← The Development Podcast
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- [00:00]
Emi Mahmoud
Foreign.
- [00:07]
Sarah Treanor
Welcome to the development podcast. 2024 is at an end and here at the Development Podcast, we hope you might be able to have some rest before 2025 is upon us. But if you need any reminders of the year gone by, we'll be taking you through some of the big events of the last 12 months. How has the global economy performed in the year just past?
- [00:31]
Ayhan Khosa
It's a good time to look back in the first decade of the century when we had the, you know, broad embrace of globalization, when we had broad embrace of integration, the desire to undertake reforms, global economy and emerging market developing economies together made significant progress. Now we need to find ways to revive that spirit and what might be.
- [00:56]
Sarah Treanor
In store for the future.
- [00:57]
Ayhan Khosa
I have a lot of hopes for the next year. Let's face it, problems do not solve themselves if left alone. Problems often become bigger and more difficult to tackle.
- [01:09]
Sarah Treanor
To put it all in perspective, we'll be bringing you an in depth conversation with the World Bank's Deputy Chief Economist, Ayhan Khosa. We also have a very special uplifting poem to share from the incredible Sudanese poet and UNHCR Goodwill Ambassador Emi Mahmood.
- [01:28]
Emi Mahmoud
Disaster has never carved a wound that sisterhood couldn't mend, Never brought a hunger that brotherhood couldn't feed, Never torn a fissure that humanity couldn't heal. And today will be no different.
- [01:40]
Sarah Treanor
The Development Podcast from the World Bank Group with me, Sarah Treenor. 2024 was really the year of elections. Around 80 countries with a combined population of about 4 billion people went to the polls this year, including Tuvalu, Rwanda, the United Kingdom, United States, States, Brazil, Indonesia, the world's largest democracy, India, South Africa and Mexico, which saw the election of its first female president. Claudia Shane Bound becomes the first woman to break centuries of male domination over the Mexican presidency.
- [02:31]
Emi Mahmoud
For the first time in 200 years.
- [02:33]
Sarah Treanor
Women have reached the presidency. It was also a year where major conflicts continued and according to the United Nations, 400 million children are now living in conflict zones. There was also a fair share of natural disasters in 2024. A major earthquake rocked Japan in January of this year, while Asia, Europe, South America and Africa saw landslides and flooding in September, flooding and extreme weather struck many parts of the globe. Typhoon Yagi swept through parts of East Asia and left Vietnam struggling with huge amounts of rainfall and winds of 149 miles per hour. And on the subject of the climate COP 29, this year's UN climate summit took place in Baku and as we covered on our last episode, ida, the International Development association, which supports the world's most vulnerable countries, just completed its latest record breaking funding round in in Korea. And finally, believe it or not, it is five years since the first COVID 19 cases were reported. Of course, the impact of the pandemic has not gone away. So that's a very brief review of the year in news. But what about the year in economics with a lot of overlapping challenges, past and present? What's the outlook at the close of the year? My colleague Andrea Tapia spoke to Aihan Khosa, the Deputy Chief Economist of the World Bank Group and Director of the Prospects Group.
- [04:08]
Andrea Tapia
Ihan, thank you so much for joining us today on the development podcast. Welcome. So to start, let's reflect on this year. 2024 has been another year of challenges. Back in January, you reflected on the resilience we have seen in the global economy despite intertwined challenges. But the five years since 2020 also looks set to record the weakest half decade of growth in 30 years. So as this year draws to a close, what are your observations?
