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International Monetary Fund
Published Date:
May 2011
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    Global Monitoring Report 2011

    Improving the Odds of Achieving the MDGs

    Global Monitoring Report 2011

    Improving the Odds of Achieving the MDGs

    Heterogeneity, Gaps, and Challenges

    © 2011 The International Bank for Reconstruction and Development / The World Bank

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    This volume is a product of the staffs of The World Bank and The International Monetary Fund. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Board of Executive Directors of The World Bank, the Board of Executive Directors of The International Monetary Fund, or the governments they represent.

    The World Bank and The International Monetary Fund do not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank or The International Monetary Fund concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

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    ISBN: 9780821387009

    eISBN: 978-0-8213-8701-6

    DOI: 10.1596/9780821387009

    The painting on the cover, “Faces of Diversity,” is by Tola Wewe; the painting is from his ‘Beauty is Everywhere’ series and is part of a private collection.

    Tola Wewe is a member of the African Artists’ Foundation (AAF), which is a nonprofit organization dedicated to the promotion of African art and artists, and the promotion of relevant social issues through artistic endeavors. AAF plays a significant role in art communities in Africa through its art exhibitions, competitions, art classes, and workshops with the aim of unearthing and developing talent, creating societal awareness, and providing a platform to express creativity. Visit www.africanartists.org for more information on AAF.

    Cover design by Debra Naylor of Naylor Design

    Interior photographs: All photographs are from the National Geographic Society Image Collection. Lynn Johnson (page 10); James P. Blair (page 42); Lynn Johnson (page 70); W. E. Garrett (page 102); Randy Olson (page 124).

    Contents

    Foreword

    This year we are facing historic development challenges—from natural disasters, to food and fuel price spikes, and profound change in the Middle East. Despite high average growth in the developing world, it is crucial to provide opportunities to those that are being left behind. Wealthier economies are experiencing slower growth—but development assistance needs remain high. In our interconnected world, sustainable recovery means supporting inclusive growth.

    Only four years remain until the 2015 deadline for reaching the Millennium Development Goals. The Global Monitoring Report 2011: Improving the Odds of Achieving the MDGs—Heterogeneity, Gaps, and Challenges underlines the urgency of helping countries that are behind on meeting key targets for extreme poverty, hunger, disease, and child and maternal mortality. The report lays out the challenges that remain; analyzes efforts to improve human development; and assesses the role of growth, policy reforms, trade, and donor policies in meeting the MDGs.

    The findings from this year’s report offer reason for both hope and concern.

    Two-thirds of developing countries are on target or close to being on target for all the MDGs. Among developing countries that are falling short, half are close to becoming on track; with improved policies and faster growth, these countries could still achieve the targets in 2015 or soon after. Yet even those middle-income countries on track to achieve the MDGs are home to indigenous and socially excluded groups that are still very poor and often well behind in reaching the goals. Moreover, progress could stall without stronger global growth, expanded access to export markets for developing countries, and adequate assistance from donors.

    We are making headway against poverty: based on our best economic projections, the world remains on track to reduce by half the number of people living in extreme poverty. We project that by 2015, 882.7 million people will be living on less than $1.25 a day, compared with 1.4 billion in 2005 and 1.8 billion in 1990. Yet a substantial portion of this progress reflects rapid growth in China and India, while many African countries are lagging behind: 17 countries are far from halving extreme poverty, even as the aggregate goals will be reached.

    Developing countries as a whole will also likely achieve the MDGs for gender parity in primary and secondary education, for access to safe drinking water, and will be very close on hunger and primary education completion. But progress is too slow on meeting goals for child and maternal mortality as well as access to sanitation.

    Many of the poorest countries—even some that have made substantial progress—face severe difficulties in achieving the MDGs. This is particularly true for those affected by violence and fragility. The difficulties reflect the drawbacks of their initial conditions; by contrast, many middle-income countries, which entered the 1990s with better policies, better institutions, and higher growth, are now in a better position to achieve the goals. Yet we have seen how improved policies in low-income countries did contribute to strong growth in the years before the financial crisis. Policy buffers that allowed for active countercyclical policies softened the impact of the crisis and drove a relatively rapid return to precrisis growth rates. To substantially reduce poverty and meet the MDGs, low-income and other developing countries need to grow faster and shore up their ability to guard against future shocks.

    To help us better understand results on the ground, this year’s report presents findings and lessons from impact evaluations in health and education. Such evaluations often show that progress in human development has not improved as much as might be expected, given substantial recent increases in resources devoted to health and education services. This is partly because, too often, scant attention has been given to improving incentives for rural doctors and health workers, for example, so as to improve the quality of services. This might explain the slower progress toward MDGs measured by outcomes (such as those for health), than those MDGs measuring access to services, (such as those for education). A key lesson is that strengthening institutions and improving incentives—by enhancing the role of performance in setting the pay of health workers, for example—are vital to better outcomes.

