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News : International Last Updated: Dec 19th, 2007 - 13:17:15

2006 World Development Indicators: World Bank data show growth rates converging among Developing Regions
By Finfacts Team
Apr 22, 2006, 19:00

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Overall economic growth in the Developing World has averaged 4.8 percent a year since 2000, more than double the rate of growth in high-income economies, which averaged 2.0 percent a year. While this robust record has been driven largely by rapid growth in East and South Asia, the newly-released 2006 World Development Indicators shows that in 2004, Sub-Saharan Africa--long lagging behind other regions--achieved an annual growth rate of 4.8 percent, exceeding the 2004 global growth rate of 4.1 percent.

The report was published in Washington D.C. on Saturday, to coincide with the Spring ministerial level meetings of the World Bank and the International Monetary Fund.

“Growth is essential to reduce poverty, and we see evidence of this in the data,” said François Bourguignon, the World Bank's Chief Economist and Vice President for Development Economics. “That's why this boost in growth in Africa is promising. After many years, the continent is showing growth that could deliver much more poverty reduction than in the recent past. It is important for Africa to build on this growth, which is partly driven by higher commodity prices and partly by fundamentals, to keep closing the gap with the rest of the world.”

East Asia and Pacific, which has grown at an average rate of eight percent a year for the last 20 years, remained the top performer among regions in 2004, with China achieving a growth rate of 10.1 percent. Growth in South Asia has averaged 5.8 percent a year over four years ending in 2004, when it reached 6.7 percent. Much of this improvement coincides with increased exports of goods and services and strong growth in the manufacturing and service sectors.

Poverty rates are falling, but progress has been uneven

Share of people living on less than $1 or $2 a day (%)

Source: World Bank

Faster growth in Africa, but challenges remain

Data in World Development Indicators 2006 show a remarkable recovery in Sub-Saharan Africa's growth since 2000. Twenty of the region's 48 countries grew by more than five percent in 2004. The recent surge in oil exports and the boom in the price of oil has helped, pushing up growth rates among oil producers such as Angola, Chad, Nigeria, and Sudan. But fifteen non-oil-producing countries have had a median growth rate of 5.3 percent since 1995, demonstrating their potential for long-term growth. The WDI data underscore the findings of the Global Monitoring Report 2006, that poverty reduction is linked to` sound policies, well-targeted aid, better governance, and a good investment climate.

Despite the recent recovery in Sub-Saharan Africa, the region's poverty rate likely remains the world's highest, as it was in 2002, when over 300 million Africans, 44 percent of the population, lived on less than $1 a day, an increase of 139 million people over 1981. This is in sharp contrast with East Asia, where the number of extremely poor people fell by 580 million people, to 12 percent of the population. Current projections are that in 2015 Africa's poverty rate will remain over 38 percent—far above the 22.3 percent which was set as its Millennium Development Goals.

African countries that have suffered from conflict and political instability, such as Côte d'Ivoire and Eritrea, or those left out of the commodity boom, such as Niger and the Central African Republic, achieved less than two percent growth. Slow growth in these and other countries, combined with a regional population growth of 2.5 percent, has limited the average growth of per capita income to 1.6 percent since 2000, still a welcome improvement after two decades of decline. Over the last four years, per capita income growth in Africa has been equal to or exceeded that of the high income economies in every year and has exceeded growth in Latin America in six out of the last 10 years.

“The emerging diversity of economic performance in Africa is striking. As in other regions, some African countries are doing quite well, while others lag behind,” said John Page, Chief Economist for the World Bank's Sub-Saharan Africa region. “This gives us hope that for more than a dozen countries in Africa reaching the Millennium Development Goals is within their grasp, but for many others the prospects of reaching the goals remain very dim.”

Africa's population growth presents both risks and opportunities. A large, youthful population—44 percent currently below the age of 14—could result in increased capacity for growth and poverty reduction, if they are healthy and adequately trained. But to seize this opportunity will require increased investment in education. Recent data from child labor surveys show that in many of the poorer countries, such as Chad, Togo, Burkina Faso, and Sierra Leone, over 65 percent of the children 7-14 are working, and of these, more than half do not go to school at all. Primary completion rates are only 62 percent, 20 percentage points lower than in South Asia, and the gains in education have been uneven, with tremendous progress in countries such as Mali where primary completion rate has more than tripled from 11 to 44 percent between 1991 and 2004 and Benin where the ratio of girls to boys in primary and secondary education is 71 percent. Some countries such as Mauritius and Botswana have reported primary completion rates over 90 percent in recent years.

Others such as Chad, Guinea Bissau and Niger still have primary completion rates of less than 30 percent, and a few countries such as Burundi and Zimbabwe have registered decreases of more than 10 percent between 1991 and 2004. Youth (ages 15−24) literacy rates have declined in a few countries, such as Chad and Kenya, between 1990 and 2002.

Investment climate surveys show that Sub-Saharan Africa remains a high-cost, high-risk place to do business, resulting in less investment, less employment, lower incomes, less growth and competitiveness, and higher poverty. Overall, doing business in Africa costs about 20 to 40 percent more than in other regions of the developing world. The World Bank-IFC Doing Business surveys, conducted in 33 African countries, conclude that more reform is needed in Africa. But of 16 West African countries surveyed, only two carried out business regulation reforms. In the region as a whole, for every three countries that improved regulation, one made it more burdensome.