- [04:34]
Ayhan Khosa
The resilience is the key word to describe the state of the global economy. Major economies were emerging mostly unscathed after the sharpest and fastest tightening of monetary policy across the world in four decades. Global inflation was coming under control without tipping the world into a recession, and there had been no episodes of widespread financial stress. Global economic conditions, in a nutshell, have been better than expected, primarily because of the continued solid expansion in the United States. So the global economy is finally approaching a soft landing with inflation coming down. And monetary policy is becoming widespread and looks set to support activity going forward. Of course, we have armed conflicts around the world and they continue to exert terrible human suffering. Their effects on commodity prices, however, over the past year have been short lived. So that is, in a sense, the positive story about the global economy. There is resilience. But that resilience also implies that the global economy is settling at a relatively low level of growth, the type of growth really not sufficient to foster sustained economic development and see incomes in developing economies catch up toward incomes in advanced economies. And that's ultimately what we want. By the end of this year, one in four developed economies will be poorer than it was on the eve of the pandemic. By 2026, countries that are home to more than 80% of the world's population would still be growing more slowly on average than they were in the decade before COVID 19. Global economic prospects, of course, face some other headwinds from heightened policy uncertainty, dislocating policy shifts and Growing trade fragmentation, as well as the continued threat of debt crisis in vulnerable developing countries, and of course, the effects of climate change.
- [06:47]
Andrea Tapia
Now let's turn to progress on eradicating poverty, as you just mentioned, which is at the heart of our work. Recently, the World Bank Group published its first Poverty, Prosperity and Planet report to reflect its updated mission. So where do we stand on eradicating poverty and boosting shared prosperity on a livable planet?
- [07:05]
Ayhan Khosa
It's fair to say that significant progress was made in reducing poverty, especially prior to the pandemic. However, the reduction in global poverty has essentially ground to a halt. Progress has been interrupted by a variety of reasons the pandemic. Other shocks in the past four years include heightened conflict and geopolitical tensions, increases in inflation, and the sharp tightening in global financial conditions. If the current weak growth trajectory continues or even deteriorates, we could see a lost decade in development. Today, about 8.5% of the world's population still lives in extreme poverty. That is less than $2.15 per person per day. If we look at a higher power to line something around, close to $7 $6.85 per day, which many of us would still see really insufficient. 44% of the world's population live below this threshold. At the current pace, it would take decades to eradicate extreme poverty and over a century to lift everyone above this $6.85 threshold.
- [08:30]
Andrea Tapia
Wow, over a century. That is quite alarming. Is the world faring any better on the reduction of inequality?
- [08:38]
Ayhan Khosa
Significant challenges remain despite some progress. The number of economies with high inequality, you know, we define as this Gini coefficient above 40 has fallen from 61 in 2013 to 49 this year. However, these high inequality economies, concentrated especially in Latin America and the Caribbean, as well as sub Saharan Africa, are home to 1.7 billion people. That's about one fifth of the world's population. In many poor countries, you see the big problem of violence and conflict and that have worsened food insecurity and further macroeconomic and institutional capacity, basically limiting the ability of these countries to respond to crisis. In addition, because of higher interest rates, debt payments get larger, diverting spending away from critical needs. The climate change problem, of course, is very acute. Almost one in five people globally are at high risk of experiencing basically significant income losses from extreme weather event that they will struggle to recover from. This risk is very acute in poorer regions. Sub Saharan Africa, for example, home to many of the world's extreme poor, has the largest share of people at high risk from extreme major events of any region.
- [10:10]
Andrea Tapia
So in Your view? What is the best strategy to tackle poverty?
- [10:14]
Ayhan Khosa
Despite these challenges I mentioned, progress is possible. We can move the dial. What we learn is that a differentiated approach based on country circumstances is key for sustainable growth. Low income countries should prioritize poverty reduction through investments in human, physical and financial capital. When you look at middle income countries, they need to really remain their focus on sustainable growth and reducing poverty and climate linked vulnerabilities while also proceeding with, you know, actions such as tackling air pollution. Now, advancing poverty reduction does not necessarily come at a large environmental cost. And although we talked about, you know, the poorest countries contribute relatively little to global emissions, they bear the brunt of climate impacts. Ultimately, urgent and coordinated global action is needed to help turn the dial when it comes to poverty reduction. We need new ways of organizing economic activity as well as fundamental changes in how countries approach their national development strategies and contribution to global public goods. The challenges are definitely interconnected. Our solutions must be interconnected and must be global.
