The latest edition of the World Bank’s Global Economic Prospects explores the immediate and longer-term outlook for advanced and developing economies in the wake of COVID-19. To understand how the economic recovery might play out for different countries, Expert Answers spoke with Ayhan Kose, Director of the World Bank’s Prospects Group.
00:00 Introducing Ayhan Kose, Director of the World Bank’s Prospects Group
00:49 Headline prediction for economic growth for 2021 and beyond
02:12 The impact of the strong growth in China and the United States
03:54 Impact and implications of safety net measures
04:59 Are we catching back up to where we were if COVID-19 never emerged?
05:49 Implications for people on the ground in emerging market and developing economies
06:43 The threat of inflation: what’s the risk for emerging market and developing economies?
07:52 The concern on rising food prices
08:35 Biggest threats to the strong growth forecasted
09:46 Thanks Ayhan Kose for sharing your expertise!
00:00 [Expert] - This is a highly uneven recovery. This is like a tale of two recoveries. It is the best of time for advanced economies and probably it is the worst of times for emerging market and developing economies.
[Host] - Today on Expert Answers a health check on the global economy. As the world enters this uneven recovery after the worst economic crisis, since World War II, what exactly do we mean by uneven recovery? And what's the prognosis for growth over the next year? To get answers to these questions and a whole lot more, I recently spoke to the World Bank's Acting Vice President for Equitable Growth and Financial Institutions, Ayhan Kose.
00:49 [Host] - So Ayhan, the latest edition of the Global Economic Prospects is out. Give us your, your headline, your top line figures.
[Expert] - First of all, when you look at the global economy the news are good. We are expecting growth around 5.6% this year. How good this number is when you look at all the global recessions and what happened after the global recessions? This is the best number we are seeing over 80 years. So we are going to have a, very strong rebound in the global economy this year, but this is a highly uneven recovery. It's like the tale off to recoveries. It is the best of times for advanced economies and probably to the worst of times for emerging market and developing economies. You have advanced economies growing at a very high rate and emerging market developing economies, especially the low income countries are struggling as they are trying to basically still make sure that there is enough vaccine, there is support for the populations suffering from the outbreaks. So it is the type of recovery on one side, it looks good. On the other side, it looks rather grim.
02:12 [Host] - On that, on that unevenness, how much of that's being driven by the big sort of economic recovery we're seeing in the United States and China, if you were to take those two countries out of the picture what is the sort of recovery picture look like?
[Expert] - US is going to deliver a record growth number close to 7%. The fastest growth we have seen in this country since mid 1980s. China is gonna grow around 8.5%. Given the size of that economy, that's a quite an impressive number. Both of these countries undertake the of course the vaccination programs, they are vaccinating their populations rather quickly, opening up their economies. They also implemented a wide range of support measures, but when you take out these two countries growth looks much weaker. For example, I talked about growth in emerging market developing economies around 6%. That number looks pretty strong, but if you take out China the number goes down to close to 4. And for low-income countries, growth number is going to be less than 3%. Those are the countries who need to grow most. Vaccination is critical. In fact, when you look at our growth numbers in January and our growth numbers now in June, those countries that have been able to vaccinate their populations speedily. They ended up having growth upgrades and those that haven't been able to do that have been subject to growth downgrades.
03:54 [Host] - One of the things I've been reading about is, you know during the crisis, a lot of these countries, the developing economies, they implemented these safety net measures these cash transfer measures, and that propped up a lot of people that give a lot of people support during the crisis. Do you worry about those measures, those mechanisms for supporting people sort of being unwound too soon or sort of deactivated too soon? And if so, what would that mean for the recovery?
[Expert] - Now, when you look at what happened last year, policymakers responded and they responded aggressively. And of course in the case of emerging market developing economies, those for example were much smaller, but they were able to implement to some extent. What we are saying in the report, let's be careful when we withdraw this support because we don't want to basically slow down the recovery and, help the, you know, the countries populations that needed the help.
04:59 [Host] - Are we catching up? And, and how soon do you think we could catch up to where we would be if COVID-19 never happened? Is it possible to sort of hypothetically say the pandemic never happened? And, and we would kind of be at that level that we thought we would be at economically speaking, growth speaking?
[Expert] - With respect to catch up, again we see the tale of two recoveries. Advanced economies are catching up. They are going to basically pretty much go back to pre-crisis per capita income levels in two years. In the case of emerging market developing economies, two-thirds of them are not going to get back to the per capita income levels because they are not going to deliver enough growth.
05:49 [Host] - Talk to me what, you know these numbers are in the abstract. And you talk about the, you know, tale of two recoveries in the countries that are still struggling those developing countries, those emerging markets. When we see numbers like these the sort of weak growth or, you know over the past few months, even negative growth. What does that mean for the average person on the ground? What does that result in for people on the street?
[Expert] - Of course we have seen a record number of people joining unfortunately, the ranks of the extreme poor. So for the average person on the street, the crisis manifested itself in different forms, dealing with the health crisis, dealing with the job losses, dealing with income losses. And in some cases, basically falling into the ranks of the poor.
06:43 [Host] - Let's talk about inflation next. It's certainly been in the headlines and it's in your report. What's the risk, if any when it comes to inflation and in particular what's at risk for emerging market and developing economies?
[Expert] - Last year, when the crisis started around March, April, we saw inflation decline. And that's what you would expect during a global recession. But that inflation decline was the most muted we have seen among all these global recessions in modern era. And then inflation roared back and we saw the fastest increase in inflation actually, during a global recession. As the economies normalized, commodity prices in a sense increased. And we had supply disruptions around the world. By the end of this year, one thing is clear. We will see higher inflation at the global level. We will see higher inflation in advanced economies and we will see higher inflation in emerging markets and developing economies. Our analysis suggest that the increase is going to be temporary.
07:52 [Host] - One more quick question on prices, food prices. I've seen in the news food prices have been on the increase. That creates a problem with food insecurity. Do you cover that in the report and what and what are some of the risks you see there?
[Expert] - We are seeing a record inflation in agricultural commodity prices. In low-income countries, inflation did increase mostly because of inflation we are seeing in food prices. So, this inflation adds to the existing food insecurity problem. We see around the world. Creates all types of challenges.
08:35 [Host] - And just finally Ayhan, looking at the predictions you're making in this edition of the Global Economic Prospects, what are some of the risks to those predictions? What are some of the variables that could potentially throw those projections off?
[Expert] - Single most important risk is associated with distribution and deployment of vaccines, controlling the pandemic. If you don't control the health crisis we cannot have a even recovery. We cannot have the type of strong recovery we would like to have. The second important risk is the risk associated with financial stability. It could be triggered by inflationary pressures, it could be triggered by high debt levels. And the third important risk, is the risk associated with vulnerabilities in the corporate sector. During the crisis, countries are undertaking a wide-range of measures to protect firms. And sooner or later they are going to remove those measures.
09:46 [Host] - Well Ayhan, thank you so much for taking the time to share the details of the latest GEP report with us.
[Expert] - Thank you.
[Host] - A huge thanks to Ayhan Kose for his time. If you want to check out the latest edition of the Global Economic Prospects and see how your country or region is faring head on over to worldbank.org. And if you wanna get in touch with me, Ayhan or any of the rest of the World Bank team shoot us an email firstname.lastname@example.org. Thanks so much for being with us. And until next time, goodbye.
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