reflections on the global economic...

@wbg2030

worldbank.org/sdgsOctober 2018

Mahmoud Mohieldin

Senior Vice President

World Bank Group

Reflections on the

Global Economic

Outlook

A presentation to the ACI-ICA World

Congress

Demographic transitions

UrbanizationFragility and

violence

Climate changeMarket Volatility

and Debt Vulnerability

Technological changes

Shifts in the global economy

Renewed debate about

globalization

Global Megatrends

There was a demographic turning point in 2010

55

60

65

70

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

World

Advanced Economies

Emerging Market and Developing Economies

Percent of total population

that is working age

Source: World Bank Global Economic Prospects, 2018

• Higher working-age

population shares are

associated with higher

per capita output

growth.

• Global demographic

trends turned from

tailwinds to growth into

headwinds around 2010.

Lagging in human

development outcomes

Job creation for rapidly

growing share of

working-age people,

mostly youth

Populations beginning to

age; potential slowdown

in growth of labor supply

Adapting to aging to

maintain living

standards

The world can be divided into four major

demographic groups

Most of the global population lives in early- and late-dividend countries and while 78 percent of global growth was

from late- and post-dividend countries, 90 percent of global poverty is in pre- and early-dividend countries

* World Bank Global Monitoring Report 2015/2016

Urbanization and development outcomes

Proportion of urban population living in slums, 1990-2010Proportion of population living in urban areas, 1960-2011

Climate change and development progress

Process of integrating climate resilience into development

Index of risk preparation across countriesGlobal disaster losses, 1980–2012

The number of disasters and losses has been rising. Development progress needs to

integrate resilience to avoid undoing hard fought development gains

Commodity cycles exacerbate global

economic volatility

Commodity price indexes, annual

The rate of technological advancement is

unprecedented

Violent conflict is increasing and becoming

more complex

Number of people killed by violent conflict Number of conflicts, by type

Source: Pathways to Peace, World Bank, 2018

The world’s economic center of gravity, 1980–2016, in black, at three-year intervals

Multipolarity

1980

1989

19982007

2016

2049

Source: Danny Quah, 2011

Source: McKinsey Global Institute, 2012

Evolution of the earth’s economic center of gravity: 1 CE to 2025

Source: Danny Quah, 2011

The global risks

landscape in 2018

Source: World Economic Forum, The Global Risks Report 2018

13

Robust but Slowing Growth in Advanced Economies; Weakening Global Trade

0

1

2

3

201

7

201

8

201

9-2

0

201

7

201

8

201

9-2

0

201

7

201

8

201

9-2

0

201

7

201

8

201

9-2

0

Advanced

economies

United

States

Euro Area Japan

(Percent, 3 months SA) (Index, 50+ = expansion)

48

50

52

54

56

0

2

4

6

8

2016 2017 2018

Industrial production

growth

14

Tightening Financing Conditions; Diverging Commodity Prices

0

200

400

600

200

300

400

500

600

2015 2016 2017 2018

EMBI spreads

EM CDS spreads (RHS)

15

Change from

June 2018

2012-16 2017 2018e 2019f 2020f 2018 2019

World 2.8 3.0 3.0 2.9 2.8 -0.1 -0.1

Advanced economies 1.7 2.3 2.2 2.0 1.6 0.0 0.0

EMDEs 4.8 4.2 4.2 4.3 4.6 -0.3 -0.4

East Asia and Pacific 7.3 6.6 6.3 6.0 6.0 0.0 -0.1

Europe and Central Asia 3.2 4.0 3.1 2.5 2.7 -0.1 -0.6

Latin America and the Caribbean 2.2 0.8 0.7 1.8 2.4 -1.0 -0.5

Middle East and North Africa 3.5 1.2 1.8 1.9 2.7 -1.2 -1.4

South Asia 6.4 6.2 6.9 7.1 7.1 0.0 0.0

Sub-Saharan Africa 4.3 2.5 2.8 3.4 3.6 -0.3 -0.1

16

Financial stress Trade tensions

Policy uncertainty Geopolitical risks

Slower potential growth

17

Bloomberg; Haver Analytics; World Bank

• Left Panel. Inflation is measured by year-on-year change in the personal consumption expenditures (PCE) price index. Both PCE price index and unemployment rate are seasonally adjusted. Dotted lines refer to projections over longer run in the latest FOMC) meeting (in September 2018), based on the central tendency. Last observation is August 2018. Right Panel.

