World Bank warns of challenges ahead for developing economies
THE World Bank warned that developing economies will face tougher years ahead, with growth globally too slow to boost living standards and a climate of high policy uncertainty deterring advanced-nation investment in poorer countries.
The anti-poverty lender warned on Tuesday (Jan 14) in its latest Global Economic Prospects report that the long-term growth outlook for developing economies is the weakest since the start of this century, and too few nations will climb from low-income to middle-income status in the next 25 years. That means hundreds of millions of people will remain mired in extreme poverty, hunger and malnutrition.
“Developing economies, which began the century on a trajectory to close the income gap with the wealthiest economies, are for the most part now falling farther behind,” Indermit Gill, the World Bank’s chief economist, wrote in the foreword to the report.
The world economy is forecast to grow 2.7 per cent this year and next, the Washington-based organisation said in the report, unchanged from the previous outlook in June. That’s below the 3.1 per cent average before the Covid-19 pandemic – too weak to help poor nations catch up with richer ones.
Most developing nations face challenges including weak investment and productivity improvements, ageing populations, and environmental crises, the bank said. The global economy faces further challenges from trade policy shifts and geopolitical tensions, it added.
Russia’s war in Ukraine since 2022 and Israel’s fight against Hamas and Hezbollah since last year have rippled through the global economy via disruptions to commodities and supply chains, while growing competition between the US and China has created stresses in global trade. Meanwhile, US president-elect Donald Trump has pledged to impose a raft of tariffs, threatening to upend trading patterns and potentially stoke inflation.
The bank noted in the report that emerging-market and developing economies – which include China, India and Brazil – contributed about 60 per cent of global growth since 2000, double their share in the 1990s. But they now face external threats from protectionist measures and geopolitical fragmentation, as well as roadblocks in implementing structural reforms.
Meanwhile, the pace has stalled for low-income countries – those with per capita gross national income of around US$3 per day – to achieve middle-income status. While 39 countries “graduated” since 2000, there are still 26 stagnating on the back of anaemic growth, violence and conflict, and the escalating impacts of climate change.
“Developing economies should have no illusions about the struggle ahead: the next 25 years will be a tougher slog than the last 25,” Gill wrote. BLOOMBERG
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