Reflections on the Global Economic Outlook
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The document summarizes Mahmoud Mohieldin's presentation on the global economic outlook. Some key points include: - Global demographic trends have shifted from being a tailwind for growth pre-2010 to a headwind due to aging populations and slowing labor force growth. - Urbanization, climate change, technological change, and other megatrends present both opportunities and challenges for development. - Risks to the global economic outlook include tightening financial conditions, diverging commodity prices, and trade tensions. - Countries need comprehensive policy frameworks and investments in areas like infrastructure, human capital, and resilience to harness disruptive changes and achieve sustainable development.
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Reflections on the Global Economic Outlook
- 1. @wbg2030 worldbank.org/sdgs October 2018 Mahmoud Mohieldin Senior Vice President World Bank Group Reflections on the Global Economic Outlook A presentation to the ACI-ICA World Congress
- 3. Demographic transitions Urbanization Fragility and violence Climate change Market Volatility and Debt Vulnerability Technological changes Shifts in the global economy Renewed debate about globalization Global Megatrends
- 4. There was a demographic turning point in 2010 55 60 65 70 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 World Advanced Economies Emerging Market and Developing Economies Percent of total population that is working age Source: World Bank Global Economic Prospects, 2018 • Higher working-age population shares are associated with higher per capita output growth. • Global demographic trends turned from tailwinds to growth into headwinds around 2010.
- 5. Lagging in human development outcomes Job creation for rapidly growing share of working-age people, mostly youth Populations beginning to age; potential slowdown in growth of labor supply Adapting to aging to maintain living standards The world can be divided into four major demographic groups Most of the global population lives in early- and late-dividend countries and while 78 percent of global growth was from late- and post-dividend countries, 90 percent of global poverty is in pre- and early-dividend countries * World Bank Global Monitoring Report 2015/2016
- 6. Urbanization and development outcomes Proportion of urban population living in slums, 1990-2010Proportion of population living in urban areas, 1960-2011
- 7. Climate change and development progress Process of integrating climate resilience into development Index of risk preparation across countriesGlobal disaster losses, 1980–2012 The number of disasters and losses has been rising. Development progress needs to integrate resilience to avoid undoing hard fought development gains
- 8. Commodity cycles exacerbate global economic volatility Commodity price indexes, annual
- 9. The rate of technological advancement is unprecedented
- 10. Violent conflict is increasing and becoming more complex Number of people killed by violent conflict Number of conflicts, by type Source: Pathways to Peace, World Bank, 2018
- 11. The world’s economic center of gravity, 1980–2016, in black, at three-year intervals Multipolarity 1980 1989 1998 2007 2016 2049 Source: Danny Quah, 2011 Source: McKinsey Global Institute, 2012 Evolution of the earth’s economic center of gravity: 1 CE to 2025 Source: Danny Quah, 2011
- 12. The global risks landscape in 2018 Source: World Economic Forum, The Global Risks Report 2018
- 13. 13 Robust but Slowing Growth in Advanced Economies; Weakening Global Trade 0 1 2 3 2017 2018 2019-20 2017 2018 2019-20 2017 2018 2019-20 2017 2018 2019-20 Advanced economies United States Euro Area Japan (Percent, 3 months SA) (Index, 50+ = expansion) 48 50 52 54 56 0 2 4 6 8 2016 2017 2018 Industrial production growth
- 14. 14 Tightening Financing Conditions; Diverging Commodity Prices 0 200 400 600 200 300 400 500 600 2015 2016 2017 2018 EMBI spreads EM CDS spreads (RHS)
- 15. 15 Change from June 2018 2012-16 2017 2018e 2019f 2020f 2018 2019 World 2.8 3.0 3.0 2.9 2.8 -0.1 -0.1 Advanced economies 1.7 2.3 2.2 2.0 1.6 0.0 0.0 EMDEs 4.8 4.2 4.2 4.3 4.6 -0.3 -0.4 East Asia and Pacific 7.3 6.6 6.3 6.0 6.0 0.0 -0.1 Europe and Central Asia 3.2 4.0 3.1 2.5 2.7 -0.1 -0.6 Latin America and the Caribbean 2.2 0.8 0.7 1.8 2.4 -1.0 -0.5 Middle East and North Africa 3.5 1.2 1.8 1.9 2.7 -1.2 -1.4 South Asia 6.4 6.2 6.9 7.1 7.1 0.0 0.0 Sub-Saharan Africa 4.3 2.5 2.8 3.4 3.6 -0.3 -0.1
