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Emerging nations’ drive to catch up with the incomes of the developed world has been set back decades by the slowdown in their economies and the impact of the commodities slump, according to World Bank research.
The bank on Tuesday downgraded its global growth forecast because of what it said was a much worse than expected performance by commodity-exporting countries. It expects the global economy to grow 2.4 per cent this year, compared with a previous forecast of 2.9 per cent, with emerging commodity exporters as a group set to expand just 0.4 per cent — down from 3.2 per cent as recently as 2013.
That downgrade came alongside a new analysis showing that for the first time since the turn of the century a majority of emerging and developing economies were no longer closing the income gap with the US and other rich countries.
Last year just 47 per cent of 114 developing economies tracked by the bank were catching up with US per capita gross domestic product, below 50 per cent for the first time since 2000 and down from 83 per cent of that same sample in 2007 as the global financial CRIsis took hold.
That, the bank’s economists warned, would have a meaningful impact on the future people in those countries could expect.
“Whereas, pre-CRIsis, the average [emerging market] could expect to reach advanced country income levels within a generation, the low growth of recent years has extended this catch-up period by several decades,” they wrote.
In the five years before the 2008 financial CRIsis, emerging markets could expect to take an average of 42.3 years to catch up with US per capita GDP, according to the bank’s analysis.
But over the past three years, as major emerging economies such as Brazil, Russia and South Africa have slowed or fallen into recession, the slower average growth means the number of years it would take to catch up with the US has grown to 67.7 years.
Many commodity-importing developing economies such as China and India had benefited from the lower prices and were proving relatively resilient.