WB-IMF Report Gauges Progress on Development Goals, Including New Target of Promoting Shared Prosperity of Bottom 40 Percent

October 8, 2014

WASHINGTON, October 8, 2014 – Much more work needs to be done to end poverty and close the gap in living standards between those in the bottom 40 percent and the top 60 percent of the population around the world, says the Global Monitoring Report 2014/2015, released today by the World Bank and International Monetary Fund (IMF).

The report details, for the first time, the World Bank Group’s twin goals of ending extreme poverty by 2030 and promoting shared prosperity, measured as income growth of the bottom 40 percent. GMR 2014/2015 continues to monitor progress on the Millennium Development Goals, which inspired the WBG twin goals.

"The world has made great progress in the last quarter-century in reducing extreme poverty – it was cut by a stunning two-thirds – and now we have the opportunity to end poverty in less than a generation,” said World Bank Group President Jim Yong Kim. “But we will not finish the job unless we find ways to reduce inequality, which stubbornly persists all over the world. This vision of a more equal world means we must find ways to spread wealth to the billions who have almost nothing.”

The report notes that much success has been achieved in reducing extreme poverty – those living on less than a $1.25 a day. However, the number of poor remains unacceptably high, at just over 1 billion people (14 percent of the world population) in 2011, compared with 1.2 billion (19 percent of the world population) in 2008.

Forecasts in the report show that poverty will remain stubbornly high in the South Asia and Sub-Saharan Africa regions, where an estimated 377 million of the world’s 412 million poor will likely reside in 2030. In 2011, the two regions were home to 814 million of the world’s 1 billion poor.

"If it is shocking to have a poverty line as low as $1.25 per day, it is even more shocking that 1/7th of the world's population lives below this line," said Kaushik Basu, Senior Vice President and Chief Economist of the World Bank Group. "The levels of inequality and poverty that prevail in the world today are totally unacceptable. This year's Global Monitoring Report, which brings together in one volume a statistical picture of where the world stands in terms of these goals, is essential fodder for anyone wishing to take on these major challenges of our time."

In a new database on shared prosperity in 86 countries, including 24 high-income countries, initial results show that incomes of the bottom 40 percent grew faster than the national average in many of them. Deeper analysis is needed to understand the success factors of these countries.

However, in terms of living standards, the bottom 40 percent in the developing world are much worse off when it comes to access to education, health, and sanitation. For example, children in the poorest households are almost twice as likely to be malnourished than those in the top 60 percent. In the high-income world, which the report analyzes for the first time, the main concern is income inequality, which has reached levels unprecedented since World War II. The analysis on high-income countries is contributed by the Organization for Economic Cooperation and Development (OECD). The OECD chapter finds that, among high-income countries, the average income of the richest 10 percent of the population is now about 9.5 times that of the poorest 10 percent, as opposed to 7 times 25 years ago. The chapter also analyzes the extent to which wealthier countries are amending their tax and transfer systems to improve their redistributive impact.

On the MDGs, the report reiterates that the target on poverty has been achieved, three years ahead of the MDGs deadline of 2015. In addition, three other sub-targets have been met, and those on gender equality in secondary education and the incidence of malaria could be met by 2015. But the maternal and child mortality and sanitation sub-targets will not be met by the 2015 deadline.

“Despite the weakness in the global economy in 2014, we still project growth for low-income developing economies to be over 6 percent over the medium term, which bodes well for the world’s poor. We are generally optimistic about the growth prospects of the three regions with almost 95 percent of world’s poor in 2011 – East Asia, South Asia, and Sub-Saharan Africa, but need to keep in mind that there are many individual countries within these regions where growth prospects are less benign,” said Sean Nolan, IMF Deputy Director, Strategy, Policy, and Review Department.

The report reaffirms the centrality of growth for development but highlights that growth is more effective in reducing poverty and promoting shared prosperity if it is inclusive and sustainable. Three key elements are considered to be of particular importance: greater investment in human capital, judicious use of safety nets, and steps to ensure the environmental sustainability of development.

Priorities for investments in education differ across countries. Developing countries require more attention to early childhood development because poor nutrition at a young age has lifelong implications for educational attainment and the ability of the poor to get better paying jobs and, ultimately, break the intergenerational transmission of poverty. In high-income OECD economies, emphasis is needed on ensuring that children of disadvantaged groups attend pre-school as a means to improve their advancement in life.

Well-designed safety nets can play a pivotal role in fostering inclusive human development. In some middle and low-income countries, safety nets assist the poor and vulnerable, redistribute the gains from growth, and enhance the ability of the poor to benefit from economic development. In developed countries, social protection systems are inclusive and efficient if they operate in tandem with employment policies, in particular if they promote employment of young and older workers.

Ensuring environmental sustainability is vital and all countries face challenges from natural resource depletion, ecosystem degradation and pollution, and climate change. When carefully designed, green growth strategies can tackle these challenges by improving the management of natural resources, reducing pollution and emissions, increasing resource efficiency, and strengthening resilience.

“These three elements of investment in human capital, safety nets, and environmental sustainability are at the core of any country’s development strategy as well as fundamental to the achievement of the WBG twin goals, the MDGs, or the Sustainable Development Goals expected to succeed the MDGs,” said Jos Verbeek, Lead Author of GMR 2014/2015.

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