    To regain momentum toward achieving the MDGs, we need international cooperation on three fronts:

    First, low-income countries in particular require a strong and stable global economic environment to continue growing. While advanced economies are facing subdued growth and high unemployment, many fast-growing emerging markets are seeing inflation pressures build. With global growth projected at 4.4 percent this year and next, advanced market economies will need to repair and reform their financial systems and tackle their fiscal imbalances in order to strengthen the recovery. Emerging market economies must adjust their macroeconomic policies to reorient growth domestically and avoid possible overheating.

    Second, low-income countries need to achieve and sustain more rapid economic growth and restore their policy buffers. One major challenge for growth is addressing the infrastructure gap through stronger public investment management systems and enhanced efforts to mobilize domestic revenue. Another is to create private sector opportunities, for local business people as well as foreign investors. Entrepreneurs’ small enterprises can create jobs, opportunity, and hope. International organizations can offer policy advice and technical assistance; donors need to meet aid commitments and strengthen the overall effectiveness of aid. The world can also assist by expanding trade opportunities, particularly for the poorest countries. Key steps include completing the Doha Round, and expanding and improving Aid for Trade, connected to trade facilitation and building capacity.

    Third, fragile states lag the furthest behind in reaching the MDGs. These countries require additional support in building institutions and moving toward a virtuous circle of development, peace, and security, as discussed in the Bank’s recently released World Development Report 2011: Conflict, Security, and Development.

    The MDGs were designed to provide a framework for the entire international community to work together toward a common end: making sure that human development reaches everyone, everywhere. If these goals are achieved, billions more people will have the opportunity to benefit from the global economy. We have four years left to reach the targets. International financial institutions, including regional development banks, are adapting policies, procedures, and tools to respond to the postcrisis world and to tailor support for unique country circumstances and needs—including economies and peoples hit hard by banking problems, food and fuel crises, and natural disasters. In doing so, we need to keep the MDGs firmly in our sights. Reaching these goals is central to global development.

    Robert B. Zoellick

    President

    The World Bank Group

    Dominique Strauss-Kahn

    Managing Director

    International Monetary Fund

    Acknowledgments

    This report has been prepared jointly by the staffs of the World Bank and the International Monetary Fund (IMF). The cooperation and support of staff of several institutions are also gratefully acknowledged: the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB), as well as the Netherlands Environmental Assessment Agency (PBL).

    Delfin S. Go was the lead author and manager of the report. Brad McDonald led the team from the IMF. The principal authors of the chapters were: chapter 1–Delfin S. Go and Jose Alejandro Quijada; Chapter 2–Brad McDonald; Chapter 3–Gayle Martin and Shwetlena Sabarwal; Chapter 4–Harry Anthony Patrinos; and Chapter 5–Amy Hey-man (aid), Mariam Malouche (trade), and Stefano Curto (international financial institutions). Jose Alejandro Quijada, Sachin Shahria, and William Shaw were key members of the core team in the overall preparation and coordination of the report.

    Bruce Ross-Larson was the principal editor.

    The work was carried out under the general guidance of Justin Lin and Hans Timmer at the World Bank. Supervision at the IMF was provided by Hugh Bredenkamp and Catherine Pattillo. Advisers to the report include Shantayanan Devarajan, Shahrokh Fardoust, Deon Filmer, Ariel Fiszbein, Ann Harrison, Jeffrey Lewis, Mohammad Zia Qureshi, Martin Ravallion, and Ritva S. Reinikka. Several people also provided specific suggestions: Andrew Burns, Jeffrey Chelsky, Punam Chuhan-Pole, Rui Coutinho, Aart C. Kraay, Barbara W. Lee, Sonia Plaza, Luis Serven, Lucio Vinas de Souza, Dominique van der Mensbrugghe, and Adam Wagstaff.

    Several staff members also made valuable contributions and inputs, including the following from the World Bank: Harold Alderman, Uranbileg Batjargal, Jinzhu Chen, Shaohua Chen, Stacey Tai Sie Chow, Yohana Dukhan, Yoichiro Ishihara, Lauren Murphy, Victor Hugo Orozco Olvera, Israel Osorio-Rodarte, Prem Sangraula, Jennifer Sturdy, and Edit Velenyi. Other contributors from the IMF included Sibabrata Das, Nisreen Farhan, Shaun Roache, Manrique Saenz, Mika Saito, and Joe Thornton. Contributors from other institutions included Paul Lucas, Henk Hilderink, Marcel Kok, Ben ten Brink, and Stefan van der Esch (PBL); Patrica Laverley and Agnes Soucat (AfDB); Indu Bhushan, Valerie Reppelin-Hill, Manju Senapaty, and Gina Marie Umali (ADB); and Murat Jadraliyev, Anita Taci, and James Earwicker (EBRD).