(Percent, year-on-year) (Percent of labor

force)

3

4

5

6

0

1

2

3

2015 2016 2017 2018

Inflation Unemployment rate (RHS)

-1

0

1

2

3

4

2010 2013 2016 2019 2022

United States Euro Area Japan

FOMC median

18

-1.2

-0.8

-0.4

0.0

United States China

EMDEs Global

80

90

100

110

Apr May Jun Jul Aug Sep

China

Other EM7

85

90

95

100

105

Apr May Jun Jul Aug Sep

China

Other EM7

19

Argentina

Brazil

Chile

China

Colombia

Hungary

India

Indonesia

Malaysia

Mexico

Morocco Peru

Philippines

Poland

Russia

Saudi

Arabia

South

Africa

ThailandTurkey

U.A.E.

0

10

20

30

-10 -5 0 5 10

Short-

term

external

debt

Current account (CA) balance

-16

-12

-8

-4

0

4

EMDEs with current

account deficits

EMDEs with current

account surpluses

20

Public Debt in EMs, 2013-18s (percent of GDP)

21

Gross Financing Needs in EMs External Financing Needs and Reserves

22

EMs: Value of International Bonds Maturing Change in Credit Rating in EMs, 2012-18

External Variable Rate Debt

Risks

Materialize

FX liquidity measures

Decline in growth

Decline in capital flows

Macro-prudential measures

Capitalflow

measures

FX reserve buffers

Monetary policy

Fiscal policy

Implement structuralreforms

Allow exchange ratedepreciation

Use targeted interventions Use conventional tools,

weighing policy trade-offs

Use fiscal stabilization if

space available; if not, build space

Build-up capital buffers

Use swap and FX liquidity measures

Ease capital flow regulationConsider temporary restrictions

on outflows

23

Financial stability

measures

Macroeconomic policy

measures

Investing in Inclusive

Growth: The Common Characteristics of High, Sustained Growth

24

Source: New Growth Models, World Economic Forum, 2014

Investing in Inclusive Growth: Dashboard for inclusive, sustainable, and multidimensional growth

25

Adapted from: WDR 2019 Changing Nature of Work, World Bank, 2018

Invest in resilience

(incl. social

protection)

Invest in infrastructureInvest in human

capital

Enablers

Achieving the SDGs

Data Finance STI

Harnessing the impact of disruptive changes

requires a comprehensive policy framework

Effects of

disruptive

changes

e.g. tech

How will we enable these investments?

Data

Finance

Implementation

Data is the new oil

Finance for development will need to

come from multiple sources

Big picture of developing countries' total resource receipts

Tax revenues

0

5

10

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

2011

2013

2015

2017

FDI Net Inflows (% of GDP)

Low & middle income

World

Middle East & North Africa

Fintech

Develop Robust Financial and Data Infrastructure to Sustain Fintech Benefits

Ensure Stability of Domestic Monetary and Financial Systems

31

Maximizing Fintech’s PotentialOpportunities, Challenges, Risks

Enable New Technologies to Enhance Financial Service Provision

Adapt Regulatory Framework and Supervisory Practices for Orderly Development and Stability of the Financial System

Modernize Legal Frameworks to Provide an Enabling Legal Landscape Enhance Collective Surveillance of

the International Monetary and Financial System

Monitor Developments Closely to Deepen Understanding of Evolving Financial Systems

Reinforce Competition and Commitment to Open, Free and Contestable Markets

Safeguard the Integrity of Financial Systems

Encourage International Cooperation and Information Sharing

Foster Fintech to Promote Financial Inclusion and Develop Financial Markets

Embrace the Promise of Fintech

Source: The Bali Fintech Agenda, World Bank, 2018

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Mahmoud Mohieldin

Senior Vice President

World Bank Group