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World Bank sees improving global economy despite ‘substantial’ risks

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Thanks to a pickup in manufacturing and trade, the global economy is recovering, but weak productivity and investment growth threaten long-term prospects in developing economies, the World Bank reported.

In its latest global economic forecast, released yesterday, the World Bank forecasts growth in advanced economies will accelerate to 1.9 per cent this year, while it could pick up to 4.1 per cent in emerging markets. The average remains at 2.7 per cent, as reported in January.

“Growth among the world’s seven largest emerging market economies is forecast to increase and exceed its long-term average by 2018,” according to the June Global Economic Prospects.

Recovering activity in these economies are likely to have “significant positive effects” for growth in other emerging and developing economies and globally, the report authors wrote.

Despite the positive prognosis, the World Bank warned that new trade restrictions and persistent policy uncertainty could dampen market confidence and investment.

“Over the longer term, persistently weak productivity and investment growth could erode long-term growth prospects in emerging market and developing economies that are key to poverty reduction,” the report noted.

One of the strong, solid news in the report is trade. Growth in this sector could top four per cent, a noticeable increase following the financial crisis low of 2.5 per cent last year.

“With a fragile but real recovery now underway, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long-term,” said World Bank President Jim Yong Kim.

He urged countries to continue investing in people, and to build resilience against climate change, forced displacement and other overlapping challenging.

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Bangladesh Economy Continues Robust Growth with Rising Exports and Remittances

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The Bangladesh economy sustains strong growth in FY19 led by rising exports and record remittances, says a new World Bank report, “Bangladesh Development Update October 2019: Tertiary Education and Job Skills,” launched today.

Remittances grew by 9.8 percent, reaching a record $16.4 billion in FY19. The contribution of net export growth was positive, supported by a diversion of garment export orders from China and a decline in imports. Agricultural and pharmaceutical exports led non-RMG export growth. However, leather and leather product exports declined by 6 percent.

Net foreign direct investment (FDI) increased by 42.9 percent from a low baseline with investments in the power, food, and textile sectors. Private consumption grew by 5.4 percent. Private sector credit growth was weak and bank liquidity remains constrained. Non-performing loans continued to rise in the banking sector.

The report warns about an uncertain global outlook and domestic risks in the financial sector. Exchange rate appreciation is also a challenge for Bangladesh’s trade competitiveness. Reforms in the financial sector, including revenue mobilization and doing business, will be essential for progress. The report also urges closing the infrastructure gap and timely implementation of the Annual Development Plan.

Bangladesh’s economy is projected to maintain strong growth backed by sound macroeconomic fundamentals and progress in structural reforms,” said Mercy Miyang Tembon, World Bank Country Director for Bangladesh and Bhutan. “To achieve its growth vision, Bangladesh will need a high-productivity economy. Human capital development that is responsive to labor market demand for higher-level skills and to rapid technological advancements will be crucial.”

Bangladesh needs to create quality jobs for about two million young people entering the labor force every year. To harness the benefits of this growing labor supply, investments in human capital are required. The country needs to invest significantly in teaching, learning and ICT facilities, among other areas, to create a competitive workforce.

Higher labor productivity will be essential to diversify the economy beyond garment exports and remittances. Growing sectors—such as export-oriented manufacturing, light engineering, shipbuilding, agribusiness, information and communication technology (ICT), and pharmaceuticals—will require skilled professionals in managerial, technical, and leadership positions.

Tertiary graduates struggle to find jobs, indicating a major skills gap. Only 19 percent of college graduates are employed full-time or part-time. At the tertiary level, more than a third of graduates remain unemployed one or two years after graduation, while unemployment rates of female graduates are even higher.

“Labor market surveys repeatedly show that employers struggle to fill high-skill positions such as technicians and managers,” said Bernard Haven, World Bank Senior Economist, and co-author of the report. “To bridge the demand and supply gap, investments in skills training, equitable access for female and poor students, public funding mechanisms to develop market-relevant skills and an effective regulatory and accountability framework are needed.”

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Tackling obesity would boost economic and social well-being

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Obesity-related diseases will claim more than 90 million lives in OECD countries in the next 30 years, with life expectancy reduced by nearly 3 years. Obesity and its related conditions also reduce GDP by 3.3% in OECD countries and exact a heavy toll on personal budgets, amounting to USD 360 per capita per year, according to a new OECD report.