    Guidance received from the Executive Directors of the World Bank and the IMF and their staffs during discussions of the draft report is gratefully acknowledged. The report also benefited from many useful comments and suggestions received from the Bank and IMF management and staff in the course of its preparation and review.

    The multilingual web sites accompanying the report were produced by Vamsee Kanchi, Roula Yazigi, Rebecca Ong, and Swati Priadarshini Mishra; the main GMR Web address is www.worldbank.org/gmr2011. Rebecca Ong and Merrell Tuck-Primdahl managed the communication and dissemination activities. The translation process was coordinated by Jorge del Rosario.

    The design and production of the Global Monitoring Report 2011 was handled by the World Bank’s Office of the Publisher, under the supervision of Stephen McGroarty, Susan Graham, and Denise Bergeron.

    Abbreviations and Acronyms

    ADB

    Asian Development Bank

    AfDB

    African Development Bank

    AIDS

    acquired immune deficiency syndrome

    BRICs

    Brazil, Russia, India, and China

    CAT DDO

    post–natural catastrophe deferred drawdown option

    CCT

    conditional cash transfer

    CFM

    capital flow management

    CPIA

    Country Policy and Institutional Assessment

    CRW

    Crisis Response Window

    DAC

    Development Assistance Committee

    DDO

    deferred drawdown option

    DFQF

    duty free, quota free

    DIME

    Development Impact Evaluation

    DMC

    developing member-country

    DPL

    development policy lending

    EBRD

    European Bank for Reconstruction and Development

    FCL

    Flexible Credit Line

    FDI

    foreign direct investment

    GDP

    gross domestic product

    G-20

    Group of Twenty

    HIV

    human immunodeficiency virus

    HRF

    Haiti Reconstruction Fund

    IADB

    Inter-American Development Bank

    IDA

    International Development Association

    IFC

    International Finance Corporation

    IFI

    international financial institution

    IIA

    independence of irrelevant alternatives

    IMF

    International Monetary Fund

    LDC

    least-developed country

    MDB

    multilateral development bank

    MDGs

    Millennium Development Goals

    NTM

    nontariff measure

    OECD

    Organisation for Economic Co-operation and Development

    PBL

    Netherlands Environmental Assessment Agency

    PCL

    Precautionary Credit Line

    PRGT

    Poverty Reduction and Growth Trust

    PRST

    Poverty Reduction Strategy Paper

    QuODA

    Quality of Official Development Assistance Assessment

    RPGs

    regional public goods

    SDRs

    special drawing rights

    SMEs

    small and medium enterprises

    TFP

    Trade Finance Program

    WBG

    World Bank Group

    WEO

    World Economic Outlook

    WTO

    World Trade Organization

    All amounts are presented in U.S. dollars, unless otherwise indicated.

    Goals and Targets from the Millennium Declaration

    GOAL 1ERADICATE EXTREME POVERTY AND HUNGER
    TARGET 1.AHalve, between 1990 and 2015, the proportion of people whose income is less than $1.25 a day
    TARGET 1.BAchieve full and productive employment and decent work for all, including women and young people
    TARGET 1.CHalve, between 1990 and 2015, the proportion of people who suffer from hunger
    GOAL 2ACHIEVE UNIVERSAL PRIMARY EDUCATION
    TARGET 2.AEnsure that by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling
    GOAL 3PROMOTE GENDER EQUALITY AND EMPOWER WOMEN
    TARGET 3.AEliminate gender disparity in primary and secondary education, preferably by 2005, and at all levels of education no later than 2015
    GOAL 4REDUCE CHILD MORTALITY
    TARGET 4.AReduce by two-thirds, between 1990 and 2015, the under-five mortality rate
    GOAL 5IMPROVE MATERNAL HEALTH
    TARGET 5.AReduce by three-quarters, between 1990 and 2015, the maternal mortality ratio
    TARGET 5.BAchieve by 2015 universal access to reproductive health
    GOAL 6COMBAT HIV/AIDS, MALARIA, AND OTHER DISEASES
    TARGET 6.AHave halted by 2015 and begun to reverse the spread of HIV/AIDS
    TARGET 6.BAchieve by 2010 universal access to treatment for HIV/AIDS for all those who need it
    TARGET 6.CHave halted by 2015 and begun to reverse the incidence of malaria and other major diseases
    GOAL 7ENSURE ENVIRONMENTAL SUSTAINABILITY
    TARGET 7.AIntegrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources
    TARGET 7.BReduce biodiversity loss, achieving by 2010 a significant reduction in the rate of loss
    TARGET 7.CHalve by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation
    TARGET 7.DHave achieved a significant improvement by 2020 in the lives of at least 100 million slum dwellers
    GOAL 8DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENT
    TARGET 8.ADevelop further an open, rule-based, predictable, nondiscriminatory trading and financial system (including a commitment to good governance, development, and poverty reduction, nationally and internationally)
    TARGET 8.BAddress the special needs of the least-developed countries (including tariff- and quota-free access for exports of the least-developed countries; enhanced debt relief for heavily indebted poor countries and cancellation of official bilateral debt; and more generous official development assistance for countries committed to reducing poverty)
    TARGET 8.CAddress the special needs of landlocked countries and small island developing states (through the Programme of Action for the Sustainable Development of Small Island Developing States and the outcome of the 22nd special session of the General Assembly)
    TARGET 8.DDeal comprehensively with the debt problems of developing countries through national and international measures to make debt sustainable in the long term
    TARGET 8.EIn cooperation with pharmaceutical companies, provide access to affordable, essential drugs in developing countries
    TARGET 8.FIn cooperation with the private sector, make available the benefits of new technologies, especially information and communications
    Source: United Nations. 2008. Report of the Secretary-General on the Indicators for Monitoring the Millennium Development Goals E/CN.3/2008/29. New York.Note: The Millennium Development Goals and targets come from the Millennium Declaration, signed by 189 countries, including 147 heads of state and government, in September 2000 (http://www.un.org/millennium/declaration/ares552e.htm) and from further agreement by member states at the 2005 World Summit (Resolution adopted by the General Assembly-A/RES/60/1). The goals and targets are interrelated and should be seen as a whole. They represent a partnership between the developed countries and the developing countries “to create an environment—at the national and global levels alike—which is conducive to development and the elimination of poverty.”

