Developing countries are going to have to find a new textbook for growth. The worldwide export boom that propelled residents of many emerging markets to higher incomes is not coming back any time soon. That's the grim lesson from the World Bank's latest downward revision to its global gross domestic product (GDP) forecasts. Domestic consumption and investing in infrastructure will have to pick up the slack.
Slowing trade in commodities and manufactured goods are among the main reasons the World Bank now thinks the world economy will grow by just 2.4 per cent this year, half a percentage point less than it predicted in January. Countries exporting raw materials and agricultural commodities have been hit hardest - despite the oil price bounce, the World Bank now thinks GDP in these economies will expand by just 0.4 per cent this year. In January, it still expected a 1.6 per cent increase. Sub-Saharan Africa is growing at its slowest rate in nearly two decades, the International Monetary Fund warned last month. Conversely, developing economies that import crude are proving resilient; the World Bank expects this group -which includes China and India - to grow by 5.8 per cent this year.
The developing world can't expect much help from richer countries and China. Trade volumes have been sluggish since 2010, and global trade in current dollars dropped to $16.5 trillion in 2015 from $19 trillion a year earlier, the World Trade Organisation reported in April. Corporate investment remains subdued because many companies are still highly leveraged.
That means growth will have to come from domestic consumers and from governments building roads, ports and power plants. The Ivory Coast, Kenya and and Senegal will grow by more than five per cent this year on the back of infrastructure spending and private consumption. India, which is expected to expand by 7.6 per cent in 2016, has been helped by the government speeding up its road-building programme, and by a jump in motor-cycle and auto sales. As developing economies abandon their old growth models, their efforts to catch up with the rest of the world will have to begin at home.
