Information and stories about economic growth.

, , , , , , , , , , ,

What Exactly Is Happening in the Northern Triangle? 

The Northern Triangle
Latin America is in a vicious circle of crime, poverty and corruption. High crime rates thwart economic opportunities and crime rates push people into poverty, all cumulating into corrupt leaders who use the pain for their power and self-interest. Nevertheless, nowhere is crime more prevalent than in the Northern Triangle.

The Northern Triangle is region in Central America that includes Guatemala, Honduras and El Salvador. It has experienced the worst problems such as poor economic growth, rampant gang violence and political corruption. This three-prong nightmare has fueled an estimated 265,000 people toward the Southern U.S. Border and will continue to grow into the foreseeable future. While some do attempt to find safety in Europe and elsewhere in South America, others take the risk and traverse their way to the U.S-Mexico border, where they risk entering the country illegally. Others surrender to U.S. border patrol and seek asylum. However, it is unlikely that they will receive asylum. On average, only 13% of individuals receive asylum and experience integration into the United States.

Gang Corruption

In 2017, a survey asked the people in El Salvador, “who runs the country?” About 42% of respondents said “Delincuencia/Maras.” For non-Spanish speakers, this translates to gangs, like MS-13.

These answers have visible ramifications that strike at the core of the government. Governments in the Northern Triangle are weak, and the people know this; the gangs know this. People understand the country’s power lies in gangs’ hands, not in the government’s.

For example, in 2012, the Salvadorian government agreed to sign a truce with the criminal organizations to address skyrocketing homicide rates. The profoundly unpopular legislation did lower the homicide rate but the people still had to continue to pay gangs. Tactics like homicide and racketeering are not the only ways these organizations flex their might.

Throughout the Northern Triangle, gangs rely on drug and human trafficking, money laundering, kidnapping and theft to export their criminal enterprise well beyond the Northern Triangle. Issues in the Northern Triangle are not just an inter-state problem but also a problem for the entire Western Hemisphere.

Governance Problem

Northern Triangle nations have made some progress when it comes to corruption. But the total damage that such corruption caused is still in the billions: $13 billion to be precise.

In 2006, Guatemala successfully combated corruption when it appealed to the U.N., which established the International Commission Against Impunity in Guatemala (CICIG). This independent body investigates the infiltration of criminal groups within state institutions. Such an organization resulted in the conviction of hundreds of officials and reduced the homicide rate.

In El Salvador, in 2019, the country created its own independent body called Commission against Corruption and Impunity in El Salvador (CITIES), which could yield the same results as CICIG. Over in Honduras, the hopes of establishing such independent oversight do not seem to be gaining the same traction. After the resignation of President Lobo Sosa in 2013, an investigation into the Honduran Institute of Social Security revealed a scandal that cost the people over $200 million. It also implicated President Orlando Hernández, who admitted to unknowingly using some of the money to fund his presidential campaign.

Unlike Guatemala and El Salvador, the Honduras legislature rejected a proposal to create its own CICI. Instead, it created Support the Fight against Corruption and Impunity in Honduras (MACCIH). Although intended to fight corruption, it does not have the same autonomy as CICIG and CITIES. MACCIH is not autonomous and cannot investigate Honduran Public Ministry. Instead, it relies heavily on its relationship with the Attorney General and Congress, which could shield the people committing corruption. This inability to pass support for CICIH instead of settling for MACCIH might be signaling that the $200 million white-collar crime is the beginning of a giant iceberg.

A Path Forward

In Washington DC, support exists for CICIH and CITIES. Congresswoman Norma Torres and others released a statement in 2019 supporting these institutions. Reinstating the CICIG and implementing the same structure in CICIH and CITIES would stop corruption. This would allow the state to use its monopoly on violence to fight crime and allow positive economic growth. In April 2021, the State Department announced $740,740 in available funding for “competition for organizations interested in submitting applications for projects that empower civil society to combat corruption and protect human rights.”

