The global economy has avoided the spectre of a debilitating recession, with the IMF last week raising its forecast for worldwide aggregate growth in 2024 to 3.2%, from the 2.9% it had projected in October. The IMF has underlined the fact that the global economy has, with surprising resilience, ridden out several adverse shocks as well as ‘significant central bank interest rate increases aimed at restoring price stability’ and sustained the growth momentum, largely on the back of advanced economies led by the U.S. undergirding demand. However, the Fund has also pointed to a growing gulf between the economic north and south by observing: “A troubling development is the widening divergence between many low-income developing countries and the rest of the world. For these economies, growth is revised downward, whereas inflation is revised up.” These poorest countries, in Africa and including some Latin American, Pacific island and Asian nations, had also suffered the most scarring from the COVID-19 pandemic in terms of estimated drop in output relative to pre-pandemic projections, and were struggling to recover. To compound their woes, these economies were now saddled with a mounting debt service burden that was severely impairing their ability to spend on vitally needed public goods including better education, health care and social nets to improve food security.
The IMF’s twin development lender, the World Bank, has, in a separate report, pointed out that for the first time in this century, half of the world’s 75 poorest countries were experiencing a widening income gap with the wealthiest economies, marking a “historic reversal” of development. As the World Bank Group’s Chief Economist Indermit Gill observed in a blog post on the lender’s site, “[the 75 poorest countries] are home to a quarter of humanity — 1.9 billion people... and are home to 90% of people facing hunger or malnutrition”. More distressingly, while these countries were midway through what he termed, potentially ‘a lost decade’, Mr. Gill averred that the rest of the world was “largely averting its gaze” even as the governments in at least half these nations were mostly paralysed by debt distress. Citing the examples of South Korea, China and India as countries that had transitioned from being borrowers of low-interest loans from the World Bank’s International Development Association into economic powerhouses that were today IDA donors, the Bank’s chief economist stressed it was imperative that the world’s richer countries financially support the poorest nations. Given that the world needs to tap every reserve of economic potential to achieve universal peace and prosperity, it can ill afford to turn its back on a quarter of its people.
