These headlines conceal an even gloomier story: the worsening plight of the world’s poorest people. With a weaker global economy making their climb out of poverty even harder, the world must support a range of bold policies to help them.
We know from recent experience what needs to be done. Between 2001 and 2019, the number of low-income countries – where annual per capita income is below $995 – fell by almost half (from 64 to 34), as 32 low-income countries attained middle-income status, whereas only two new countries joined the group of low-income countries. This remarkable progress in just one generation – the result of strong growth, better policies, and in some cases plain luck – lifted millions of people out of poverty.
Faster growth is crucial to reducing poverty. From 2001-2018, the 32 economies that moved from low- to middle-income status grew by an average of roughly 6% per year. That was about 60% faster overall than growth in the middle- and high-income emerging market and developing economies in that period, and some 25% faster than in countries that remained stuck in the low-income bracket.
A favourable external environment supported rapid growth prior to the global financial crisis, while the commodities boom of 2001-2011 fueled heavy investments in exploration and production in many low-income countries. The resulting increase in export earnings improved their governments’ finances.
Furthermore, nine low-income countries in Eastern Europe and Central Asia rebounded from deep recessions in the 1990s as they moved from planned to market economies. Separately, multilateral debt-relief initiatives in 2001 helped some low-income countries to stabilize their budgets and economies. Conflicts in some African countries eased, leading to a steady decline in violence-related casualties. And further trade integration boosted exports, attracted foreign investment, and spurred reforms. Low-income countries were thus able to invest more in their people: since 2001, secondary education enrollment rates have doubled, and the investment-to-GDP ratio has increased by five percentage points in low-income countries since 2001.