway

Iceland Islands Finland

(Den) Sweden Russian Federation

The Netherlands Estonia

Latvia

Isle of Man (UK) Russian

Denmark Fed. Lithuania

United Belarus

Ireland Germany Poland

Kingdom Belgium

Channel Islands (UK) Ukraine Kazakhstan

Luxembourg Moldova Mongolia

Liechtenstein Romania

Italy

France

Switzerland Bulgaria Kyrgyz

Georgia Uzbekistan

Andorra Azer- D.P.R.

Rep.

Armenia

Spain baijan of Korea

Turkey Turkmenistan

Portugal Tajikistan

Monaco Japan

Greece Syrian

Cyprus Rep. of

Gibraltar (UK) Islamic Rep.

Arab China

Tunisia Malta Korea

Afghanistan

Lebanon of Iran

Rep. Iraq

Israel

Morocco Kuwait

Jordan Bhutan

Pakistan

West Bank and Gaza Bahrain Nepal

Algeria Qatar

Libya Arab Rep.

Former Saudi

of Egypt

Spanish Bangladesh

United Arab

Arabia

Sahara India

Emirates Myanmar Lao

Mauritania Oman P.D.R.

Cape Verde N. Mariana Islands (US)

Mali Rep. of

Niger Thailand Vietnam

Eritrea

Senegal Yemen

Chad Guam (US)

Sudan

The Gambia Burkina Cambodia Philippines Marshall Islands

Djibouti Federated States of Micronesia

Faso

Guinea

Guinea-Bissau Benin Sri

Nigeria Ethiopia

Ghana

Côte

Sierra Leone Central Lanka Brunei

D’Ivoire African Rep. Palau

Liberia Somalia

Cameroon Malaysia

Togo Maldives

Equatorial Guinea Uganda Kiribati

Kenya

Congo Nauru

Singapore

Gabon

São Tomé and Príncipe Rwanda Seychelles

Burundi

Dem. Rep. of Papua Solomon

Indonesia

Congo New Guinea Islands

Comoros

Tanzania Tuvalu

Timor-Leste

Angola Malawi

Zambia Mayotte Fiji

Vanuatu

(Fr)

Zimbabwe Mauritius

Namibia Madagascar

Botswana New

Réunion (Fr)

Mozambique Caledonia

Poland Australia (Fr)

Swaziland

Ukraine

Germany Czech Rep. Slovak Rep. Lesotho

South

Africa

Austria Hungary

Slovenia Romania New

Croatia Zealand

Bosnia and Serbia

San Herz. Bulgaria

Marino Kosovo

Montenegro FYR

Macedonia

Italy

Vatican Albania Greece

City 7

outfl

ows and pressures on the exchange rate. best approach to exit from policy stimulus.

In such a situation, rising interest rates may be The appropriate timing and nature of exit

appropriate to avoid excessive exchange rate policies depend on individual country circum-

volatility and ensure that suffi

cient external fi

- stances. In many countries, where private de-

nancing remains available for the economy. On mand components are still cyclically weak and

average, growth in countries with this policy suffi

cient policy space is available, monetary

mix in 2009 was not weaker than in countries and fi

scal policy should remain geared toward

that had expansionary policies on both the supporting activity. Governments in these

monetary and fi

scal front. countries should lay out a credible exit strategy

to maintain confi

dence in the authorities’ com-

mitment to macroeconomic stability. Mon-

Adapting monetary and etary and fi

scal support should be gradually

fi

scal policies to changing removed when private demand is suffi

ciently

circumstances strong to sustain growth. In addition, to sup-

As the recovery in emerging and developing port fi

scal consolidation, reforms to strengthen

countries takes hold, questions arise about the fi

scal institutions could be initiated now.

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

82 strong downward pressures on the exchange

FIGURE 3.17 Most countries responded with expansionary fi scal

and monetary policy rate (fl

exible regime) or reserves (fi

xed regime)

emerge.

a. Emerging markets b. Developing countries Several countries, mainly emerging econo-

mies, face high or rising rates of infl

ation. The

economic dynamics underlying these phenom-

ena differ from country to country. In several

countries, the fi

rst signs of rising infl

ationary

expectations are becoming visible in the con-

text of exceptional macroeconomic policy

support. In some other countries, infl ation

rates remained stubbornly high in 2009, not-

withstanding depressed demand conditions,

usually refl

ecting a lack of confi

dence in mon-

monetary and fiscal loosening etary policy. In both categories of countries, a

monetary and fiscal tightening

monetary loosening and fiscal tightening move toward a more restrictive monetary and

fiscal loosening and monetary tightening fi

scal policy stance would be warranted.

Maintaining confi

dence in macroeconomic

Source: IMF International Financial Statistics. stability remains a priority for all countries.

Note: Fiscal conditions are defi ned based on the change in government balance as a percent of GDP Credible medium-term fi

scal adjustment plans

in 2008–09. Monetary conditions are based on the change in the MCI from 2008Q4 to 2009Q3. are important to manage expectations by re-

ducing the risks of crowding out and unsus-

A number of countries, however, are not tainable debt dynamics. To maintain the abil-

in a position to delay adjustment and should ity of fi

scal policy to respond to future crises,

act in 2010 to reduce fi

scal defi

cits. In some a preferable strategy would aim to reduce

cases, this reduction should be accompanied debt ratios to their precrisis levels in the me-

by a gradual tightening of the monetary policy dium term. In addition to phasing out tem-

stance. Three broad groups of countries can be porary stimulus measures, this approach will

distinguished. require some emerging economies to make

Most developing countries fi

nanced widen- improvements in their structural primary bal-

ing budget defi

cits in 2009 by increasing reli- 8

ance. To enhance confi

dence that future fi

s-

ance on domestic sources of fi

nancing. This cal adjustment will not lead to an appreciable

nancing policy, while appropriate when the increase in the tax burden, the medium-term

global economy was facing the risks of a fur- adjustment plans could emphasize the follow-

ther sharp downturn, cannot be continued for ing elements.

very long, especially in countries with weak

external payments positions, low reserves, or • Phasing out temporary stimulus measures

rapidly rising debt. Without higher aid infl

ows, while strengthening well-targeted social

nancing constraints and the need to maintain safety nets. A large number of emerging

scal sustainability will compel many countries and developing countries are supporting

to move to more prudent policies in 2010. domestic activity with ad hoc measures,

Some developing economies with fi scal such as increased spending on public works

sustainability problems may still be able to or reductions in tax rates. Medium-term

nance defi cits in the current environment. fi

scal consolidation plans should envisage

But they could rapidly face external fi

nanc- public investment at levels consistent with

ing pressures if the perception takes hold that fi

scal sustainability and available fi

nancing,

scal discipline is not a priority. If there are and phase out tax reductions presented as

no signs of rising infl

ation, accommodating temporary stimulus measures. At the same

monetary policies can be maintained for some

time to support domestic demand, unless time, temporary social programs should be

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 83

BOX 3.1 Quality of macroeconomic policies in low-income countries

tion of the rapid response to the global crisis in many

As in previous years, IMF staff conducted surveys countries and governance in the public sector. At the

among mission chiefs to gauge their assessments of same time, governance in monetary and financial

the quality of macroeconomic policies in low-income institutions showed deterioration, while little change

countries. In 2009 low-income countries made good was recorded in other areas.

progress in the quality of monetary policies, a refl ec-

a. Fiscal policy b. Composition of public spending

90 90

countries countries

80 80

70 70

category category

60 60

those those

50 50

40 40

each each

of of

30 30

shares shares

in in

20 20

10 10

% %

0 0

unsatisfactory adequate good unsatisfactory adequate good

c. Fiscal transparency d. Monetary policy

90 90

countries countries

80 80

70 70

category category

60 60

those those

50 50

40 40

each each

of of

30 30

shares shares

in in

20 20

10 10

% %

0 0

unsatisfactory adequate good unsatisfactory adequate good

e. Consistency of macroeconomic policy f. Governance in monetary and financial institutions

90 90

countries countries

80 80

70 70

category category

60 60

those those

50 50

40 40

each each

of of

30 30

shares shares

in in

20 20

10 10

% %

0 0

unsatisfactory adequate good unsatisfactory adequate good

g. Governance in the public sector h. Access to foreign exchange

90 90

countries countries

80 80

70 70

category category

60 60

those those

50 50

40 40

each each

of of

30 30

shares shares

in in

20 20

10 10

% %

0 0

unsatisfactory adequate good unsatisfactory adequate good

2003 2007 2008 2009

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

84 replaced with cost-effective, well-targeted, has helped to stabilize the macroeconomic ef-

permanent social safety nets. fects of the crisis (box 3.3).

• Structural cuts in nonpriority spending.

Governments should continue their efforts Strengthening international

to reduce nonpriority spending, through policy cooperation

further improvements in public fi nancial The global crisis of confi

dence that eventually

management and by eliminating expendi- caused the collapse in world trade in 2008 re-

ture categories such as badly targeted fuel quired a global response: a simultaneous fi

scal

and food subsidies. Although the decline and monetary policy stimulus in countries with

in food and fuel prices since mid-2008 has suffi

cient room to maneuver for such policies.

allowed some countries to reduce spend- The prospects of sustaining the current eco-

ing on ineffi

cient general subsidies, further nomic recovery will be enhanced if advanced,

progress could be made in replacing general emerging, and developing countries continue

subsidies with programs better targeted to to cooperate in the implementation of exit

the poor. strategies and policies aimed at increasing

• Improving revenue performance. Many growth. The agreement among the Group of

emerging and developing countries have

room for further improvements in tax sys- Twenty (G-20) leaders at Pittsburgh to create

tems and revenue administration, including a new process for mutual policy assessments

measures aimed at widening the tax base is an important step in the right direction, but

to include informal sectors, further shifts policy cooperation cannot be limited to those

away from trade taxes to domestic taxes, countries. Enhanced policy cooperation will

and addressing governance problems. Well- be necessary in the following areas.

functioning revenue administrations, in Avoiding protectionism. Restrictions on

combination with tax systems that mini- international trade and services, government

mize distortions, lay the basis for better rev- subsidies for domestic industries, distortions

enue performance and create a more stable to foreign direct investment, informal pres-

investment climate (box 3.2). sures on banks to give preference to domestic

borrowers—all constitute serious threats to

Countries with strong fi

scal policies in the the economic recovery. Political pressures to

period leading to the global crisis have been maintain fi

nancial support to domestic indus-

better able to deal with its effects than coun- tries indefi

nitely and to take more far-reaching

tries with weak policies. They regained faster protective measures could rise if unemploy-

access to international fi

nancing on more fa- ment remains relatively high in the coming

vorable terms—and were better able to offset years, in line with current expectations. Gov-

the effects of falling world demand with coun- ernments should eschew such protectionist

tercyclical fi

scal policies in 2009 and 2010. policies and make strong efforts to reinvigorate

This experience argues in favor of a counter- the Doha Round. An ambitious Doha Round

cyclical, medium-term fi

scal rule that aims to would constitute a major step toward a higher

generate savings during good years and create growth path for the world economy: a recent

room for countercyclical policies during cri- study puts potential annual GDP gains from

sis periods. Although almost 60 emerging and multilateral trade liberalization at $300 billion

10

developing countries have had some type of to $700 billion.

9

scal rule since the 1990s, helping to main- Increasing aid levels and aid effectiveness.

tain fi

scal discipline, only some of these are de- Insuffi

cient progress has been made in enhanc-

signed to smooth out the effects of fl

uctuations ing aid effectiveness, and aid still falls well

in commodity export prices and other external short of the 2005 Gleneagles commitments, in

shocks. Chile and Nigeria are countries where particular for Africa. In addition, many donor

a countercyclical fi

scal rule on the basis of pru- countries have reduced their aid budgets, while

others face pressures to reduce aid in light of

dent projections of commodity export prices

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 85

BOX 3.2 Mobilizing additional revenue in developing countries: Key issues for tax

policy and revenue administration reasons. Addressing these issues is key to improving

The international fi nancial crisis and its consequences the equity of tax systems.

for economic activity have put additional pressure on Some tax sources remain underexploited in many

an already fragile revenue situation in many develop- countries—excise taxes on alcohol and tobacco, and

ing countries. Although the revenue situation in most environmental taxes (fuel and car taxes, for example)

countries is expected to improve as the effects of the are important examples.

crisis dissipate and temporary stimulus measures are The institutional framework for policy making,

phased out, some policy changes made in response including coordination at the country level between

to the crisis, and during the precrisis period that saw the various government entities with responsibility

substantial increases in food and fuel prices, may have for tax policy, is defi cient in many developing coun-

longer-term effects on revenues. An example is the tries and often leads to fragmentation of policy deci-

proposed change to the value added tax (VAT) direc- sions with negative consequences for revenues— for

tive of the West African Economic and Monetary example, between trade and tax policy, industrial and

Union to allow for broader exemptions and a second tax policy, and central and local taxation. Countries

(lower) rate on selected items. In addition, taxpayer should better integrate tax policy making into macro-

compliance may have declined in many countries, economic management, and strengthen the coordina-

posing challenges for revenue administration. tion mechanisms across government entities.

The policy tools that developing countries can Taxes on real property have historically yielded

mobilize to deal with the potential revenue loss stem- very little revenue for a number of reasons, including

ming from the crisis and other ongoing challenges the lack of a proper framework for sharing taxation

may be more limited today than in the 1980s and powers between central and regional levels of govern-

1990s, and those that are left may involve stronger ment. This revenue source remains underexploited in

political commitments. The vast majority of coun- many developing countries.

tries have already implemented broad-based con-

sumption taxes (typically VATs) at rates that are not Revenue administration

particularly low in general and with bases that are Tax agencies should also develop a strategy to enhance

generally narrow. Moreover, corporate tax rates have revenue administration. The primary objective of the

fallen dramatically since the early 1990s (by about strategy should be to contain the rise in noncompli-

one-quarter on average), and countries have intensi- ance often observed during periods of crisis. If left

fi ed the use of tax incentives, further narrowing the unchecked, rising noncompliance could lead to sub-

tax base. stantial forgone revenue and provide unfair competi-

Country experiences in addressing these chal- tive advantages to noncompliant businesses.

lenges differ, sometimes signifi cantly, but common To achieve this objective, the following four sets

areas for reform exist. of measures could be considered.

Tax policy • Assistance to taxpayers could be expanded by

Tax bases can be broadened, especially for VAT and adjusting advance payments, accelerating tax

profi t taxes. This is not an issue of improving tax refunds, and making greater use of payment

administration to better handle the informal sector extensions.

(which is a separate and ongoing challenge); it pri- • Communication with the taxpayer population

marily means rationalizing the use of income tax could be improved. An effective communication

incentives (such as tax holidays) and reducing signifi - program for taxpayers and other key stakeholders

cantly the reliance on VAT exemptions as a (costly in the tax system should aim at clearly conveying

and largely ineffective) social policy tool. to stakeholders and the public the various elements

The taxation of individuals is, in many countries, of the tax agency’s compliance strategy.

limited to the taxation of wages of the public sector • Legislative reforms that facilitate revenue admin-

and large enterprises. The taxation of unincorpo- istration could be enacted. Needed reforms vary

rated small and midsize enterprises remains largely from country to country; they could include mea-

elusive—both for technical and for political economy continued

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

86

BOX 3.2 (continued) face the prospect of declining budget allocations in

sures such as the strengthening of transfer-pricing an economic downturn as governments seek to cre-

rules or the introduction of default assessments ate fi scal room for high-priority social expenditures.

and indirect audit methods. However, it should be recognized that the task of tax

administration becomes more demanding during dif-

Enforcement could be strengthened, including fi cult economic times. In this situation, substantial

the reassessment of controls over the largest taxpay- cuts in tax agencies’ budgets are likely to reduce the

ers, the intensifi cation of arrears collection, securing effectiveness of tax collection and further aggravate

tax withholding, giving greater attention to loss- a decline in revenue.

reporting businesses, and enhancing the scrutiny of Tax agencies should align their near-term com-

cross-border transactions and offshore evasion. pliance strategies and medium-term modernization

Early warning for shifts in taxpayer compliance is plans. Sustaining revenue collection over the medium

crucial for prevention. The sooner a tax agency can term will require tax agencies to address their most

identify an increase in noncompliance, the faster it fundamental weaknesses (such as poor organiza-

can respond. Few tax agencies, however, have the tional and staffing arrangements, weak taxpayer

capacity to estimate the precise level of the overall services and enforcement programs, and outdated

tax gap. In this situation, tax agencies should identify information systems). By their nature, such problems

and track compliance indicators that can be more can be addressed only over the medium term, but in

easily measured, such as increases in late fi ling of tax developing a compliance strategy for the economic

returns and growth in tax arrears. crisis, tax agencies should not neglect their medium-

Government support for tax administration is term goals.

critical. Like all government agencies, tax agencies 11

tighter domestic fi

scal constraints. These pres- has not been in the spotlight. Moreover, an

sures must be resisted. A substantial increase in extensive theoretical literature explores the

aid, at least in line with existing international possibility of low-income countries falling into

commitments, is essential to allow developing prolonged periods of underdevelopment, com-

12

countries, especially those in vulnerable debt monly known as poverty traps. Finally, cri-

situations and with limited alternative sources ses can result in sharp declines in investment in

of fi

nance, to generate resources for higher education and health, declines that potentially

13

growth, improve social protection for the most can have long-lasting effects.

vulnerable, and enhance food security. Past growth

The medium- and long-term This section thus puts the current crisis in

economic eff

ects of the crisis in historical perspective and examines the pros-

low-income countries pects for growth in the medium to long run.