- 16. 16 Financial stress Trade tensions Policy uncertainty Geopolitical risks Slower potential growth
- 17. 17 Bloomberg; Haver Analytics; World Bank • Left Panel. Inflation is measured by year-on-year change in the personal consumption expenditures (PCE) price index. Both PCE price index and unemployment rate are seasonally adjusted. Dotted lines refer to projections over longer run in the latest FOMC) meeting (in September 2018), based on the central tendency. Last observation is August 2018. Right Panel. (Percent, year-on-year) (Percent of labor force) 3 4 5 6 0 1 2 3 2015 2016 2017 2018 Inflation Unemployment rate (RHS) -1 0 1 2 3 4 2010 2013 2016 2019 2022 United States Euro Area Japan FOMC median
- 18. 18 -1.2 -0.8 -0.4 0.0 United States China EMDEs Global 80 90 100 110 Apr May Jun Jul Aug Sep China Other EM7 85 90 95 100 105 Apr May Jun Jul Aug Sep China Other EM7
- 19. 19 [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] [CELLRA NGE] 0 10 20 30 -10 -5 0 5 10 Short- term external debt Current account (CA) balance -16 -12 -8 -4 0 4 EMDEs with current account deficits EMDEs with current account surpluses
- 20. 20 Public Debt in EMs, 2013-18s (percent of GDP)
- 21. 21 Gross Financing Needs in EMs External Financing Needs and Reserves
- 22. 22 EMs: Value of International Bonds Maturing Change in Credit Rating in EMs, 2012-18External Variable Rate Debt
- 23. Risks Materialize FX liquidity measures Decline in growth Decline in capital flows Macro- prudential measures Capital flow measures FX reserve buffers Monetary policy Fiscal policy Implement structural reforms Allow exchange rate depreciation Use targeted interventions Use conventional tools, weighing policy trade-offs Use fiscal stabilization if space available; if not, build space Build-up capital buffers Use swap and FX liquidity measures Ease capital flow regulation Consider temporary restrictions on outflows 23 Financial stability measures Macroeconomic policy measures
- 24. Investing in Inclusive Growth: The Common Characteristics of High, Sustained Growth 24
- 25. Source: New Growth Models, World Economic Forum, 2014 Investing in Inclusive Growth: Dashboard for inclusive, sustainable, and multidimensional growth 25
- 26. Adapted from: WDR 2019 Changing Nature of Work, World Bank, 2018 Invest in resilience (incl. social protection) Invest in infrastructureInvest in human capital Enablers Achieving the SDGs Data Finance STI Harnessing the impact of disruptive changes requires a comprehensive policy framework Effects of disruptive changes e.g. tech
- 27. How will we enable these investments? Data Finance Implementation
- 28. Data is the new oil
- 29. Finance for development will need to come from multiple sources
- 30. Big picture of developing countries' total resource receipts Tax revenues 0 5 10 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 FDI Net Inflows (% of GDP) Low & middle income World Middle East & North Africa Fintech
- 31. Develop Robust Financial and Data Infrastructure to Sustain Fintech Benefits Ensure Stability of Domestic Monetary and Financial Systems 31 Maximizing Fintech’s Potential Opportunities, Challenges, Risks Enable New Technologies to Enhance Financial Service Provision Adapt Regulatory Framework and Supervisory Practices for Orderly Development and Stability of the Financial System Modernize Legal Frameworks to Provide an Enabling Legal Landscape Enhance Collective Surveillance of the International Monetary and Financial System Monitor Developments Closely to Deepen Understanding of Evolving Financial Systems Reinforce Competition and Commitment to Open, Free and Contestable Markets Safeguard the Integrity of Financial Systems Encourage International Cooperation and Information Sharing Foster Fintech to Promote Financial Inclusion and Develop Financial Markets Embrace the Promise of Fintech Source: The Bali Fintech Agenda, World Bank, 2018
- 35. worldbankgroup.org/sdgs Follow us on twitter @WBG2030 Mahmoud-Mohieldin on @wbg2030 worldbank.org/sdgs Mahmoud Mohieldin Senior Vice President World Bank Group
Editor's Notes
- 1) Facts 2) Controversy/debates 3) What to be done (policies/solutions)
- “Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.” -John Kenneth Galbraith
- “Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.” -John Kenneth Galbraith