– Diego Romero
Photo: Flickr

, , , , , ,

4 Pillars to Tackling Extreme Poverty in Botswana

Extreme Poverty in Botswana
The nation of Botswana, home to approximately 2.3 million people, has undergone an amazing change over the past three decades, transforming from an impoverished nation to one of the wealthiest nations in sub-Saharan Africa. While many of its neighbors have lagged behind—in fact, the United Nations classifies sub-Saharan Africa as the poorest region in the world—Botswana reduced the percentage of its population living on less than $1.90 a day from 29.8% between 2002-2003 to 16.1% between 2015-2016. What are the secrets to success in combatting extreme poverty in Botswana that have allowed it to prosper relative to its neighboring African nations?

A Brief Look at the History of Botswana

Botswana gained its independence from Great Britain in 1966 and quickly adopted a parliamentary constitutional republic. In fact, Botswana is the oldest democracy on the continent, though one party—the Botswana Democratic Party—has dominated elections since the adoption of the country’s constitution. Compared to its neighbors, Botswana began with a commitment to free enterprise, rule of law and individual liberties. Its first president, Seretse Khama, had a devotion to fighting corruption, which was critical to Botswana’s success.

To fight extreme poverty in Botswana, the country invested in four critical pillars: public institutions, education, economic diversification and women’s rights.

4 Pillars to Tackling Extreme Poverty in Botswana

  1. One of the most remarkable aspects of Botswana is its extraordinarily low levels of corruption as a result of institutional checks and balances. According to the 2017 Corruption Perception Index, Botswana was the least corrupt nation in Africa, with its score twice as high as the average sub-Saharan African nation. Botswana is one of only a handful of nations that outperform parts of Western Europe, with its score outpacing Spain in 2018. This is as a result of institutional checks and balances, including the Corruption and Economic Crime Act of 1994 and the development of the Directorate on Corruption and Economic Crime, an agency tasked with investigating and preventing corruption. As a resource-rich state known for diamond mining, Botswana was careful to prevent government employees from benefiting from what the nation’s first president deemed public resources.
  2. Botswana invests a considerable percentage of its GDP in education; this percentage was more than 20% in 2009. Botswana’s investment in education translated to a literacy rate of 87% in 2019, compared to a regional average of 65%. High rates of education have contributed to Botswana’s increased economic diversification and strong political stability, making the nation one of the more attractive places to do business in Africa.
  3. Smart economic development has contributed to Botswana’s high living standards and low corruption levels, placing it ahead of its peers. Botswana derived much of its early economic growth from diamond extraction which, among other exports, accounts for approximately 40% of Botswana’s GDP composition by end-use. However, consistent investment in other sectors of the economy has remained a strategy for the ruling party, and the government has increasingly diversified its economy towards the service sector and tourism jobs. Investment in conservation and wildlife has grown the tourism industry to approximately 14% of Botswana’s GDP,  nearly doubling since 1999. Remarkably, Botswana’s commitment to managing its domestic ecosystems allowed it to sign one of the first “debt-for-nature” agreements with the United States, which forgave more than $8 million in debt in exchange for the continued protection of the Okavango Delta and tropical forests.
  4. In addition to the high rates of women’s education and literacy, Botswana remains committed to a strong National Family Planning Policy and healthcare service. Botswana has experienced a rapid decline in fertility, according to the CIA World Factbook, with the total fertility rate falling from over five children per woman in the 1980s to 2.42 in 2021. Easy access to contraception and above-average rural and urban access to healthcare facilities have not only contributed to a decline in fertility but emboldened women’s rights and improved standards of living.

Botswana is by no means a perfect nation. It has extremely high rates of HIV/AIDS, like many of its African peers, and its single-party government has been criticized by some international organizations for suppressing competition. However, decades of consistent improvement in education and women’s rights, increased economic diversification, high levels of economic freedom and a commitment to fighting corruption have made Botswana the most prosperous nation in sub-Saharan Africa and a model for its peers.