Although the uncertainties are enormous, and

Over the past few decades, a low-income coun- the light that recent history can shed is limited,

try’s growth rate in one decade has generally some preliminary and conditional answers are

been a poor predictor of its growth rate in the possible.

next decade, while many policies and country Transmission mechanisms from the global

characteristics are more stable. An emerging and crisis seem to vary considerably across coun-

vibrant empirical literature points to growth tries. While advanced economies have primar-

nonlinearities—accelerations (periods of high ily suffered a fi

nancial and banking crisis, most

growth) and growth decelerations (periods of developing countries primarily were hit by an

abrupt and severe growth slowdowns)—as an external demand effect, although some, nota-

important development fact that until recently

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 87

BOX 3.3 A fi scal rule for commodity exporters: The cases of Chile and Nigeria

zation Fund, creating a comfortable buffer to offset

Several commodity exporters have in recent years the sharp revenue declines in 2009.

adopted medium-term frameworks for fi scal policy Nigeria introduced an oil-price-based fi scal rule in

aimed at reducing the impact of commodity price fl

uc- 2004 as a framework for the annual budget process,

tuations on the domestic economy. These frameworks which was subsequently formalized in the 2007 Fis-

allowed countries to build up sizable reserves during cal Responsibility Act. In the annual Medium-Term

the commodity price boom of 2007–08, helped to Fiscal Strategy presented to parliament, expenditures

stabilize expenditures, and created additional space are set on the basis of relatively prudent projections

for countercyclical policies in 2009. Chile and Nige- for oil prices and production. If actual oil revenues

ria illustrate the benefi ts of such a fi scal rule. exceed the budgeted levels, the surpluses are trans-

Since the beginning of the decade, fiscal poli- ferred to accounts held by the federal, state, and

cies in Chile have been based on a structural fi scal local governments at the central bank according to a

surplus rule aimed at mitigating the effects of fl uc- preset intergovernmental sharing formula. Balances

tuations in prices for copper and molybdenum, the accumulated in the accounts can be used as a source

country’s main commodity exports. Each year, the of budget fi nancing at the various levels of govern-

authorities make a calculation of structural revenue, ment if the actual oil price falls below the reference

consistent with potential GDP and long-term projec- price for three consecutive months.

tions of copper and molybdenum prices. The annual The fi scal rule is supported by a limit on the fed-

spending budget is set on the basis of total structural eral government’s fi scal defi cit of 3 percent of GDP,

tax and nontax (mainly mining) revenue minus a enshrined in the Fiscal Responsibility Act. The fi scal

structural surplus. Fiscal surpluses are used to feed rule helped Nigeria stabilize expenditures and accu-

two sovereign wealth funds established under the mulate sizable reserves during the oil price boom of

2006 Fiscal Responsibility Law: the Pension Reserve 2007–08. Although the political backing for the new

Fund to cover the government’s long-term pension approach does not seem to be as strong as in Chile,

liabilities; and the Economic and Social Stabilization and lower levels of government are not bound by the

Fund, established to smooth fi scal expenditure and Fiscal Responsibility Act, the fi scal rule has served

fi nance regular or extraordinary public debt amor- Nigeria well thus far. Notwithstanding extraordi-

tization. The consistent implementation of the fi scal nary distributions from the central bank accounts

rule, which has received broad public support, and in response to political pressures during the oil price

the sovereign wealth funds have served Chile well in boom, Nigeria accumulated suffi cient resources to

recent years. Rising copper prices since the middle avoid a contraction of public spending in 2009, reduc-

of the decade have allowed Chile to accumulate sub- ing the effects of the global economic downturn.

stantial reserves in the Economic and Social Stabili- b. Nigeria

a. Chile 50

100 crude oil,

copper, 40 price change

80 price change 30

60

% 20

rate, 10

40

growth 0

20 –10

–20

0 real public primary

real public primary –30 spending growth

–20 spending growth –40

–40 –50

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: World Economic Outlook.

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

88 MAP 3.2 Across the world, 884 million people lack access to safe water—

84 percent of them in rural areas

Access to water:

Share of population with access to improved water source, % (2006) Green

(D

<50

50–69

70–89

90–99

100 Canada

no data United States Bermuda

(UK)

The Bahamas

Cayman Is. (UK) Turks and Caicos Islands (UK)

Cuba

Mexico Haiti C

Belize Jamaica

Guatemala Honduras

Nicaragua

El Salvador Panama

Costa Rica R.B. de Guyana

Venezuela Suriname

Colombia French Guiana (Fr)

Ecuador

Kiribati Brazil

Peru

Samoa Cook Is. (NZ) French Polynesia (Fr)

American Bolivia

Samoa (US)

Fiji Tonga Paraguay

British Virgin

Dominican Puerto Islands (UK)

Republic Rico (US) Anguilla (UK)

Antigua and Barbuda

U.S. Virgin

Islands (US) Uruguay

Guadeloupe (Fr)

St. Kitts Chile

and Nevis Argentina

Dominica

This map was produced by the Netherlands Montserrat (UK) Martinique (Fr)

Map Design Unit of The World Bank. Antilles (Neth)

The boundaries, colors, denominations St. Lucia

St. Vincent and

Aruba

and any other information shown on Barbados

The Grenadines

(Neth)

this map do not imply, on the part of Grenada

The World Bank Group, any judgment

on the legal status of any territory, or Trinidad

any endorsement or acceptance of and Tobago

R.B. de Venezuela

such boundaries.

Source: World Economic Indicators. 14

bly fuel exporters, were also hit by a terms-of- countries. The analysis consists of four ex-

trade and, perhaps to a lesser extent, a capital ercises, each tackling the importance of exter-

ows effect. From a methodological point of nal shocks from a slightly different angle. The

view, this difference is quite important because fi

rst is a simple event study that illustrates the

these types of external shocks are more famil- growth paths of past crises and compares these

iar to low-income countries than the fi

nancial to the current crisis. The second and third ex-

shock is to advanced countries, therefore per- ercises focus on the medium-run effects of

mitting a more credible historical analysis of the crisis. Specifi

cally, an impulse response

the effects in low-income countries. analysis (a time-series analysis) is employed to

The historical analysis that follows fo- estimate the effects over time, complemented

cuses on external demand, terms of trade, and with fi

ve-year growth panel regressions. The

capital fl

ows as the three main transmission last exercise is concerned with the longer-run

mechanisms of the crisis affecting low-income implications of the crisis using recently devel-

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 89

IBRD 37737

APRIL 2010

nland

Den) Faeroe Norway

Iceland Islands Finland

(Den) Sweden Russian Federation

The Netherlands Estonia

Latvia

Isle of Man (UK) Russian

Denmark Fed. Lithuania

United Belarus

Ireland Germany Poland

Kingdom Belgium

Channel Islands (UK) Ukraine Kazakhstan

Luxembourg Moldova Mongolia

Liechtenstein Romania

Italy

France

Switzerland Bulgaria Kyrgyz

Georgia Uzbekistan

Andorra Azer- D.P.R.

Rep.

Armenia

Spain baijan of Korea

Turkey Turkmenistan

Portugal Tajikistan

Monaco Japan

Greece Syrian

Cyprus Rep. of

Gibraltar (UK) Islamic Rep.

Arab China

Tunisia Malta Korea

Afghanistan

Lebanon of Iran

Rep.

Israel Iraq

Morocco Kuwait

Jordan Bhutan

Pakistan

West Bank and Gaza Bahrain Nepal

Algeria Qatar

Libya Arab Rep.

Former Saudi

of Egypt

Spanish Bangladesh

United Arab

Arabia

Sahara India

Emirates Myanmar Lao

Mauritania Oman P.D.R.

Cape Verde N. Mariana Islands (US)

Mali Rep. of

Niger Thailand Vietnam

Eritrea

Senegal Yemen

Chad Guam (US)

Sudan

The Gambia Burkina Cambodia Philippines Marshall Islands

Djibouti Federated States of Micronesia

Faso

Guinea

Guinea-Bissau Benin Sri

Nigeria Ethiopia

Ghana

Côte

Sierra Leone Central Lanka Brunei

D’Ivoire African Rep. Palau

Liberia Somalia

Cameroon Malaysia

Togo Maldives

Equatorial Guinea Uganda Kiribati

Kenya

Congo Nauru

Singapore

Gabon

São Tomé and Príncipe Rwanda Seychelles

Burundi

Dem. Rep. of Papua Solomon

Indonesia

Congo New Guinea Islands

Comoros

Tanzania Tuvalu

Timor-Leste

Angola Malawi

Zambia Mayotte Fiji

Vanuatu

(Fr)

Zimbabwe Mauritius

Namibia Madagascar

Botswana New

Réunion (Fr)

Mozambique Caledonia

Poland Australia (Fr)

Swaziland

Ukraine

Germany Czech Rep. Slovak Rep. Lesotho

South

Africa

Austria Hungary

Slovenia Romania New

Croatia Zealand

Bosnia and Serbia

San Herz. Bulgaria

Marino Kosovo

Montenegro FYR

Macedonia

Italy

Vatican Albania Greece

City oped methods to capture possible sharp and mediately after the crisis year, it took about

very persistent drops in growth rates. three years for a turnaround to take place in

low-income countries in previous global crises.

The good news is that low-income countries

Global shocks have tended to recover fully in the sense that

In past global crises, growth declined sharply they have reached or surpassed their precrisis

leading toward the crisis year, but low-income growth rate after about fi

ve years.

countries experienced the worst of the crises The current crisis is distinguished by more

about a year after the global low point was synchronization between low-income countries

reached (fi

gure 3.18). In addition, recovery and global cyclical growth movement. Also,

seemed to be faster in the world economy IMF forecasts imply a more rapid V-shape re-

than in low-income countries. More precisely, covery path out of the recession than in previ-

while recovery in the world began almost im- ous crises.

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

90 on average moving around historical averages

FIGURE 3.18 After previous crises, low-income countries recovered

more slowly than the world economy 15

(fi

gure 3.19).

8.0 year of shock Persistence of output loss over time

6.0 using time series or impulse response

analysis

4.0

%

rate, An impulse response function analysis, as in

2.0

growth Cerra and Saxena (2008), examines whether

0.0 terms of trade and external demand have his-

torically been associated with severe output

–2.0 losses and whether such output losses have

–4.0 16

been permanent in low-income countries. Fig-

–5 –4 –3 –2 –1 0 1 2 3 4 5 ure 3.20 presents impulse responses of output

world (3 crises) world, 2009 world, 2009 projected losses, measured as the percentage change from

low-income countries (3 crises) low-income countries, 2009 a linear growth trend to a terms-of-trade shock

low-income countries, 2009 projected 17

and an external demand shock, respectively.

The solid orange line is the mean of output loss,

Source: IMF staff calculations. and the dashed lines refl

ect one standard devia-

Note: The fi gure plots the average per capita GDP growth in the world and in low-income countries

fi ve years before and fi ve years after the global crises (centered at zero on the horizontal axis) of 1975, tion from the mean. A key assumption is that

1982, and 1991, and the current crisis. Also shown in dashed lines are IMF projections until 2013. countries will eventually return to the growth

rate existing before the shock. This assumption

FIGURE 3.19 Growth of terms of trade and external demand in is quite reasonable because most of the low-

low-income countries in past and current crises income countries considered in these exercises

tend to revert to their preexisting growth trend

6 year of shock in the fi

ve years following the shock.

4 The main message is that the impact on

output is negative and highly persistent under

2

% both types of shock, but especially under exter-

rate, 0 nal demand shocks. Output losses continue to

growth rise without a sign of a reversal even 10 years

–2 after an external demand shock, mounting to

–4 a cumulative loss of over 6 percent of GDP.

This result may stem from interactions of ex-

–6 ternal demand shocks with private and public

5

–5 –4 –3 –2 –1 0 1 2 3 4 investment decisions or policy responses. The

external demand (3 crises)

average terms of trade output loss path eventually becomes fl

at as

current terms of trade, 2009 external demand, 2009

terms of trade, 2009 projected external demand, 2009 projected growth reaches its precrisis rate. But after a

decade, lower growth and a substantial loss of

Source: IMF staff calculations. output is likely to have detrimental effects on

Note: The fi gure plots the terms of trade and external demand growth in low-income countries fi ve tax revenues, income, and certainly welfare.

years before and fi ve years after the global crises (centered at zero on the horizontal axis) of 1975,

1982, and 1991, and the current crisis. Also shown in dashed lines are IMF projections until 2013. The impulse response analysis is replicated

for Sub-Saharan Africa (fi

gure 3.21). One no-

table difference is that terms-of-trade shocks

seem to have had a larger and more persistent

Unlike previous crises in which terms-of-

trade growth suffered a sharp downturn rela- effect than external demand shocks in the rest

tive to external demand growth, the current of low-income countries. Many Sub-Saharan

crisis is characterized by a sharp decline in countries are commodity exporters, particu-

export demand, with terms-of-trade growth larly fuel exporters, and are thus more prone to

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 91

FIGURE 3.20 Output losses are highly persistent, especially under external demand shocks

a. Terms of trade, low-income countries b. External demand, low-income countries

0

0

trend trend –2

baseline baseline

–1 –4

–2

from from

deviation deviation

–3 –6

% %

–4 –8

0 2 4 6 8 10 0 2 4 6 8 10

years after the shock years after the shock

Source: IMF staff calculations.

Note: Impulse response of output loss in low-income countries to terms-of-trade and external demand shocks. Dashed lines are 1 standard deviation from

the mean output loss.

FIGURE 3.21 In Sub-Saharan Africa terms-of-trade shocks have larger and more persistent eff ects

a. Terms of trade, Sub-Saharan Africa b. External demand, Sub-Saharan Africa

0 2

trend trend

–2

baseline baseline 0

–4

from from –2

deviation deviation

–6 –4

% %

–8 –6

0 2 4 6 8 10 0 2 4 6 8 10

years after the shock years after the shock

Source: IMF staff calculations.

Note: Impulse response of output loss in Sub-Saharan Africa countries to terms-of-trade and external demand shocks. Dashed lines are 1 standard deviation

from the mean output loss.

terms-of-trade shocks. This issue is explained sults are based on panel regressions that com-

further below regarding growth downbreak. bine time-series and cross-country informa-

19

tion, and the sample is restricted to nonfuel

exporters. Fuel exporters are excluded from

Regression analysis the baseline sample because these countries’

A third exercise employs fi ve-year panel growth experience has been heavily infl

uenced

growth regressions as an alternative approach by external demand for fuel. In the baseline

to investigating the impact of terms-of-trade, specifi

cation, per capita growth is regressed on

external demand, and foreign direct invest- lagged per capita GDP growth, and the three

ment (FDI) shocks on medium-term per capita shock variables (growth in terms of trade and

18

GDP growth. In particular, the estimation re- external demand and the lag of the difference

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

92

TABLE 3.4 Growth regression results

Entire time period Before 1989 After 1989

(1) (2) (3) (4) (5) (6) (7) (8) (9)

Low-income Other Low-income Other Low-income Other

countries, countries, countries, countries, countries, countries,

Variables All non-fuel non-fuel All non-fuel non-fuel All non-fuel non-fuel

Lagged growth –0.209*** –0.167** –0.237** –0.577*** –0.487*** –0.662*** –0.292*** –0.287*** –0.261***

(0.066) (0.077) (0.095) (0.092) (0.096) (0.110) (0.063) (0.080) (0.083)

Growth in terms of trade 0.123*** 0.115* 0.111** 0.031 0.030 0.023 0.156** 0.131* 0.182***

(0.047) (0.064) (0.053) (0.028) (0.046) (0.028) (0.063) (0.077) (0.066)

Growth in external demand 2.603*** 1.960*** 3.419*** 1.332** 0.617 2.599** 1.727*** 1.665* 1.769**

(0.606) (0.736) (0.786) (0.609) (0.599) (1.135) (0.666) (0.938) (0.706)

Lagged change in (FDI / GDP) 0.631*** 0.221 1.010*** 0.599 –0.404 1.773*** 0.783*** 0.517* 0.953***

(0.187) (0.222) (0.270) (0.633) (0.732) (0.528) (0.243) (0.305) (0.319)

Observations 529 281 248 181 92 89 348 189 159

Number of countries 88 48 40 86 47 39 88 48 40

Source: IMF staff calculations

Robust standard errors in parentheses

*** p < 0.01; ** p < 0.05; * p < 0.1.

in FDI-to-GDP ratio) are all measured in fi

ve- fi

cient becomes positive and signifi

cant. That

20

year averages. Columns 1–3 in table 3.4 may not be surprising given that FDI in low-

present results for “All” nonadvanced nonfuel income countries has been plentiful only in the

21

countries, nonfuel low-income countries, and The broad message of this

past decade or so.

nonfuel non-low-income countries. The com- exercise is that regression results seem to rein-

parison between low-income countries and force the impulse response fi

ndings showing

non-low-income countries is intended to pro- economically signifi

cant effects of the shocks

vide some insights into the differential effects in the medium run.

of these shocks to the two income groups.

