Page 10 - 31JAN2020E3

CoverStory

the opportunity to undertake structural reforms that
boost broad-based growth, which is essential to pov-
erty reduction,” said World Bank Group Vice President
for Equitable Growth, Finance and Institutions, Ceyla
Pazarbasioglu. “Steps to improve the business climate,
the rule of law, debt management, and productivity
can help achieve sustained growth.”
Following its weakest performance since the glob-
al financial crisis, the world economy is poised for a
modest rebound this year — if everything goes just
right. Hanging over this lethargic recovery are two
other trends that raise questions about the course of
economic growth: the unprecedented runup in debt
worldwide, and the prolonged deceleration of pro-
ductivity growth, which needs to pick up to bolster
standards of living and poverty eradication.
The gobal growth is set to rise by 2.5 per cent, a small
uptick from 2.4 per cent as trade and investment grad-
ually recover, the World Bank’s semi-annual Global
Economic Prospects forecasts. Advanced economies
are expected to slow as a group to 1.4 per cent from
1.6 per cent, mainly reflecting lingering weakness in
manufacturing.
Emerging market and developing economies will
see growth accelerate to 4.1 per cent from 3.5 per cent
last year. However, the pickup is anticipated to come
largely from a small number of large emerging econ-
omies shaking off economic doldrums or stabilizing The February 1 Budget is widely
after recession or turbulence. For many other econo- expected to unveil more measures
mies, growth is on track to decelerate, as exports and to boost growth
investments remain weak.

WORRYING FACTOR
A worrying aspect of the sluggish growth trend growth and driver of poverty reduction, has slowed
is that even if the recovery in emerging economy more broadly and steeply since the global financial
growth takes place as expected, per capita growth will crisis than at any time in four decades. In emerging
remain below the long term averages and will advance market and developing economies, the slowdown has
at a pace too slow to meet poverty eradication goals reflected weakness in investment and moderating
Income growth would in fact be slowest in the region efficiency gains as well as dwindling resource real-
where 56 percent of the world’s poor live. location between sectors. The pace of improvements
There have been four waves of debt accumulation in many key drivers of labor productivity — including
in the last 50 years. The latest wave, which started in education and institutions — has slowed or stagnated
2010, has seen the largest, fastest, and most broad- since the global financial crisis.
based increase in debt among the four. While current Yet another aspect of the disappointing pace of
low levels of interest rates mitigate some of the risks global growth is the broad-based slowdown in pro-
associated with high debt, previous waves of broad- ductivity growth over the last ten years. Growth in
based debt accumulation ended with widespread productivity — output per worker — is essential to
financial crises. raising living standards and achieving development
Policy options to reduce the likelihood of crises goals. The use of price controls is widespread in
and lessen their impact should they materialize emerging market and developing economies. While
include building resilient monetary and fiscal frame- sometimes used as a tool for social policy, price con-
works, instituting robust supervisory and regulatory trols can dampen investment and growth, worsen
regimes, and following transparent debt manage- poverty outcomes, cause countries to incur heavy
ment practices. fiscal burdens, and complicate the effective conduct
Productivity growth, a primary source of income of monetary policy. Replacing price controls with

10