Global Economic Prospects, 2007 Managing the Next Wave of Globalization Richard Newfarmer and Paul Brenton World Bank February, 2007
Strong growth in developing economies 7.0 Real GDP annual percent change Forecast 6.0 Developing 5.0 4.0 3.0 2.0 1.0 0.0 1980 1985 1990 1995 2000 2005 Source: World Bank 2008
Strong growth in developing economies 7.0 Real GDP annual percent change Forecast 6.0 Developing 5.0 4.0 3.0 2.0 1.0 0.0 1980 1985 1990 1995 2000 2005 Source: World Bank 2008
10 Growth, though tapering off, will likely remain solid over the medium term in most regions Percent change, GDP 9 8 7 6 2005 2006 2007 2008 5 4 3 2 East-Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle-East & North Africa South Asia Sub-Saharan Africa Source: World Bank
and growth in Africa is likely to remain strong Percent change, GDP 10 8 6 2005 2007 2008 4 2006 2 0 South Africa Nigeria Kenya Tanzania Uganda Source: World Bank
The next wave of globalization.. is likely to spur faster growth through four channels: trade, finance, people and technology and pose critical challenges Stresses over income distribution and in labor markets could undermine potential growth and failure to manage environmental pressures entails serious risks Policy responses to these stresses are so far inadequate to the challenges, so new efforts are needed at both the national and multilateral level
Developing countries share of world trade will rise as global integration intensifies US$2001 trln. 30 Exports from developing and developed countries, 2005-2030 2030 $27 trln 25 High-income countries 20 15 10 5 Developing countries 45% 0 22% 32% 1980 2005 2030 Source: World Bank simulations with Linkage model.
China, India, and other developing countries will become centers of global demand over the next quarter century $2001 trillion 45 40 35 30 25 20 15 10 5 0 GDP at PPP exchange rates Other developing countries 2005 2010 2015 2020 2025 2030 China USA EU India
Growth would raise income and reduce absolute poverty Average per capita incomes in developing countries are likely to double.. Even so, huge disparities will remain Developing countries average incomes, now 16% of rich countries, will rise to about one-quarter African incomes, though growing more rapidly, would still be less than 10% of rich countries
Growth would raise income and reduce absolute poverty Average per capita incomes in developing countries are likely to double.. and more people from developing countries will enter the global middle class 1400 Number of people (million) 1200 1000 800 600 400 Africa South Asia Middle East Latin America Europe & Central Asia East-Asia 200 0 2005 2030
Growth would raise incomes and reduce absolute poverty Average incomes are likely to double and more people from developing countries will enter the global middle class and sharp reductions in dire absolute poverty 1,400 Millions of people 1,200 1,000 28% Other Sub-Saharan Saharan Africa 20% 800 600 South Asia 12% 8% 400 200 East Asia 0 1990 2003 2015 2030
More acceleration is possible and Africa could grow even faster than our high growth scenario Income growth per capita, percent per annum 2010/2030 8 7 6 5 4 3 2 1 Base scenario High growth Scenario 0 East Asia S. Asia E. Europe & C. Asia M. East & N. Afr S.S. Africa Latin Am. Africa s s advantages: : demographics, technological leap-froging froging, labor costs, and natural resources
Managing stresses: uneven benefits Returns to skilled workers will likely rise relative to unskilled workers Ratio of skilled wages relative to unskilled wages 7 6 5 4 3 2001 2030 2 1 0 East Asia E. Eur & C. Asia Latin Am. M. East & N. Afr. S. Asia S. S. Africa Source : Bank staff calculations
Managing stresses: environmental pressures Global institutions and policies are still too weak to deal with severe environmental pressures Carbon emissions are causing global warming Annual carbon emissions (millions of tons) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Others Large developing countries High-income countries 1990 2000 2010 2020 2030 2040 2050 Source: OECD GREEN model simulations
Realizing the potential of global integration requires an affirmative policy response domestically and globally Domestic policy must enhance competitiveness and ensure that growth is broadly shared Institutional measures to raise productivity and growth Removing barriers to integration Improving investment climate Investing in education Protecting workers but not jobs Multilateral collaboration Using development assistance to promote integration of lagging countries Removing barriers to the products that the poor produce Near-term priority: Completing Doha round in the WTO Reinforcing mechanisms to protect the global commons
Global Economic Prospects, 2007 Managing the Next Wave of Globalization Richard Newfarmer and Paul Brenton World Bank February, 2007