Good morning everyone, and welcome to the 2015 Spring Meetings of the World Bank Group and International Monetary Fund.
During these meetings, the World Bank Group is focusing intensely on one of our goals – ending extreme poverty by 2030. The world has had great success in the last 25 years in lifting people out of poverty – an astounding two-thirds reduction. Today, fewer than 1 billion people live in extreme poverty, and we must now reexamine our strategies to lift the final billion out of poverty and into the modern world.
We’ve looked back at the last 50 years or so of the world’s efforts to fight poverty, and we found three broad approaches have worked well and will help frame our advice to countries in the months and years ahead. First, we must promote strong economic growth; second, countries must invest in people, especially in education and health care; and third, countries must build social safety nets and protections against natural disasters and pandemics to ensure that people don’t remain trapped in extreme poverty.
Today, I’d like to talk about the first part of our strategy -- economic growth, especially in developing countries. Global growth is expected to be around 3 percent this year – just as we forecast in January. But prospects for developing countries continue to be downgraded from 4.8 percent in January to an estimate of 4.5 percent now. For developing countries, this marks a further slowdown from 2014 and the fourth consecutive year of falling growth rates, which had averaged 6 percent over 2000 to 2011.
The World Bank Group’s work is focused on improving economic growth in developing countries in order to end extreme poverty and boost shared prosperity.
We see two major transitions for developing countries in the coming months: adjustment to lower oil prices and the prospect of tightening global financing conditions.
Our main piece of advice for developing countries – they should undertake comprehensive structural reform programs to promote growth.
Structural reforms raise productivity and growth over time to sustain rising prosperity. Some reforms also support domestic demand in the near-term. And ambitious reform plans signal to investors that governments are proactive about improving long-term prospects. This boosts confidence and often translates into larger capital inflows and lower borrowing costs.
In several developing countries, important reforms are already underway. India implemented diesel subsidy reforms and reduced barriers to foreign direct investment in telecoms, railways, and retail. China reduced barriers to private investment, and enacted new legislation with rules on local government borrowing. Mexico increased competition in telecommunications and widened its tax base. And Rwanda reduced barriers to private investment and made general improvements in the business environment.
But more needs to be done. There is no single blueprint for structural reforms – but broadly we see several drivers of economic growth in the future.
- Reorienting growth – whether it be away from consumption and toward investment in Turkey or Brazil, or the opposite in China – away from investment and toward consumption.
- Addressing infrastructure needs -- especially in energy and transportation.
- Improving education and health care, and reforming labor markets
- Reducing barriers to trade and facilitating regional integration
- And reforming energy subsidies.
Let me turn to the impact of falling oil prices on developing countries. The picture is mixed -- lower oil prices will help reduce poverty for many, but they also will have negative effects for some.
One benefit is that more than 70 percent of the world's poor live in oil-importing countries, and the lower prices will have a positive impact on growth, which will raise incomes. And two, the majority of poor households in low-income countries are net food buyers and will benefit from lower food prices.
However, lower oil prices also will hurt some of the very poorest who tend to be net food sellers. Falling food prices will reduce their incomes. About 70 percent of the world’s extreme poor live in rural villages and work as farmers or in informal jobs. We must promote growth in agriculture by giving farmers more control over how and what they produce – and by improving their access to better seeds, water, electricity and markets.
Finally, there were published reports today regarding the Bank’s resettlement history. The stories are based on internal Bank documents that I ordered released. I took that action because I believe we must do better in implementing our resettlement policies. As I said a month ago, what we found from our own investigations seriously concerned me. We are now reviewing our safeguards policies and I am determined that we will learn from the past and that we will do all in our own power to protect people and the environment.
Development is complex and difficult. Resettlement, in particular, is a very hard issue. Every country in the world knows this. Developed countries used eminent domain to take land in order to build highways, railways, ports and other infrastructure projects for the greater good -- in order to create jobs and build economies. Developing countries are doing the same. If we are serious about our goals – ending extreme poverty and boosting shared prosperity – we will need to do even more infrastructure in the developing world. But alongside those projects, we need strong safeguards and we will ensure that they will not only be put in place, but that we will implement them to the best of our abilities.
Thank you. I’ll now take your questions.