– Saarthak Madan
Photo: Flickr

, , ,

Reducing Poverty Through Productivity in Thailand

Productivity in ThailandProductivity is important for economic growth in any country. Productivity growth allows a nation to have access to more output while putting in the same amount of input. Output could be things like goods and services while input consists of hours at work. For Thailand, increasing productivity is an extremely sought-after goal, so much so that the government has taken steps to increase productivity. The fact that Thailand’s labor productivity growth has averaged around 3% since the first half of the early 2000s is one reason better productivity is so desired. Increasing productivity will also be vitally important to eradicating poverty in the nation.

Barriers to Productivity

Better productivity in Thailand faces a few challenges. Falling birth rates are a problem because it means that there will be a smaller population of citizens that are old enough to work. Fewer people who can work means a decline in productivity. Automation is in many ways a blessing and a curse for Thailand. Automation will allow people more job opportunities in technology, however, it will also mean that other jobs will be taken over by machines.

Thailand 4.0

Thailand 4.0 is a strategy formulated by the Thai government that will resolve several economic issues Thailand is facing. One goal of the strategy is to bring the per capita income of Thailand up to $15,000 by 2032. The strategy also plans on improving social inclusivity so that no citizen in Thailand is left in a vulnerable economic position. In terms of the Human Development Index (HDI), Thailand 4.0 aims to raise Thailand’s HDI from 0.722 to 0.8 so that it can be part of the top 50 countries within 10 years. The plan for universities in the Thailand 4.0 strategy is to have five or more of them join the top 100 global higher education institutions within 20 years.

Overall, all the goals of the Thailand 4.0 strategy will ultimately improve productivity in Thailand. Because technology will play such a factor in the economy, Thailand’s government wants to improve productivity by providing better training for its citizens. This type of educational training will help Thai citizens be able to better work in industries that deal with technology. Having workers with the proper training will allow citizens to be more productive in their work. The Thai government also wants to increase innovation within the country by working alongside the business sector and academic institutions in Thailand. By taking these steps, the Thai government plans on transforming the economy to become more productive and technology-driven.

How Productivity Reduces Poverty

The productivity of a country is an important factor that leads to the growth of its economy. The higher the output that can be produced, the better the economic growth of a nation will be. The labor productivity of a nation can improve when workers get paid more but also have the proper training to complete their jobs. Broad economic growth can therefore reduce poverty. It is clear that the Thailand 4.0 strategy seeks to address all of these factors. Due to the steps taken by the Thai government, productivity in Thailand will help reduce poverty and improve the economy.

– Jacob E. Lee
Photo: Flickr

, , , , , ,

India’s Foreign Aid Explained

India's Foreign Aid
The Republic of India receives millions of dollars each year in foreign aid. This money goes toward ending poverty and improving living standards. However, as India develops and modernizes, the government has started to lend a helping hand to poorer nations across the world. Many see India’s foreign aid as both a tool for diplomacy and an act of good faith. As in the words of India’s Development Partnership, its approach to foreign aid is, “shaped by India’s struggle for independence and solidarity with other colonized and developing countries and the inspiring leadership of Mahatma Gandhi…” The nation is transitioning from a recipient to a donor, as the nation often gives more in foreign aid than it receives.

By The Numbers

The Indian Government allocated $1.32 billion for foreign aid in its 2019-2020 budget year (around 0.3% of the budget). This amount follows a trend of India drastically stepping up its foreign aid over the past decade. The budget went from around $500 million in 2010 to a peak of $1.5 billion in 2015. Despite a three-year slump in funding, the central government is now stepping back up to the plate. The main focus of India’s foreign aid centers around the development and modernization of its recipients.