- [11:43]
Andrea Tapia
And speaking of low income countries, last month on the podcast we looked at the work of ida, the World Bank Group's International Development association, which supports the 78 most vulnerable economies. The replenishment finalized this month has raised $24 billion. This will generate a total of 100 billion in affordable financing, which is the largest replenishment in all of ida's history. So as that money is set to work, my question is, what are some of the biggest challenges facing IDA countries born out of this data?
- [12:13]
Ayhan Khosa
Indeed, the successful end of the IDA replenishment round is absolutely critical when we think about the challenges confronting these economies. IDA's support, the concessional finance it provides, but also the knowledge the World bank brings to the table will be crucial. I think that's what donors ultimately have recognized because, you know, when you think about it, people everywhere, they face challenges. It's not immediately obvious just how difficult things are are for either countries. These were already the world's poorest and most vulnerable economies. But things have become even tougher. We published a report back in April assessing developments and prospects in these countries which outlined the great reversal in development these countries are really facing. You know, in a normal world, you expect poorer countries should generally catch up toward richer ones. But that convergence process has essentially stopped since 2020. Per capita incomes have been growing more slowly in IDA countries than in the rest of the world. As a result, income gaps between IDA countries and other countries has been widening. Now, the second observation is that one in three IDA countries actually poorer now in per capita terms than on the eve of the pandemic and of course, the rate of extreme poverty in these countries is eight times higher than the rest of the world. So when you think about this other big problem, food insecurity, either countries really account for 90% of all people facing hunger or malnutrition. There are real challenges on the ground and there are some very critical risks confronting these economies. That stress is a reality for half of IDA countries. In many of IDA countries, there's conflict, fragility, and when you think about trade, used to be the traditional engine for economic growth. But now we have a really fragmenting world economy. Now, I mentioned the problems, I mentioned the risks, but we are still hopeful about ida's potential. Many developing economies, we have the middle income countries, they used to be basically IDA countries at some point. So the current crop of IDA countries, they can also deliver much faster growth and graduate. Why we are optimistic. In many IDA countries, populations are expanding rapidly, even as much of the world worries about aging. Furnishing young people entering the workforce with the right skills, capacities and opportunities for productive work will drive sustained growth and prosperity. That is a crucial task. Many of these countries also have great natural advantages. Minerals vital for the green transition, valuable for biodiversity, natural beauty that can attract tourism. If those natural assets can be leveraged responsibly, that will be a big win for people in IDA countries and for the world as a whole.
- [15:33]
Andrea Tapia
And looking forward, what are your hopes for the next year?
- [15:37]
Ayhan Khosa
I have a lot of hopes for the next year, but my biggest hope is that policymakers at both the global and national levels will rise to the occasion, taking decisive action to promote growth and development around the world. Let's face it, problems do not solve themselves if left alone. Problems often become bigger and more difficult to tackle with. And the policymakers need to tackle the problems that require really urgent solutions. And there are many aspects to this observation. Some issues fall under conventional macroeconomic management. Others concern pressing challenges that are more practical to the global policy environment today. So first, on the conventional macro side, it's essential that central banks stay the course so we can basically contain this most recent inflation surge to history, where inflation is proving more persistent. Monetary policies need to remain resolutely focused on price stability. At the same time, high debt burdens will require policymakers to balance these investment needs and with fiscal sustainability. And really, there's no easy solution here. People who have seen their incomes struggle to keep up with inflation are understandably wary of anything that sounds like consolidation. Austerity. Governments will have to put in the hard yards to broaden tax bases and improve spending efficiency so that fiscal resources stretch further. Second, when you think about the more idiosyncratic challenges of today, our hope is that policymakers will resist protectionism and avoid policy shifts that exacerbate trade fragmentation or make global cooperation more difficult. If trade disputes emerge, and it's natural that disputes emerge, affected parties should prior to finding swift, orderly and sustainable resolutions so that uncertainty and adverse spillovers are minimized. At the same time, the global community must not lose sight of the issue of debt distress in the poorest countries. We hope to