Reflections on the Global Economic Outlook A presentation to the ACI-ICA World Congress Mahmoud Mohieldin @wbg2030 October 2018 Senior Vice President worldbank.org/sdgs World Bank Group
Global Megatrends Demographic Fragility and Urbanization transitions violence Market Volatility Technological and Debt Climate change changes Vulnerability Renewed debate Shifts in the about global economy globalization
There was a demographic turning point in 2010 Percent of total population World that is working age Advanced Economies 70 • Higher working-age Emerging Market and Developing Economies population shares are associated with higher per capita output 65 growth. • Global demographic trends turned from 60 tailwinds to growth into headwinds around 2010. 55 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Source: World Bank Global Economic Prospects, 2018
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 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 * World Bank Global Monitoring Report 2015/2016
Urbanization and development outcomes Proportion of urban population living in slums, 1990-2010 Proportion of population living in urban areas, 1960-2011
Climate change and development progress The number of disasters and losses has been rising. Development progress needs to integrate resilience to avoid undoing hard fought development gains Global disaster losses, 1980 – 2012 Index of risk preparation across countries Process of integrating climate resilience into development
Commodity cycles exacerbate global economic volatility Commodity price indexes, annual
The rate of technological advancement is unprecedented
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
Multipolarity The world’s economic center of gravity, Evolution of the earth’s economic center of 1980 – 2016, in black, at three-year intervals gravity: 1 CE to 2025 1989 2007 2049 1998 1980 2016 Source: Danny Quah, 2011 Source: McKinsey Global Institute, 2012 Source: Danny Quah, 2011
The global risks landscape in 2018 Source: World Economic Forum, The Global Risks Report 2018
Robust but Slowing Growth in Advanced Economies; Weakening Global Trade (Percent, 3 months SA) (Index, 50+ = expansion) 3 8 56 Industrial production growth 2 6 54 1 4 52 0 2017 2018 2019-20 2017 2018 2019-20 2017 2018 2019-20 2017 2018 2019-20 2 50 0 48 Advanced United Euro Area Japan 2016 2017 2018 economies States 13
Tightening Financing Conditions; Diverging Commodity Prices 600 600 EMBI spreads EM CDS spreads (RHS) 500 400 400 200 300 200 0 2015 2016 2017 2018 14
Change from June 2018 2018e 2019f 2020f 2018 2019 2012-16 2017 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 7.3 6.6 6.3 6.0 6.0 0.0 -0.1 East Asia and Pacific 3.2 4.0 3.1 2.5 2.7 -0.1 -0.6 Europe and Central Asia 2.2 0.8 0.7 1.8 2.4 -1.0 -0.5 Latin America and the Caribbean 3.5 1.2 1.8 1.9 2.7 -1.2 -1.4 Middle East and North Africa 6.4 6.2 6.9 7.1 7.1 0.0 0.0 South Asia 4.3 2.5 2.8 3.4 3.6 -0.3 -0.1 Sub-Saharan Africa 15
Financial stress Trade tensions Policy uncertainty Geopolitical risks Slower potential growth 16
(Percent, year-on-year) (Percent of labor 3 6 4 force) FOMC median Inflation Unemployment rate (RHS) United States Euro Area Japan 3 2 5 2 1 1 4 0 0 3 -1 2015 2016 2017 2018 2010 2013 2016 2019 2022 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. 17
110 105 0.0 100 -0.4 100 95 -0.8 90 90 China China Other EM7 Other EM7 EMDEs Global -1.2 80 85 United States China Apr May Jun Jul Aug Sep Apr May Jun Jul Aug Sep 18
4 30 Short- term Malaysia 0 external South debt 20 Africa -4 Turkey Thailand Indonesia Argentina U.A.E. -8 Colombia Poland 10 Chile Hungary Saudi -12 China Mexico Arabia Philippines India Russia Morocco Peru -16 Brazil 0 EMDEs with current EMDEs with current -10 -5 0 5 10 account deficits account surpluses Current account (CA) balance 19
Public Debt in EMs, 2013-18s (percent of GDP) 20
Gross Financing Needs in EMs External Financing Needs and Reserves 21
EMs: Value of International Bonds Maturing External Variable Rate Debt Change in Credit Rating in EMs, 2012-18 22
Use swap and FX Ease capital flow regulation Build-up capital liquidity measures Consider temporary restrictions buffers on outflows Financial stability FX liquidity Macro- Capital prudential measures flow measures measures measures Decline in Implement Risks Allow exchange rate Decline in capital flows structural Materialize depreciation growth reforms Macroeconomic policy FX reserve Fiscal Monetary buffers policy measures policy Use fiscal Use targeted stabilization if interventions space available; if Use conventional tools, weighing policy trade-offs not, build space 23
Investing in Inclusive Growth: The Common Characteristics of High, Sustained Growth 24
Investing in Inclusive Growth: Dashboard for inclusive, sustainable, and multidimensional growth 25 Source: New Growth Models, World Economic Forum, 2014
Harnessing the impact of disruptive changes requires a comprehensive policy framework Effects of disruptive changes e.g. tech Invest in resilience Invest in human Invest in infrastructure (incl. social capital protection) Data STI Finance Enablers Achieving the SDGs Adapted from: WDR 2019 Changing Nature of Work, World Bank, 2018
Data How will we Finance enable these investments? Implementation
Data is the new oil
Finance for development will need to come from multiple sources
Big picture of developing countries' total resource receipts FDI Net Inflows (% of GDP) Tax revenues Fintech 10 5 0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Low & middle income World Middle East & North Africa
Maximizing Fintech’s Potential Opportunities, Challenges, Risks Reinforce Competition and Commitment Monitor Developments Closely to Deepen to Open, Free and Contestable Markets Understanding of Evolving Financial Systems Foster Fintech to Promote Financial Embrace the Inclusion and Develop Financial Markets Promise of Fintech Enable New Adapt Regulatory Framework and Supervisory Technologies to Practices for Orderly Development and Stability Enhance Financial of the Financial System Safeguard the Service Provision Integrity of Financial Systems Modernize Legal Frameworks to Provide an Enabling Legal Enhance Collective Surveillance of Landscape the International Monetary and Financial System Ensure Stability of Domestic Encourage Monetary and Financial Systems International Cooperation and Develop Robust Financial and Data Information Sharing Infrastructure to Sustain Fintech Benefits 31 Source: The Bali Fintech Agenda, World Bank, 2018
worldbankgroup.org/sdgs Follow us on twitter @WBG2030 Mahmoud-Mohieldin on Mahmoud Mohieldin @wbg2030 Senior Vice President worldbank.org/sdgs World Bank Group
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