World Economic Outlook

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2.1
Contribution to Global Growth and Consumption
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2.2
Emerging Market and Developing Economies, Relative Income in Purchasing-Power-Parity Terms
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2.3
Distribution of Income per Capita in EMDEs in the 1970s and the 2010s
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2.4
Change in Real Income per Capita in EMDEs Relative to the United States over Decades
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2.5
Elasticity of Medium-Term GDP per Capita Growth in EMDEs with Respect to External Conditions
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2.6
Average Contribution to GDP per Capita Growth
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2.7
Relative Average Contribution to GDP per Capita Growth among External Conditions Variables
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2.8
Average Contribution of Terms of Trade to GDP per Capita Growth, by Groups of Economies
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2.9
Variance of GDP per Capita Growth Accounted for by Each External Conditions Variable
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2.10
Contribution of Other Common Factors to GDP per Capita Growth and Selected Global Variables
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2.11
Growth Episodes in EMDEs, 1970-2015
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2.12
Cumulative Growth during Episodes, 1970-2015
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2.13
Normalized GDP per Capita during Growth Episodes and Their Aftermath, 1970-2015
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2.14
Cumulative Growth Rate of Real Income per Capita during Episodes versus Average Growth Rate of Real Income per Capita during 1970–2015
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2.15
Event Analysis: Persistent Accelerations and Reversals, 1970–2015
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2.16
Event Analysis: Persistent and Nonpersistent Accelerations, 1970–2015
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2.17
Change in the Probability of Occurrence of Growth Episodes, 1970–2015
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2.18
Domestic Attributes across Persistent Accelerations and Reversals, 1970–2015
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2.19
Change in Marginal Effect of External Conditions When Domestic Attributes Improve
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2.20
Actual and Projected External Conditions for Emerging Market and Developing Economies
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2.1.1
Decomposition of Selected Emerging Market Economies by Province
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2.2.1
Capital Inflows and Industry Growth, 1998–2010
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2.3.1
Value Added in China’s Final Demand
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2.3.2
Relative Changes in Country Exposures to China’s Final Demand
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2.3.3
Sector Composition of Value Added in China’s Final Demand
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2.3.4
Sector Composition of Commodity-Exporting Economies’ Foreign Value Added
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2.4.1
EMDEs: Current Account Balance by Group and Net Capital Inflows by Type
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2.4.2
Distribution of EMDEs’ Average Current Account Balances, 2000–16
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2.4.3
Correlation between Capital Flows and per Capita Real GDP Growth
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Annex
2.1.1
Correlation between Country-Specific External Conditions Variables and Global Variables over Time
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Annex
2.2.1
Changes in Levels of Selected Variables Relative to the United States
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Annex
2.4.1
Persistent Acceleration Episodes by Region
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Annex
2.4.2
Reversal Episodes by Region
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Annex
2.5.1
Change in the Odds Ratio of Occurrence of Growth Episodes, 1970–2015
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Annex
2.5.2
Change in the Odds Ratio of Occurrence of Growth Episodes by Subsamples, 1970–2015
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Annex
2.5.3
Change in the Probability of Occurrence of Growth Episodes (Marginal Effect) Using Seven-Year Durations, 1970–2015
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Annex
2.5.4
Change in the Probability of Occurrence of Persistent Accelerations (Marginal Effect) by Type of Acceleration, 1970–2015
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Annex
2.6.1
Change in the Probability of Occurrence of Growth Episodes (Marginal Effect), 1970–2015
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Annex
2.6.2
Reversals: Change in the Marginal Effect of External Financial Conditions When Selected Domestic Attributes Improve

Emerging market and developing economies have become increasingly important in the global economy in recent years. They now account for more than 75 percent of global growth in output and consumption, almost double the share of just two decades ago. The external environment has been important for this transformation. Terms of trade, external demand, and, in particular, external financial conditions are increasingly influential determinants of medium-term growth in these economies as they become more integrated into the global economy. The still-considerable income gaps in these economies vis-à-vis those in advanced economies suggest further room for catch-up, favoring their prospects of maintaining relatively strong potential growth over the medium term. Yet, the findings show that steady, sustained catch-up growth is not automatic and exhibits episodes of accelerations and reversals over time. Moreover, with the global economy in the midst of potentially persistent structural shifts, emerging market and developing economies may face a less supportive external environment going forward than they experienced for long stretches of the post-2000 period. Nevertheless, these economies can still get the most out of a weaker growth impulse from external conditions by strengthening their institutional frameworks, protecting trade integration, permitting exchange rate flexibility, and containing vulnerabilities arising from high current account deficits and external borrowing, as well as large public debt.

