Slow growth and world change: Thoughts from the World Bank Meetings

Located in the heart of Lima’s bustling business district San Borja, this year’s World Bank / IMF Annual Meetings gave a strong sense of hope that the Sustainable Development Agenda will be carried forward by a dynamic and strong global development partnership.

Some examples:

  • The World Bank, IMF, as well as most of their shareholder countries, now squarely embrace the idea that principles of sustainable and inclusive development are critical components of longer-term economic growth strategies.
  • The World Bank in particular showed a strong willingness to close remaining gaps in the equity agenda, with a clear focus on areas like affordable quality education, Universal Health Coverage, and adequate Social Protection systems.
  • Children featured prominently in statements of senior World Bank and government officials. Equity-focused investment in children’s development were recognized as crucial for achieving sustainable and inclusive long-run growth.  Children were also frequently mentioned as agents of change.

Despite these good signs, the dominant mood at the meetings was that the crucial first years of SDG implementation won’t be easy. The SDGs were inspired by over a decade of robust growth in developing countries. Most economic forecasts at the meetings suggest that this growth period is now – at least temporarily – ending.

Since its June projections, the IMF has reduced its global growth estimates by 0.2 percentage points to 3.1 percent. Most of this decline is due to weak performance in emerging markets and developing economies, with strong headwinds in large and populous countries that made fast strides on key global development indicators over the recent decades (e.g. China, Brazil). In Latin America and other natural resource-dependent regions, many economies will stop growing due to the commodity boom’s end. Adding to these concerns is the potential increase in US interest rates, which will make it more expensive to service developing markets’ debt and which may result in a reversal of capital flows from developing to developed countries.

While slower growth makes reaching key SDG priorities more challenging, there are ample opportunities to advocate for smart investments in children.

Four priorities emerged during the meetings.

Build strong partnerships in SDG-priority areas with large funding gap

The World Bank made honest efforts to ‘fill’ the Addis Ababa SDG Financing agenda with concrete pledges and commitments. But even the Bank’s considerable weight is not sufficient to meet the vast finance needs of the SDGs. In climate finance, the announcement that the Bank will increase annual investments by a third (to almost $US 30 billion) shows progress. But it is a small step towards the trillion or more dollars required to finance global climate change adaptation and mitigation efforts. Additional commitments and action are needed around the COP 21 conference, such as by building on existing financial pledges from G7 countries, bringing in new donors, and strengthening synergies across pillars of the SDG agenda.

In humanitarian finance, the World Bank similarly presented a promising new initiative. Through a partnership with the Islamic Development Bank, the UN, and member states, the Bank will enable middle income countries affected by the Syria crisis to access loans under more favourable terms. Further concerted action will be needed to bring in additional donors and innovative sources of finance, and to build strong implementation partnerships with agencies and organizations that can fill gaps outside the Bank’s traditional focus on finance (e.g. delivery of basic services to crisis-affected populations, institution building, peace and justice, etc.).

Maintain political commitments to protect adequate spending on children and social policies.

With the diminishing relative importance of ODA for development finance the SDGs and associated Addis Ababa Financing for Development framework justifiably place the focus of attention on domestic resource mobilization and spending commitments. In the context of the present economic slowdown, helping vulnerable families with food, clothing and other essential expenses via cash transfers emerged as a particularly important priority, because it simultaneously protects vulnerable populations and bolsters domestic demand during times of sluggish growth and employment. Improved education for children and youth was another widely-mentioned response, due to its potential to increase productivity and accelerate diversification. The priority in the coming months will be to sustain these political commitments in an environment of increasingly constrained public budgets. For organizations like UNICEF, this constitutes a strong case to continue our investments in advocacy and ‘upstream’ policy work – by engaging with governments and IFIs on policies that increase fiscal space, and by assisting governments to improve the effectiveness and equitability of public expenditures and programmes.

Build on the political support of new middle classes.

A consequence of the recent boom period is the rapid expansion of middle classes in developing countries. Because of their increased spending power, these groups can help sustain domestic demand and private investment in children during the downturn. At the same time, many lower middle class households who are closer to the poverty line remain extremely vulnerable to shocks and will require increased support from public social protection systems. These groups could become a strong political voice for social protection strategies that incorporate vulnerability as part of programme design (as endorsed by UNICEF). But again, political engagement around these programmes must be accompanied by smart policy advice, including how to sustain social protection interventions during the economic downturn, and – where necessary – through engagement with IFIs, to ensure adequate social spending safeguards are included in economic adjustment programmes.

Integrate investment in children in longer term development strategies.

Senior World Bank and government officials made repeated statements about the importance of ECD, child nutrition and education, illustrating that the economic benefits of investing in children are now well understood. Importantly, the World Bank’s latest global poverty Monitoring Report now discusses growth and poverty reduction policies through a demographic lens. This opens the door for policy messages that treat child-focused investments and age-disaggregated monitoring and policy analysis as an integral part of national strategies to link management of the demographic transition with longer-term economic development. Annual Meeting reps of countries where the demographic transition has begun also used demographic arguments to defend interventions in social sectors, such as educational investments to smooth the transition of young working-age people into the labor market and social protection reforms to address vulnerabilities related to population ageing.

Governments affected by the economic downturn will value policies and proposals that manage to marry economic and social development objectives. Fortunately, we have strong arguments to continue to advocate for child-focused investments as the economic context continues to evolve.

Frank Borge Wietzke is a Public Partnership Specialist in the Public Partnership Division of UNICEF

 

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