"Despite high potential, 75 vulnerable economies face \u2018historic reversal\u2019, World Bank says"

" Despite high potential, 75 vulnerable economies face \u2018historic reversal\u2019, World Bank says \r\n\r\nDespite their high potential to advance global prosperity, one-half of the world\u2019s 75 most vulnerable countries are facing a widening income gap with the wealthiest economies for the first time in this century, a new World Bank report has found. Taking full advantage of their younger populations, their rich natural resources, and their abundant solar-energy potential can help them overcome the setback.\r\n\r\nThe report,\u00a0 The Great Reversal: Prospects, Risks, and Policies in International Development Association Countries , offers the first comprehensive look at the opportunities and risks confronting the 75 countries eligible for grants and zero to low-interest loans from the World Bank\u2019s International Development Association (IDA). These countries are home to a quarter of humanity\u20141.9 billion people. At a time when populations are aging nearly everywhere else, IDA countries will enjoy a growing share of young workers through 2070\u2014a huge potential \u201cdemographic dividend.\u201d These countries are also rich in natural resources, enjoy high potential for solar-energy generation, and boast a large reservoir of mineral deposits that could be crucial for the world\u2019s transition to clean energy.\r\n\r\nYet a historic reversal is underway for them. Over 2020-24, average per capita incomes in half of IDA countries\u2014the largest share since the start of this century\u2014have been growing more slowly than those of wealthy economies. This is widening the income gap between these two groups of countries. One out of three IDA countries is poorer, on average, than it was on the eve of the COVID-19 pandemic. The extreme-poverty rate is more than eight times the average in the rest of the world: one in four people in IDA countries struggles on less than $2.15 a day. These countries now account for 90 percent of all people facing hunger or malnutrition. Half of these countries are either in debt distress or at high risk of it. Still, except for the World Bank Group and other multilateral development donors, foreign lenders\u2014private as well as government creditors\u2014have been backing away from them.\r\n\r\n \u201cThe world cannot afford to turn its back on IDA countries,\u201d \u00a0said\u00a0 Indermit Gill, the World Bank Group\u2019s Chief Economist and Senior Vice President .\u00a0 \u201cThe welfare of these countries has always been crucial to the long-term outlook for global prosperity. Three of the world\u2019s economic powerhouses today\u2014China, India, and South Korea\u2014were all once IDA borrowers. All three prospered in ways that whittled down extreme poverty and raised living standards. With help from abroad, today\u2019s batch of IDA countries has the potential to do the same.\u201d \r\n\r\nMore than half of all IDA countries\u201439 in all\u2014are in Sub-Saharan Africa. Fourteen of them\u2014mainly small island states\u2014are in East Asia, and eight are in Latin America and the Caribbean. In South Asia, all countries except for India are IDA countries. Thirty-one IDA countries have per capita incomes of less than $1,315 a year. Thirty-three are fragile and conflict-affected states.\r\n\r\nIDA countries share similar opportunities. The \u201cdemographic dividend\u201d\u2014a deep and growing reserve of young workers\u2014is one of them. Abundant natural resources is another. These countries account for about 20 percent of global production of tin, copper, and gold. In addition, some IDA countries possess critical mineral deposits essential for the global energy transition. Because of their abundant sunshine, most IDA countries are well situated to take advantage of solar energy. On average, their long-term daily solar-electricity generation potential is among the highest in the world.\r\n\r\nThis potential, however, comes with risks that must be managed. To reap the demographic dividend, IDA governments will need to undertake policies to improve education and health outcomes and make sure that jobs are available for the rising number of young people who will enter the workforce in the coming decades. To seize the full potential of their natural-resource wealth, IDA countries will need to improve policy frameworks and build stronger institutions capable of better economic management. All of this will require ambitious domestic policy reforms\u2014and significant financial support from the international community.\r\n\r\n \u201cIDA countries have incredible potential to deliver strong, sustainable, and inclusive growth. Realizing this potential will require them\u00a0 to implement an ambitious set of policies centered on boosting investment,\u201d\u00a0 said\u00a0 Ayhan Kose, \u00a0 the World Bank\u2019s Deputy Chief Economist and Director of the Prospects Group . \u201c This means improving fiscal, monetary, and financial policy frameworks and advancing an array of structural reforms to strengthen institutions and enhance human capital.\" \r\n\r\nIDA countries today have large investment needs. In the poorest of them, closing existing development and infrastructure gaps and building resilience to climate change will require investment that amounts to nearly 10 percent of GDP. The costs of climate disasters have doubled in IDA countries over the past decade: Economic losses from natural disasters average 1.3% of GDP a year\u2014four times the average of other emerging market and developing economies. Such needs will require IDA countries to generate sustained investment booms\u2014the type that boosts productivity and incomes and reduces poverty. Historically, such investment booms have often been sparked by a comprehensive package of policy measures\u2014to bolster fiscal and monetary frameworks, ramp up cross-border trade and financial flows, and improve the quality of institutions. Such reforms are never easy, the report notes. They need careful sequencing and implementation. But previous IDA countries have shown they are possible.\r\n\r\nIDA countries will need significant international financial support to make progress and lower the risk of \u201cprotracted stagnation,\u201d the report notes. Stronger cooperation on global policy issues\u2014including fighting climate change, facilitating more timely and effective debt restructurings, and supporting cross-border trade and investment\u2014will also be crucial to help IDA countries avert a lost decade in development.\r\n\r\n "

"Despite high potential, 75 vulnerable economies face \u2018historic reversal\u2019, World Bank says"

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