Trade and Development Report 2012

Inclusive Policies for Sustainable Growth

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In the context of the ongoing fallout from the global financial crisis, income distribution is back to the centre of economic analysis and policies. This publication explores the linkages between income distribution, growth and development. It analyzes the evolution of income inequality over the last decades in different regions and groups of countries. It also examines the explanations given for the widespread rise of inequality. The report questions the thesis that rising inequality is a necessary condition for successful development. Based on a comprehensive theory of economic policy elaborated in former reports, this book argues that only inclusive development policies create the conditions for sustainable and rapid growth.

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Current trends and challenges in the world economy

The global economy weakened significantly towards the end of 2011 and further downside risks emerged in the first half of 2012. The growth rate of global output, which had already decelerated from 4.1 per cent in 2010 to 2.7 per cent in 2011, is expected to slow down even more in 2012 to below 2.5 per cent (table 1.1). Despite a very modest improvement in gross domestic product (GDP) growth in the United States and a more significant one in Japan, developed economies as a whole are likely to grow by only slightly more than 1 per cent in 2012, owing to the recession currently gripping the European Union (EU). This contrasts with a much stronger performance in developing and transition economies, where GDP growth should remain relatively high, at around 5 per cent and 4 per cent respectively.

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