Most of India’s foreign aid goes to countries in Asia and Africa, as it seeks to improve relations with its neighbors and assert its global presence. The nations India is providing aid to include Myanmar ($56 million), Bangladesh ($24.5 million) and Bhutan ($392.7 million). Aid that these nations receive has the goal of promoting regional stability and creating higher living standards. The Indian Government has also taken more interest in Indian Ocean countries such as Mauritius ($161 million), Sri Lanka ($35 million) and The Maldives (~$81 million) to increase Indian presence in the Indian Ocean.

How India’s Foreign Aid Helps

India’s foreign aid goes to a variety of projects such as infrastructure, agriculture and energy. The nation has invested billions in infrastructure projects in nations like Nepal and Afghanistan, such as hydroelectric plants, dams and schools. Famously, India and Afghanistan finished the Salma Dam, renamed the Afghan-India Friendship Dam. The Dam cost India around $300 million and provides hydroelectric power and irrigated farmland to the surrounding area. Additionally, India gave millions in foreign aid to Caribbean nations to improve their renewable/clean energy sectors that combat pollution and environmental challenges.

India is also heavily active in humanitarian efforts and disaster relief, frequently giving out loans, medical supplies and other types of assistance. The Brookings Institute has even called the nation “The Neighborhood First Responder,” helping with disaster relief in Sri Lanka, Afghanistan and Myanmar. Humanitarian aid has gone to nations like Fiji after Cyclone Winston hit the nation in 2016. Recently, India has helped combat the COVID-19 pandemic through monetary aid, donating food and distributing vaccines. Brazil, which faces a vaccine shortage, received 2 million doses from the Indian government.

Indian-US Relations

India is a prime example of how U.S. Foreign Aid benefits all sides. Nations like the United States have invested heavily in India and continue to help the government combat problems that plague the nation. As a result, India and the U.S. are now close allies and often cooperate on shared goals such as combating environmental challenges and ending extreme poverty. The two nations also cooperate with each other in international organizations like the U.N. and IMF. Both nation’s economies benefit from a strong India, with bilateral trade totaling around $149 billion. A diverse array of U.S. businesses operate in India, from energy and infrastructure business to ones involving technology and entertainment.

– Malcolm Schulz
Photo: Flickr

, , ,

Agricultural Improvements in Tanzania

Agricultural Improvements in Tanzania
Tanzania is a country located along the coast of the Indian ocean in Eastern Africa. It has a population of more than 60 million people and continues to grow. Tanzania’s economy has been on the rise over the last decade. However, its agricultural sector employs a large number of people and is still struggling to make ends meet. The country partners with many agencies and organizations. Moreover, the U.S. government-funded USAID is Tanzania’s most important donor. It has been working to contribute to agricultural improvements in Tanzania by increasing the efficiency of weather information. Here are some facts about Tanzania’s economic condition, the importance of access to climate information and the U.S. aid that the country’s farming sector has received recently.

The Total Number of Low-Income Tanzanians Has Increased Despite Economic Growth

Tanzania has a wide variety of resources and economic reforms. As a result, the nation has witnessed astonishing growth in its economy within the last 10 years. Thus, the poverty rate fell from 34.4% in 2007 to 26.4% in 2018. Additionally, approximately 14 million people were living in poverty. However, due to the country’s rapid population growth, the absolute number of people living in poverty increased while the relative number decreased. The areas of economic growth were related to industry and service. This only gives work to 6% of the total population. The agriculture industry requires the most support and foreign aid because it grows slower. In addition, many Tanzanians work in this industry.

Easy Access to Weather Information is a Necessity

Access to weather information is the main tool in the process of agricultural improvements in Tanzania. This has become increasingly important as the climate is constantly changing. Since food production heavily relies on precipitation, farmers need to be able to predict and prepare for any amount of rainfall. The Tanzania Meteorological Authority (TMA) has been sending out SMS to more than 3,000 farmers all around the country several times a month to provide them with the much-needed information. However, due to high cost and inefficiency, the methods of spreading information have been the main focus of improvement.

