World Bank’s Global Economic Prospects (GEP)

Source: Livemint

Syllabus:  Indian Economy and issues relating to planning, mobilization, of resources

Synopsis: The World Bank releases a Global Economic Prospects (GEP) report twice a year. It is the most important source for evaluating the current and future outlook for emerging markets and developing economies (EMDEs). The recently released edition is significant because of the warnings it contains. 

Key findings of the recent Global Economic Prospects report: 

• The world economy is recovering from the pandemic. While the advanced economies (with successful or rapidly progressing covid vaccination programmes) appear to return to or even exceed their earlier growth rates.  
• Emerging markets and developing economies (EMDEs) prospects are more mixed. 
  • The strongest-looking emerging-market region is East Asia and the Pacific followed by South Asia.  
• The huge global disparity in vaccine access means that poorer countries are likely to face more waves of the coronavirus and its variants in the coming months and years. 
• Inflation: If inflation in advanced economies persists, central banks may be compelled to tighten monetary policy. That could lead to higher capital inflows for advanced economies and the depreciation of EMDE currencies. 
• The report shows that one big stumbling block to faster growth and progress for EMDEs is the high cost of a trade. Tariffs account for only one-fourteenth of the total cost of trade, with logistics, transport, bureaucracy and corruption making up the rest. As a result, a good sold to another country costs on average double what it does domestically. 

Key findings of the Global Economic Prospects related to India: 

• The World Bank estimates that covid will cause the number of people living in poverty to increase by 143-163 million in 2021. More than half of the newly poor in South Asia, mainly in India 
• The problem with India is not its economic fundamentals, which are strong, but the fact that poor management of its economy, and the pandemic means “confidence remains depressed, and balance sheets damaged.