JAKARTA - The World Bank or the World Bank revealed a report on the World Bank's latest Global Economic Prospects stated that developing countries that are pushing for 60 percent of global growth are projected to face the weakest long-term growth prospects since 2000.
However, the global economy is expected to stabilize in the next two years. The economy of developing countries is expected to make slower progress in pursuing the level of income of developed countries.
The global economy is projected to grow by 2.7 percent in 2025 and 2026, the same as in 2024, in line with the gradual decline in inflation and interest rates.
In addition, growth in developing countries is also expected to remain stable in the range of 4 percent over the next two years. However, this will be a weaker performance than before the pandemic and not enough to push for the necessary progress to reduce poverty and achieve wider development goals.
The economic performance of developing countries grew the fastest since the 1970s. However, this progress slowed down after the 2008-2009 Global Financial Crisis.
In addition, the direct flow of foreign investment (FDI) to developing countries was around half of the initial 2000s level. As a result, overall economic growth decreased from 5.9 percent in the 2000s to 5.1 percent in the 2010s to 3.5 percent in the 2020s.
Since 2014, except for China and India, the average per capita income growth rate in developing countries is half a percentage point lower than in developed countries, thereby widening the gap between rich and poor.
"The next 25 years will be a tougher time for developing countries than the last 25 years," Head of Economist and Senior Vice President for the World Bank Group Development Economy, Indermit Gill, said in an official statement, quoted on Sunday, January 19.
Most of the strengths that have ever helped their revival have disappeared. Instead, frightening obstacles arise such as high debt burdens, weak investment growth and productivity, and rising climate change costs," he added.
Indermit said that in the coming years, developing countries will need new guidebooks that emphasize domestic reforms to accelerate private investment, deepen trade ties, and promote more efficient use of capital, talent, and energy.
Even so, developing countries are more important to the global economy than at the beginning of this century. Developed countries accounted for about 45 percent of global GDP, up from 25 percent in 2000. In addition, export goods between developing countries also doubled, to more than 40 percent of their total trade.
Developed countries are also an important source of global capital flows, remittances, and development assistance for other developing countries between 2019 and 2023, they accounted for 40 percent of global remittances. This figure is up from 30 percent in the first decade of this century.
As a result, these economies now have a greater influence on growth and development results in other developing countries. For example, a percentage increase in 1 percentage point in GDP growth from China's three largest developing countries, India, and Brazil tends to produce a cumulative GDP increase of almost 2 percent in other developing countries after three years.
However, this impact is only about half of the impact of growth in the three largest economies such as the United States, Europe, and Japan.
In short, the welfare of developing countries is still closely related to growth in three developed economies.
"In a world formed by policy uncertainty and trade tensions, developing countries will need bold and broadly outreach policies to take advantage of opportunities that have not been exploited for cross-border cooperation," said Deputy Head of the World Bank Economist and Director of Prospects Group, M. Ayhan Kose.
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Ayhan recommended several important steps, such as pursuing trade partnerships and strategic investments with other fast-growing developing markets. Modernizing transportation infrastructure and standardizing customs processes is an important step to cut unnecessary costs and encourage greater trade efficiency.
"Finally, good macroeconomic policies in the country will strengthen their capacity to navigate the uncertainty of global prospects," he concluded.
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