Database for Farmers has Supported Agricultural Improvement in Tanzania

USAID funds the Building Capacity for Resilient Food Security Project and serves as an important partner in improving the spread of information. This project’s goal is to support the Tanzanian government in stabilizing its agricultural sector through different climate challenges. Additionally, the Food and Agricultural Organization of the United Nations (FAO) is one of the project’s three national partners. It has also supported TMA in creating a database for farmers to access and analyze weather information. The new technology has made it easier for farmers to receive the necessary information and has also resulted in higher usage of social media platforms by people in rural areas. It has become much easier for those in the agricultural sector to schedule the planting and harvesting of crops with this improvement.

USAID Sponsored Training to Increase Food Production Efficiency

The Building Capacity for Resilient Food Security project has contributed to many agricultural improvements in Tanzania. For example, the project sponsored training sessions for decision-makers and stakeholders throughout Tanzania in 2019. These training sessions teach farmers how to survive different climate crises and how to plant and harvest efficiently. Experts from American universities and various international partners are leading the training program. Furthermore, the goal is to teach the participants how to practice climate-smart agriculture. The hope was that the training session would increase Tanzania’s food production and decrease the number of farmers living in poverty.

Making Tanzanian Agriculture Self-Reliant

The partners of the Building Capacity for Resilient Food Security Project, FAO, USAID and the U.S. Department of Agriculture (USDA) improved Tanzanian farmers’ capability to plan their food production efficiently in January 2021. Furthermore, the partners provided important supplies such as ph meters, measuring cylinders, bottles and new technologies for a weather database to the TMA.

It will be easier for the agency to collect weather data and quickly spread the information to Tanzanian farmers with the new equipment. This will support the farmers’ goal in expanding their food production and security to the point of self-reliance. The organizations hope that making Tanzania’s agriculture more sustainable will contribute to the country’s economic growth and help many people who have employment in the sector out of poverty.

– Bianca Adelman
Photo: Flickr

, , ,

3 Companies Improving Brazil’s Emerging Market

Brazil's Emerging Market
Brazil currently has the ninth-largest economy in the world. It has a gross domestic product (GDP) of $2.05 trillion which accounts for slightly more than 2.5% of the global GDP in 2020. Brazil would account for 2.5% of the world’s wealth if one measured it by all of the goods and services it exchanged in 2020. Thus, Brazil’s emerging market has become a reputable force on the world economic stage. It has now surpassed some developed economies in GDP. For example, Brazil’s economy is now larger than Italy’s, which accounted for 2.4% of global GDP in 2020. Several factors contribute to the success of Brazil’s emerging market: better international relations, the adaptation of technology and improved education. However, the most important element of an emerging market is a solid mix of domestic companies. Here are three Brazilian companies that have been driving the economy forward.

Eletrobras

Eletrobras is the number one supplier of electricity in Latin America. Additionally, it projects that it can be one of the top three clean energy suppliers for the entire world by 2030. Furthermore, Eletrobras differentiates itself from other energy companies by focusing on generating electricity through renewable methods. In fact, the company strives to ensure that less than 10% of electricity produced comes from sources that have high greenhouse gas emissions. Eletrobras utilizes hydropower and wind farms to create the vast majority of its electricity.

The company supplied about one-third of Brazil’s total energy in 2020. As a result, there was a reduction in reliance on foreign energy companies. In addition, it provided vast employment opportunities to Brazilians and residents of other Latin American countries.

Vale

Vale is a Brazilian mining company responsible for churning out more iron ore and nickel than any other mining company. Iron ore has multiple applications and is the raw ingredient for steel. One can find it in cars, trains, sinks, dishwashers and much more. Additionally, a battery’s fundamental material is nickel. It has a shiny appearance and is inexpensive. Therefore, many countries use it to make their currencies.

Vale now employs more than 100,000 workers ranging in countries from Canada to Indonesia. The company has been able to successfully push into other sectors including artificial intelligence and energy production.