For low-income countries, terms-of-trade Growth downbreaks

growth and external demand growth obtain

positive and signifi

cant coeffi

cient estimates, The analysis shows that external demand

indicating a positive impact on medium-term shocks, such as those faced by low-income

growth (column 2 of table 3.4). While the countries in 2009, cause growth to slow down

coeffi

cient estimate on FDI for low-income not just immediately but for several years. An

countries using the entire time period in the even greater concern, though, is the risk that

sample is insignifi

cant, it is highly signifi

cant the global crisis may cause an essentially per-

for “All” and non-low-income countries manent decline in growth in many low-income

along with the coeffi

cient estimates for terms countries—that is, a growth “downbreak.”

of trade and external demand (columns 1 and Many low-income countries have enjoyed

3, respectively). Columns (4–9) present results relatively strong growth over the past 10–15

from splitting the sample in the periods be- years, when a favorable external environ-

fore and after 1989 (the median year in the ment prevailed. The concern is that, with the

sample). Coincidentally, “after 1989” is the global shock, this could change. Underlying

period when growth increased dramatically in this concern is the observation that, whereas

most low-income countries. Note that most of output paths in the advanced countries tend to

the effect of terms-of-trade and external de- be reasonably steady, in developing countries

mand growth for low-income countries has they are often characterized by “mountains,

22

been driven by variation in the period after cliffs, and plains.” This exercise employs the

1989 (columns 5 and 8). Even more notable methodology by Berg, Ostry, and Zettelmeyer

is that in the post-1989 sample the FDI coef- (2008) to obtain growth downbreaks (sus-

GLOBAL MONITORING REPORT 2010 GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES 93

FIGURE 3.22 In low-income countries, growth downbreaks are more associated with terms-of-trade

shocks, giving hope for smoother recovery

a. Growth downbreaks vs. b. Growth downbreaks vs.

persistent terms-of-trade shock persistent external demand shock

10

10

downbreaks downbreaks 5

5

growth growth

GDP GDP

# # 0

0 –5 –4 –3 –2 –1 0 1 2 3 4 5 –5 –4 –3 –2 –1 0 1 2 3 4 5

year of shock year of shock

Source: Berg and others forthcoming.

Note: The left panel plots the number of GDP growth downbreaks in a large sample of low-income countries during the periods leading up to and following

a large persistent terms-of-trade shock (year 0 on the horizontal axis). A large persistent terms-of-trade shock is defi ned as the worst 10 percent of the distri-

bution of all terms-of-trade shocks, measured as the diff erence of the average three-year terms-of-trade growth before and after a year of shock. The right

panel is the same, except that the shock is to external demand, measured as partner-country real growth weighted by export shares.

tained declines in the rate of growth) in low- Notes

income countries and to explore whether 1. In this chapter, the group of developing coun-

terms-of-trade and external demand shocks tries includes mainly low-income countries and

are correlated with such “cliffs.” some middle-income countries that are not

One pattern emerging from fi

gure 3.22 is considered emerging economies. High-income

that persistent negative terms-of-trade shocks oil-exporting countries are excluded from this

have often coincided with growth downbreaks category.

in the past. However, persistent negative part- 2. IMF 2009g, box 1.2; IMF 2009d.

3. The adequacy of reserves depends on many

ner-country demand shocks have shown no factors, including the volatility of exports and

association with growth downbreaks. This imports, fl

uctuations in the terms of trade, the

phenomenon may be related to the fact that level and maturity structure of external debt,

terms-of-trade changes are usually strongest and the vulnerability to sudden shifts in inter-

in commodity sectors, and that these sectors national capital movements. While reserve ad-

often fi

nd it more diffi

cult to adjust to the new equacy should be assessed country by country,

environment than do, for instance, industrial a level equivalent to three months of imports

sectors. The supply factors that produce the is often used as a rule of thumb, especially for

commodities in question cannot easily switch low-income countries. For a discussion on op-

to other uses, such as satisfying domestic de- timal reserve determination, with a focus on

low-income countries, see Drummond and

mand or fi

nding other export markets. The re- Dhasmana (2008).

sulting decline in foreign income could squeeze 4. The evolution of monetary policy stance is ap-

imports and activity persistently, thus impeding proximated by the Monetary Conditions In-

productive activities throughout the economy. dex (MCI), a summary indicator of the impact

This remarkable observation suggests that of policy rates and exchange rates on domestic

if indeed the current crisis has affected primar- demand. The MCI combines nominal short-

ily low-income countries through external de- term interest rates and the nominal effective

mand and not through terms of trade, there exchange rate (with a one-third weight for the

may be more reason for hope for a smoother latter) in a single index. The change in the in-

23

recovery. dicator is calculated up to 2009Q3, except for

GROWTH OUTLOOK AND MACROECONOMIC CHALLENGES GLOBAL MONITORING REPORT 2010

94 16. Daniel Leigh very helpfully provided his Stata

Vietnam and Rwanda, which have data only

until 2009Q1. The MCI is a useful indicator code and invaluable input. For methodological

of direction in the monetary policy stance: it is details, see Cerra and Saxena (2008) and IMF

simple to calculate and based on data readily 2009g, ch. 4.

available. However, it also suffers from vari- 17. The shock dummy variable for both terms of

ous caveats (including, for example, the use of trade and external demand was constructed as

common weights across diverse countries), so follows: A restricted sample was constructed in

detailed country results need to be interpreted which values below and above the 1st and 99th

with some caution. percentiles were excluded to mitigate the effects

5. In many countries that reduced rates in 2009, from extreme values. The crisis periods belong

infl

ation came down faster than nominal rates, to the left tail of the moving-average growth

propping up real interest rates. Temporary (based in two periods) distribution, where the

factors, such as commodity price movements, left tail is based on one standard deviation of

may have contributed to the fall in infl

ation, the restricted sample defi

ned above. Results are

however, mitigating the impact of higher real qualitatively similar to two alternative shock

rates on spending and investment decisions. defi

nitions considered.

6. See IMF 2009e and Baldacci and Kumar, 18. A similar estimation methodology was fol-

forthcoming. An increase in fi

scal defi

cits of 1 lowed in Drummond and Ramirez (2009).

percent of GDP is found to increase 10-year 19. Using a statistical estimation method called

nominal bond yields by about 20 basis points generalized method of moments (GMM).

in the medium term, and an increase in the 20. An alternative growth regression specifi

cation

debt-to-GDP ratio of 1 percent increases rates would be the Barro-Solow type regression.

by approximately 5 basis points. Although the This alternative was not considered, because

econometric analysis is based on a sample of it suffers from the well-documented endogene-

advanced and emerging economies, it is plau- ity and omitted variable problems, which the

sible that low-income countries show similar specifi

cation used here is less subject to.

relations between defi

cits, debt, and interest 21. The robustness of these results to alterna-

rates. tive specifi

cations and subsamples has been

7. For a detailed discussion of exit strategies see checked.

IMF 2010a. 22. Pritchett 2000.

8. IMF 2010b. 23. The defi

nitions of “persistent” and “large” can

9. IMF 2009a. be found in the note to fi

gure 3.22. It turns out

10. This represents approximately 0.5–1.2 per- that large negative external demand shocks

cent of 2008 world GDP. See Adler and others such as those experienced by many countries

(2009). in 2009 are not unprecedented for many low-

11. Hausmann, Pritchett, and Rodrik 2005; and income countries. In the sample used for fi

gure

Berg, Ostry, and Zettelmeyer 2008. 3.22, there were 68 instances in which coun-

12. See the literature review in Azariadis and Sta- tries faced external demand shocks larger than

churski (2007) and more specifi

cally the debt trap they faced in 2009 (assuming IMF projections

model in Kehoe and Levine (1993). for the out-years).

13. Benhabib and Spiegel 1994; Krueger and Lin-

dahl 2001.

14. Data are from IMF. External demand is partner- References

country real GDP growth, 2000 = 100, weighted

by trade exports to all partner countries (APR Adler, M., C. Brunel, J. C. Hufbauer, and J. J.

2009 Global Economic Environment). Terms Schott. 2009. “What’s on the Table? The Doha

of trade are for goods (World Economic Out- Round as of August 2009.” Working Paper

look [WEO] latest update). Capital fl

ows are 09-6. Peterson Institute for International Eco-

proxied by direct investment in reporting econ- nomics. Washington, DC.

omy in billions of U.S. dollars. Azariadis, C., and J. Stachurski. 2007. “Poverty

15. Data on foreign direct investment were not Traps.” In Handbook of Economic Growth,

available to produce a similar plot. This ob- Vol. 1, Ch. 5, edited by P. Aghion and S. N.

servation is also shown in more formal growth Durlauf. Amsterdam: Elsevier Science.

regression analysis in Berg and others (work Baldacci, E., and M. Kumar. Forthcoming. “Defi

-

in progress). cits, Debt, and Interest Rates.” IMF working

paper. Washington, DC.

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Benhabib, J., and M. Spiegel. 1994. “The Role IMF (International Monetary Fund). 2009a. “Fis-

cal Rules: Anchoring Expectations for Sustain-

of Human Capital in Economic Development: able Public Finances.” Washington, DC (www.

Evidence from Cross-Country Data.” Journal of imf.org/external/np/pp/eng/2009/121609.pdf).

Monetary Economics 34: 143–73. ———. 2009b. “Global Financial Stability Re-

Berg, A., J. D. Ostry, and J. Zettelmeyer. 2008. port.” Washington, DC (October).

“What Makes Growth Sustained.” Working ———. 2009c. “Regional Economic Outlook-

Paper 08/59. International Monetary Fund, Sub-Sahara Africa.” Washington, DC (Fall).

Washington, DC. ———. 2009d. “Review of Recent Crisis Pro-

Berg, A., C. A. M Pattillo, H. Weisfeld, C. Papa- grams.” Washington, DC (September 14).

georgiou, N. Spatafora, and S. P. Tokarick. ———. 2009e. “The State of Public Finances Cross

Forthcoming. “The Short-Run Effects of the Country.” IMF Staff Position Note, SPN/09/25.

Crisis in Low-Income Countries.” International Washington, DC (November).

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Cerra, V., and S. C. Saxena. 2008. “Growth Dy- ington, DC (Spring).

namics: The Myth of Economic Recovery.” ———. 2009g. World Economic Outlook. Wash-

ington, DC (October).

American Economic Review 98: 439–57. ———. 2010a. “Exiting from Crisis Intervention

Drummond P., and A. Dhasmana. 2008. “Foreign Policies and Fiscal Consolidation in the Post-

Reserve Adequacy in Sub-Saharan Africa.” Crisis World.” Washington, DC (February).

Working Paper WP/08/150. International Mon- ———. 2010b “Strategies for Fiscal Consolida-

etary Fund, Washington, DC. tion in the Post-Crisis World.” Washington, DC

Drummond P., and G. Ramirez. 2009. “Spillovers (February).

from the Rest of the World into Sub-Saharan Kehoe, T., and D. Levine. 1993. “Debt-Constrained

African Countries.” Working Paper WP/09/155. Asset Markets.” Review of Economic Studies

International Monetary Fund, Washington, 60: 865–88.

DC. Krueger, A. B., and M. Lindahl. 2001. “Education

Erickson and others 2004<<Please complete or de- for Growth: Why and for Whom?” Journal of

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Hausmann, R., L. Prichett, and D. Rodrik. 2005. Pritchett, L. 2000. “Understanding Patterns of

“Growth Accelerations.” Journal of Economic Economic Growth: Searching for Hills among

Growth 10: 303–29. Plateaus, Mountains, and Plains.” World Bank

Economic Review 14: 221–25. 4

Outlook for the Millennium

Development Goals

H

ow will the global economic crisis numbers— additional children dying or

alter precrisis trends in the Millen- uneducated, additional people left without

nium Development Goals (MDGs)? clean water—could be large because of the

With only fi ve years left until the target date size of the population underlying each rate.

of 2015, it is obvious that several of the Countries can achieve better development

MDGs will not be attained, globally or by a outcomes through improved policies, most

majority of countries. Many of the goals are notably shifts in expenditures, increases in

too high for low-income countries, given their domestic revenue, and better service deliv-

low starting points. Many countries, includ- ery. Stronger policies are unlikely to com-

ing low-income ones, have seen substantial pensate fully for the deterioration in human

gains in recent years, however, and entered development indicators that result from

the current crisis in a stronger position than slower growth, however. In the current con-

in past crises (chapters 1 and 2). Important text, better development outcomes will thus

questions are whether the gains will be pre- depend on the speed at which the global eco-

served, and what happens if the fragile recov- nomic recovery supports increases in devel-

ery slips into a prolonged stagnation. oping countries’ export revenues and exter-

The crisis is likely to have a lasting impact nal fi nance.

on human development indicators that will This chapter looks at these issues in two

not overcome even a robust economic recov- ways. It first presents alternative scenarios

ery. Although growth in emerging and devel- for progress on some key human develop-

oping countries is currently accelerating, ment–related MDGs based solely on dif-

should growth slow or deteriorate, progress ferent forecasts of GDP growth, with the

toward the MDGs will suffer even more. A results aggregated by regions. This relatively

decline in growth would have a signifi cant limited approach provides a general sense

impact on poverty and undernourishment. of the impact of the crisis and the potential

The impact of a growth slowdown on some envelope for the MDGs looking ahead over

of the other MDG indicators analyzed is the next fi

ve to ten years. The second part of

more muted, although the cost in absolute the chapter then takes into account a broader

GLOBAL MONITORING REPORT 2010 97

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

98 set of determinants of progress in the MDGs, economic growth and delivery of services

including fi scal policy (public expenditures to the poor—the very two factors likely to

and their composition plus revenue efforts), be most affected by global economic crisis.

export revenues, terms of trade, aid flows, That is why the lessons of history regarding

remittances, and foreign borrowing. This the effects of growth decelerations on various

richer analysis allows a much more robust human development indicators are examined

view of how the external economic environ- in chapter 2. Although not the only driver,

ment and developing-country policies will growth will likewise be a key factor in pro-

affect progress toward the MDGs. The scope jecting the postcrisis trends for the MDGs.

of the analysis, however, and the variables The other key factor, effective service deliv-

involved, make it extremely diffi cult to pro- ery, is diffi cult to assess even in the best of

2

vide comprehensive forecasts of human devel- circumstances.

opment indicators for developing countries. The current crisis has resulted in a deterio-

Instead, this section illuminates the channels ration in human development indicators that

that infl uence MDG outcomes through the will have important future effects even with a

lens of two types of low-income developing- robust economic recovery. If growth were to

country structure based on natural endow- stagnate or slow, the impact on human wel-

ments—those that are resource poor and fare in developing countries would be severe.

1

those that are resource rich. Projecting the aggregate outlook for the

3

MDGs is fraught with diffi culties (box 4.1).

