How to overcome the middle-income trap
Dr. Pingfan Hong UN/DESA/DPADMay 16, 2013Minsk, Belarus
2
Outline
Macroeconomic prospects for the MICs in the aftermath of the global financial crisis
The rise of MICs in the global economy How to overcome the middle-income trap Strengthen UN development cooperation
with MICs
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Recovery from the global financial crisis
-4
-2
0
2
4
6
8
10
2007 2008 2009 2010 2011 2012 2013 2014
World High income country
Middle income country Low income country
GDP growth %
Source: UN/DESA World Economic Situation and Prospects 2013
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Contribution to global growth
53.3
9.2
-124.2
54.2 44.8 41.9 37.1
45.9
88.5
22.8
44.853.8 56.4 61.2
-150
-100
-50
0
50
100
2007 2008 2009 2010 2011 2012 2013
Low income countryMiddle income countryHigh income country
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Growth prospects for CIS, and South-Eastern Europe
-8
-6
-4
-2
0
2
4
6
8
10
South-Eastern Europe CIS and Georgia
2007 2008 2009 2010 2011 20122013 2014
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Macroeconomic policy challenges for MICs Dealing spillover effects from the
unconventional monetary policies by developed countries:
Increased volatility in capital flows, commodity prices and exchange rates
Policy mix in accordance with the specific situation in individual countries
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The rise of MICs in the global economy
-4
-2
0
2
4
6
8
10
1991 1994 1997 2000 2003 2006 2009 2012
World High income country
Middle income country Low income country
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The share of MICs in the global economy has increased
50
60
70
80
90
100
1991 1994 1997 2000 2003 2006 2009 2012
%
High income country Middle income country Low income country
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A too optimistic projection?
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A too optimistic projection? (2)
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A too optimistic projection? (3)
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The middle income trap
Source: World Bank
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The middle income trap (2)
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Factors entrapping MICs
Productivity gains exhausted from the model of growth at low income level:
Shift of workers from rural to urbanreaching a turning point;
Reaping the gains from imported technology
Lack of investment in human capital and in R&DEnding of demographic dividend
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R&D spending among countries
Source: Keun Lee (2013) CDP presentation
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More challenges for MICs today than 50 years ago in the area of sustainable development
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Strengthen UN system development cooperation with MICs
Align programme with national development strategies Develop a specific framework for development
cooperation with MICs Enhance capacity of MICs in the areas: -Higher value-added industries -Diversification -Employment -Coherent strategies in economic, social and environmental -Macroeconomic management and prudential financial regulation -Hubs for South-South cooperation Increase voice and voting power of MICs in IFIs