see coordinated improvements in debt relief to free up resources for growth enhancing investments. And we hope that international cooperation to tackle climate change and accelerate the clean energy transition will be there in a stronger, more coordinated fashion. And finally, we hope the global community can come together to address alarming levels of armed conflict globally. Resolving conflict goes far beyond economic policy. But conflict has rightly been called development in reverse. It usually has deeply negative economic consequences as well as, of course, catastrophic human implications. Now, every new year is special in a different way. But the next year, 2025, will mark the beginning of the second quarter of this century. So it is a good time to look back the past 25 years and assess how the global economy, especially emerging market developing economies, have performed. In the January 2025 edition of the Global Economy Prospects Report, we will have two analytical chapters exactly doing that. One chapter is about the low income countries which we are releasing in advance, and the other one is on middle income emerging and developing economies. There are 26 low income countries today, down from 63 at the turn of the century. Yet when we look forward, even based on the growth rates we saw in the 2010s, so before the most recent damage done by the pandemic and other shocks, only six of these 26 low income countries seem on course to to graduate to middle income status by 2050. As a group, low income countries have barely grown on per capita basis in the past 15 years. We must hope this performance improves, and we must work to ensure it does. By far the most promising period for low income countries and for the global economy in this century was the early 2000s. And that period was characterized by deepening global integration as opposed to the fragmentation and protectionist motives we see today. I think that brings a kind of a very large chest of lessons for policymakers. When we look at the early period of the century, we had very high growth, successful deep poverty reduction and made progress. When it comes to development objectives, we need to basically revive that type of sentiment to make progress in 2025.
- [21:04]
Andrea Tapia
Ayhan, thank you for sharing all of these perspectives and also for reflecting with me on this year and what the global community should be thinking about for the next year.
- [21:15]
Sarah Treanor
Well, a mixed picture for the globe, but a few notes of optimism there. Thank you to Ayhan and Andrea. Well, to end this episode and the year, we wanted to bring you a very special poem. This poem offers a message of optimism and of promise and was performed in Korea at the final meeting of the IDA21 replenishment. And it speaks of a thousand futures just within our reach. Let's hear from the Sudanese activist, spoken word poet and UNHCR Goodwill Ambassador Emi Mahmoud.
- [21:53]
Emi Mahmoud
I've heard tales of the early famines in Sudan when the saplings withered and the earth stood still and the food couldn't keep the cattle and the mouths of babes ran dry as the river beds. I heard the tales from our moms and dads, our aunts and uncles who lived to say, one day I ate, one day my neighbor. We weathered the storm together. Sawa, Hamki, all of us or none of us. Our neighbors, where are they now? Can they not hear us? Can they not see us? Do they know about the sickness, the storms? Do they know about the hunger, the wars in the darkest hour? Who do we call to light the flame that brings the dawn? What a sunlight to a night that never ends. A new day. When I think of the future, I imagine my brethren before myself. I remember my sisters who lifted me up, who opened every door and closed not one behind them. How they triumphed against me, all odds becoming more than this world ever imagined for them. From the walls of humble homes to the halls of ivy leagues. I remember the mountains, how they reached back as they climbed. How our hands grasp one another's eyes, locked as if to say, I've been where you are before. I will hold you up. I will not let you fall. Oye, listen. Do you hear it? The pledge to hold one another in times of hardship, to lift one another in times of doubt, to transform lives. To light the flame that brings the dawn. Do you hear it? To our humanity, our resilience. To call for help and answer. To the pledge. To our increased devotion to one another. This earth, our home. Every one of us a bringer of change. Each helping hand returns threefold. A thousand futures just within our reach. The bridges of Bosnia, the hospitals in the heart of Kar, the books in Seoul, New homes in Nepal. The promise of peace in Sudan or the Congo or beyond. Disaster has never carved a wound that sisterhood couldn't mend Never brought a hunger that brotherhood couldn't feed Never torn a fissure that humanity couldn't heal. And today will be no different. Today our heads won't turn away Our eyes will only open Our hearts will only grow Our hands will only build and when our children ask, what did we do to bring the dawn? What did we build to end the loss? We will bathe in the light of our togetherness and say each other.
- [24:36]
Sarah Treanor
Thanks to Emmy and thank you for listening. We'll be back with a new episode at the end of January, so please do subscribe, like and download for from your favorite podcast platform.