    Overview

    With less than five years remaining to achieve the Millennium Development Goals (MDGs), the international development community has to set priorities that focus on lagging countries and sectors and take onboard lessons from past interventions, reflecting the limited resources available. To inform this effort, Global Monitoring Report 2011 analyzes the diverse record in improving human development across and within developing countries; summarizes the results of impact evaluations of health and education programs; and reviews recent developments in global growth, trade, and donor policies. The key messages:

    • Global progress toward the various targets continues to be mixed, and country performance is predictably diverse. Among developing countries that are off track, the top half are, on average, within 10 percent of the on-track trajectory. While countries close to the target may still miss the 2015 deadline, they could achieve the targets soon after, with improved policies and an acceleration of growth to precrisis levels.

    • For countries that are on track, or close to it, solid economic growth and good policies and institutions have been the key factors. Progress on both fronts has been evident since the 1990s. Indeed, policy responses in the recent global economic downturn have softened the negative impact, particularly for low-income countries (especially in Africa).

    • This substantial progress is not a reason for complacency. Without a stable expansion of the global economy, continuing access to advanced and developing-country markets, and adequate assistance from donors, progress could still break down. Enhancing the resilience to adverse economic shocks, including the provision of social safety programs, will need greater attention and support.

    • Reaching the MDGs is only one milestone, for there still is much work to do in fostering inclusive growth, reducing inequality and poverty, and improving health and education outcomes in even the most successful countries. Even the middle-income countries on track to reach the MDGs have trailing pockets of indigenous and socially excluded groups whose odds of reaching the goals are slim.

    • Unsurprisingly, countries with slower growth and poorer institutions are farthest behind. Many countries far from the target are fragile states, reinforcing the need for the international community to step up support to these countries.

    • Impact evaluations show that the quantity of health and education services has increased, but not the quality. This might be one reason that progress has been slower for MDGs measured by outcomes (like those for health) than for those measured by access (like those for education). That is why improving the incentives for service providers and consumers—especially making service providers directly accountable to consumers—is so essential to improving outcomes.

    • The growing assistance from new donors—many in the developing world—will not compensate for a significant future fall in aid from traditional donors, particularly if they pursue different development priorities and practices. The changing aid landscape could also have implications for the transparency of official flows and for the policies and programs that aid supports.

    The diversity of country performance

    The global numbers tell a mixed story.

    Progress has been substantial in achieving the MDGs for gender parity in primary and secondary education, completion of primary education, access to safe drinking water, and eradicating extreme poverty and hunger, in that order (figure 1). On current trends, and despite the recent global economic crisis, developing countries are on track to reach the global target of cutting income poverty in half by 2015, thanks in large part to rapid growth in China and India. Developing countries will also likely achieve the MDGs for gender parity in primary and secondary education and for access to safe drinking water, and will be very close on hunger and on primary education completion. Progress is too slow, however, on health-related outcomes—such as child and maternal mortality and access to sanitation—so the world will likely miss these MDGs by 2015. Most regions are lagging on these health goals, but East Asia and Pacific, Latin America and the Caribbean, and Europe and Central Asia are doing better than other regions.

