Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Wednesday, June 28, 2017 01:12:45 PM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Developing countries to lead the world economy

By
14th-May-2017       Readers ( 115 )   0 Comments
Comments
Share your thought
Post a comment »
Read all (0) »

Stephen S Roach :
Slowly but surely a bruised and battered global economy now appears to be shaking off its deep post-crisis malaise. If the International Monetary Fund's latest forecasts are borne out - an iffy proposition, to be sure - the nearly 3.6 per cent average annual growth in world GDP expected over the 2017-2018 period would represent a modest uptick from the 3.2 per cent pace of the past two years. Fully a decade after the Great Financial Crisis, global growth is finally returning to its 3.5 per cent post-1980 trend.
But this round trip hardly signals that the world is back to normal. On the contrary, the overhyped idea of a "new normal" for the world economy overlooks an extraordinary transformation in the global growth dynamic over the past nine years.
At the margin, the recent improvement has been concentrated in the advanced economies, where GDP growth is now expected to average two per cent over 2017-2018 - a meaningful pick-up from the unprecedented anaemic 1.1 per cent average growth of the preceding nine years. Relative strength in the United States (2.4 per cent) is expected to be offset by weakness in both Europe (1.7 per cent) and of course Japan (0.9 per cent). However, annual growth in the advanced economies is expected to remain considerably below the longer-term trend of 2.9 per cent recorded during the 1980-2007 period.
By contrast, the developing world keeps chugging along at a much faster pace. Although the average growth rate expected for these economies over 2017-2018, at 4.6 per cent, is about half a percentage point lower than during the preceding nine years, they would still be expanding at more than twice the pace of the developed world. Not surprisingly (at least to those of us who never bought into the Chinese hard-landing scenario), strength in the developing world is expected to be concentrated in China (6.4 per cent) and India (7.5 per cent), with growth lagging in Latin America (1.5 per cent) and Russia (1.4 per cent).
This persistent divergence between developed and developing economies has now reached a critical point. From 1980 to 2007, the advanced economies accounted for an average of 59 per cent of world GDP (measured in terms of purchasing power parity), whereas the combined share of developing and emerging economies was 41 per cent. That was then. According to the IMF's latest forecast, those shares will completely reverse by 2018: 41 per cent for the advanced economies and 59 per cent for the developing world.
The pendulum of world economic growth has swung dramatically from the so-called advanced countries to the emerging and developing economies. New? Absolutely. Normal? Not even close. It is a stunning development, one that raises at least three fundamental questions about our under-standing of macroeconomics.
First, isn't it time to rethink the role of monetary policy?
The anaemic recovery in the developed world has occurred against the backdrop of the most dramatic monetary easing in history - eight years of policy interest rates near the zero bound and enormous liquidity injections from vastly expanded central-bank balance sheets.
Yet these unconventional policies have had only a limited impact on real economic activity, middle-class jobs, and wages. Instead, the excess liquidity spilled over into financial markets, sustaining upward pressure on asset prices and producing outsize returns for wealthy investors. Like it or not, monetary policy has become an instrument of mounting inequality.
Second, has the developing world finally broken free of its long-standing dependence on the developed world?
I have long argued that claims of such a 'decoupling' were spurious, given the persistence of export-led growth in poorer countries, which tethers their economies to external demand in richer countries. But the facts now speak otherwise. Growth in global trade slowed to a three per cent average pace over the 2008-2016 post-crisis period - half the 6 per cent norm from 1980 to 2016. Yet, over the same period, GDP growth in the developing economies barely skipped a beat. This attests to a developing world that is now far less dependent on the global trade cycle and more reliant on internal demand. Finally, has China played a disproportionate role in reshaping the world economy? Chinese rebalancing suggests that this may well be the case, there are grounds for optimism on this front as well.
Indeed, the explosive growth of Chinese e-commerce points to a shortcut toward a newly vibrant consumer culture that was unavailable to today's advanced economies at a similar stage of development. In the annals of structural change, where shifts tend to be glacial, China's evolution is a sprint.
All of this speaks to a radically different world than that which prevailed prior to the Great Financial Crisis - a world that raises profound questions about the efficacy of monetary policy, development strategies, and the role of China. While some healing of an $80 trillion global economy is now evident, progress needs to be seen through a different lens than used in past cycles. A world turned inside out, with new dynamism in the developing world far eclipsing lingering malaise in the advanced economies, is new - but hardly normal.
(Stephen S Roach is a senior fellow at Yale University's Jackson Institute of Global Affairs and a senior lecturer at Yale's School of Management).

0 Comments. Share your thoughts also.
Write a comment
Tariff
Add Rate

News Archive

Inside The New Nation

Editorial »

Eid Mubarak


THE nation is set to celebrate EID-UL-FITR on Monday subject to sighting of the moon of Shawal. It is also known as the 'Feast of Breaking the Fast' through the whole month of Ramzan. Preparations are afoot throughout the country to end the fasting through festivities. Eid is an important ...

