11:39 AM Jun 18, 1996
RISING PER CAPITA INCOMES IN DEVELOPING WORLD
Geneva 18 Jun (Chakravarthi Raghavan) -- Growth impulses are spreading across to an increasing number of developing countries and transition economies, with real per capita incomes rising in 1996 in over 80% of developing countries, according to the UN's World Economic and Social Survey of 1996. In 1995, the per capita GDP rose in three-quarters of developing countries, accounting for 90% of the developing world's population. According to a summary made available here by the UN in a press release (the survey is to be released next week), the world economy is in a "slowly accelerating growth path", but has not yet attained the more rapid and sustainable rate of growth that it is capable of, though such growth appears to be on the horizon for 1997. But within the expansion already being realized, growth impulses are spreading across to an increasing number of countries -- with atleast 109 countries, having a combined population of 5.3 billion, expected to see per capita output rising this year. The survey also reports strong economic growth continuing in Central and Eastern Europe, while the Russian Federation is expected to record its first year of growth since the collapse of the Soviet Union -- assuming current policies continue. The world's output of goods and services is expected to grow at about 2.5% in 1996 -- a lower rate of expansion than the world average of the 1980s, but a considerable improvement compared to the first three years of the 1990s. The higher growth trajectory of 3-1/2 percent forecast a year ago for 1996, the UN says has been 'postponed' by a slower growth trajectory of the developed economies in 1995 and 1996. The developed economies had a slower growth in 1995 of just two percent (instead of the 2-3/4 projected earlier), and in 1996 their growth is expected to be a two percent (instead of the three forecast earlier). A modest improvement is seen in 1997. But the growth in developing countries GDP was close to 5.2% in 1995 (compared to a five percent forecast) and it is expected to be higher at 5-1/2 percent in 1996. The decline in output in 1995 in the transition economies, at 1.8%, was less than had been anticipated and they are now expected to register a two percent growth in 1996. However, in a footnote, the survey calls for extreme caution in interpreting aggregate output statistics of the transition economies. The developing countries and transition economies have been outperforming the anticipations of a year ago. These trends, the UN says, suggest that domestic factors have been important sources of economic growth in developing and transition economies and that they are "increasingly seen as important markets and potential stimuli for growth in developed economies." The UN says that the increasing growth rates and per capita incomes reflect a dynamic and encouraging trend for some countries, while for others it is only a "minor or incipient improvement" of the most difficult of circumstances. The UN also saw in the figures domestic adjustment programmes "bearing fruit" in many developing and transition economies. Nevertheless a number of developing countries and transition economies have not yet pried loose from their 'low-level equilibrium' trap of high poverty and low growth. However, despite rising per capita incomes, some of the richest countries, and particularly in Europe, have been unable to significantly reduce their high unemployment rates, while their highly prized social safety nets seem no longer affordable in several developed countries or are seen by governments as being beyond reach. In terms of their macro-economic policy stances, the developed economies have shown success. They have succeeded in squeezing inflation from their economies and, with the exception of Japan, their fiscal deficits have fallen relative to GDP, while monetary policy has slowed growth of demand, as intended. But progress on other economic fronts has been disappointing. There has been virtually no reduction in overall unemployment. Paralleling the unemployment situation, there has been relative stagnation in real wages. While this has been a major contribution to low inflation, it has also been a factor in slow economic growth, since wage incomes are an important determinant of household expenditure and thus aggregate demand and production. Investment in high technology equipment and policies of corporations in down-sizing operations, specially in the US, have raised fears of unemployment. And the fiscal consolidation imperative has reduced prospects for important discretionary government spending in many countries, while many governments are reassessing how to fully meet their non-discretionary spending commitments. These problems do not lend themselves to facile solutions, but labour militancy and voter dissatisfaction are increasing underlining the incompleteness of the existing policy package. The rising per capita output in developing world is not a phenomenon limited mainly to China and the growing economies of South and East Asia, but has spread across. Per capita GDP rose in 1995 in 71 out of the 93 countries whose data are regularly monitored. This year this group is expected to number 75. The Least Developed Countries too have made significant gains in 1995 and are expected to advance further in 1996. Atleast 21 of the 48 LDCs, with 78% of the total population of the growth, registered per capita increases. The gain in per capita incomes have been most pronounced in Africa where some 67% of the population lived in 1995 in countries with growing per capita. This proportion is expected to increase to over 87% in 1996. And in Latin America, after the sharp slowdown in 1995, per capita GDP growth is becoming much more widespread and is expected to extend to 96% of the population in 1996. However, all this must be tempered by two sobering facts, says the UN. In many countries the per capita growth has been small and average levels still remain below those of 1980 in real terms. At the regional level, per capita growth was negative in Latin America and negligible in Africa in 1995. In 1996, it is expected to average just 3/4 percent in latin America and 1-2/2 percent in Africa. In the majority of countries experiencing growth in Latin America and Africa, the per capita growth was under two percent in 1995 and 1996.