- Cross-cutting and integrated – so the point is that progress on one affects progress on others. And that they need to be approached in a holistic manner. How can SDGs, as an open competition/race between nations, help address challenges and take advantage of opportunities, in a specific timeline, 12 yrs Advances in information and communication technologies (ICTs) are at the heart of this technological change. They have vastly increased digital interconnectedness, digital data storage and analytics capabilities at declining cost. Artificial intelligence (AI) in particular, which allows machines and computers to learn to solve problems on their own, could have transformative effects across many sectors of the economy, making it essential that innovations are in the public interest and guided by the 2030 Agenda for Sustainable Development and the Addis Agenda. Due to their potential to disrupt industries and markets, these technologies are sometimes described as being part of a fourth industrial revolution (following mechanization, mass production and the digital revolution) and have the potential to accelerate SDG implementation through their rapidly declining costs and improving performance. These technologies and their applications offer new opportunities for economic prosperity, social inclusion, and environmental sustainability, with great potential to contribute to achieving the SDGs. This can be seen in the emergence of innovation-driven entrepreneurs in developing countries that base their business model on specific aspects of the SDGs. 3 For example, agricultural biotechnology can improve productivity and natural-resource use efficiency, with significant benefits to small farmers. Biological nanotechnology applications are already starting to have an impact on the diagnosis, treatment and prevention of disease. Biotechnology and synthetic biology have enormous potential for addressing the environment, climate crisis and loss of biodiversity through more advanced biofuels and “cleaner” agriculture—that is, agricultural processeswith less input of chemical fertilizers and pesticides, and/or a reduction of carbon dioxide through artificial leaf technology. Nuclear and isotopic techniques to track and quantify carbon, water and nutrient movement and dynamics are also used to increase agricultural productivity, resilience, and the sector’s greenhouse gas emissions. In Sudan, the application of climate-smart agriculture has allowed hundreds of women, many of whom are refugees or internally displaced persons, to start small-scale farms and home gardens in extremely arid areas. Table 1 presents a wide range of promising emerging technologies across the 17 SDGs, as identified by a group of 158 scientists for the 2016 Global Sustainable Development Report. 4 The pace of technological change has accelerated significantly. In some areas, such as digital technologies, which are characterized by very low marginal costs and wide distribution through platforms and networks, performance, cost and applicability across sectors is improving at exponential rates. Technologies are also diffused much more rapidly across borders than in the past. For example, the adoption of the steam engine by developing regions took 120 years. Current technologies are clearly spreading within much shorter periods of time. To ensure that technology dividends are shared broadly, countries should put in place policies to support lifelong learning and skills acquisition for all. At the same time, the significant increase in self-employment and new forms of employment call for adapted and strengthened employment and social protection policies. To address continued gender disparities and enhance inclusion of marginalized groups, such policies should emphasize the equitable participation of women and all social groups in decent jobs. In development finance, new technologies can help overcome weak contract enforcement, improve administrative procedures, increase access to financial services for those currently underserved and address data gaps. But opportunities will only be available to those who are connected. Wide access of individuals and businesses to new technologies, platforms and payment systems is critical, and Governments need to adjust their regulatory frameworks in order to close access gaps while managing risks. Policymakers also need to be proactive in addressing emerging risks to privacy, financial stability, and financial integrity.