But in Rwanda, reforms are paying off. Since reforms began three years ago in areas such as labor laws, land titling, customs, and judicial procedures, economic growth has averaged 5.2 percent a year for the period 2000−2004. And Uganda has benefited from an improved investment climate, posting GDP growth of about 6.1 percent a year between 1995 and 2004. Other countries that have made progress in business reform include Mauritius, Namibia, Nigeria, and South Africa.

A massive effort is needed in Africa to provide infrastructure that will reduce transport costs and improve power supply. Only 30 percent of Sub-Saharan Africa's rural population has access to an all-season road—the lowest level in the entire developing world— in contrast with East Asia, which is approaching near universal (94 percent) coverage of rural population's access to all-season roads. And while Sub-Saharan Africa has shared in the global expansion of the telecommunications sector, progress has been small in comparison with other regions.

Sub-Saharan Africa is the world's most vulnerable region in terms of water availability and food security, and could be severely affected by the consequences of global climate change. Changes in rainfall could have a serious impact on areas dependent on hydroelectricity. Major droughts, of which there have been three in as many decades, increase the risk of crop failure, livestock losses, malnutrition and disease.

Latin America on an uneven path

Over the past 10 years (1995−2004) Sub-Saharan Africa, where total output grew by of 3.4 percent a year and per capita output grew by 0.9 percent, outperformed Latin America and the Caribbean, which posted a 2.1 percent growth rate and only 0.6 percent growth in output per capita. The largest economy in the region, Mexico, accounts for about 33 percent of the region's GDP, and with an overall growth of 3.6 percent a year, had the highest growth of the three largest economies. Brazil, the second largest economy, grew at two percent a year, while Argentina registered only 0.1 percent growth a year during the last decade. Overall growth in Latin America has been on an uneven path, with large declines in Argentina from 1999 to 2002 as well as declines in Venezuela in 1999, 2002, and 2003.

The most recent trend is positive, as the major economies are on the rebound: Argentina's growth in 2003 and 2004 was around nine percent per year, and continuing strong growth is projected for 2005. Brazil grew by almost five percent and Mexico grew by more than four percent in 2004. In Venezuela, accounting for about five percent of Latin America's overall economy, benefited from the surge in oil prices and grew at 18 percent in 2004.

The richest of all developing regions, Latin America and the Caribbean has made good progress toward many of the Millennium Development Goals. In many countries children already complete a full course of primary education and girls' enrollments equal or exceed boys'. Mortality rates of children under age five have fallen from 54 per thousand in 1990 to 31 in 2004, putting the region close to achieving the target of a two-thirds reduction by 2015. But the region's volatile pattern growth and high levels of income inequality in many countries has left it short of achieving a substantial reduction in poverty rates.

Trade and investment knitting the world together

Trade has proven to be an engine for growth in East Asia, equal to 81 percent of the region's GDP, which far outstrips trade's 55-percent share of GDP at the global level. Rapid expansion of China's trade has not only sustained its growth, but has also helped its regional trading partners integrate faster into global manufacturing. Exports of goods and services grew by 10 to 28 percent in Malaysia, Thailand, the Philippines, Vietnam and Cambodia, and contributed to economic growth rates over six percent in 2004 in all of these countries. In contrast, trade plays a much smaller role in Latin America and the Caribbean, making up barely 52 percent of total output. Exports from Latin American countries have expanded by only 4.5 percent a year since 2000, less than one-third the growth of exports by East Asia and less than half the growth of exports from South Asia and Europe and Central Asia.

Although low-and middle income economies still receive only a third of global foreign direct investment (FDI)—which reached $625 billion in 2004—the absolute level has increased nearly tenfold between 1990 and 2004. East Asian countries received the largest net FDI inflows ($64.6 billion), followed by Eastern Europe and Central Asia, where FDI inflows have doubled since 1999 to reach $62 billion in 2004.

Measures of the investment climate show that progress has been greatest in Eastern Europe and Central Asia, where every country has taken steps toward reform. Many countries in the region simplified tax administration, and reduced the tax burden, with the top reformers being Slovakia, Romania, and Latvia, all of which have made it easier to start a new business. These efforts have paid off, with new start-ups increasing by 8% in Latvia, 13% in Slovakia, and 22% in Romania.

The telecommunications sector attracted the most investment with private participation between 2000 and 2004 (about $200 billion). Internet users in developing countries have quadrupled from 2000 to 2004, with penetration in every region increasing rapidly. Spectacular increases are noted in Eastern Europe and Central Asia, where access to the Internet jumped from 30 per 1,000 people in 2000 to 138 in 2004, and more than half the population had access to fixed and mobile telephones by 2003.

“Expanding trade, new foreign direct investment, and a growing telecommunications sector are all evidence of countries that are integrating with the global economy and whose prospects for future growth are good.” said Eric Swanson, Program Manager with the World Bank's Development Data Group.

A comprehensive guide to development trends

The World Development Indicators, published annually by the World Bank, is the world's most authoritative set of development statistics. It draws on an underlying database of more than 600 indicators covering 206 countries and territories. The World Bank works closely with other international agencies to assemble the most reliable statistics for its publications.

Improving statistics in developing countries is also an important part of the World Bank's development agenda. “Good statistics are needed by governments, businesses, and citizens to make sound decisions,” said Shaida Badiee, director of the World Bank's Development Data Group. “We have made a long-term commitment to work with our partners to improve the quality and availability statistics covering every aspect of development.”

The report and related material are available here.

© Copyright 2007 by Finfacts.com

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