    Poor countries and regions tend to lag in attaining the MDGs. The low-income countries lag on all the MDGs. While poverty in Sub-Saharan Africa has fallen steeply with the acceleration of growth since 2000, the region is not on track to meet the poverty reduction goal. Middle-income countries—both lower and upper—generally exhibit the best performance. Eighty percent of the upper-middle-income countries (23 of them) have achieved or are on track to achieve the extreme poverty eradication target. And 72 percent of lower-middle-income countries (34 of them) are set to reach the target for gender parity in secondary education. Both low- and middle-income countries have made good progress on gender parity in primary education.

    FIGURE 1The distance to global MDGs ranges widely

    Source: World Bank staff calculations based on data from the World Development Indicators database.

    Note: Distance to goal achieved in this graph is a weighted average of the latest indicators, using population weights in 2009.

    Even so, the targets remain within reach for many developing countries. Although more developing countries are off track than on track in achieving the targets, many off-track countries are closer to the goals, thanks to more than a decade of better policy and faster growth. A country is “close to the target” if its distance to getting on target is smaller than the average gap of all lagging countries. Others are “far from the target,” if their distance to getting on target is bigger than the average gap.

    Indeed, two-thirds or more of developing countries are, on average, on target or close to being on target for all the MDGs (figure 2). Many countries are on track to achieve several MDGs: gender parity in primary education (89 of them), gender parity in secondary education (82); access to safe drinking water (66); primary completion rate (55); and wiping out extreme poverty (47). For instance, about 70 percent of developing countries have achieved or are on track to achieve the targets for gender parity in primary and secondary education. Although half the monitored countries (57) are off target for the primary education completion goal, two thirds of them (38) are very close.

    Progress is still mixed or poor for access to sanitation, maternal mortality, and child mortality. For example, more than 40 percent of low- to upper-middle-income countries (58 of them) are lagging significantly on access to sanitation.

    The variation among lagging countries is still large, but the average gap is not, Lagging countries are, on average, 23 percent behind being on track to achieve all the MDGs (table 1). They are close to being on track for gender parity in primary education (7 percent); gender parity in secondary education (16 percent); hunger (19 percent); primary education completion (20 percent); and, to some extent, under-five mortality (23 percent). But for each target there are countries with scant progress. For example, 17 countries are far from halving extreme poverty, even as the global goal will be reached.

    More important, among countries that are off track, the top half are, on average, about 10 percent off the on-track trajectory. Their mean distance is only 4-9 percent for gender parity in primary and secondary education, child mortality, primary education completion, and alleviating hunger. Indeed, these countries close to the target need to increase primary education completion by only 9.2 percent, on average, to become on track.

    FIGURE 2More than two-thirds of developing countries are on track or close to being on track

    Source: World Bank staff calculations based on data from the World Development Indicators database.

    Note: The figure above each bar is the number of countries.

    TABLE 1Lagging countries are close to getting on target
    Average distance to getting on target (gaps, %)
    All off-target countriesCountries close to the targetCountries far from the target
    MDG 1.a Extreme poverty39 (96)1767
    MDG 1.c Hunger19 (60)935
    MDG 2.a Primary education completion20 (96)940
    MDG 3.a Gender parity in primary education7 (22)414
    MDG 3.a Gender parity in secondary education16 (52)829
    MDG 4.a Child mortality under five23 (59)838
    MDG 5.a Maternal mortality32 (80)1151
    MDG 7.c Access to safe drinking water25 (76)1441
    MDG 7.c Access to sanitation27 (50)1634
    Simple average231139
    Source: World Bank staff calculations based on data from the World Development Indicators database.Note: A country is “close to the target” if its distance to getting on target is smaller than the average gap of all lagging countries. It is “far from the target” if its distance is bigger than the average gap. Figures in parentheses indicate the range of variation (maximum value minus minimum value) of countries off target, by MDG. Averages and numbers of countries cover only those with data, which can vary by MDG.

    Reducing data gaps will improve the assessment of progress. Poor data availability may fail to convey progress or understate deterioration resulting from shocks and conflicts. Among the MDGs, the collection of data on poverty seems to lag the most. Conducting household income and expenditure surveys in both large and poor countries is difficult, often delaying global or regional poverty updates when the countries with missing data account for a large share of the total. The new household surveys employed in the analysis covered about 43 percent of the population in developing countries in 2008 and 7.6 percent in 2009. However, gaps for 2008-10 household surveys remain in several regions—particularly, South Asia (pending India’s new household survey, 10.8 percent of the population is covered), Middle East and North Africa (19.1 percent), and Sub-Saharan Africa (20.1 percent). Efforts are already under way at the World Bank to close the remaining gaps before the end of 2011 to complete and update the time-series estimate of poverty at the global and regional levels for 2008. There is also spotty information about infectious diseases, such as malaria and tuberculosis. Other data issues include reporting errors that severely hamper the accuracy of the maternal mortality ratio.

    The quality, timeliness, and availability of data are gradually improving, which can be seen from the World Bank Statistical Capacity Indicator (http://bbsc.worldbank.org); but additional effort and support for statistical capacity-building activities will be required to improve data and close gaps for all MDG-related indicators.