Nevertheless, it is essential to assess where

Forward analysis of the MDGs things stand in the aftermath of the crisis,

The original analytical framework under- as developing countries enter a new and less

pinning the assessment of policies as devel- favorable external environment.

oped by the World Bank and the Interna- The alternative scenarios of progress

tional Monetary Fund (IMF) in the first toward the MDGs presented here are based

Global Monitoring Report in 2004 remains on a simplified reduced-form analysis link-

very valid today for organizing this policy ing economic growth—the key variable of

assessment (fi gure 4.1). The two key pillars the crisis and the recovery scenarios—to the

4

for achieving the development outcomes are MDG indicators. The simulations are based

FIGURE 4.1 Framework linking policies and actions with development outcomes

POLICIES AND ACTIONS KEY INTERMEDIATE OUTCOMES

Agenda anchored in IN DEVELOPING COUNTRIES

developing countries

• Create a good enabling

climate for economic activity

• Empower and invest in stronger and sustainable

poor people economic growth Achieving the

developed countries

• Enhance support to MDGs

developing country reform

efforts and global public

goods improved delivery of services

to poor people

development agencies

• Better align support to

delivery of development

results

Source: World Bank 2004a.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 99

BOX 4.1 Uncertainty and risk in projecting attainment of the MDGs

vate expenditures. Hence, fi scal adjustment and thus

There are many uncertainties and risks in projecting the implications of slower growth for the MDGs will

development outcomes. One is the strength and tim- vary from country to country depending on circum-

ing of the economic recovery. Another is the com- stances and conditions entering the crisis.

plexity of the relationships between the MDGs and Several studies point to other problems in account-

their determinants, which are still poorly understood. ing for all of the infl uences on human development

Among the MDGs the impact of economic perfor- indicators. An increase in public expenditures does

mance on poverty is better established, although the not necessarily improve education and health out-

elasticity of poverty to growth can vary with country comes; nor does economic growth alone. Links

circumstances and initial conditions. Furthermore, between public expenditures and social sector out-

human development outcomes are influenced by comes are weak. Supply-side factors associated

a wide range of factors, including the evolution of with effective service delivery are preconditions for

household incomes and public resources, as well as improving basic service provision—school facilities,

the consequences of supply and demand for policies, books, health clinics, vaccination programs, qualifi ed

institutional actions, and microlevel services. Given teachers and health staff, and the like. Client demand

the complexity and differing assumptions about the for services and various other factors at the local

recovery, assessments of human development out- level—household incomes, distance and opportunity

comes can be wide ranging. costs, voice and participation of clients, educational

Another important uncertainty in forecasting attainment of mothers, corruption, and cultural and

progress toward the MDGs is fiscal adjustment— religious norms—also matter and may vary by com-

public expenditures and their composition are key munity. The empirical regularity of these potential

determinants of human development indicators in determinants can become diffi cult to establish at the

low-income countries. A deterioration in the mac- country, regional, and global levels.

roeconomic environment may reduce government

income, thus endangering public expenditures essen-

tial for progress toward the MDGs. However, aid,

external borrowing, and international reserves may Source: Dinh, Adugna, and Myers 2002; Adams and Bevan

provide the fiscal space needed to protect social 2000; Filmer, Hammer, and Pritchett 2000, 2002; Devarajan

spending, while remittances may help to support pri- and Reinikka 2004; World Bank 2004.

on GDP growth because it is a major deter- surveys in more than 100 countries and

minant of progress toward the MDGs, and it assumes that the underlying income or expen-

is the only determinant that is projected for a diture distribution is relatively stable during

5

large group of countries and that is anchored changes in economic growth. The poverty

by the short-, medium-, and long-term eco- analysis brings 31 new household surveys

nomic outlook in the International Monetary to the 2010 Global Monitoring Report and

Fund’s (IMF) World Economic Outlook new projections of per capita income growth

and the long-term growth projections that in the aftermath of the crisis. The analysis

underpin the World Bank’s Global Economic also considers four other MDGs—primary

Prospects. Because of the many uncertainties education completion, infant mortality,

described in box 4.1, these projections relat- gender equality in education, and access to

ing progress in the MDGs to alternative sce- clean water—for which aggregate quanti-

narios for GDP growth are necessarily subject tative analysis is currently feasible (future

to large margins of error and should be taken reports will expand the analysis to other

as illustrative. MDGs). The relationship between GDP

The estimated relationship between growth and each indicator is estimated for

poverty and growth is based on household each country.

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

100 MAP 4.1 In 2007, 72 million children worldwide were denied access to education

Primary completion rate:

% of relevant age group (2004-09) Green

(De

<50

50–69

70–84

85–94

≥95 Canada

no data United States Bermuda

(UK)

The Bahamas

Cayman Is. (UK) Turks and Caicos Islands (UK)

Cuba

Mexico Haiti C

Belize Jamaica

Guatemala Honduras

Nicaragua

El Salvador Panama

Costa Rica R.B. de Guyana

Venezuela Suriname

Colombia French Guiana (Fr)

Ecuador

Kiribati Brazil

Peru

Samoa Cook Is. (NZ) French Polynesia (Fr)

American Bolivia

Samoa (US)

Fiji Tonga Paraguay

British Virgin

Dominican Puerto Islands (UK)

Republic Rico (US) Anguilla (UK)

Antigua and Barbuda

U.S. Virgin

Islands (US) Uruguay

Guadeloupe (Fr)

St. Kitts Chile

and Nevis Argentina

Dominica

This map was produced by the Netherlands Montserrat (UK) Martinique (Fr)

Map Design Unit of The World Bank. Antilles (Neth)

The boundaries, colors, denominations St. Lucia

St. Vincent and

Aruba

and any other information shown on Barbados

The Grenadines

(Neth)

this map do not imply, on the part of Grenada

The World Bank Group, any judgment

on the legal status of any territory, or Trinidad

any endorsement or acceptance of and Tobago

R.B. de Venezuela

such boundaries.

Source: World Development Indicators.

The results show that growth generally Three global scenarios

was significantly related to progress in the for progress on human

human development indicators. However, development–related MDGs

confi rming all the caveats mentioned above,

the estimations using growth alone accounted Three global scenarios for GDP growth

for only 30–40 percent of past variations of address the risks of the current global eco-

the MDG indicators across countries and nomic crisis: a postcrisis trend; a high-

time. These coefficients were then used to growth or precrisis trend; and a low-growth

forecast each MDG indicator for each coun- scenario.

try, based on alternative scenarios for GDP The postcrisis trend assumes a relatively

growth. Although it is certainly possible to rapid economic recovery in 2010, with

include other determinants of the MDG indi- strong growth continuing into the future, as

6

cators in the estimation, it is not practical to described in chapter 2. This is essentially the

forecast these other indicators on a country- base case forecast for growth in developing

by-country basis (box 4.2). countries after the crisis.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 101

IBRD 37741

APRIL 2010

nland

en) Faeroe Norway

Iceland Islands Finland

(Den) Sweden Russian Federation

The Netherlands Estonia

Latvia

Isle of Man (UK) Russian

Denmark Fed. Lithuania

United Belarus

Ireland Germany Poland

Kingdom Belgium

Channel Islands (UK) Ukraine Kazakhstan

Luxembourg Moldova Mongolia

Liechtenstein Romania

Italy

France

Switzerland Bulgaria Kyrgyz

Georgia Uzbekistan

Andorra Azer- D.P.R.

Rep.

Armenia

Spain baijan of Korea

Turkey Turkmenistan

Portugal Tajikistan

Monaco Japan

Greece Syrian

Cyprus Rep. of

Gibraltar (UK) Islamic Rep.

Arab China

Tunisia Malta Korea

Afghanistan

Lebanon of Iran

Rep. Iraq

Israel

Morocco Kuwait

Jordan Bhutan

Pakistan

West Bank and Gaza Bahrain Nepal

Algeria Qatar

Libya Arab Rep.

Former Saudi

of Egypt

Spanish Bangladesh

United Arab

Arabia

Sahara India

Emirates Myanmar Lao

Mauritania Oman P.D.R.

Cape Verde N. Mariana Islands (US)

Mali Rep. of

Niger Thailand Vietnam

Eritrea

Senegal Yemen

Chad Guam (US)

Sudan

The Gambia Burkina Cambodia Philippines Marshall Islands

Djibouti Federated States of Micronesia

Faso

Guinea

Guinea-Bissau Benin Sri

Nigeria Ethiopia

Ghana

Côte

Sierra Leone Central Lanka Brunei

D’Ivoire African Rep. Palau

Liberia Somalia

Cameroon Malaysia

Togo Maldives

Equatorial Guinea Uganda Kiribati

Kenya

Congo Nauru

Singapore

Gabon

São Tomé and Príncipe Rwanda Seychelles

Burundi

Dem. Rep. of Papua Solomon

Indonesia

Congo New Guinea Islands

Comoros

Tanzania Tuvalu

Timor-Leste

Angola Malawi

Zambia Mayotte Fiji

Vanuatu

(Fr)

Zimbabwe Mauritius

Namibia Madagascar

Botswana New

Réunion (Fr)

Mozambique Caledonia

Poland Australia (Fr)

Swaziland

Ukraine

Germany Czech Rep. Slovak Rep. Lesotho

South

Africa

Austria Hungary

Slovenia Romania New

Croatia Zealand

Bosnia and Serbia

San Herz. Bulgaria

Marino Kosovo

Montenegro FYR

Macedonia

Italy

Vatican Albania Greece

City past responses to severe external shocks in

The precrisis trend gives the forecast developing countries.

path for the MDGs if developing countries

had continued their impressive growth per-

formance during 2000–07, the period just The impact on the very poor

before the global economic crisis. The impact

of the crisis on the MDGs can thus be mea- Recent economic shocks have taken a toll on

sured by comparing the postcrisis trend with the poor. The crisis left an estimated 50 mil-

this one. lion more people in extreme poverty in 2009,

The low-growth scenario assumes that and some 64 million more will fall into that

the recovery projected for the postcrisis trend category by the end of 2010 relative to a pre-

7

will not take place in the medium run. The crisis trend. New estimates suggest that the

scenario assumes little or no growth for large global spike in food prices in 2008 may

about five years, when it begins to slowly have led the incidence of undernourishment

recover. This scenario follows the pattern of to rise by around 63 million people, while

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

102

BOX 4.2 Estimating the impact of growth on human development indicators

jumps from 30–40 percent using growth as the sole

The relationship between GDP growth and the explanatory variable to 80 percent when the index of

MDGs was estimated taking into account a policy policy and initial conditions are taken into account.

index reflecting the country’s level of policy and These estimations help to refi ne the understanding

institutions plus a set of initial conditions (for exam- of the relationship between growth and the human

ple, adult female literacy rate, urbanization, ethnic development indicators. However, it did not prove

fractionalization, level of income, and location by

a possible to use the policy index or the initial condi-

geographical region). Several policy indexes had a tions in the alternative scenarios for future progress

signifi cant relationship with the MDG indicators. in the MDG indicators, given the diffi culties involved

Among these, the World Bank’s Country Policy and in forecasting these variables in many countries.

Institutional Assessment (CPIA) rating was selected

because it is a broader measure than one based solely

on governance indexes. It covers economic manage- a. The use of the policy index is similar to the empirical works

ment, structural policies, policies for social inclu- of Wagstaff and Claeson (2004), Rajkumar and Swaroop

sion and equity, and public sector management and (2002), and Filmer and Pritchett (1999). The CPIA is avail-

institutions. The explanatory power of the equations able in the World Development Indicators.

the crisis itself may have led to an additional reductions in the poverty rate, to 15 percent

41.3 million undernourished people, or 4.4 in 2015, well below the MDG target of 20.4

percent more undernourished people in 2009 percent (table 4.1). Nevertheless, the crisis has

than would have been the case without the imposed a lasting cost on poverty reduction.

8

economic crisis. Had the crisis not interrupted the rapid eco-

A rapid economic recovery (the postcrisis nomic progress made by developing countries

trend) would improve the situation for many through 2007 (the precrisis trend), the pov-

of the extremely poor and lead to substantial erty rate at $1.25 a day would have fallen to

TABLE 4.1 Poverty in developing countries, alternative scenarios, 1990 –2020

Region and scenario 1990 2005 2015 2020

Global level Percentage of the population living on less than $1.25 a day

Postcrisis 41.7 25.2 15.0 12.8

Precrisis 41.7 25.2 14.1 11.7

Low-growth 41.7 25.2 18.5 16.3

Number of people living on less than $1.25 a day (millions)

Postcrisis 1,817 1,371 918 826

Precrisis 1,817 1,371 865 755

Low-growth 1,817 1,371 1132 1053

Sub-Saharan Africa Percentage of the population living on less than $1.25 a day

Postcrisis 57.6 50.9 38.0 32.8

Precrisis 57.6 50.9 35.9 29.9

Low-growth 57.6 50.9 43.8 39.9

Number of people living on less than $1.25 a day (millions)

Postcrisis 296 387 366 352

Precrisis 296 387 346 321

Low-growth 296 387 421 428

Source: World Bank staff calculations using the PovcalNet database.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 103

about 14 percent by 2015, implying that an are projected to miss the poverty reduction

additional 53 million people would have been MDG at poverty lines of both $1.25 and $2

lifted out of extreme poverty. Things could a day. However, the poverty rates in these

be worse than the postcrisis trend, however. countries are very low to start with (about 4

If the economic outlook deteriorates to the percent at $1.25 a day and about 9 percent

low-growth scenario, the poverty rate could at $2 a day in 2005), so a higher poverty line

fall only to 18.5 percent, with an additional of $4 to $5 a day is more meaningful for this

214 million people living in absolute poverty group of countries.

by 2015 (relative to the postcrisis trend). Overall, the projection for the $2 a day

On current or postcrisis growth trends, poverty threshold is less promising. In the

poverty in Sub-Saharan Africa is projected postcrisis trend, 2 billion people, or one-third

to drop to 38 percent by 2015—more than of the population of developing countries—

9 percentage points short of its target. Before more than half of the 1990s level—remain in

the crisis the region had been on a path to poverty at $2 a day.

reach a poverty rate of 35.9 percent, which

would have lifted another 20 million people Impact on selected human development

out of poverty by 2015. If growth stagnates indicators

into the low-growth scenario, the trend gap

could more than double, implying an addi- The crisis will have serious and lasting costs

tional 55 million people remaining in extreme and gaps for other human development

poverty by 2015. indicators as well (fi gure 4.2 and table 4.2).

The long-term nature of the cumulative According to the projections for 2015, as a

effects becomes clearer when global projec- result of the crisis:

tions are extended 10 years forward. The

postcrisis trend suggests that by 2020, 826 • The number of infants dying would increase

million people (12.8 percent) in developing by 55,000. Without the crisis, 260,000

countries will be living on less than $1.25 a additional children under the age of five

day, implying that 71 million more people could have been prevented from dying in

will be living in absolute poverty in 2020 as 2015. The cumulative total from 2009 to

a result of the crisis. The low-growth sce- 2015 could reach 265,000 and 1.2 million,

nario would result in a rise of 227 million respectively. The consequences for infant

living in absolute poverty compared with the mortality in Africa are grave, with some

postcrisis trend. The corresponding increases 30,000–50,000 additional infant deaths

9

in poverty for Sub-Saharan Africa in 2020 in 2009, virtually all of them girls. The

are 31 million more people in poverty for tragedy is not just these added deaths—

the postcrisis trend and 76 million more for more than 3 million infants die in Africa

the low-growth scenario. The fi

ve additional every year, a number that could be reduced

through better policies and interventions.

years would leave Sub-Saharan Africa still • Some 350,000 more students will fail to

short of halving poverty, the MDG target for complete primary school.

2015. • Some 100 million more people will lose

Poverty rates vary considerably among the access to safe drinking water.

other regions (annex tables 4A.1 and 4A.2).

Even in the low-growth scenario, the East The impact on gender equality in educa-

Asia and Pacifi c region more than meets its tion and on access to safe water is muted

poverty target, in large part because of Chi- in these scenarios (although even small

na’s success in reducing poverty. South Asia, changes in these indicators can translate into

on the strength of India’s achievement, meets large numbers of people affected) because

the poverty target in the postcrisis trend but these indicators are influenced by forces

not in the low-growth scenario. Middle- that change only slowly. For example, the

income countries in Europe and Central Asia

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

104 FIGURE 4.2 The long-run eff ect of slower growth on selected MDGs is worrisome

a. MDG 2: Primary completion rate a. MDG 2: Primary completion rate by 2015

96 100 100

94 96

92

percent percent 91.8 91.5

90 92 90.4

88 88

86

84 86

2007 2009 2011 2013 2015 2017 2019 target precrisis postcrisis low-growth

low-growth postcrisis precrisis

b. MDG 3: Gender parity in primary b. MDG 3: Gender parity in primary

and secondary education and secondary education by 2015

100

98.0 100

99

97.0 98

percent percent 97 96.5

96.0 96

96 95.6

95

95.0 94

94.0 93

2007 2009 2011 2013 2015 2017 2019 target precrisis postcrisis low-growth

low-growth postcrisis precrisis

c. MDG 4: Child mortality under five c. MDG 4: Child mortality under five by 2015

80

75 69.5

68.6

68.1

73

1,000 1,000 60

71

per per 40 33.7

69

deaths deaths 20

67

65 0

2007 2009 2011 2013 2015 2017 2019 target precrisis postcrisis low-growth

low-growth postcrisis precrisis

d. MDG 7.c: Access to safe drinking water d. MDG 7.c: Access to safe drinking water by 2015

17 16 14

15 12 11

10.1

13 9.6

percent percent

11 8

9 4

7

5 0

2007 2009 2011 2013 2015 2017 2019 target precrisis postcrisis low-growth

low-growth postcrisis precrisis

Source: World Bank staff calculations.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 105

TABLE 4.2 Trends for other MDG human development indicators by region and alternative economic

scenarios 2015

MDG and region Target 1991 2007 Postcrisis Precrisis Low-growth

MDG 2: Primary completion rate (%)

East Asia and Pacifi c 100 101 98 100 100 99.3

Europe and Central Asia 100 93 98 99.9 100 99.9

Latin America and the Caribbean 100 84 100 97.9 100 97.7

Middle East and North Africa 100 78 90 94.9 95.6 93.6

South Asia 100 62 80 82.4 91.7 81.9

Sub-Saharan Africa 100 51 60 67.3 67.6 66.7

All developing countries 100 78 85 91.5 91.8 90.4

MDG 3: Ratio of girls to boys in primary Target 1991 2007

and secondary education (%)