Itau Unibanco

Itau Unibanco is Brazil’s largest bank in the private sector. The company’s headquarters are in Sao Paulo and it employs more than 90,000 people across nine countries. The government now owns the majority of the company’s equity because it is in the private sector. The primary shareholders are private institutions, corporations and individuals. As such, Itau Unibanco is a bank for everyday workers.

Furthermore, Itau Unibanco has a commitment to giving back to the community. The company invested more than $0.5 billion into education projects and improving transportation infrastructure in Brazil. It shows that people should not consider domestic companies that give back as charities, but rather as an investment in the people.

The Reason these Companies Matter

These companies are critical to Brazil’s emerging market for two major reasons. First, Brazil needs businesses that spark interest in countries abroad to make the leap from emerging markets to the developed economy. All three of these companies successfully accomplished this goal. As such, these companies are appealing to many nations. As a result, there is an inflow of non-domestic goods and services. This allows the economy to expand and raise the overall quality of life for everyone.

The second reason is that these companies provide employment opportunities to Brazilian citizens in diverse sectors. Brazil needs companies such as Eletrobras to provide electricity in an economic boom and a severe recession. In addition, Brazil needs Vale to produce steel. In the end, these companies create many opportunities for Brazilian citizens in many sectors.

If Brazil can navigate through the pandemic while keeping companies like Eletrobras, Vale and Itau Unibanco afloat, it has a fair shot at becoming a developed economy in the future.

– Jake Hill
Photo: Wikimedia Commons

, , , ,

Economic Policies in Africa Reduce Poverty

Economic Policies in AfricaCOVID-19 has had disastrous effects on Africa’s fight against poverty. After a 25-year streak without a recession, sub-Saharan Africa now faces a new uphill battle. In spite of the challenges posed by the global pandemic, several economic policies in Africa are being quickly implemented by African governments stepping up to combat pandemic-induced poverty.

Impacts of COVID-19

Projections in 2020 indicated that the economic effects of COVID-19 would lower Africa’s GDP by three to five percentage points. A lower GDP is projected to increase the number of Africans living below the international poverty line by 13 million people. In sub-Saharan Africa, a projected loss of $37-79 billion is expected in output losses.

Facing a dire economic situation, several African nations are implementing comprehensive policies and strategic partnerships with key financial institutions. These economic policies in Africa come with the goal of providing much-needed economic support for individuals and families hit hardest by the pandemic.

Cameroon’s Joint Initiative

In late November 2020, French multi-international bank, Société Générale, and the European Investment Bank (EIB) confirmed a new joint initiative to support economic development in Cameroon. The new initiative aims to provide support for private sector development to help increase the economic resilience of companies across Africa that have been impacted by COVID-19.

Among the initiatives is the SocGen-EIB COVID-19 economic resilience financing program. It will allow working capital expenses, and most importantly, payment of salaries and social security and tax, leaving out a minimum maturity requirement to help ease the economic effects of COVID-19. By increasing backing for financial investment through more flexible disbursement conditions, the initiative hopes to support the economic challenges faced by Cameroon and the Central African economy.

Rwanda’s Economic Recovery Fund

Among the most effective economic policies in Africa, Rwanda’s government finalized an Economic Recovery Fund in June 2020 to increase the number of businesses eligible for economic support. The recovery fund initially included approximately RWF100 billion aimed at supporting local businesses most financially impacted by COVID-19. Benefiting the most from this recovery fund has been hotels. Through refinancing initiatives, hotels are able to restructure loans and working capital to avoid lay-offs and ultimately keep their doors open.

Although only a portion of the total funds (roughly RWF50 billion) was slated for hotel refinancing, the portion looked to restructure at least 35% of total outstanding loans of the hotel industry for some 571 borrowers by close of February 2020. The mark has already been met, resulting in John Rwangombwa, Rwanda’s central bank governor, approving RWF43 billion more in additional funds for hotel loans. The hotel refinancing loans are disbursed at a 5% interest rate compared to present market rates of 16%.

