Economics of G20. Группа авторов
growth in the Latin American countries.
Gross fixed capital formation (GFCF) as a share of GDP increased in 2008–2009 despite the slowdown in growth. But later, the share decreased for LA and SSA while it continued to increase in Asia. However, the investment share was higher during post-crisis period compared to the pre-crisis period for all the three regions. The investment in Asian countries financed by higher savings rates implied maintenance of a sustainable current account (CA). CA deficits in African countries were larger than those reported historically and further adjustments may be needed to sustain higher growth. Latin American countries experienced a reversal of the temporary increase in savings rates during 2008–2009 leading to a decline in investment, decrease in rates and a worsening CA; thus, they still face major problems of adjustment.
Share of exports of goods and services (XG&S) in GDP increased in all three regions during 2008–2009, i.e. the immediate aftermath of the crisis. The increase was particularly large for LA. Subsequently, the share fell in LA and Asia but continued to increase in SSA.
CA improved for countries in LA and Asia during the period 2008–2009 as there was a surge in exports, but it worsened in SSA as savings did not keep pace with the surge in the share of GFCF in GDP, which rose from 18.4% to 23.5%.4 In the recovery period, 2010–2015, the current account balance (CAB) deteriorated in LA and Asia.
The performance of the individual countries presents a mixed picture. Only three countries have a significantly different growth rate, Bolivia a higher rate and Pakistan and South Africa a lower one. It seems that these large countries have weathered the crisis without a significantly lower growth. Since the overall growth rates of the developing countries have fallen, this suggests that the brunt of the adjustment burden has fallen on smaller countries. In addition, there is a good relation between export performance and growth rate. Bolivia’s export share increased and its growth rate increased. The two countries in which the growth rate fell also saw a decrease in the export share. By and large the countries have a higher investment ratio. The countries also had a higher money growth and a lower interest rate, which helped to maintain the investment rate.
Our analysis using Pearson’s rank correlation confirms this, as does the correlation analysis. Countries with good export performance grew faster before the crisis and their better export performance enabled them to build up reserves. They were able to continue their good export performance after the crisis. This together with their accumulated reserves enabled them to adopt expansionary policies and thus maintain better investment and growth in the post-crisis situation.
Economic growth in LA and SSA has particularly severely fallen since the GFC. The G20 needs to consider measures that could accelerate growth in these two regions. Acceleration of growth in SSA is particularly critical for these countries to achieve the SDGs. The next two chapters discuss the problems faced by these countries in these two regions. Economic growth in SSA has lagged behind that in the other regions over the past half century (1965–2016). Civil strife and preponderance of the least developed countries in SSA do not account for this poor performance. The chapter by Agarwal and Brahmo explores this question further. SSA still remains less integrated with the major fast-growing regions of the world. Its savings rate also continues to be low. This makes it more dependent on foreign capital flows for investment. But aid has been declining and the CA has deteriorated in many countries after the GFC. Even after a period of rapid growth earlier in this century, prospects look gloomy unless the G20 steps in to provide more easy aid.
Despite a greater emerging correlation with growth rates of the world economy and major players such as the US and China, SSA is far from realising its economic potential, with a very low average annual per capita GDP growth of 0.7% over the past half a century. With liberalisation and increased financial integration with the world markets over the decades (1965–2016), the African economies are influenced more significantly by international factors than before, and this brings a fair share of both advantages and pitfalls.
SSA’s share of exports in GDP (XGS), while high, has increased the slowest out of all the developing regions and the burgeoning importance of remittances has failed to prevent the deterioration of the CAB. The savings rate in SSA remains lower than the level attained in the 1970s, leaving the region vulnerable to the vagaries of the CAB; however, the growth projections of 5%, if the current levels of the investment ratio and incremental capital output ratio (ICOR) hold, lend credence to the expectation that the effective damage to economic growth can be limited.
The next chapter by Agarwal and Brahmo (ABb) examines the performance of the countries in LA over the past half a century. The average annual growth rate of per capita income at 1.7 is higher than the growth rate of only the Sub-Saharan region. The performance has been particularly poor since the debt crisis broke in 1982. Thus, the region has not been catching up with the high-income countries. There is no convergence within the region either. If anything, the richer countries have shown a weak tendency to grow faster.
Even over the period 2001–2015, most saw a decline in their growth rates after the onset of the 2008 crisis and then a slight recovery. Only Bolivia, Guyana and Uruguay grew faster after the crisis than they had done earlier, and only Brazil did not experience a recovery over the 2010–2015 period.
The share of GFCF in GDP declined after the onset of the debt crisis and has never recovered to previous levels. This share is also much lower than that in other regions. But despite this lower GFCF share, growth has been so much slower so that the ICOR in the region and of most countries within the region has been relatively high. The region has experienced a greater integration with the world economy as the share of exports in GDP has doubled over the last half century. The integration with other countries has resulted in an increased correlation between growth rates of the countries of the region with the outside world. The correlations are particularly high for growth rates with the entire world and with the region itself. The correlation with growth rates in China is also becoming stronger. However, the increase is less than that in other regions; thus, the ratio of exports to GDP despite the increase was the lowest for the Latin American and Caribbean (LAC) region in the period 2011–2015. This has meant that the CA remains precarious. However, foreign exchange reserves as a share of GDP have continued to grow after the 2008 crisis unlike in many other large countries.
The slow recovery since the crisis, the low rates of investment and the precarious state of the CA all point to continued slow growth for the region. Recovery of the world economy would help. In addition, the stronger correlations between the growth rates of the countries and that of the region as a whole suggest that the time may be ripe for a revival of the project for closer regional integration.
The second part of the volume deals with the interests and strategies of some of the developing country members of the G20. These chapters seek to answer questions such as what the country expects from the G20, the strategies adopted to achieve its ends, the extent to which it sees itself as a representative of developing countries in its region and how does it seek to represent them. Aparajita Gangopadhyay (AG) discusses Argentina. According to AG, Argentina has not been a valuable member of the G20 and there have been attempts to expel it. It had one of the worst records between 2008 and 2013 in fulfilling its commitments. Because of this, it is often seen as an outsider. Argentina sees its presidency as a way to bolster its credentials. It seeks to represent the interests of the region, trade liberalisation, agricultural growth and food security and inclusive and sustained growth. These match its own interests. It seeks to coordinate its positions with the other two Latin American members, Mexico and Brazil. Its interests align more closely with those of Brazil.
Indonesian conditions changed significantly after the ouster of Suharto and the subsequent switch to democracy, claims Shankari Sundararaman (SS). Internally, it has sought to undertake reforms which essentially underpin the new regime structure, and a key aspect of this is decentralisation. This has increased the number of stakeholders in the system. The regime switch has also resulted in an acceleration of growth. Indonesia seeks to become a pivotal country in ASEAN, but the regional integration is not proceeding as rapidly as the government desires. Thus, it is expanding its activities in the international arena. In particular, it seeks to advance reform of the international financial structure, one that would provide better support to growth in developing countries. It seeks to represent ASEAN