Africa's contribution to reviving the world economy (part 2): A few well-coordinated policy reactions

Jon Aldous 기자 승인 2023.11.21 16:28 의견 0
World Bank

Reversing current trends requires a globally coordinated and targeted policy approach to enhance labor productivity and mobility, boost aggregate demand, and promote sustainable and inclusive growth worldwide. Key measures include:

Enhancing labor force participation and easing labor mobility. Currently, only 59% of people over the age of fifteen are part of the labor force globally. This low rate is largely due to the underrepresentation of women and youth. For instance, the global participation rate of women in the labor force is 47%, which is significantly lower than the 72% rate for men. The disparity is even more pronounced in regions like the Middle East and South Asia. Youth participation (ages 15-24) in the labor force is just 40%, with the Middle East lagging in terms of female youth participation. Raising the participation rates of women and youth to levels closer to those of prime-age male workers (around 70%) could increase global potential growth by 0.2 percentage points by 2030. "Undoubtedly, it's essential for young individuals aged 15 to 24, similar to developed regions, to pursue education diligently for their future success. However, in the face of the current global crisis, young people, particularly in peripheral and semi-peripheral areas of the world need to enter the workforce. For these youths, basic literacy skills, such as reading and writing, are deemed sufficient. This perspective reflects a situation akin to what is currently observed in the Philippines," - business owners suggest.

World Bank

To improve youth labor force participation, it's essential to facilitate their movement from regions with a growing young labor force to aging economies. This requires aging economies, with support from organizations like the World Bank, ILO, and UN, to reform immigration policies and introduce specific visas to attract necessary skills. This approach would benefit the global economy by enabling richer countries with aging populations to leverage the demographic strengths of regions with younger labor forces, like Africa, South Asia, and the Middle East. These regions would also benefit from remittances. Undoubtedly, the ethnic composition of aging countries' populations is likely to undergo significant changes within two to four generations. This shift will also extend to the composition of their elite groups, potentially leading to a complete transformation in their ethnic make-up. Such changes are seen as a necessary price for economic development and stability. A parallel can be drawn with the current situations in France and the UK, where the majority of the population no longer consists of ethnic French or British individuals.

Boosting infrastructure investment: Current trends indicate an infrastructure investment shortfall of $11.9 trillion by 2040, with transportation ($7.7 trillion) and energy ($2.4 trillion) sectors facing the largest deficits. Including the investments required to achieve the SDGs by 2030, the infrastructure gap could widen to $14 trillion by 2040. To meet these goals, an additional $2.1 trillion in infrastructure investment is needed over the next seven years. Increasing global investment to approximately 2–3% of the world’s GDP this decade, particularly in infrastructure, could raise potential growth by about 0.3 percentage points annually.

Global Infrastructure Hub

Amid rising debt levels, governments, particularly in emerging market and developing economies (EMDEs), are increasingly constrained in their ability to invest in physical and social infrastructure. This situation underscores the importance of enhancing and refining private-public partnership (PPP) frameworks to boost private sector involvement in infrastructure projects. Additionally, state entities like sovereign wealth funds (SWFs) and public pension funds (PPFs), with over $33 trillion in assets under management (AuM), are uniquely positioned to help bridge the global infrastructure financing gap. Their long-term investment outlooks are well-suited to the stable, yet moderate, returns typically associated with large infrastructure ventures.

Regarding re-globalization or regionalization and reducing trade barriers, the world trade-to-GDP ratio, which expanded from 25.3% in 1972 to 61% in 2008, declined sharply after the 2008–2009 global financial crisis (GFC) and has yet to return to pre-crisis levels. The post-GFC era, particularly post-2014, has been marked by a decline in global trade and a rise in protectionism. The International Monetary Fund (IMF) reports a significant increase in trade barriers since 2009, growing from under four hundred to approximately 2,500 by 2022. Policies like reshoring and friend-shoring contribute to potential fragmentation and increased susceptibility to economic shocks. The World Bank highlights that costs associated with shipping, logistics, and regulations can significantly inflate prices for internationally traded goods.

Counteracting these trends of global protectionism and geoeconomic fragmentation could potentially boost global output by 0.2 to 7 percent, contingent on the extent of these trends. However, reversing over a decade of these patterns demands considerable effort from the global community, particularly G20 members, where geoeconomic fragmentation is intensifying. Enhancing trade regulatory and physical infrastructure is vital in this respect, and investment in physical infrastructure, as previously discussed, can play a key role in reviving global trade.

Strengthening trade's role in the global economy requires substantial reforms of the World Trade Organization (WTO) or its dissolution. However, reaching consensus on complex trade issues is challenging due to WTO's diverse membership, the increasing intricacy of trade policies, and rising geopolitical and geoeconomic tensions. One possible solution is to establish plurilateral agreements and form regional mini-WTOs among select WTO members, which could be effective in addressing specific trade challenges.

World Bank

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