By Jeff Kapembwa
Climate change, reduced foreign aid are some of the turbulences likely to affect most families in Least developed and developing countries, Zambia included until 2027, a call for mitigatory measures and sustained strategic domestic resource mobilization plan, the World Bank projects.
The projected economic turbulence entails the Least Developed and Developing nations heightening strategies and prudent policies including initiating domestic resource mobilization initiatives, embracing the informal economy to raise more resources than is the case presently as climate change, too, takes ground.
Besides initiating a hype in production in mining, agriculture, manufacturing, energy and other growth sectors because of the reduction in aid from developed nations that are unlikely to be spared when the crunch hits the ground before the close of this year until the end of the next two years as projected, affected countries should strive to attract direct foreign investments and improve exports to raise resources.
The Bretton Woods Institution, in its global outlook report, sees tariffs and other turbulence crippling global growth which will weaken and hover around 2.3 percent in 2025, marking a significant downgrade from previous forecasts, followed by a modest pickup to 2.5 percent in 2026-27.
In the context of a more challenging external environment, growth in Emerging Market and Developing Economies (EMDEs) is forecast to be well below pre-pandemic averages and the pace that is needed to make significant progress in boosting job creation and closing large per capita income gaps with advanced economies.
Indermit Gill, the Senior Vice President and Chief Economist at the World Bank Group warns that risks to the outlook are tilted to the downside. In particular, renewed increases in trade tensions and prolonged intense uncertainty could substantially reduce global growth relative to the baseline.
Arguably, without decisive policy efforts, global growth prospects are unlikely to materially improve. There is greater need for the restoration of predictable, transparent, and rules-based approaches to resolving trade disputes is a top priority.
At the same time, policy makers, the report notes, need to retain focus on addressing debt distress, supporting vulnerable EMDEs, and combating climate change, a major threat.
Developing economies need to expand their fiscal room to maneuver. They have a lot of work to do in this regard, because they collect far less in revenues than high-income economies do—about 25 percent of GDP compared with nearly 40 percent of GDP in the wealthiest economies, a call for sustained revenue streams.
“They should step up efforts to mobilize greater domestic resources—by broadening the tax base and strengthening tax administration and collection to reduce tax avoidance and profit shifting.” Gill notes.
“They can also reap significant gains by narrowing the focus of costly food and fuel subsidies, channeling them simply toward low income households.”
Accelerating job creation is paramount. Across the world, a historic demographic shift is underway—one that is intensifying the need for jobs in many of the poorest countries.
Sub-Saharan Africa’s working age population is forecast to almost double by 2050, growing by more than 600 million, more than any region has ever experienced over a 25- year period.
South Asia’s working-age population is expected to expand by nearly 300 million over the same timeframe, and the Middle East and North Africa’s by more than 100 million.
Whether these regions succeed or fail in tackling the challenge will determine the outlook for long term global peace and prosperity.
They will need to accelerate economic growth, upgrade the workforce’s education and skills, and set the stage for labor markets to function efficiently. The global economy today is at an inflection point.
The forces that once drove economic convergence and lifted billions out of poverty are now in retreat. But this moment offers a chance to reset the agenda—with renewed global cooperation, restored fiscal responsibility, and a relentless focus on creating jobs.
With decisive action, governments across the world can still regain the momentum of poverty reduction—and deliver rising living standards for the next generation. Developing economies need to expand their fiscal room to maneuver.
They have a lot of work to do in this regard, because they collect far less in revenues than high-income economies do—about 25 percent of GDP compared with nearly 40 percent of GDP in the wealthiest economies.
But this moment offers a chance to reset the agenda—with renewed global cooperation, restored fiscal responsibility, and a relentless focus on creating jobs.
With decisive action, governments across the world can still regain the momentum of poverty reduction—and deliver rising living standards for the next generation.