Cricket »

Danielle Hazell claimed the wicket of Punam Raut in the match of the ICC Women`s World Cup between England and India in Derby on Saturday.


.

City »

BNP Standing Committee Member Gayeshwar Chandra Roy speaking at a protest rally organised by Jatiyatabadi Projanmo Dal at the Jatiya Press Club on Saturday demanding release of BNP leader Barkat Ullah Bulu.


.

Entertainment »

Shahrukh is not doing a cameo in Jagga Jasoos


It was recently reported that Shah Rukh Khan will do a cameo in Ranbir Kapoor’s Jagga Jasoos, however contrary to the rumours it emerges that Shah Rukh Khan will not be seen in Anurag Basu’s musical adventure featuring Ranbir Kapoor and Katrina Kaif. Sources close to the film rubbishes the ...

International »

Ivanka ordered to testify in dispute with shoe company


AP, New York :Ivanka Trump must testify in a dispute with an Italian shoemaker over one of her company's shoe designs, a judge said Friday.U.S. District Judge Katherine Forrest rejected a request by the senior White House aide's lawyers that she be blocked from submitting to a deposition in the ...

Editorial »

Safety on highway must be high on card


AS the Eid-ul-Fitr is knocking the door, home-bound passengers are taking long journey on highways and using Railways and Waterways to reach families overnight. There is acrimonious scene all over and we must say the government must ensure discipline at critical places to avoid mishap. The weather is however good ...

Back Page »

Iftar Mahfil welfare approach


Abdul Muqit Chowdhury :Iftar Mahfil has become a tradition in the Holy Ramzan. Such gathering, if it is a positive approach to contribute to fraternal relation in the society, is surely acceptable. Sharing the joy of fasting irrespective of social status and class is praiseworthy.This reflects allegiance to the Islamic ...

City »

BNP Standing Committee Member Barrister Moudud Ahmed, among others, at a discussion on 'Attack on Mirza Fakhrul Islam Alamgir and Amir Khasru Mahmud Chowdhury and Future of Clean Politics of Bangladesh' organised by Swadhinata Forum at the Jatiya Press Club on Friday.


.

Entertainment »

Alia is Raazi for Meghna Gulzar`s next


Alia Bhatt is all set to feature in Meghna Gulzar’s next, Raazi. The actress would be seen playing a Kashmiri girl marries to a Pakistani army officer in the espionage thriller. Raazi portrays the story of a Kashmiri girl married to a Pakistani army officer who would provide Indian intelligence ...

International »

Senate Republicans unveil Obamacare replacement bill after months of closed-door crafting


Reuters, Washington :U.S. Senate Republicans on Thursday unveiled their version of legislation that would replace Obamacare, proposing to kill a tax on the wealthy that pays for it and reduce aid to the poor to cut costs.With Democrats deeply opposed to Republican attempts to overhaul former President Barack Obama's signature ...

Editorial »

Mayors must do more to contain chikungunya in city


THE outbreak of mosquito borne diseases like a new type of fever called chikungunya, in addition to dengue fever in the city and elsewhere is causing additional concern to city dwellers and public health authorities how to protect people from this danger. People in most families in the city are ...

Back Page »

Zum'atul Wida


Abdul Muqit Chowdhury :The last Friday of the Holy Ramzan is called 'Zum'atul Wida'. It means 'departing Zum'a'. The musallies with due religious fervour join the Zum'a congregation and bid farewell to this month of patience and self-restraint. Al-Quran imposes obligation of the Friday prayer in the followingverses : "O ...

Cricket »

Malinga in hot water over 'monkey' comment


AFP, Colombo :Sri Lanka fast bowler Lasith Malinga faced an investigation Thursday after he compared a government minister to a monkey following criticism that the country's cricketers were too fat.Sports minister Dayasiri Jayasekera said he ordered an inquiry after Malinga lambasted him for questioning the endurance of Sri Lankan players ...

Entertainment »

Harry and Sejal grooving on Radha


Jab Harry met Sejal’s first song Radha is out and it’s as refreshing as it can get. The song features Shah Rukh Khan and Anushka Sharma dancing to the tunes of Sukhwinder Singh and Sunidhi Chauhan on the streets. The peppy number with its foot tapping music and catchy lyrics ...

Entertainment »

Samia Rahman’s Eid reality show Rupantor


Entertainment Report :A reality show will be telecasted in five days of Eid holidays and its result will be announced during this time. This short-term reality show Rupantor is planned by Samia Rahman. She will moderate the show. She will select 30 university females among hundred students. Produced by Samia ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news