    The role of growth and policy

    Starting points—inherited initial conditions—count in MDG performance, but subsequent growth and policy also matter greatly. Countries with a higher per capita GDP in 1990 generally have better MDG performance. Countries starting with good policy and institutions also tend to do better. But initial conditions do not fully determine outcomes, and economic growth and policy performance after the initial year may be more important in meeting the goals. Countries that have reached or are on track to reach the targets show, on average, the fastest per capita GDP growth over 1990-2009 (table 2). Similarly, countries close to the target tend to have faster per capita growth than countries far from the target. A strong policy and institutional framework, as measured by the World Bank’s annual country policy and institutional assessment (CPIA), appears to be associated with improved MDG performance.

    TABLE 2Growth and CPIA scores are higher in countries on track or close to being on trackAverage values across MDGs (weighted by the number of countries in each MDG category)
    Close toFar from
    On targetthe targetthe target
    Average GDP per capita growth (1990-2009)2.41.81.2
    CPIA index (2009)3.73.53.3
    Source: World Bank staff calculations based on data from the World Development Indicators database.Note: The pairwise correlation between average GDP per capita growth and the CPIA index is 0.32 (significant at 0.01). A country is “close to the target” if its distance to getting on target is smaller than the average gap of all lagging countries. It is “far from the target” if its distance is bigger than the average gap.

    Both factors—initial conditions and subsequent growth and policy—also point to why the MDGs are such big challenges for the poorest and most fragile countries. Middle-income countries, having grown earlier, often have better policies and institutions.

    Growth has an all-encompassing bearing on the progress of MDGs, while policy is vital for outcome-based MDGs. Preliminary econometric results suggest that economic growth has a pervasive association with the odds of achieving the MDGs. For those countries currently far from the goals, a strong growth performance seems to catalyze progress toward the MDGs. And for those that are closer to becoming on target, growth seems to be significantly correlated with specific goals such as primary education completion and gender parity. Improved policy and institutions appear to be especially important for health-related MDGs, such as maternal mortality, under-five mortality, hunger alleviation, and access to safe drinking water; as outcome-based goals, they depend (in addition to growth and resources) on a myriad of factors that improve the quality of public expenditures and service delivery.

    Overall, an increase in growth and in the quality of policies equivalent to one standard deviation would appear to put 32 more developing countries (44 percent) on track to meet the MDGs. Increasing average growth in developing countries by one standard deviation is feasible, although the implied rate of 3.8 percent in average developing-country per capita growth is roughly double its historical 1.8 percent rate (see table 2), it is comparable both to recent periods of accelerated growth and to current forecasts of growth for 2010–15. Achieving the assumed improvement in policy and institutions may be more challenging, given the few years to 2015. Because policy reforms can take time to implement and bear fruit, it is important to begin now. Although many close-to-target countries may still miss the 2015 deadline, with higher growth and better policies they could still achieve the targets soon afterward.

    Prospects and challenges for economic growth

    The global economic recovery is proceeding along multiple tracks. Advanced economies are slowly recovering from the recent global economic crisis and face continued high unemployment. By contrast, emerging economies have seen a robust recovery, and some faster-growing economies are experiencing inflation pressures amid signs of overheating. Thanks in part to their countercyclical policy responses to the crisis, low-income economies are seeing a relatively rapid return to precrisis growth rates. Higher commodity prices are supporting growth in commodity-exporting countries, but are sparking concerns over the affordability of food for the poorer segments of the population in some low- and lower-middle-income countries. Global GDP is forecast to rise by about 4.5 percent in 2011 and 2012, with rates in advanced economies several percentage points below those in emerging and developing economies (table 3).

    TABLE 3Global output, 2007-14annual percentage change
    Projections
    Region200720082009201020112012-14
    World output5.42.9-0.55.04.44.6
    Advanced economies2.70.2-3.43.02.42.5
    Emerging and Developing Economies8.86.12.77.36.56.6
    Central and Eastern Europe5.53.2-3.64.23.73.9
    Commonwealth of Independent States9.05.3-6.44.65.04.6
    Developing Asia11.47.77.29.58.48.5
    Middle East and North Africa6.25.11.83.84.14.5
    Sub-Saharan Africa7.25.62.85.05.55.7
    Western Hemisphere5.74.3-1.76.14.74.0
    Emerging Economies9.26.32.67.56.76.7
    Other Developing Economies7.26.05.26.26.16.4
    Least Developed Countries (LDCs)a9.06.95.25.36.16.4
    Source: World Economic Outlook.

    a. United Nations classification, a subset of developing countries.

