It is natural for people to focus on problems at home. But it is also essential to take a wider view. The succession of shocks — the pandemic, supply constraints, Russia’s invasion of Ukraine, soaring inflation and tightening monetary and financial conditions — have adversely affected large parts of the world economy, but the weakest of countries and the most vulnerable people within them, above all. All this has had (and will have) dire consequences for economic development, the alleviation of poverty and even political stability in poor countries. These challenges, which emerge clearly in the World Bank’s latest Global Economic Prospects report must not be ignored. They certainly give its new president, Ajay Banga, a formidable in-tray.
The World Bank’s summation of the consequences of these shocks, made worse by the longer-term slowdown in the growth of world trade, rising protectionism, the build up of debt and the worsening climate crisis, is grim. What can justly be called a “polycrisis” has “dealt an enduring setback to development in emerging and developing countries, one that will persist for the foreseeable future. By the end of 2024, economic activity in these economies is expected to be about 5 per cent below levels projected on the eve of the pandemic.” Worse, in more than one-third of the poorest countries, incomes per head will be below 2019 levels in 2024. This will have far-reaching effects: the impoverished and insecure will find it hard to improve their own human capital or that of their children. Today’s disasters will radiate far into the future.
As has long been the case, east Asia and south Asia are expected to perform relatively well. But performance elsewhere, notably in Latin America and sub-Saharan Africa, is forecast to be poor. Yet this has to be set in a longer-term perspective. The report indicates that, without China, incomes per head of emerging and developing countries have stagnated relative to those in high-income countries since the middle of the last decade. The relative incomes per head of the low-income countries have stagnated for even longer. In brief, the reduction in global inequality seems to have stalled.