World Bank Sees Sharp Poverty Drop By 2030 As Econ Doubles

from Nasdaq

The number of people living in extreme poverty could be cut in half over the next 25 years as global economic output, increasingly driven by developing countries, more than doubles, according to World Bank projections released Wednesday.

Total international economic output is projected to climb to $72 trillion by 2030 from $35 trillion in 2005 as annual growth averages about 3%, reflecting growth rates of 2.5% for high-income countries and 4.2% for lower-income developing countries. That outlook was in the World Bank's latest Global Economic Prospects report, the first to make such long-run forecasts.

"The number of people living on less than $1 a day could be cut in half, from 1.1 billion now to 550 million in 2030," said Francois Bourguignon, the World Bank's chief economist. But some regions such as Africa are at risk of trailing behind the trend towards poverty alleviation, and within countries income inequality could widen, Bourguignon said.

In the shorter-term, the report shows global economic growth will accelerate somewhat this year to 3.9% before slowing to 3.2% next year for a "soft landing" and then recovering to 3.5% in 2008. Developing countries' economies are expected to expand by a near-record 7% this year and slow gradually over the next two years, while high-income countries' output grows about 3.1% this year and expands somewhat more slowly for the next two years.

Prices for oil and other commodities should ease over the next two years as a result of increased supply, demand management and conservation, but global growth is expected to keep these prices high by historical standards, the report says.

Risks to the two-year forecast include potential sharp corrections for the fastest-growing developing countries such as Argentina and China, a faster-than- projected weakening of housing markets in wealthy countries, oil-market shocks and a disruptive unwinding of the U.S. current account deficit.

As for the longer-term outlook, the World Bank said positive growth trends are solidly entrenched. "While exact numbers will undoubtedly turn out to be different, the underlying trends are relatively impervious to all but the most severe or disruptive shocks," said Richard Newfarmer, the report's lead author.

Overall, developing countries' share of global output is seen growing to about one-third in 2030 from the current one-fifth, while their share of manufactured imports to rich countries is likely to grow to 65% from about 40%, the report says. With services trade playing an increasingly important role, international trade is expected to more than triple to $27 trillion in the 2005-2030 period.

Meanwhile, a "global middle class" will emerge as the number of relatively middle-income people in developing countries triples to 1.2 billion in the 2000- 2030 period, the report says. This group, with annual purchasing power of $4, 000-$17,000, "will participate actively in the global marketplace, demand world- class products and aspire to international standards of higher education," it says.

Sore spots the report foresees include: Africa, where fragile governments and civil conflicts have hindered growth; the potential for global trade to aggravate income inequality within countries; and threats to the "global commons" such as air quality, marine fisheries and public health.

The report is available on the Internet at: http://www.worldbank.org/gep2007