    Good macroeconomic policies remain crucial to the recovery. Continuing accommodative monetary policy in most advanced economies has alleviated the financial crisis and recession, and monetary conditions in most emerging and developing countries began to normalize in 2010. Fiscal policy is shifting from supporting recovery to cutting deficits, although easy credit conditions may be slowing the pace of fiscal consolidation among major emerging economies. Low-income countries have, appropriately, begun to reverse the unprecedented countercyclical fiscal response that softened the impact of the crisis. In many countries, policy makers can also take steps to improve employment opportunities, including for young adults.

    Sustaining the global recovery demands greater effort. To avoid unsustainable debt burdens, the advanced economies must redress fiscal imbalances and repair and reform financial systems. Emerging economies face policy challenges of overheating and strong capital inflows. Although core inflation remains subdued in many of them, inflationary expectations are rising and policy targets have been exceeded in some cases. Inflation could threaten otherwise sound policy frameworks, but concerns about further currency appreciation are resulting in a sluggish monetary policy response in several emerging economies. Differences in interest rates and growth prospects have spurred strong capital flows from the advanced to the emerging economies, adding to the overheating and complicating the policy response.

    The challenge in low-income countries is to sustain and accelerate growth through better policies and greater investment in infrastructure. Closing the large infrastructure gap by raising productivity and encouraging private investment could substantially increase per capita income growth. Effective public investment management—better strategic planning and analyses of the feasibility of projects—is critical. The financing of additional investment also needs to be carefully managed, to ensure that debt sustainability is preserved, and should be supported by parallel reforms to strengthen tax revenue.

    Rebuilding policy buffers can help protect growth in the face of future shocks. Good policies in low-income countries contributed to strong growth before the crisis. The policy buffers established then also created the space for countercyclical policies that softened the impact of the crisis and drove a fairly rapid return to precrisis growth rates. To ensure that higher growth is sustained in the face of future shocks—a prerequisite for meeting the MDGs—low-income and other developing countries need to rebuild their policy buffers as the recovery proceeds. In addition to strong, well-designed national policies, international cooperation is required to restore a global economic environment conducive to development and poverty reduction, and to support the most vulnerable countries.

    Making the right policy interventions—lessons from impact evaluations in education and health

    Improving the likelihood of more countries attaining the MDGs depends not just on more resources but also, and quite critically, on improving the quality of service provision through better policies and stronger institutions. But not much is known about how exactly to do this. To help inform this question, a special feature of this year’s report presents the findings and lessons from impact evaluations in health and education.

    Development assistance for health and education has risen to unprecedented levels in volume, but has not generated the expected improvements in outcomes. And given the current global economic environment, citizens in developed and developing countries alike are demanding more value for their money. This requires closer attention to the causal chain linking spending to outcomes and actions to isolate and strengthen the weak links in this chain. In recent years, impact evaluations have emerged as a tool to do this; and even though their evidence base is still far from complete, some interesting lessons are beginning to emerge.

    Impact evaluations highlight the disconnect between increased public spending and changes in outcomes. The outcomes have been disappointing, partly because the spending focus has been narrowly trained on input provision, ignoring other parts of the causal chain that links public spending to better outcomes. Inputs continue to be important, but alone they are not sufficient for attaining the goals in many developing countries. Policies have failed to account for the incentives facing both service providers and consumers. Too much effort has been devoted to increasing inputs, and not enough to ensuring that institutions provide services efficiently and responsively—and that consumers have the ability and incentive to use services efficiently and hold service providers accountable for quality. Some of the lessons are these:

    • Reducing user costs and providing cash transfers has improved the uptake of health and education services, but issues of quality remain.

    • Health inputs have had to grapple with uptake and use by citizens, and school-based and community-based approaches are tackling this. But more research and impact evaluations are needed to discover when and how these approaches work.

    • Increasing traditional schooling inputs has often been ineffective in improving learning outcomes—as in Bolivia, Colombia, Kenya, and Nicaragua.

    • Service delivery too often fails the poor—as in Bangladesh, Brazil, Ecuador, Ghana, India, Indonesia, Morocco, Peru, Tunisia, and Uganda.

    • Pay for performance improved student learning outcomes—as in India, Israel, and Kenya. The Rwanda health center pay-for-performance program increased institutional deliveries and preventive care visits by young children and improved the quality of prenatal care.

    • New approaches are being designed to improve service delivery, and an evidence base on the effectiveness of these approaches is beginning to take shape.

    These are just some of the compelling messages from the evaluations summarized in chapter 3.

    Although designing the right approach to improving outcomes is complex and depends on context, a systematic evidence base generated through rigorous impact evaluations can provide useful guidance for policy makers. The information base on impact evaluations is far from complete, and much more work is needed before the most pressing questions can be answered. But some new approaches show promise in improving incentives and in strengthening the accountability of service provision.

