Trade and development report 2016: structural transformation for inclusive and sustained growth

The report reviews recent trends in the global economy and focuses on the policies needed to foster structural transformation. It observes that global economic growth remains weak, growing at a rate below 2.5 per cent, and global trade slowed down dramatically to around 1.5 per cent in 2015 and 2016, compared to 7 per cent before the crisis. The loss of dynamism in the advanced economies, combined with low commodity prices and global financial instability, is having knock-on effects on most developing countries. Developing economies will grow on average less than 4 percent in 2016, but with considerable variation across countries and regions: while Latin America is in recession and growth in Africa and West Asia is slowing down to around 2 per cent, East, South-East and South Asia is still growing at a rate close to 5 per cent. Considered in a long-term perspective, most developing countries outside some Asian sub-regions have failed to significantly reduce the income gap with developed economies. The big investment push in developing regions remains one of the unfulfilled promises of the more open global economy set in place in the 1980s and 1990s; and after general growth accelerations at the beginning of the century, convergence is now losing steam with a more challenging international environment. To attain sustained and inclusive growth, countries need to adjust their policy strategies in order to advance structural transformation. To that end, proactive industrial policies are needed to encourage the shifting of employment and resources from low-productivity agriculture to higher productivity industrial and modern services sectors. Manufacturing activities play a key role in such processes, as they create formal employment, incomes and demand, and accelerate productivity growth; this in turn further boosts incomes and demand. However, many developing countries have not been able to develop sufficiently their manufacturing sector (experiencing a "stalled industrialization") or have even endured a "premature de-industrialization" since the 1980s owing to a policy strategy centred on unilateral trade opening, financial deregulation and the retreat of the developmental State.