The OECD’s The Heavy Burden of Obesity – The Economics of Prevention says that more than half the population is now overweight in 34 out of 36 OECD countries and almost one in four people is obese. Average rates of adult obesity in OECD countries have increased from 21% in 2010 to 24% in 2016, meaning an additional 50 million people are now obese.


Children in particular are paying a high price for obesity. Children who are overweight do less well at school, are more likely to miss school, and, when they grow up, are less likely to complete higher education. They also show lower life satisfaction and are up to three times more likely to be bullied, which in turn may contribute to lower school performance.

Obese adults are at greater risk of chronic illnesses, such as diabetes, and reduced life expectancy. In the EU28, women and men in the lowest income group are, respectively, 90% and 50% more likely to be obese, compared to those on the highest incomes, entrenching inequality. Individuals with at least one chronic disease associated with being overweight are 8% less likely to be employed the following year. When they have a job, they are up to 3.4% more likely to be absent or less productive.

“There is an urgent economic and social case to scale up investments to tackle obesity and promote healthy lifestyles,” said OECD Secretary-General Angel Gurría. “These findings clearly illustrate the need for better social, health and education policies that lead to better lives. By investing in prevention, policymakers can halt the rise in obesity for future generations, and benefit economies. There is no more excuse for inaction.”

OECD countries already spend 8.4% of their total health budget on treating obesity-related diseases. This is equivalent to about USD 311 billion or USD 209 per capita per year. Obesity is responsible for 70% of all treatment costs for diabetes, 23% for cardiovascular diseases and 9% for cancers.

New OECD analysis in the report finds that investing in initiatives like better labelling of food in shops or regulating the advertising of unhealthy foods to children can generate major savings. Every dollar invested in preventing obesity would generate an economic return of up to six dollars, according to the report.

Reducing by 20% the calorie content in energy-dense food, such as crisps and confectionery, could avoid more than 1 million cases of chronic disease per year, particularly heart disease. Initiatives targeting the whole population, such as food and menus displaying nutritional information and mass media campaigns, could lead to gains of  between 51,000 to 115,000 life years per year up to 2050 in the 36 countries included in the analysis. This would be equivalent to preventing all road deaths in EU28 and OECD countries respectively. Economic savings would also be significant, with menu labelling alone saving up to USD 13 billion between 2020 and 2050. The report, together with country notes for Australia, Canada, France, Germany, Italy, Mexico, Spain and the United Kingdom, are available at http://www.oecd.org/health/the-heavy-burden-of-obesity-67450d67-en.htm.

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OECD leading multilateral efforts to address tax challenges from digitalisation of the economy

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Today the OECD Secretariat published a proposal to advance international negotiations to ensure large and highly profitable Multinational Enterprises, including digital companies, pay tax wherever they have significant consumer-facing activities and generate their profits.

The new OECD proposal brings together common elements of three competing proposals from member countries, and is based on the work of the OECD/G20 Inclusive Framework on BEPS, which groups 134 countries and jurisdictions on an equal footing, for multilateral negotiation of international tax rules, making them fit for purpose for the global economy of the 21st Century.

The proposal, which is now open to a public consultation process, would re-allocate some profits and corresponding taxing rights to countries and jurisdictions where MNEs have their markets. It would ensure that MNEs conducting significant business in places where they do not have a physical presence, be taxed in such jurisdictions, through the creation of new rules stating (1) where tax should be paid (“nexus” rules) and (2) on what portion of profits they should be taxed (“profit allocation” rules). 

“We’re making real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system by 2020,” said OECD Secretary-General Angel Gurría. “This plan brings together common elements of existing competing proposals, involving over 130 countries, with input from governments, business, civil society, academia and the general public. It brings us closer to our ultimate goal: ensuring all MNEs pay their fair share.”

”Failure to reach agreement by 2020 would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy. We must not allow that to happen,” Mr Gurría said.

The Inclusive Framework’s tax work on the digitalisation of the economy is part of wider efforts to restore stability and certainty in the international tax system, address possible overlaps with existing rules and mitigate the risks of double taxation. Beyond the specific elements on reallocating taxing rights, a second pillar of the work aims to resolve remaining BEPS issues, ensuring a minimum corporate income tax on MNE profits. This will be discussed in a public consultation foreseen to take place in December 2019.

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