Trade and Development Report 2005

New Features of Global Interdependence

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The world economy is still expanding, but there are serious risks of a setback. Several populous Asian countries, in particular China and India, have emerged as new engines of economic growth. Thanks to their vigorous expansion and their appetite for natural resources, many of their developing-country trade partners have reaped windfall profits from rising commodity prices and from surging demand for intermediate products. Some dark clouds are looming over this rather rosy horizon. Oil prices are historically high and place a huge burden on many developing countries. And there has been no multilateral action that might gently defuse global current-account imbalances. The Trade and Development Report recommends that international initiatives to alleviate poverty and reach the MDGs should not ignore the importance of a smooth unwinding of global economic imbalances that will allow the Asian Miracle to continue, along with its positive repercussions for other less wealthy countries.




Looking at recent trends in the world economy from the perspective of the Millennium Development Goals (MDGs), the good news is that in 2004 growth in the developing countries was rapid and more broad-based than it had been for many years. Strong per capita income growth continued in China and India, the two countries with the largest number of people living in absolute poverty. Latin America has seen a rebound from its deep economic crisis, and a return to faster growth, fuelled by export expansion. Africa again reached a growth rate of more than 4.5 per cent in 2004. Moreover, relatively strong growth in many African countries is envisaged in the short-term, owing to continuing strong demand for a number of their primary commodities. The bad news is that even growth rates of close to 5 per cent in sub-Saharan Africa are insufficient to attain the MDGs, and that the outlook for 2005, overshadowed by increasing global imbalances, is for slower growth in the developed countries with attendant effects on the developing countries.


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