East Asia and Pacifi c 100 89 99 100 100 100

Europe and Central Asia 100 100 102 99.4 100 97.8

Latin America and the Caribbean 100 98 103 100 100 100

Middle East and North Africa 100 78 96 95.6 98.2 94.7

South Asia 100 70 89 92.7 94.4 92.1

Sub-Saharan Africa 100 79 86 89.7 89.9 89.1

All developing countries 100 83 95 96.0 96.5 95.6

MDG 4: Child mortality under fi ve Target 1990 2007

(per 1,000)

East Asia and Pacifi c 19 56 27 24.6 18.6 24.9

Europe and Central Asia 17 50 23 18.8 15.4 21.7

Latin America and the Caribbean 18 55 26 23.7 19.7 25.4

Middle East and North Africa 26 78 38 36.7 29.2 37.3

South Asia 42 125 78 76.0 62.7 76.6

Sub-Saharan Africa 61 183 146 139.5 138.7 141.0

All developing countries 34 101 74 68.6 68.1 69.5

MDG 7.c: Access to improved water source

Target 1990 2006

(% population w/access)

East Asia and Pacifi c 16 32 13 3.3 0.6 4.1

Europe and Central Asia 5 10 5 0 0 1.8

Latin America and the Caribbean 8 16 9 5.4 4.5 7.1

Middle East and North Africa 6 11 12 8.3 7.4 10.0

South Asia 13 27 13 9.3 5.1 10.2

Sub-Saharan Africa 26 51 42 39.1 38.8 39.8

All developing countries 12 24 14 10.1 9.6 11

Source: World Bank staff estimates.

participation by girls in school reflects in In general, the impact of the low-growth

part the educational level of the mother, and scenario on development outcomes will be

access to safe water is affected by the degree cumulative and long term (fi gure 4.3).

of urbanization. The impact of slower growth

on the MDGs increases, however, as the time • If the baseline scenario (the postcrisis trend)

horizon is extended further into the future holds up, human development indicators

(for example, fewer girls being educated now will continue to improve albeit less rapidly

means that eventually women of childbearing owing to the extended impact of the crisis.

age will have less education). By 2015 the differences between the gains

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

106 FIGURE 4.3 The long-run eff ect of slower growth is especially worrisome in Sub-Saharan Africa

a. MDG 2: Primary completion rate by 2015,

a. MDG 2: Primary completion rate, Sub-Saharan Africa Sub-Saharan Africa

70 100 100

69 90

68 80

percent

percent 67 67.6 67.3

70 66.7

66 60

65 50

64 40 target precrisis postcrisis low-growth

63

2008 2010 2012 2014 2016 2018 2020

postcrisis precrisis

low-growth

b. MDG 3: Gender parity in primary and secondary b. MDG 3: Gender parity in primary and secondary

education, Sub-Saharan Africa education by 2015, Sub-Saharan Africa

91.5 100 100

91

90.5 94

percent

90

percent 89.9 89.7 89.1

89.5 88

89

88.5 82

88 target precrisis postcrisis low-growth

87.5

2008 2010 2012 2014 2016 2018 2020

low-growth precrisis

postcrisis

c. MDG 4: Child mortality under five, c. MDG 4: Child mortality under five by 2015,

Sub-Saharan Africa Sub-Saharan Africa

147 160 141

139.5

138.7

145 1,000 120

1,000 143 per 80

per 61.1

141 deaths

deaths 40

139

137 0 target precrisis postcrisis low-growth

135

2008 2010 2012 2014 2016 2018 2020

low-growth postcrisis precrisis

d. MDG 7.c: Access to safe drinking water, d. MDG 7.c: Access to safe drinking water by 2015,

Sub-Saharan Africa Sub-Saharan Africa

41.5 45 39.8

39.1

38.8

41

40.5 30 25.7

40 percent

percent 39.5

39 15

38.5

38 0

37.5 target precrisis postcrisis low-growth

37

2008 2010 2012 2014 2016 2018 2020

low-growth postcrisis precrisis

Source: World Bank staff estimates.

Note: The precrisis period is 2000–07.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 107

projected in the postcrisis trend and those each of the two representative economies are

for the precrisis trend will become discern- given in box 4.3.

ible, especially for human development These simulations use the World Bank’s

outcomes such as primary school comple- Maquette for MDG Simulations (MAMS),

tion and infant mortality. a model that analyzes the implications of

• Like the compounding effects of interest strategic choices for economic outcomes,

rates, these gaps will intensify from 2015 to including changes in human development

2020. A look at the long-term impact reveals indicators (see box 4A.1 in the annex for

11

that the projected slide in human develop- MAMS’ main contribu-

more discussion).

ment outcomes will become damaging and tion is its integration of government services

irreversible unless action is taken now. and their impact on the economy, including

• The world needs to avoid economic stag- on the MDGs and the labor market, within a

nation. If the growth trend in developing standard recursive dynamic computable gen-

countries becomes sluggish for a long time, eral equilibrium framework. Several MAMS

as in the low-growth scenario, development features are useful for assessing the impact of

outcomes will deteriorate or stall, as hap- alternative scenarios on MDGs. The model

pened in many low-income countries in incorporates a formal representation of the

Sub-Saharan Africa during the 1970s and production of government services (educa-

1980s. tion, health, and infrastructure) that takes

into account demand, supply, and effi ciency.

It allows for complementarity or synergy

Spending strategies under less effects across the MDGs—for example, bet-

favorable circumstances ter access to clean water may improve health,

which may boost school attendance, labor

What can developing countries do if the exter- productivity, and economic growth. It shows

nal economic environment remains unfavor- the economywide repercussions of scaling

able, and what impacts might their policy up (or down) human development services,

and spending strategies have on development including the impact on economic growth,

outcomes? The three global growth scenarios relative prices, the exchange rate, and the

provided a broad picture of the likely impact allocation of resources between government

of the crisis on poverty. But these scenarios and nongovernment sectors. And it makes

cannot be used to explore the scope for miti- possible the consideration of sequencing and

gating the effects of external shocks on pov- time-related trade-offs through a recursive

erty through appropriate policy adjustments. treatment of dynamics that tracks indicators

For this purpose, the broad country cover- over time.

age achieved in the scenarios given above is

set aside in favor of a richer analysis of the

impact of policies. The low-income, resource-poor country

To begin, low-income countries are divided

into two groups—those that are resource rich The analysis for the low-income, resource-

10

and those that are resource poor. A repre- poor archetype (LIRP) considers four cases

sentative economy of each type is then con- (the reference year for the analysis is 2009,

structed based on the average indicators for and the simulation period is 2010–20):

all of the low-income countries in that group

(tables 4A.1 and 4A.2 in the annex sum- • The base case is relatively optimistic. It

marize the social and economic indicators assumes that GDP growth recovers by

that characterize each country archetype; 2011 to the growth rate in 2008. The

for the most part they correspond to the lat- annual growth rate in 2012–20 is slightly

est median statistics from the World Bank’s higher than in 2011 (see figure 4.4 for

World Development Indicators database. The GDP growth under different LIRP cases).

assumptions and data used in constructing Growth in foreign aid is slower after 2010

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

108

BOX 4.3 Assumptions for the archetype countries

archetype and 61.8 percent for the LIRR—the

The low-income, resource-rich (LIRR) archetype has median values for the countries in each group. The

a natural resource that it exports. The government poorest statistics for the LIRR result partly from the

receives 70 percent of the income, and foreign inves- “natural resource curse” associated with past con-

tors get the rest. In 2009 government income from the fl icts and corruption; see, for example, Collier and

natural resource was 8.4 percent of GDP. All output Goderis (2007). Median GDP per capita is $598 for

of the natural resource commodity is exported and the LIRP and $482 for the LIRR. Similarly, both the

accounts for 56 percent of the value of total exports. LIRP and the LIRR are assumed to have the median

Government borrowing is 2.6 percent of GDP, and value of their group for share of the population with

foreign debt is 49 percent of GDP. The country access to clean water (MDG 7); the under-fi ve mor-

receives no debt relief during the simulation period. tality rate (MDG 4); and selected education indica-

The low-income, resource-poor (LIRP) archetype is tors, including the gross completion rate for primary

more dependent than the LIRR on foreign aid, which school (MDG 2) and gross enrollment rates at all

equals about 6.5 percent of GDP, and its foreign debt three levels (primary, secondary, and tertiary). The

is higher, at 65 percent of GDP. Like the LIRR, it analysis looks especially at the evolution of MDGs

receives no debt relief during the analysis period. 1, 2, 4, and 7.

The poverty headcount rate at $1.25 a day (the

indicator for MDG 1) is 49.6 percent for the LIRP

Government and nongovernment payments and foreign debt of archetype

countries, 2009

percent of GDP Low-income, Low-income,

Payment resource-poor countries resource-rich countries

Income from natural resource n.a. 8.4

Foreign aid 6.5 1.2

Taxes 20.2 16.0

Private borrowing 0.5 0.4

Foreign borrowing 4.0 2.6

Foreign debt 65.0 48.8

Foreign direct investment 1.9 1.7

Remittances 1.3 1.2

Source: Go and others, forthcoming.

Note: n.a. = not applicable.

than in the previous decade, reflecting in productivity growth. World prices, FDI,

a decline in GDP growth in donor coun- and foreign aid all grow at slower rates

12

tries. Remittance growth and foreign than in the base case (25 percent of base

direct investment (FDI) fall relative to the case rates). The growth slowdown for for-

previous decade, also refl

ecting a decline in eign aid and other government receipts

GDP growth in the countries from which leads to reduced development spending

the payments fl ow. By 2015 world prices (defi ned as spending on education, health,

have recovered to 2008 precrisis levels. water and sanitation, and infrastructure),

• The low-aid case represents an extreme, as the government fails to reduce spending

negative case with a weak recovery in GDP in other areas. Remittances are assumed to

growth (to just 40 percent of real GDP grow at the same annual rate as in the base

growth in the base case), driven by a deteri- case because these payments are based on

orating external environment and a decline personal connections, and there is little

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 109

reason to expect them to respond nega- FIGURE 4.4 Annual GDP growth for LIRP under four cases

tively to slower growth in the developing Low-income, resource-poor archetype

countries. 8.0

• In the low-aid internal 1 case the govern- 7.0

ment makes internal adjustments to offset % 6.0

growth,

the effects on the MDGs of a weak recov- 5.0

ery in GDP and reduced growth in foreign 4.0

annual

infl

ows. The government reduces growth in 3.0

nondevelopment spending (to 90 percent of GDP 2.0

such spending in the base case), increases 1.0

receipts from domestic taxes (by half a 0.0

percentage point of GDP over the base 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

case), and uses the resulting fi scal space to base case low-aid case

expand development spending. low-aid internal 2 case low-aid internal 1 case

• In the low-aid internal 2 case, the govern-

ment further improves policies and service Source: Go and others, forthcoming.

delivery relative to the low-aid internal 1

case, resulting in a moderately higher GDP

13

growth (55 percent of the base-case rate). the increase in taxes (predominantly indi-

rect taxes in low-income countries) reduces

expenditures or incomes of the poor.

Slow growth in the low-income, resource- Under the low-aid internal 2 case, a more

poor country results in a severe deteriora- substantial improvement in MDG indicators

tion in human development indicators. All can be accomplished by combining improved

four of the MDGs covered by the analysis fi scal policies with policies that improve over-

(poverty, primary school gross completion all productivity. Progress toward the MDGs

rate, under-fi ve mortality rate, and share of improves relative to the low-aid internal 1

population with access to safe water) decline and the low-aid cases, although not enough

in the low-aid simulation relative to the base to catch up with the base case.

case (fi gure 4.5). By 2020 the poverty rate is Thus policy adjustments to support devel-

more than 20 percentage points higher, the opment spending and improve overall eco-

under-five mortality rate 15 points higher, nomic productivity are critical to limiting the

and the share of the population with access impact on human development indicators of

to safe water 4 percentage points lower in the an externally induced decline in GDP growth

low-aid case than in the base case. The gross (for example, the current crisis). However, to

primary school completion rate improves in the extent that policies cannot maintain trend

all scenarios, as students enrolled in lower growth in the face of an external shock, then

grades (reflecting recent strong expansion a deterioration in human development indi-

in primary enrollment) proceed through the cators is inevitable. This fact highlights the

primary level. Because of a natural decline in importance of a global response to the crisis

the intake of out-of-cohort students, progress

14 that focuses on ensuring strong fl

ows of aid,

tends to level off. limiting the deterioration in developing coun-

With better expenditure management tries’ access to external fi nance, and main-

and internal effort in the low-aid internal 1 taining open export markets to permit trade

case, including a government shift in expen- expansion at more attractive world prices.

ditures to protect development spending and

increased domestic tax collection, all the

MDGs (except poverty reduction) do better The low-income, resource-rich country

than under the low-aid case. The poverty The pattern of results for the low-income,

rate in the low-aid internal 1 case is margin- resource-rich archetype (LIRR) is similar to

ally higher than in the low-aid case, because

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

110 MAP 4.2 Tuberculosis kills around 1.3 million people a year, or 3,500 a day

Tuberculosis rate:

Incidence of tuberculosis per 100,000 people (2008) Green

(De

≥500

250–499

100–249

50–99

<50 Canada

no data United States Bermuda

(UK)

The Bahamas

Cayman Is. (UK) Turks and Caicos Islands (UK)

Cuba

Mexico Haiti C

Belize Jamaica

Guatemala Honduras

Nicaragua

El Salvador Panama

Costa Rica R.B. de Guyana

Venezuela Suriname

Colombia French Guiana (Fr)

Ecuador

Kiribati Brazil

Peru

Samoa Cook Is. (NZ) French Polynesia (Fr)

American Bolivia

Samoa (US)

Fiji Tonga Paraguay

British Virgin

Dominican Puerto Islands (UK)

Republic Rico (US) Anguilla (UK)

Antigua and Barbuda

U.S. Virgin

Islands (US) Uruguay

Guadeloupe (Fr)

St. Kitts Chile

and Nevis Argentina

Dominica

This map was produced by the Netherlands Montserrat (UK) Martinique (Fr)

Map Design Unit of The World Bank. Antilles (Neth)

The boundaries, colors, denominations St. Lucia

St. Vincent and

Aruba

and any other information shown on Barbados

The Grenadines

(Neth)

this map do not imply, on the part of Grenada

The World Bank Group, any judgment

on the legal status of any territory, or Trinidad

any endorsement or acceptance of and Tobago

R.B. de Venezuela

such boundaries.

Source: World Development Indicators.

the MDGs but is not suffi cient to bring the

that of the LIRP, including GDP growth rates country up to the path of the base case (fi

gure

in fi gure 4.4. Under the optimistic base case, 4.6). A resource-rich country has the ability

which, unlike the other scenarios, includes to draw down reserves accumulated from its

a strong recovery in the world price of the resource exports or to increase government

natural resource export, all MDG indica- foreign borrowing, in both cases creating a

tors continue to improve. Internal adjustment capital infl ow, captured by the government.

(that is, the government reduces growth in This option, incorporated into the low-aid

nondevelopment spending, increases domes- internal 2 simulation, can move progress on

tic taxes, and uses the resulting fi scal space 15

the MDGs closer to the base path.

to expand spending on education, health, But at

water and sanitation, and infrastructure) in the level reported, the LIRR country cannot

the context of stagnant export prices for the make up for the impact of the fi nancial crisis

natural resource improves progress toward on MDGs through internal adjustment alone.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 111

IBRD 37732

APRIL 2010

nland

en) Faeroe Norway

Iceland Islands Finland

(Den) Sweden Russian Federation

The Netherlands Estonia

Latvia

Isle of Man (UK) Russian

Denmark Fed. Lithuania

United Belarus

Ireland Germany Poland

Kingdom Belgium

Channel Islands (UK) Ukraine Kazakhstan

Luxembourg Moldova Mongolia

Liechtenstein Romania

Italy

France

Switzerland Bulgaria Kyrgyz

Georgia Uzbekistan

Andorra Azer- D.P.R.

Rep.

Armenia

Spain baijan of Korea

Turkey Turkmenistan

Portugal Tajikistan

Monaco Japan

Greece Syrian

Cyprus Rep. of

Gibraltar (UK) Islamic Rep.

Arab China

Tunisia Malta Korea

Afghanistan

Lebanon of Iran

Rep. Iraq

Israel

Morocco Kuwait

Jordan Bhutan

Pakistan

West Bank and Gaza Bahrain Nepal

Algeria Qatar

Libya Arab Rep.

Former Saudi

of Egypt

Spanish Bangladesh

United Arab

Arabia

Sahara India

Emirates Myanmar Lao

Mauritania Oman P.D.R.

