Developing economies need immediate and fresh game plan to kickstart growth

Global economic disparity pose several challenges that affect both the developing and developed nations.Millions of people in developing countries lack access to basic needs like food, clean water, healthcare, and education.The long-term growth outlook for developing economies is now the weakest it has been since the start of the century, according to the World Bank.Without a sustained improvement in growth rates, only six of today’s 26 low-income countries are likely to attain middle-income status by 2050, the World Bank noted in its latest ‘Global Economic Prospects’ report.By 2030, 622mn people will remain in extreme poverty. Hunger and malnutrition will continue to be the fate of roughly the same number.Developing economies, which began the century on a trajectory to close the income gap with the wealthiest economies, are now falling farther behind for the most part.Most of the forces that powered their rise have dispersed. In their place have come fierce headwinds: weak investment and productivity growth, ageing populations in nearly all but the poorest countries, rising trade and geopolitical tensions, and the escalating dangers of climate change.These economies did achieve substantial progress in the 21st century, the new report finds: initially, they grew at the fastest clip since the 1970s.Today, they account for nearly half of global gross domestic product (GDP), up from just 25% in 2000.Most of this progress occurred in the earliest years before the Global Financial Crisis of 2008-2009. It began to peter out after that. Overall economic growth underwent a series of downward shifts: from 5.9% in the 2000s to 5.1% in the 2010s to 3.5% in the 2020s.Since 2014, with the exception of China and India, per capita incomes in developing economies have been growing half a percentage point below the average in wealthy economies, widening the rich-poor gap.Domestic reforms stalled. Government debt surged to record highs as public expenditures ballooned without an attendant rise in revenues. Global economic integration faltered: as a share of GDP, foreign direct investment inflows into developing economies today are at just half the level of the 2000s.The consequences were greatest for low-income economies, home to more than 40% of people struggling on less than $2.15 a day. These economies have been the focus of global efforts to end extreme poverty.Yet, their progress has come to a virtual standstill amid rising conflict, frequent economic crises, and persistently weak growth. At the start of the 21st century, some 63 countries were classified as "low-income.”Since then, some 39 — including India, Indonesia, and Bangladesh — have entered the ranks of middle-income countries, meaning their annual per capita incomes were above $1,145 by 2023.The World Bank analysis indicates that a 1% increase in GDP growth in the three biggest developing economies — China, India, and Brazil — boosts GDP in other developing economies by nearly 2% after three years.Still, the dependence is smaller than it was at the turn of the century — and that points to an opportunity for them.Developing economies should have no illusions about the struggle ahead: the next 25 years will be a tougher slog than the last 25.They need an immediate and fresh game plan, one that strengthens their capacity to fend for themselves and seize growth opportunities wherever they can be found.With the right policies, some challenges can be turned into opportunities. Given their tighter trade links with one another, developing economies can reap significant rewards by increasing reforms to attract investment and deepen trade and investment ties with these economies.