DHAKA, Jan 17, 2025 (BSS) - Developing economies-which fuel 60 percent of 
global growth-are projected to finish the first quarter of the 21st century 
with the weakest long-term growth outlook since 2000, according to the World 
Bank's latest Global Economic Prospects report. 

Even as the global economy stabilizes in the next two years, developing 
economies are expected to make slower progress in catching up with the income 
levels of advanced economies, said a press release here. 

The global economy is projected to expand by 2.7 percent (pc) in both 2025 
and 2026, the same pace as in 2024, as inflation and interest rates decline 
gradually. Growth in developing economies is also expected to hold steady at 
about 4 percent over the next two years. 

This, however, would be a weaker performance than before the pandemic-and 
insufficient to foster the progress necessary to alleviate poverty and 
achieve wider development goals. 

The World Bank's analysis is its first systematic assessment of the 
performance of developing economies in the first quarter of the 21st century. 
It finds that, during the first decade, developing economies grew at the 
fastest clip since the 1970s.

Yet progress ebbed after the Global Financial Crisis of 2008-09. Global 
economic integration faltered: as a share of GDP, foreign direct investment 
(FDI) inflows into developing economies are at about half the level of the 
early 2000s. 

New global trade restrictions in 2024 were five times the 2010-19 average. As 
a result, overall economic growth dropped-from 5.9pc in the 2000s to 5.1pc in 
the 2010s to 3.5pc in the 2020s. Since 2014, with the exception of China and 
India, the average per capita growth rates of income in developing economies 
have been half a percentage point lower than that in wealthy economies, 
widening the rich-poor gap. 

"The next 25 years will be a tougher slog for developing economies than the 
last 25," said Indermit Gill, the World Bank Group's Chief Economist and 
Senior Vice President for Development Economics.

"Most of the forces that once aided their rise have dissipated. In their 
place have come daunting headwinds: high debt burdens, weak investment and 
productivity growth, and the rising costs of climate change. In the coming 
years, developing economies will need a new playbook that emphasizes domestic 
reforms to quicken private investment, deepen trade relations, and promote 
more efficient use of capital, talent and energy," he added. 

Developing economies are more important for the global economy than they were 
at the start of the century. They account for about 45pc of global GDP, up 
from 25pc in 2000. Their interdependence has also grown: more than 40pc of 
their goods exports go to other developing economies, double the share in 
2000. Developing economies have also become an important source of global 
capital flows, remittances, and development assistance to other developing 
economies: between 2019 and 2023, they accounted for 40pc of global 
remittances-up from 30pc in the first decade of the century. 

As a result, these economies now have greater sway on growth and development 
outcomes in other developing economies. For example, an increase of one 
percentage point in the GDP growth of the three largest developing economies-
China, India, and Brazil-tends to result in a cumulative GDP boost of nearly 
two percent in other developing economies after three years. 

Those effects, however, are only about half the effect of growth in the three 
biggest economies: the United States, the euro area, and Japan. The welfare 
of developing economies, in short, is still strongly tied to growth in the 
big three advanced economies. 

"In a world shaped by policy uncertainty and trade tensions, developing 
economies will need bold and far-reaching policies to seize untapped 
opportunities for cross-border cooperation," said M. Ayhan Kose, the World 
Bank's Deputy Chief Economist and Director of the Prospects Group.

"A good start would be to pursue strategic trade and investment partnerships 
with the rapidly expanding markets of other developing nations. Modernizing 
transportation infrastructure and standardizing customs processes are 
critical steps to cut unnecessary expenses and foster greater trade 
efficiency. Finally, sound macroeconomic policies at home will fortify their 
capacity to navigate the uncertainties of the global outlook," he added. 

Over the next two years, developing economies could face serious headwinds, 
the report notes. High global policy uncertainty could undercut investor 
confidence and constrain financing flows. Rising trade tensions could reduce 
global growth. Persistent inflation could delay expected cuts in interest 
rates. Yet the global economy could also do better than expected-especially 
if its largest engines, the United States and China, manage to gain steam. In 
China, additional stimulus measures could boost demand. In the United States, 
robust household spending could result in stronger-than-expected growth, with 
beneficial effects for developing economies. 

The report argues that developing economies have many options to improve 
their growth prospects, despite the headwinds. With the right policies, these 
economies can even transform some challenges into significant opportunities. 
Addressing infrastructure needs, speeding up the climate transition, and 
improving human capital can improve growth prospects while also helping to 
achieve climate and development goals. All countries, meanwhile, should work 
together to strengthen global trade governance, with the support of 
multilateral institutions.