    Assisting the poorest of the poor—socially excluded groups

    Reaching the MDGs requires addressing the plight of the world’s socially excluded groups, including indigenous people, ethnic minorities, and linguistic groups. They make up a sizable proportion of the world’s people and an even greater share of the world’s poor. Turning the situation around will therefore require widespread and sustainable economic growth, as well as specific interventions to reach these groups.

    Most MDG indicators for indigenous people and ethnic minorities are worse than population averages. This is true for under-five mortality; adult literacy; school enrollment, completion, and achievement; gender equity; water deprivation; child nutrition; and, especially, poverty reduction. Most countries in Latin America with sizable indigenous populations, for example, show almost no poverty reduction for those groups.

    Programs can meet the needs of indigenous people and ethnic minorities. Bilingual education programs can promote national language acquisition, school completion, and subsequent earnings gains, contributing to multiple goals—and be cost effective. Conditional cash transfer programs can promote schooling, health, and poverty reduction; and these programs result in disproportionate gains for minority populations, particularly in countries with large vulnerable populations.

    Attaining the MDGs for indigenous people and ethnic minorities requires innovative approaches. These people may be hard to reach because they live in remote locations with poor transportation. They may also suffer from social and economic discrimination and government neglect. So assisting them may require more complex interventions than those for the general population. The lack of data also complicates the design and evaluation of programs. The more successful programs, such as those in Asia, have extended economic opportunities and provided cash or in-kind assistance, thus allowing these groups to use the targeted assistance more effectively. Other countries may need to target these groups more tightly and raise the quality of services by increasing the accountability of service providers to their clients.

    In addition to assisting the indigenous peoples, more inclusive growth and equality within countries will also benefit people in the bottom quintiles and lift more people out of poverty. The case of Brazil points to two lessons: (1) reforms to social policies and programs to make them more pro-poor (if fiscally possible) can play an important role in sustaining poverty reduction, even during a period of economic stagnation; and (2) sensible macroeconomic and trade policies need not hurt the poor and, in the specific case of taming hyperinflation, are likely to make a significant contribution in the fight against poverty, even when that is not the primary objective.

    Progress in the international development framework

    The international development framework functioned well in coping with the crisis

    Governments and international institutions cooperated well in the face of recession, thus avoiding the perils of a downward protectionist spiral, maintaining aid, and boosting emergency financial resources. Financing from the international institutions jumped sharply, leading to a general increase in their resources. Although recent research suggests that declines in aid have tended to deepen for several years after banking-related crises, aid levels from countries in 2010 have not yet been constrained by concerns over rising fiscal deficits. Some major-donor governments remained dedicated to maintaining aid levels and others announced cuts. Even so, official development assistance (ODA) from members of the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD) rose to its highest level, at $128.7 billion, an increase of 6.5 percent over 2009 in real terms. Developing countries are also benefiting from new donors (including disbursements of some $9–$10 billion a year from donors that are not members of DAC) and from a sharp rise in donations from the private sector in advanced countries.

    The past tumultuous decade has ushered in significant changes in the assistance policies of international institutions. They have developed a results-based, country-driven assistance framework grounded in regular reviews of country strategy and independent evaluations. A more diverse and flexible range of financing instruments helped them tailor assistance to the needs of particular countries (such as those affected by conflict) and in particular situations (such as disaster relief and crisis assistance). They are also doing more in providing knowledge—through loans and technical assistance, and global programs and projects—as well as free information to the global community.

    The growing assistance from emerging donors (many in the developing world) is welcome but may not compensate fully for a significant fall in aid from traditional donors, to the extent that the emerging donors pursue different development priorities and practices. This changing aid landscape could also have implications for the transparency of official flows and the policies and programs that aid supports.

    Trade integration and facilitation remain essential for inclusive growth and poverty reduction. World trade, now recovering at about double the 2002–08 rate of growth, remains well below the precrisis peak and even lower than the level it would have achieved if it had continued the 1995-2008 trend. The rise in protectionist measures during the crisis, which particularly affected the exports of least-developed countries, appears to be receding. Solidifying an open, rules-based international trade regime can be accomplished best by concluding the Doha Round.

    The global community can support poverty reduction through improving trade integration in low-income countries. Poor-country market access could improve significantly if rich countries extended duty-free, quota-free access to all poor-country exports and simplified rules of origin in preference agreements. Efforts also are required to ensure that poor countries can access trade finance at reasonable cost, along with improvements in data and a review of whether banking regulations impose excessive capital requirements on trade finance transactions. Regional trade agreements should support open trade through low external tariffs, while technical assistance to developing-country trade negotiators would support deeper regional integration. More financial resources and technical assistance are needed to strengthen trade facilitation and to reduce supply constraints on poor-country exports. These efforts should include increased commitments for aid for trade (which in real terms stagnated in 2009) and greater use of public-private partnerships. Further efforts are required to connect landlocked countries and lagging regions to regional and international markets. Logistical improvements at the subnational level are also critical for connecting rural and remote areas in developing countries.

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