Cape Verde N. Mariana Islands (US)

Mali Rep. of

Niger Thailand Vietnam

Eritrea

Senegal Yemen

Chad Guam (US)

Sudan

The Gambia Burkina Cambodia Philippines Marshall Islands

Djibouti Federated States of Micronesia

Faso

Guinea

Guinea-Bissau Benin Sri

Nigeria Ethiopia

Ghana

Côte

Sierra Leone Central Lanka Brunei

D’Ivoire African Rep. Palau

Liberia Somalia

Cameroon Malaysia

Togo Maldives

Equatorial Guinea Uganda Kiribati

Kenya

Congo Nauru

Singapore

Gabon

São Tomé and Príncipe Rwanda Seychelles

Burundi

Dem. Rep. of Papua Solomon

Indonesia

Congo New Guinea Islands

Comoros

Tanzania Tuvalu

Timor-Leste

Angola Malawi

Zambia Mayotte Fiji

Vanuatu

(Fr)

Zimbabwe Mauritius

Namibia Madagascar

Botswana New

Réunion (Fr)

Mozambique Caledonia

Poland Australia (Fr)

Swaziland

Ukraine

Germany Czech Rep. Slovak Rep. Lesotho

South

Africa

Austria Hungary

Slovenia Romania New

Croatia Zealand

Bosnia and Serbia

San Herz. Bulgaria

Marino Kosovo

Montenegro FYR

Macedonia

Italy

Vatican Albania Greece

City are resource poor. While understanding the

Summary and conclusions prospects for progress toward the MDGs is

of crucial importance as the world looks for-

This chapter presented forecasts of MDG ward to 2015 and beyond, it should be recog-

outcomes at the global level and for Sub- nized that such analysis inevitably is fraught

Saharan Africa based solely on alternative with difficulties given data gaps and still-

assumptions for growth in developing coun- limited knowledge about the processes that

tries. It also explored the scope for policy determine these outcomes.

improvements to mitigate the impact of The projections given here indicate that

slower growth on progress toward the MDGs the economic crisis will lead to a deteriora-

through simulations using two archetypical tion across all MDGs, extending beyond

low-income countries, one representing those 2015. In all the growth scenarios, the world

that are resource rich and the other those that

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

112 FIGURE 4.5 Simulated MDG outcomes for the LIRP archetype under alternative cases

b. MDG 2: Primary completion rate

a. MDG 1: Extreme poverty and hunger 100

70 90

60 80

70

percent

percent 50 60

50

40 40

30

30 2009 2011 2013 2015 2017 2019

2009 2011 2013 2015 2017 2019

base case low-aid case base case low-aid case

low-aid internal 1 case low-aid internal 1 case

low-aid internal 2 case low-aid internal 2 case

d. MDG 7c: Access to safe drinking water

c. MDG 4: Child mortality under five 68

145 67

140

1,000 66

135 percent

per 65

deaths 130 64

125 63

62

120 2009 2011 2013 2015 2017 2019

2009 2011 2013 2015 2017 2019

base case low-aid case base case low-aid case

low-aid internal 1 case low-aid internal 1 case

low-aid internal 2 case low-aid internal 2 case

Source: World Bank staff calculations using the Maquette for MDG Simulations (MAMS). See Go and others, forthcoming.

will meet the MDG of halving its headcount rates and will have the most diffi culty achiev-

poverty rate using a poverty line of $1.25 a ing its regional poverty reduction targets.

day. However, the poverty rate in 2015 is con- The projected impact of alternative sce-

siderably higher in the low-growth scenario narios for growth on the other MDGs ana-

(18.5 percent) than in the postcrisis trend lyzed here—completion of primary school,

(15 percent), which assumes a rapid recovery under-fi ve mortality rate, gender equality in

from the crisis. The rough magnitude of the education, and access to safe water—is more

projected effects on hunger is similar. Under- limited, although small changes in these per-

lying these fi gures are considerable regional centages may involve large numbers of peo-

variations. Sub-Saharan Africa poses the ple. This muted effect refl ects the presence

greatest challenge—it has the highest poverty of signifi cant lags, perhaps most obviously

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 113

FIGURE 4.6 Simulated MDG outcomes for the LIRR archetype under alternative cases

b. MDG 2: Primary completion rate

a. MDG 1: Extreme poverty and hunger 90

80

75 80

70 70

percent

65

percent 60

60 50

55 40

50 30

45 2009 2011 2013 2015 2017 2019

2009 2011 2013 2015 2017 2019

base case low-aid case base case low-aid case

low-aid internal 1 case low-aid internal 1 case

low-aid internal 2 case low-aid internal 2 case

c. MDG 4: Child mortality under five d. MDG 7.c: Access to safe drinking water

66

140 64

135

1,000 62

130 percent

per 60

125

deaths 58

120 56

115 54

110 2009 2011 2013 2015 2017 2019

2009 2011 2013 2015 2017 2019

base case low-aid case base case low-aid case

low-aid internal 1 case low-aid internal 1 case

low-aid internal 2 case low-aid internal 2 case

Source: World Bank staff calculations using the Maquette for MDG Simulations (MAMS). See Go and others, forthcoming.

in education. The negative effects of slower development and tax increases) lead to some

growth will make themselves more strongly improvement in the MDGs compared with

felt in the long run, however. a scenario with no improvement in policies.

Country-level simulations for the two However, the improvement from internal

low-income archetypes indicate that, if the efforts alone falls far short of that required

global economic environment and domestic to achieve the base-case levels of the MDG

GDP growth recover rapidly, continued prog- indicators. Thus, while policy matters, bet-

ress will take place across the MDGs that ter development outcomes hinge critically on

are covered here (poverty, primary comple- a rapid global recovery that improves export

tion, under-fi

ve mortality, and access to safe conditions, terms of trade, and capital fl ows

water). If the global recovery is weak, internal for low-income countries. Chapter 5 turns to

efforts (including spending switches toward this subject.

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

114

Annex: Forecast, Tools, and Data

BOX 4A.1 MAMS: A tool for country-level analysis of development strategies

education, students successfully complete their grade,

MAMS (Maquette for MDG Simulations) is an econ- repeat it, or drop out of their cycle. Student perfor-

omywide simulation model developed at the World mance depends on educational quality (quantity of

Bank to analyze development strategies. The model services per student), household welfare, public infra-

integrates a dynamic recursive computable general structure, wage incentives, and health status.

equilibrium model with an additional module that A MAMS country database is a synthesis of infor-

links specifi c MDG or poverty-related interventions mation from a variety of sources, structured to meet

to progress on poverty and other MDGs. This link the requirements of the model. The model parameters

is made possible by a disaggregation of government are defi ned using this data. The main components of

activities into functions related to MDG services the database are a social accounting matrix and other

(education, health, and water and sanitation) and data that refl ect the functioning of the economy, with

infrastructure as well as a residual for other govern- some emphasis on human development and infrastruc-

ment activity. The government fi nances its activities ture. More specifi cally, the information is primarily

from domestic taxes, domestic borrowing, and for- related to stock data (for labor and other production

eign aid (borrowing and grants). The private sector factors, students, and population) and elasticities

disaggregation varies between applications; where (related to substitutability in production, consump-

private provision of MDG services is important, such tion, and trade as well as to responses in MDG indica-

services are included, complementing the contribution tors to various determinants). For the simulations, it is

of government services to MDG progress. The factors also necessary to provide assumptions about the evo-

of production in the model typically include three lution of policies and other factors that are exogenous

types of labor, each of which is linked to an educa- to the model.

tion cycle: those with incomplete secondary education The government policies that may be considered

(unskilled), those with completed secondary educa- include spending—its level and allocation across differ-

tion but incomplete tertiary (semi-skilled), and those ent areas, including education, health, and infrastruc-

with completed tertiary (skilled). The labor force ture—and fi nancing—policies for taxation, domestic

variable depends on the functioning of the education and foreign borrowing, and foreign aid. Economic per-

system in the model. The other factors of production formance is measured by the evolution of:

include public capital stocks by government activity

and a private capital stock. Growth in the stock of • poverty and other MDG targets

government infrastructure capital contributes to over- • macro-indicators, including GDP (split into pri-

all growth by adding to the productivity of other pro- vate and government consumption and investment,

duction activities. exports, and imports); the composition of the gov-

MAMS covers MDGs in the areas of poverty, edu- ernment budget, the balance of payments, and the

cation, health, and water and sanitation. For poverty, savings-investment balance; total factor productiv-

a log-normal distribution is assumed; other applica- ity; and domestic and foreign debt stocks

tions have used microsimulations. For other MDGs, • sectoral structure of production, employment,

a set of functions links the level of each indicator to incomes, and trade

a set of determinants. The determinants include the • the labor market, including unemployment and the

delivery of relevant services and other indicators, also educational composition of the labor force

allowing for the recognition that achievements in one

MDG can have an impact on other MDGs. Other

than education, service delivery for other MDGs is Note: For more information about MAMS, see www.world

expressed relative to the size of the population. In bank.org/mams.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 115

TABLE 4A.1 Alternate scenarios for poverty reduction, based on a poverty line of $1.25 a day, by region

Scenario Region or country 1990 2005 2015 2020 1990 2005 2015 2020

Percentage of the population living on Number of people living on

Postcrisis less than $1.25 a day less than $1.25 a day (millions)

East Asia and Pacifi c 54.7 16.8 5.9 4.0 873 317 120 83

China 60.2 15.9 5.1 4.0 683 208 70 56

Europe and Central Asia 2.0 3.7 1.7 1.2 9 16 7 5

Latin America and the

Caribbean 11.3 8.2 5.0 4.3 50 45 30 27

Middle East and North Africa 4.3 3.6 1.8 1.5 10 11 6 6

South Asia 51.7 40.3 22.8 19.4 579 595 388 352

India 51.3 41.6 23.6 20.3 435 456 295 268

Sub-Saharan Africa 57.6 50.9 38.0 32.8 296 387 366 352

Total 41.7 25.2 15.0 12.8 1,817 1,371 918 826

Percentage of the population living on Number of people living on less than

Precrisis less than $1.25 (2005 PPP) a day $1.25 (2005 PPP) a day (millions)

East Asia and Pacifi c 54.7 16.8 5.5 3.5 873 317 111 73

China 60.2 15.9 5.0 3.9 683 208 69 55

Europe and Central Asia 2.0 3.7 1.5 1.1 9 16 7 5

Latin America and the

Caribbean 11.3 8.2 4.6 3.9 50 45 28 25

Middle East and North Africa 4.3 3.6 1.7 1.4 10 11 6 6

South Asia 51.7 40.3 21.5 17.9 579 595 367 326

India 51.3 41.6 22.7 19.6 435 456 283 259

Sub-Saharan Africa 57.6 50.9 35.9 29.9 296 387 346 321

Total 41.7 25.2 14.1 11.7 1,817 1,371 865 755

Percentage of the population living on Number of people living on less than

Low-growth less than $1.25 (2005 PPP) a day $1.25 (2005 PPP) a day (millions)

East Asia and Pacifi c 54.7 16.8 7.8 5.8 873 317 159 122

China 60.2 15.9 6.0 4.7 683 208 82 67

Europe and Central Asia 2.0 3.7 2.5 2.2 9 16 11 10

Latin America and the

Caribbean 11.3 8.2 6.5 5.7 50 45 39 36

Middle East and North Africa 4.3 3.6 3.3 2.7 10 11 12 11

South Asia 51.7 40.3 28.6 24.6 579 595 489 447

India 51.3 41.6 29.4 25.2 435 456 367 333

Sub-Saharan Africa 57.6 50.9 43.8 39.9 296 387 421 428

Total 41.7 25.2 18.5 16.3 1,817 1,371 1,132 1,053

Source: World Bank staff calculations, using PovcalNet.

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

116

TABLE 4A.2 Alternate scenarios for poverty reduction, based on a poverty line of $2.00 a day, by region

Scenario Region or country 1990 2005 2015 2020 1990 2005 2015 2020

Percentage of the population living on Number of people living on

Postcrisis less than $2.00 a day less than $2.00 a day (millions)

East Asia and Pacifi c 79.8 38.7 19.4 14.3 1,274 730 394 299

China 84.6 36.3 16.0 12.0 961 473 220 168

Europe and Central Asia 6.9 8.9 5.0 4.1 32 39 22 18

Latin America and the

Caribbean 19.7 16.6 11.1 9.7 86 91 67 62

Middle East and North Africa 19.7 16.9 8.3 6.6 44 52 30 26

South Asia 82.7 73.9 57.0 51.0 926 1,091 973 926

India 82.6 75.6 58.3 51.9 702 828 728 686

Sub-Saharan Africa 76.2 73.0 59.6 55.4 391 555 574 595

Total 63.2 47.0 33.7 29.8 2,754 2,557 2,060 1,926

Percentage of the population living on Number of people living on less than

Precrisis less than $2.00 (2005 PPP) a day $2.00 (2005 PPP) a day (millions)

East Asia and Pacifi c 79.8 38.7 18.6 13.4 1,274 730 379 280

China 84.6 36.3 15.7 11.8 961 473 216 166

Europe and Central Asia 6.9 8.9 4.5 3.7 32 39 20 16

Latin America and the

Caribbean 19.7 16.6 10.3 8.8 86 91 62 56

Middle East and North Africa 19.7 16.9 8.0 6.1 44 52 29 24

South Asia 82.7 73.9 55.5 49.0 926 1,091 946 890

India 82.6 75.6 57.2 50.9 702 828 715 674

Sub-Saharan Africa 76.2 73.0 57.6 52.4 391 555 555 563

Total 63.2 47.0 32.6 28.4 2,754 2,557 1,991 1,830

Percentage of the population living on Number of people living on less than

Low-growth less than $2.00 (2005 PPP) a day $2.00 (2005 PPP) a day (millions)

East Asia and Pacifi c 79.8 38.7 22.2 18.1 1,274 730 451 379

China 84.6 36.3 16.9 13.6 961 473 233 191

Europe and Central Asia 6.9 8.9 7.1 6.2 32 39 31 27

Latin America and the

Caribbean 19.7 16.6 14.5 12.9 86 91 88 82

Middle East and North Africa 19.7 16.9 14.1 11.4 44 52 52 45

South Asia 82.7 73.9 63.9 57.8 926 1,091 1,089 1,049

India 82.6 75.6 64.6 57.9 702 828 808 766

Sub-Saharan Africa 76.2 73.0 65.1 62.5 391 555 627 671

Total 63.2 47.0 38.2 34.9 2,754 2,557 2,338 2,254

Source: World Bank staff calculations, using PovcalNet.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 117

TABLE 4A.3 Detailed data for archetypes

Median values by archetype, selected variables Low-income, resource-poor Low-income, resource-rich

Variable (LIRP) (LIRR)

Poverty headcount ratio at $1.25 a day (% of population) 49.6 61.8

Poverty headcount ratio at $2.00 a day (% of population) 76.7 80.5

Elasticity of poverty to income –1.01 –1.01

Poverty headcount ratio at national poverty line (% of population) 44.2 45.4

Primary school completion rate, total (% gross) 55.8 59.9

Primary school enrollment (% gross) 95.9 95.2

Secondary school enrollment (% gross) 31.6 35.5

Tertiary school enrollment (% gross) 3.2 4.7

Under-fi ve mortality rate (per 1,000) 115.2 141.6

Maternal mortality ratio, modeled estimate (per 100,000 live births) 720.0 825.0

Maternal mortality ratio, national estimate (per 100,000 live births) 478.0 613.0

Improved water source (% of population with access) 65.0 60.0

Improved sanitation facilities (% of population with access) 30.0 31.5

Foreign direct investment, net infl ows (% of GDP) 2.7 6.5

Foreign direct investment, net outfl ows (% of GDP) 0.0 0.0

Foreign direct investment infl ow outfl ows (% of GDP) 2.7 6.5

Net current transfers, remittances (% of GDP) 8.9 4.5

Offi cial current transfers, receipts, foreign aid (% of GDP) 2.5 1.7

External debt stocks (% GNI) 29.9 49.5

External debt stocks private (% GNI) 0.0 0.0

External debt stocks public (% GNI) 29.9 49.5

External debt stocks public, median (% GDP) 28.0 48.6

Gross fi xed capital formation (% of GDP) 20.8 18.3

Gross fi xed capital formation, private (% of GDP) 10.7 11.3

Labor force participation rate (% of total population ages 15–64) 74.3 71.4

Resource exports (% of GDP) 0.4 19.0

Resource exports (% of merchandise exports) 3.4 67.9

Mining value added (% of GDP) 0.7 3.3

Interest payment on private external debt (% of GDP) 0.0 0.0

Interest payment on public external debt (% of GDP) 0.3 0.5

Source: World Bank 2009b.

OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS GLOBAL MONITORING REPORT 2010

118 tendency for the indicator to level off would

Notes be weaker, especially for the base case.

