What is the human cost of the global economic crisis? How many people will the crisis prevent from escaping poverty, and how many will remain hungry? How many more infants will die? Are children being pulled out of schools, making it virtually impossible to reach 100 percent completion in primary education by 2015? What are the gender dimensions of the impacts? These are some of the questions as the global economy comes out of the worst recession since the Great Depression.
Historically, periods of sharp contraction have been extremely harmful for human development. Social indicators tend to deteriorate rapidly during economic downturns and improve slowly during economic booms. Moreover, vulnerable groups, such as children and women, are more exposed to the effects of growth volatility.
The recovery of the global economy has been more robust than expected. Driven by strong internal demand in many emerging economies and the recovery of global trade, GDP growth in emerging and developing countries is projected to accelerate to 6.3 percent in 2010, from 2.4 percent in 2009. Supporting the economic recovery are expansionary macroeconomic and, especially, fiscal policies. Fiscal deficits in emerging and developing countries, up by almost 3 percent of GDP in 2009, are projected to remain high in 2010. More than in previous crises, many countries sustained spending plans and raised social spending to mitigate the effects of the downturn on the poorest people, although the differences among countries are wide. While financial market conditions for emerging and developing countries are improving and capital flows are returning, international bank financing and foreign direct investment are projected to remain weak in 2010.
How will the global economic crisis alter precrisis trends in the Millennium Development Goals (MDGs)? With only five years left until the target date of 2015, it is obvious that several of the MDGs will not be attained, globally or by a majority of countries. Many of the goals are too high for low-income countries, given their low starting points. Many countries, including low-income ones, have seen substantial gains in recent years, however, and entered the current crisis in a stronger position than in past crises (chapter 1 and chapter 2). Important questions are whether the gains will be preserved, and what happens if the fragile recovery slips into a prolonged stagnation.
The global economic crisis severely reduced developing-country external resources by drastically curtailing their export revenues and their access to private capital flows. As elaborated in previous chapters, the resulting decline in economic activity sharply increased poverty and impaired public services to the poor. To a degree, the international system worked effectively to support developing-country access to external resources and limit the rise in poverty. Despite initial fears, increased trade restrictions in reaction to the crisis affected only a small part of international trade. Bilateral donors increased aid (at least through 2008), and the international financial institutions (IFIs) dramatically increased their lending. As the global recovery has taken hold, developing-country export revenues have begun to recover, and their access to external finance to improve, although both remain well below precrisis levels.
Poverty and unemployment remained high in Botswana. The shortcomings of the labor market policies are responsible for a high unemployment rate. This selected issues paper sheds considerable light on ways that Botswana can enhance inclusive growth and reduce the high level of structural unemployment. Botswana was identified as having been able to sustain the highest economic growth compared with others in its league. Assessors suggest a prudent labor market for an overall sustained economic growth.
PALL R. MASSON, MIGUEL A. SAVASTANO, and SUNIL SHARMA
In a number of industrial countries, the adoption of inflation targeting as a monetary policy framework has enhanced transparency and accountability. Can this framework also be applied to developing countries?
The development of local securities and derivatives markets is just one response of many emerging markets to global volatility since the mid-1990s, particularly the sudden losses of access to international capital markets and periods of high global asset price volatility. This chapter analyzes key policy issues related to the role of these markets as an alternative source of funding for sovereign and corporate entities and a means of attracting foreign capital inflows. Subsequent chapters examine the development of local bond, equity, and derivatives markets in emerging markets.