Open Chapter 2 Full Table of Contents

  • Introduction
  • Emerging Market and Developing Economy Growth Performance over Time
  • How Important Are External Conditions?
  • How Do External Conditions Influence the Occurrence of Growth Episodes?
  • The Role of Policies and Structural Attributes in Mediating the Impact of External Conditions
  • Taking Stock: What Does the Current Environment Imply for Growth Prospects in Emerging Market and Developing Economies?
  • Conclusion
  • Box 2.1. Within-Country Trends in Income per Capita: The Cases of Brazil, Russia, India, China, and South Africa
  • Box 2.2. Growing with Flows: Evidence from Industry-Level Data
  • Box 2.3. The Evolution of Emerging Market and Developing Economies’ Trade Integration with China’s Final Demand
  • Box 2.4. Shifts in the Global Allocation of Capital: Implications for Emerging Market and Developing Economies
  • Annex 2.1. Data
  • Annex 2.2. Channels through Which Emerging Market and Developing Economies Have Narrowed Income Differentials with Advanced Economies
  • Annex 2.3. Estimation of the Impact of External Conditions on Emerging Market and Developing Economy Growth
  • Annex 2.4. Identification of Growth Episodes
  • Annex 2.5. Estimation of the Influence of External Conditions on the Likelihood of Experiencing Persistent Accelerations and Reversals
  • Annex 2.6. Analysis of Domestic Attributes in Mediating the Impact of External Conditions
  • References
  • Table 2.1.1. Industry Growth with Low versus High Levels of Capital Inflows
  • Table 2.2.2. Capital Inflows and Industry Growth
  • Annex Table 2.1.1. Data Sources
  • Annex Table 2.1.2. Sample of Emerging Market and Developing Economies Included in the Analyses
  • Annex Table 2.1.3. Pairwise Correlation between External Conditions Variables
  • Annex Table 2.3.1. Estimation Results from Linear Panel Growth Regression
  • Annex Table 2.3.2. Estimation Results from Linear Panel Growth Regression: Robustness Exercises
  • Annex Table 2.4.1. Persistent Acceleration Episodes
  • Annex Table 2.4.2. Reversal Episodes
  • Annex Table 2.5.1. Logistic Estimates of the Effects of External Conditions Variables on the Odds Ratio of Persistent Accelerations
  • Annex Table 2.5.2. Logistic Estimates of the Effects of External Conditions Variables on the Odds Ratio of Reversals
  • Annex Table 2.6.1. Logistic Estimates of the Effects of Policy Variables on the Odds Ratio of Persistent Accelerations
  • Annex Table 2.6.2. Logistic Estimates of the Effects of Policy Variables on the Odds Ratio of Reversals

Figures
Chart
Data
2.1
Contribution to Global Growth and Consumption
Chart
Data
2.2
Emerging Market and Developing Economies, Relative Income in Purchasing-Power-Parity Terms
Chart
Data
2.3
Distribution of Income per Capita in EMDEs in the 1970s and the 2010s
Chart
Data
2.4
Change in Real Income per Capita in EMDEs Relative to the United States over Decades
Chart
Data
2.5
Elasticity of Medium-Term GDP per Capita Growth in EMDEs with Respect to External Conditions
Chart
Data
2.6
Average Contribution to GDP per Capita Growth
Chart
Data
2.7
Relative Average Contribution to GDP per Capita Growth among External Conditions Variables
Chart
Data
2.8
Average Contribution of Terms of Trade to GDP per Capita Growth, by Groups of Economies
Chart
Data
2.9
Variance of GDP per Capita Growth Accounted for by Each External Conditions Variable
Chart
Data
2.10
Contribution of Other Common Factors to GDP per Capita Growth and Selected Global Variables
Chart
Data
2.11
Growth Episodes in EMDEs, 1970-2015
Chart
Data
2.12
Cumulative Growth during Episodes, 1970-2015
Chart
Data
2.13
Normalized GDP per Capita during Growth Episodes and Their Aftermath, 1970-2015
Chart
Data
2.14
Cumulative Growth Rate of Real Income per Capita during Episodes versus Average Growth Rate of Real Income per Capita during 1970–2015
Chart
Data
2.15
Event Analysis: Persistent Accelerations and Reversals, 1970–2015
Chart
Data
2.16
Event Analysis: Persistent and Nonpersistent Accelerations, 1970–2015
Chart
Data
2.17
Change in the Probability of Occurrence of Growth Episodes, 1970–2015
Chart
Data
2.18
Domestic Attributes across Persistent Accelerations and Reversals, 1970–2015
Chart
Data
2.19
Change in Marginal Effect of External Conditions When Domestic Attributes Improve
Chart
Data
2.20
Actual and Projected External Conditions for Emerging Market and Developing Economies
Chart
Data
2.1.1
Decomposition of Selected Emerging Market Economies by Province
Chart
Data
2.2.1
Capital Inflows and Industry Growth, 1998–2010
Chart
Data
2.3.1
Value Added in China’s Final Demand
Chart
Data
2.3.2
Relative Changes in Country Exposures to China’s Final Demand
Chart
Data
2.3.3
Sector Composition of Value Added in China’s Final Demand
Chart
Data
2.3.4
Sector Composition of Commodity-Exporting Economies’ Foreign Value Added
Chart
Data
2.4.1
EMDEs: Current Account Balance by Group and Net Capital Inflows by Type
Chart
Data
2.4.2
Distribution of EMDEs’ Average Current Account Balances, 2000–16
Chart
Data
2.4.3
Correlation between Capital Flows and per Capita Real GDP Growth
Chart
Data
Annex
2.1.1
Correlation between Country-Specific External Conditions Variables and Global Variables over Time
Chart
Data
Annex
2.2.1
Changes in Levels of Selected Variables Relative to the United States
Chart
Data
Annex
2.4.1
Persistent Acceleration Episodes by Region
Chart
Data
Annex
2.4.2
Reversal Episodes by Region
Chart
Data
Annex
2.5.1
Change in the Odds Ratio of Occurrence of Growth Episodes, 1970–2015
Chart
Data
Annex
2.5.2
Change in the Odds Ratio of Occurrence of Growth Episodes by Subsamples, 1970–2015
Chart
Data
Annex
2.5.3
Change in the Probability of Occurrence of Growth Episodes (Marginal Effect) Using Seven-Year Durations, 1970–2015
Chart
Data
Annex
2.5.4
Change in the Probability of Occurrence of Persistent Accelerations (Marginal Effect) by Type of Acceleration, 1970–2015
Chart
Data
Annex
2.6.1
Change in the Probability of Occurrence of Growth Episodes (Marginal Effect), 1970–2015
Chart
Data
Annex
2.6.2
Reversals: Change in the Marginal Effect of External Financial Conditions When Selected Domestic Attributes Improve