1. Resource intensity is an important factor in 15. In the model this is done by increasing foreign

the performance of low-income countries and borrowing, which reduces the net asset posi-

has been used to classify developing countries tion of the country relative to the rest of the

in several studies; see Collier and O’Connell world and is equivalent to drawing down for-

(2006); IMF (2006); Ndulu and others (2007); eign exchange reserves or liquidating foreign

and Arbache, Go, and Page (2008). investment fi nanced by the natural resource in

2. World Bank 2004b. the past. Here, the annual growth rates in for-

3. Even short-term assessments are necessar- eign borrowing are assumed to be twice the

ily projections because of the infrequency annual growth rates in the base. As a result,

of the underlying data. Household surveys the foreign debt stock in foreign currency is

of incomes and expenditures are generally 30 percent higher in 2020 for the low-aid

undertaken only every fi ve or more years in internal 2 case than for the other scenarios.

many developing countries. Relative to GDP, the foreign debt stock is

4. The estimation uses a logistic function, simi- around 10 percentage points higher in 2020

lar to Clemens, Kenny, and Moss (2007) but for the low-aid internal 2 case than for the

with per capita income as a key determinant low-aid internal 1 case (which has a slightly

instead of a time trend. Income rather than slower rate of GDP growth and similar evolu-

social spending is used as the independent tion for the exchange rate). References

variable because of data and other diffi culties

with fiscal adjustment and public expendi-

tures. The logistic curve was used for the pro- References

jections because it has a smoother transition Adams, C. S., and D. Bevan. 2000. “The Cash

across income levels, although the elasticity Budget as Restraint: The Experience of Zam-

form (double-log regressions) by income level bia.” In Investment and Risk in Africa, ed. P.

or region yielded similar results. Collier and C. Patillo. New York: St. Martin’s

5. World Bank PovcalNet database. Press.

6. See also IMF (2010); World Bank (2010b). Arbache, J., D. Go, and J. Page. 2008. “Is Africa’s

7. World Bank 2003, p. 41. These calculations Economy at a Turning Point?” In Africa at

update estimates found in Ravallion (2009) a Turning Point? ed. D. Go and J. Page, pp.

and World Bank (2009a). 13–85. Washington, DC: World Bank.

8. Tiwari and Zaman 2010; World Bank 2010a. Bourguignon, François, Carolina Diaz-Bonilla,

9. Friedman and Schady 2009. and Hans Lofgren. 2008. “Aid, Service Deliv-

10. The low-income countries are disaggregated ery and the Millennium Development Goals

into resource rich and resource poor using in an Economywide Framework.” In The

data on exports of fuel ore and minerals as a Impact of Macroeconomic Policies on Pov-

share of merchandise exports. See table 4A.3 erty and Income Distribution: Macro-Micro

in the annex for more details. Evaluation Techniques and Tools, ed. Fran-

11. See Bourguignon, Diaz-Bonilla, and Lofgren çois Bourguignon, Maurizio Bussolo, and Luiz

(2008) and Lofgren and Diaz-Bonilla (2010) A. Pereira da Silva, pp. 283–315. Washington,

as well as www.worldbank.org/mams. DC: World Bank.

12. The growth rate is set at 3 percent, the Clemens, M. A., C. J. Kenny, and T. J. Moss.

assumed annual GDP growth in developed 2007. “The Trouble with the MDGs: Con-

countries from 2010 onward. fronting Expectations of Aid and Development

13. This is 15 percent higher than the annual Success.” World Development 35 (5): 735–51.

GDP growth in the pessimistic scenario with Collier, P., and S. O’Connell. 2006. “Opportu-

internal adjustment (low-aid internal 1 case). nities and Choices.” Explaining African Eco-

14. The primary gross completion rate (MDG nomic Growth, ch. 2 of synthesis vol. Nairobi:

2) is defi ned as the total number of primary African Economic Research Consortium.

school graduates (regardless of age) as a share Collier, P., and B. Goderis. 2007. “Commodity

of the total population of the theoretical Prices, Growth, and the Natural Resource

graduation age. If MDG 2 were measured by

the net completion rate (the number of grad- Curse: Reconciling a Conundrum.” Oxford

uates of the theoretical right age as a share University, Centre for the Study of African

of the total population of the same age), the Economies, Oxford, U.K.

GLOBAL MONITORING REPORT 2010 OUTLOOK FOR THE MILLENNIUM DEVELOPMENT GOALS 119

Ndulu, B. J., L. Chakroborti, L. Lijane, V.

Devarajan S., and R. Reinikka. 2004. “Making

Services Work for the Poor.” Journal of Afri- Ramachandran, and J. Wolgin. 2007. Chal-

can Economies 13 (Supp. 1): i142–66. lenges of Africa Growth: Opportunities, Con-

Dinh, H., A. Adugna, and B. Myers. 2002. “The straints, and Strategic Directions. Washington,

Impact of Cash Budgets on Poverty Reduc- DC: World Bank.

tion in Zambia: A Case Study of the Confl ict Rajkumar, A., and V. Swaroop. 2008. “Public

between Well-Intentioned Macroeconomic Spending and Outcomes: Does Governance

Policy and Service Delivery to the Poor.” Policy Matter?” Journal of Development Economics

Research Working Paper 2914. World Bank, 86 (1): 96–111.

Washington, DC. Ravallion, M. 2009. “The Crisis and the World’s

Filmer, D., J. Hammer, and L. Pritchett. 2000. Poorest.” Development Outreach, World Bank,

“Weak Links in the Chain: A Diagnosis of Washington, DC (December).

Health Policy in Poor Countries.” World Bank Tiwari, S., and H. Zaman 2010. “The Impact of

Research Observer 15 (2): 188–224. Economic Shocks on Global Undernourish-

———. 2002. “Weak Links in the Chain II: A Pre- ment” Policy Research Working Paper 5215.

scription for Health Policy in Poor Countries.” World Bank, Washington, DC.

World Bank Research Observer 17 (1): 47–66. Wagstaff, A., and M. Claeson. 2004. Rising to

Filmer, D., and L. Pritchett. 1999. “The Impact the Challenges: The Millennium Development

of Public Spending on Health: Does Money Goals for Health. Washington, DC: World

Matter?” Social Science and Medicine 49 (10): Bank.

1309–23. World Bank. 2004a. Global Monitoring Report

Friedman, J., and N. Schady. 2009. “How Many 2004: Policies and Actions for Achieving the

More Infants Are Likely to Die in Africa as a Millennium Development Goals and Related

Result of the Global Financial Crisis?” Policy Outcomes. Washington, DC: World Bank.

Research Working Paper 5023. World Bank, ———. 2004b. World Development Report

Washington, DC. 2004: Making Services Work for Poor People.

Go, D., H. Lofgren, S. Robinson, and K. Thier- Washington, D.C.: World Bank.

felder. Forthcoming. “The Impact of the ———. 2009a. “Protecting Progress: The Chal-

Global Economic Crisis on MDGs in Arche- lenge Facing Low-Income Countries in the

typical Developing Countries.” World Bank, Global Recession.” Background paper prepared

Washington, DC. for the G-20 Leaders’ Meeting, Pittsburgh, PA,

IMF (International Monetary Fund). 2006. September 24–25.

Regional Economic Outlook: Sub-Saharan ———. 2009b. World Development Indicators.

Africa. Washington, DC. Washington, DC: World Bank.

———. 2010. World Economic Outlook. Wash- ———2010a. “Food Price Watch.” Washington,

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Lofgren, H., and C. Diaz-Bonilla. 2010. “MAMS: ———. 2010b. Global Economic Prospects 2010.

An Economywide Model for Development Washington, DC: World Bank.

Strategy Analysis.” World Bank, Washington,

DC. 5

The International Community and

Development: Trade, Aid, and the

International Financial Institutions

T

he global economic crisis severely progress is required to strengthen aid effec-

reduced developing-country external tiveness and improve aid allocation. Reach-

resources by drastically curtailing their ing agreement on the Doha Round would

export revenues and their access to private support an open trading environment and

capital fl ows. As elaborated in previous chap- generate substantial increases in market

ters, the resulting decline in economic activ- access for developing countries. And the cri-

ity sharply increased poverty and impaired sis has raised new development challenges,

public services to the poor. To a degree, the including questions about the sustainability

international system worked effectively to of the IFIs’ policy responses and their policies

support developing-country access to external and structure for dealing with the challenges

resources and limit the rise in poverty. Despite in the future—questions that now need to be

initial fears, increased trade restrictions in reac- resolved.

tion to the crisis affected only a small part of

international trade. Bilateral donors increased Recovering from the crisis

aid (at least through 2008), and the interna- through trade

tional fi nancial institutions (IFIs) dramatically

increased their lending. As the global recovery World trade contracted by about 12 percent

has taken hold, developing-country export rev- in 2009, and all regions experienced deep

enues have begun to recover, and their access declines in imports (figure 5.1). Although

to external fi nance to improve, although both demand for exports declined signifi cantly in

remain well below precrisis levels. most developing countries, countries depen-

Despite these positive signs, the global dent on durable goods exports felt the sharp-

recovery remains fragile, and continuing est decline. Demand was more resilient for

efforts of the global community to support nondurable consumer goods (such as clothing

development are essential. Although aid has and food) and services (except the more vola-

hit record levels, aid fl ows remain well below tile tourism sector). And continued growth

those envisioned in donor promises, and the in China meant countries in East Asia faced

more constrained fiscal environment is a smaller drops in export demand than else-

serious threat to future aid efforts. Further where. Developing countries also had sharp

GLOBAL MONITORING REPORT 2010 121

THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT GLOBAL MONITORING REPORT 2010

122 declines in external fi nance: net private capi-

FIGURE 5.1 Trade has bottomed out and started to recover tal fl

ows to developing countries in 2009 are

80 estimated to have fallen almost 70 percent

from their 2007 peak. Remittances, as much

60

% as 20 percent of GDP in some countries, have

region, 40 been more stable than capital fl ows and mer-

20

by chandise trade but nevertheless declined by an

growth estimated 6.1 percent in 2009. All in all, by

0 mid-2009, the collapse in developing-country

–20

import external resources necessitated a sharp con-

–40 traction in import demand, which fell to 25

percent below precrisis levels.

–60

Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Almost a year into the trade recovery, espe-

2008 2009 cially in East Asia and the Pacifi c and Latin

America, the dollar value of global trade

80 remains around 20 percent lower than its

% 60 precrisis level and 40 percent lower than it

region, would have been had world trade continued

40 to grow at its 2002–08 trend. A number of

by 20

growth advanced indicators of trade developments

0 underscore the fragility of the recovery. For

–20

export instance, the Baltic Dry Index and air freight

–40 traffi

c point to a fragile rebound. The index, a

measure of the cost of shipping bulk cargo by

–60

Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. sea, picked up in February 2009 after a seven-

2008 2009 month drop but has been hovering since then

North America

East Asia and Pacific (fi

gure 5.2). Given the uncertain recovery and

Europe and Central Asia South Asia still-depressed investment activity, world trade

Sub-Saharan Africa

Latin America and the Caribbean is projected to expand by only 4.3 percent

Middle East and North Africa 1

in 2010 and by 6.2 percent in 2011. While

a strong recovery in developing countries’

Source: World Bank Development Economics Trade and International Integration, Trade Watch,

January 2010 (www.wordlbank.org/research/trade). exports will depend on global macroeconomic

Note: Trade volume is the 3-month over 3-month growth rate (rolling, seasonally adjusted 3-month developments, policies in both rich and poor

moving average). FIGURE 5.2 Baltic Dry Index points to a fragile rebound in shipping by sea

Baltic Dry Index

12,000

10,000

9,000

8,000

7,000

change 6,000

5,000

% 4,000

3,000

2,000

1,000

Jul. 10 Sep. 10 Nov. 10 Jan. 10 Mar. 10 May 10 Jul. 10 Sep. 10 Nov. 10 Jan. 10

2009 2010

2008 Baltic Dry Index

Source: Baltic Exchange Information Services Ltd 2010.

GLOBAL MONITORING REPORT 2010 THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT 123

countries can play an important role. In par- export insurance and guarantees suggest that

ticular, expanding developing-country access export credit agencies prevented a complete

to foreign exchange through supporting trade drying up of trade fi nance markets during the

3

finance, aid for trade, and maintaining an crisis.

open trading environment will continue to Lessons from past crises suggest that effec-

play a critical role. These issues are taken in tive public actions in support of trade fi nance

turn in the rest of this section. should be guided by several key principles,

including the avoidance of moral hazard and

the crowding out of commercial banks by

Trade fi nance remains weak but shows setting clear time limits and exit strategies for

signs of recovery intervention programs and by sharing, rather

4

While the decline in developing-country than fully underwriting, risk. The substan-

exports was largely driven by the collapse in tial resources committed by G-20 leaders

global demand, there is some evidence that and multilateral institutions to support trade

the global credit crunch and sharp contraction fi nance during the crisis underscore the criti-

in trade credit also contributed to the trade cal importance of establishing a systematic

decline. For example, although surveys found and reliable mechanism to collect data on

that demand has been the major driving factor trade fi nance to monitor the market. Such a

behind the contraction in trade credit, many system could be used not only to assess how

respondents acknowledged that the reduced current interventions are infl uencing credit

availability of trade finance instruments in supply but also to provide an early warning

their institutions contributed to the fall in of stress in trade credit provision.

2

trade fi nance volumes. Recent trade finance data indicate slight

As the fi nancial crisis signs of improvement. According to a Septem-

deepened, trade fi nance tightened because of ber 2009 report of the International Cham-

higher lending costs and risk premiums result- ber of Commerce, banks’ ability to provide

ing from rising liquidity pressures, capital trade credit has improved, refl

ecting enhanced

scarcity, and heightened risk aversion among capacity and liquidity in the banking sector

trade fi nance providers for counterparty and and efforts by the international community to

country risks. The drying up of the secondary 5

support trade fi nance instruments.

market for short-term exposure exacerbated Data from

the problem, as banks and other financial the Society for Worldwide Interbank Financial

institutions deleveraged and such key players Telecommunication document that short-term

as Lehman Brothers exited the market. In an trade fi nance messages sent between banks for

environment of global recession, banks may letters of credit, guarantees, and documentary

also have felt additional pressure to hold back collections collapsed in January 2009 and

on trade fi nance following implementation of have gradually recovered since then, returning

the Basel II Accord on banking laws and reg- to positive territories in January 2010 (fi gure

ulations, which increased the risk sensitivity 5.3). Yet the number of trade messages during

of capital requirements. January-February 2010 remained more than

To mitigate the effects of these trade fi nance 10 percent below the number registered dur-

constraints, governments and multilateral ing the same period in 2007 or 2008.

development institutions responded with a

range of trade fi nance programs, including a Maintaining an open trading

pledge by the Group of 20 (G-20) leaders at environment is critical

their April 2009 London Summit to ensure

$250 billion in support for trade. The World World leaders acknowledged early on the

Bank Group provided additional guarantees systemic risks stemming from protectionist

as well as liquidity for trade fi nance through policy responses such as those used during the

the International Finance Corporation’s (IFC) Great Depression. The G-20 communiqués

Global Trade Finance Program and Global at the Washington, London, and Pittsburgh

Trade Liquidity Program. Recent data on Summits in 2009 provided assurances that

THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT GLOBAL MONITORING REPORT 2010

124

FIGURE 5.3 Short-term trade fi nance messages increased steadily percent higher than in 2007. According to the

from Jan. 2009 to Feb. 2010 World Trade Organization’s (WTO) quarterly

monitoring report, some 350 trade-restrictive

10 measures had been put in place as of Decem-

ber 2009, although some of them have since

5 been removed. Protectionist measures have

0 included tariff increases (although tariff rates

change –5 fell in many countries—fi

gure 5.4—and gen-

erally remained below bounded limits set in

–10

% multilateral trade agreements), various quan-

–15 titative restrictions, trade remedies (antidump-

–20 ing) and subsidies, and domestic purchase

8 The

requirements in stimulus packages.

–25

Jan. Mar. May Jul. Sep. Nov. Jan. Mar. May Jul. Sep. Nov. Jan. fourth report of the Global Trade Alert, pub-

2009 2010

2008 lished in February 2010, confi rms that “low

fever” protectionism continues, with several

of the largest economies taking discrimina-

Source: SWIFTNET (www.swift.com). 9

tory measures.

Meanwhile, some countries have reacted

to the crisis by reducing trade barriers—

FIGURE 5.4 Tariff rates fell except in upper-middle-income

countries, 2008–09 about 77 trade-liberalizing measures have

been taken since the onset of the crisis—in

1.0 an effort to reduce costs for industries and

0.8 10

households (fi gure 5.5). Furthermore, the

0.6 newly adopted trade restrictions have been

points 0.4 applied mainly to specific sectors (such as

0.2 agriculture and iron and steel, followed at

percentage 0 some distance by consumer electronics and

–0.2 textiles, clothing, and footwear). The affected

products account for only about 0.5 percent

–0.4 of world trade (although the backlog of ongo-

–0.6 ing investigations of requests for trade reme-

–0.8 high-income upper-middle- lower-middle- low-income dies may imply some increase in 2010). Also,

countries income income countries many policies aimed at stimulating domes-

countries countries tic demand and economic activity may have

total trade agriculture manufacturing benefi

ted trading partners when applied on a

nondiscriminatory basis.

Source: World Bank staff calculations. While protectionist measures taken during

the crisis undoubtedly curtailed trade fl ows,

they have affected a relatively small share of

governments would refrain from discrimina- global trade, and their effect on international

tory trade measures. Since the onset of the trade has been secondary to the lack of aggre-

crisis, many countries have adopted policies gate demand and the global credit crunch. So,

that favored domestic over foreign prod-

6 while some countries and industries have seen

In particular, all G-20 countries have

ucts. their exports depressed by protectionist mea-

imposed measures restricting trade since the

7 sures, the global trading system has largely

November 2008 summit. The Global Anti- weathered the threat of beggar-thy-neighbor

dumping Database records a 19.7 percent rise policies that loomed large at the outset of the

in industry requests for trade barriers in 2009 crisis. Perhaps helping to moderate a resort to

over 2008, when requests were already 35.0

GLOBAL MONITORING REPORT 2010 THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT 125

protectionist measures is the interdependence FIGURE 5.5 About 350 trade-restrictive measures and 80 trade-

liberalizing measures have been implemented or initiated since the

of countries in global supply and production onset of the crisis, but some have already been removed

chains. Domestic producers rely on imported

parts, and exporters rely on foreign end-user Vietnam

markets—and vice versa. The average trade- Venezuela, R.B. de

Uzbekistan

to-GDP ratio today is about 60 percent, up Uruguay

United States

from 27 percent in 1970, and trade in parts United Arab Emirates

Ukraine

and components, an indicator of the interna- Tunisia

Turkey

tionalization of supply chains, has more than Thailand

Tajikistan

doubled as a share of trade in manufactures. Switzerland

Suriname

WTO rules and disciplines have also helped, Sudan

South Africa

as have the monitoring, surveillance, and Serbia

Saudi Arabia

information exchange under its auspices. Saint Lucia

Russian Federation

The danger of more protectionist responses Philippines

Peru

during the global recovery—especially if Paraguay

Pakistan

it continues to be jobless—underlines the Morocco

Montenegro

importance of maintaining an open trading Mongolia

Moldova

environment. In particular, keeping trade Mexico

Malaysia

open will be key to counter the effects of the Lebanon

Kyrgyz Republic

withdrawal of expansionary fi scal and mon- Korea, Rep.

Kazakhstan

etary policies and to support the global eco- Jordan

Israel

nomic recovery. Indonesia

India

Honduras

Ghana

Gabon

Keeping up with the Doha Macedonia, FYR

El Salvador

Development Agenda Egypt, Arab Rep.

Ecuador

European Commission

The global economic crisis has confirmed Dominican Republic

Croatia

that trade rules matter and that WTO rules Costa Rica

Colombia

constrain protectionism. Indeed, it is worth Taiwan, China

China

noting that countries have been less able to Chile

Chad

resist protectionist pressures in areas not cov- Canada

Cameroon

ered by multilateral disciplines or with lim- Brunei Darussalam

Brazil

ited coverage. Examples include export sub- Bosnia and Herzegovina

Bolivia

sidies by the European Union and the United Belarus

Bangladesh

States, national bailout packages that call Bahrain

Azerbaijan

for preferential treatment for domestic fi rms, Australia

Armenia

more restrictive policies on workers provid- Argentina

Algeria

ing cross-border services, and discriminatory 0 5 10 15 20 25 30 35 40 45

procurement. number of measures

Concluding the Doha Round remains an trade restrictive measures trade liberalizing measures

important milestone. As the global economy

gradually recovers, governments must ensure Source: World Bank calculations based on WTO (2009).

that the long-run benefits of an open and

transparent multilateral trading system are not

compromised by short-run pressures to pro- tariffs and subsidies, help governments resist

tect domestic markets. Concluding the Doha protectionist pressures as they unwind current

Round would not only improve market access. expansionary policies, and provide a much

It would also strengthen the international needed boost to keep markets open.

trading system, constrain future increases in So what is on the table at the negotia-

tions in Geneva matters. Based on current

THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT GLOBAL MONITORING REPORT 2010

126 proposals, the Doha Round would do as essential for cooperation among countries

much as any previous round, if not more seeking to manage the crisis. Comprehensive

11

to open trade. The gains in market access and timely notifi cation of trade contingency

would be considerable—even after factoring measures (public procurement, subsidies,

in exceptions for special and sensitive prod- and other nontariff measures) to WTO bod-

ucts. The round would lower tariff bindings, ies is needed to ensure proper monitoring.

ban agricultural export subsidies, and cap

agricultural and marine production subsidies. Expanding aid for trade

It also offers scope for increasing the security

of market access for services. It would lower Aid for trade has become more urgent with

trade costs and enhance the competitiveness the global economic crisis. As the world

of developing countries through an agreement economy recovers, developing countries will

on trade facilitation. At the Seventh WTO rely on international markets as a source

Ministerial Conference in Geneva in Novem- of demand to revitalize economic growth.

ber 2009, ministers reiterated the importance Enhancing the competitiveness of firms in

of trade and the Doha Round to economic developing countries by lowering trade costs

recovery and poverty alleviation in develop- through better trade policies and regulations,

ing countries. They reaffirmed the need to institutional support for trade, trade-related

conclude the round in 2010 and to engage in infrastructure, and trade-related adjustment

a stocktaking exercise in the fi rst quarter of is particularly important. Improving trade

2010. But at this stage, only strong leadership logistics is a priority for development (box

and engagement by world leaders can revive 5.1). Sustaining efforts to deliver on the com-

the round and bring it to closure. mitments made at the 2005 WTO Ministerial

Beyond Doha, government actions in Meeting (in Hong Kong, China) to expand

response to the crisis reveal the need for greater aid for trade should continue to be a priority.

cooperation in the multilateral trading system The second global review of aid for trade,

to ensure that the cross-border policy matters held in Geneva in July 2009, found that devel-

that are not on the Doha Development Agenda oping countries are setting priorities for

are appropriately addressed. Potential areas for trade in national development strategies; that

negotiating new rules and disciplines include donors are offering more and better aid for

trade; and that new partners are engaging

food and energy security and trade-related cli- in cooperation among developing countries.

mate change such as the treatment of environ- Allocations to aid for trade have increased

ment goods and services to increase the global without reducing resources to other develop-

ow of clean, energy-effi

cient technologies and 12

ment priorities.

renewal energy. The limited guidelines and Improving the effectiveness

rules in these areas allow for discriminatory of aid for trade requires strengthening its

actions to be imposed with impunity, and the regional dimension and the contribution of

stalled Doha Round is preventing these issues the private sector, better evaluating its impact,

from being properly addressed through nego- and mobilizing resources beyond 2010.

World Bank Group concessional aid-for-

tiated rules and norms. trade lending has increased. Its concessional

The crisis has also revealed the impor- lending to low-income countries rose from

tance of strengthening monitoring and public $2.3 billion annually in 2002–05 to $3.9 bil-

reporting of government measures to improve lion in 2007–08 (table 5.1). The IFC invest-

transparency in the trading system so that ments in building new productive capacity

WTO-compatible policies can be readily and infrastructure in low-income countries

distinguished from discriminatory policies. have added another $3.4 billion in private

Transparency is critical in maintaining a pre- investments. The aid-for-trade program of

dictable and open trading system. Free-fl

ow- the World Bank Group, as with other donors,

ing information on policies affecting trade is

GLOBAL MONITORING REPORT 2010 THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT 127

BOX 5.1 Facilitating trade through logistics reforms

focused on supporting trade infrastructure invest-

Effi cient logistics contribute to trade and develop- ment and modernizing customs. Looking forward,

ment. Evidence from the 2007 and 2010 World Bank the focus will be extended to new areas, such as the

Logistics Performance Index (LPI) indicates that, market for logistics services, coordination of border

for countries at the same level of per capita income, processes, and joint cross-border initiatives, espe-

those with the best logistics performance do better: cially for landlocked countries (World Bank 2006).

they can expect 1 percent additional growth in GDP

a Some of these reforms can be implemented at the

and 2 percent additional growth in trade. Effi cient country level. Others require bilateral and regional

trade logistics systems support trade diversifi cation cooperation, such as border and transit trade for

and attract foreign direct investment. landlocked countries.

The 2010 LPI points to modest but positive trends Taking a more comprehensive approach to the

in customs use of information technologies for trade clearance of goods is a key element in the new trade

and investment in private services. It fi nds that logis- facilitation agenda. It requires better collaboration

tics overperformers—countries with a higher LPI among all border management agencies—including

score than income would predict—have consistently standards, sanitary, phytosanitary, transport, and

invested in reforms. Encouraging trends are emerg- veterinary agencies—and modern approaches to

ing in infrastructure, refl ecting successful trade facil- regulatory compliance. It matters little that customs

itation projects. In port management, separation of agencies employ high levels of automation and exam-

commercial activities from the regulatory missions ines goods selectively if other government agencies

of the port authority is now the norm in developing are not automated and continue to routinely inspect

countries, and there are many examples of success- all imported goods regardless of the risk they pose.

ful private participation in container terminal opera-

tions. Automation of customs procedures is also a. The LPI summarizes the performance of countries in six

common, with only a few countries lacking some areas: effi

ciency of the customs clearance process, quality of

form of automated customs system. But logistics trade and transport-related infrastructure, ease of arranging

professionals also confi rmed that the quantity and competitively priced shipments, competence and quality of

performance of infrastructure, especially roads and logistics services, ability to track and trace consignments,

ports, remain signifi cant bottlenecks in most low- and frequency with which shipments reach the consignee

income countries—and, in relative terms, even more within the scheduled or expected time (Arvis and others

so in middle-income countries. 2010). The LPI is based on more than 5,000 country assess-

Transport reform has become a key development ments by more than 1,000 international freight forwarders.

priority. Traditional efforts to facilitate trade have It provides trade profi

les for 155 countries.

Nations Conference on Trade and Develop-

goes beyond concessional lending commit- ment, United Nations Development Pro-

ments to low-income countries—the conven- gramme, and the International Trade Cen-

tional defi nition used by the Organisation for ter—has provided technical assistance and

Economic Co-operation and Development fi nancing for trade capacity-building projects.

(OECD) and the WTO—and includes non- The signifi cant progress in integrating trade

concessional trade–related lending to mid- into development strategies refl ects a collec-

dle-income countries. Promoting trade-led tive effort by governments and donors and by

growth in middle-income countries generates the trade and development communities. One

market opportunities for neighboring low- measure of this integration is that two-thirds

income countries and has positive spin-offs of country assistance strategies, which part-

for the world economy.

The World Bank Group—working with ner governments and the World Bank forge,

other organizations such as the WTO, United identify trade as a priority.

THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT GLOBAL MONITORING REPORT 2010

128 TABLE 5.1 World Bank Group trade-related activities, 2007 and 2008

commitments, US$ millions Public sector Private sector

Year, income group, activity (loans and grants) (IFC) Total

2007

Low-income countries (IDA) 4,267 3,514 7,782

Country programs 3,313 3,020 6,332

Regional activities 954 495 1,449

Middle-income countries (IBRD) 4,905 6,302 11,206

Total 2007 9,172 9,816 18,988

2008

Low-income countries (IDA) 3,520 3,304 6,824

Country programs 3,245 2,770 6,016

Regional activities 275 533 808

Middle-income countries (IBRD) 8,263 5,772 14,035

Total 2008 11,782 9,076 20,858

Source: World Bank staff calculations.

Note: This table uses the OECD-WTO defi nition of sectoral coverage for aid for trade. IDA = International Development Association; IBRD = International

Bank for Reconstruction and Development. DAC fell back slightly to 10 percent in real

Bringing aid fl

ows back on track terms to $67 billion (44 percent of all DAC

Global aid has risen, and donors are so far ODA).

holding to their commitments to increase Other donors recording a sharp increase

aid. But it remains only 80 percent of the in aid in real terms were Greece (up 28.7 per-

2010 level implied by donor promises, and cent), Portugal (22.3 percent), and Spain (22.6

the shortfall is particularly large for aid to percent). The four largest donors in 2008,

Africa. Increasing aid must remain a politi- measured as a share of GNI, were Sweden

cal priority to prevent the crisis from seri- (0.98 percent), Luxembourg (0.97 percent),

ously damaging development prospects and Norway (0.88 percent), and the Netherlands

to keep alive the hope of halving poverty by (0.80 percent). Non-DAC aid continues to

2015. grow in importance, rising 63 percent in real

terms in 2008 to $9.5 billion (for non-DAC

donors reporting to DAC). Arab donors, led

Aid volumes rose in real terms during by Saudi Arabia, were the largest and fastest-

the crisis years, 2008–09, but greater growing component: their aid rose to $5.9 bil-

eff orts are still needed lion, a real increase of 115 percent over 2007.

Following an 11.7 percent increase in 2008, The rise in aid is encouraging, but there

total net official development assistance is no room for complacency. DAC members

(ODA) from the OECD’s Development have reaffi rmed their aid commitments and

Assistance Committee (DAC) countries rose agreed to maintain aid flows in line with

slightly by 0.7 percent in real terms in 2009. these commitments. But in the current eco-

(But in current U.S. dollars, it actually fell nomic climate, donor countries have diffi

cult

from $122.3 billion in 2008 to $119.6 billion budgetary choices to make and foreign aid

in 2009.) The 2009 figure represents 0.31 could be at risk. Following the early 1990s

percent of members’ combined gross national recession, official development assistance

income (GNI). ODA from the United States, from DAC donors fell from 0.33 percent of

the largest donor, rose 5.4 percent in real their combined GNI in 1992 to 0.22 percent

terms to $29 billion—0.20 percent of GNI, in 1997. And the 2010 targets are slipping

up from 0.19 percent in 2008 (fi

gure 5.6). Aid away. At the 2005 Group of Eight Summit

from the United Kingdom rose to $11.5 bil- in Gleneagles, Scotland, donors aimed to

raise offi cial development assistance by $50

lion, 0.52 percent of GNI. Combined ODA billion in 2010 over the level in 2004 (2004

from the 15 European Union members of the

GLOBAL MONITORING REPORT 2010 THE INTERNATIONAL COMMUNIT Y AND DE VELOPMENT 129

FIGURE 5.6 Net offi cial development assistance rose in real terms in 2008 and 2009

140

120

100

billions 77.40

72.50

80 77.54

US$/SDR, 60

40

20

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

constant 2007 prices, US$ current prices, US$ current SDR

Source: OECD DAC.

Note: SDR = special drawing rights.

prices and exchange rates). And they pledged FIGURE 5.7 Signifi cant amounts of offi cial

development assistance are in debt relief and

to increase offi cial development assistance to humanitarian assistance

Sub-Saharan Africa by $25 billion by 2010,

more than double the 2004 level. Achiev- 35

ing the global aid target implies an increase

of more than $20 billion in real terms from 30

the 2008 level. The most recent OECD sur- 25

vey of donors’ forward-spending plans indi- billions 20

cates that after factoring in the aid increases

already programmed, donors need to provide 15

US$,

an additional $14 billion to meet the 2010 10

target. Nor is the outlook for 2011 more 5

encouraging. Aid is programmed to increase

only 3 percent in real terms in 2011 over that 0 2000 2001 2002 2003 2004 2005 2006 2007 2008

programmed for 2010. humanitarian assistance debt forgiveness

Meeting the pledge to Sub-Saharan Africa other ODA

will require an even greater effort. Aid to the

region has risen considerably since the start Source: OECD DAC.

of the decade, growing at 5 percent a year. In Note: ODA = offi cial development assistance.

2008 the region received 37 percent of global

offi cial development assistance—up from 30

percent in 1999–2000—with a much higher $2 billion allocation for Sub-Saharan Africa,

share as grants. But much of the increase has leaving a gap of $18 billion.

been in the form of debt relief and emergency Programmable aid in support of core devel-

13

and humanitarian assistance (fi

gure 5.7). At opment programs is critical to achieving the

the 2002 Monterrey Conference on Financing MDGs, because it can be incorporated into

14

for Development, donors pledged that debt developing-country budgets. Although the

relief would not displace other components of share of programmable aid has risen, non-

offi cial development assistance. Meeting the programmable categories still commanded a

Gleneagles target would require an increase large share of aid fl ows in 2008 (fi gure 5.8).

of $20 billion over 2008, equivalent to a rise Nonprogrammable aid made up 35 percent

in net offi cial development assistance of 25 of gross offi

cial development assistance fl

ows

percent annually for 2009 and 2010. Donors’ from bilateral donors in 2008. That was down

forward-spending plans are for an additional from a peak of 47 percent in 2005–06, when


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DESCRIZIONE DISPENSA

Materiale didattico per il corso di Diritto internazionale dello sviluppo della Prof.ssa Cristiana Carletti utile alla stesura degli elaborati finali. Trattasi del rapporto 2010 della Banca Mondiale e del Fondo monetario internazionale all'interno del quale sono analizzate le conseguenze della crisi economica globale sulle possibilità di raggiungere gli obiettivi del millennio e sulle strategie da mettere in atto a tale scopo.


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Corso di laurea: Corso di laurea magistrale in relazioni internazionali
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A.A.: 2011-2012

I contenuti di questa pagina costituiscono rielaborazioni personali del Publisher Atreyu di informazioni apprese con la frequenza delle lezioni di Diritto internazionale dello sviluppo e studio autonomo di eventuali libri di riferimento in preparazione dell'esame finale o della tesi. Non devono intendersi come materiale ufficiale dell'università Roma Tre - Uniroma3 o del prof Carletti Cristiana.

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