Zimbabwe’s Economic Blueprint

Zimbabwe’s President Emmerson Mnangagwa recently launched a five-year economic blueprint called the National Development Strategy (NDS). Targeting a 5% growth rate per year, the plan intends to establish the country as an upper-middle-income economy by 2030. The NDS will look to accelerate economic growth, improve infrastructure and improve investments and usage in information and communications technology.

The plan takes over from the now outdated Transitional Stabilization Program (TSP), which managed to help the country take steps toward a more stable economy. The NDS hopes to improve and bolster the economy even further through improved quality of life and more equitable and equal distribution of wealth. It was projected that the Zimbabwean economy would contract by 4.5% in 2020 due to the effects of COVID-19. Fortunately, the NDS is expected to expand the economy by 7.4% in 2021 and an estimated 760,000 formal jobs are to be created.

African Continental Free Trade Area Agreement (AfCFTA)

Malawi is working to finalize the ratification of the African Continental Free Trade Area (AfCFTA) with other key stakeholders in the African Union (AU). The AfCFTA went into effect on January 1, 2021, and will bring together 55 African countries, affecting 1.2 billion people. The initiative has ambitious goals such as boosting the region’s income by a projected $450 billion. If accomplished this would bring 30 million people out of extreme poverty and increase the incomes of 68 million Africans.

In the short term, the measure will help mitigate the immediate effects of COVID-19 by supporting regional trade and value chains. In the long term, it will lay a new foundation and framework for cooperation among AU members and policy reform needed to curb the shocks felt on the African economy after COVID-19.

The Road to Recovery

Unfortunately, COVID-19 is still a major global issue that continues to pose serious threats to the economic and social stability of Africa. The situation calls for government action, and fortunately, many African nations are stepping up to the plate. Strategic partnerships and expedient economic recovery plans put in place by Cameroon, Rwanda and Zimbabwe hope to set an effective precedent for other African nations to follow. More importantly, pan-African agreements that require continent-wide cooperation such as the African Continental Free Trade Area Agreement can lay the potential groundwork for a prosperous and strengthened Africa.

– Andrew Eckas
Photo: Flickr

, , , ,

The Success of Hungary’s Improving Economy

Hungary’s Improving EconomyThe Central European country of Hungary is a fairly small nation that has had high rates of poverty in the past. In 2007, 29.4% of Hungarians were at risk of poverty and that number rose to 34.8% in 2013. Despite these high poverty risk rates, the country has had success in reduction. The poverty risk rate reduced down to 18.9% in 2019. Hungary’s improving economy is fueled by new policies and support from other nations.

Increasing Consumer Spending

Part of the reason Hungary has struggled to develop a productive economy dates back to the 1990s after the fall of the Soviet Union. Hungary implemented many reforms such as the privatization of businesses that were once state-owned. Hungary began to cut funding to social programs as well. Despite living conditions deteriorating, Hungary was able to improve these conditions with its policy implementations and growing exports. Since then, Hungary has adopted a multitude of policies to help improve its economy.

Before the 2018 election, the country tried to increase its amount of consumer spending by implementing an increase in the minimum wage. Hungary’s government also reduced income tax by 1%. The Hungarian government implemented these strategies to encourage Hungarian citizens to put money back into the economy and keep Hungarian businesses operating.

European Commission Support

When COVID-19 swept the globe, many nations had to implement lockdown measures to protect their citizens and stop the spread of the virus. Because of Hungary’s struggling economy, the nation required financial assistance from the European Commission. In 2020, support came in the form of €1 billion. The monetary assistance aimed to provide Hungarian companies the help they needed to survive during COVID-19.  The assistance applied to all companies —  micro, small, medium and large. Certain businesses have a cap on how much of this aid they can access. Monetary support of up to €100,000 is available to businesses working in the agricultural production sector whereas up to €120,000 is available to businesses working in the fishery and aquaculture sector. The assistance excludes companies that were already in economic hardship on December 31, 2019. The monetary assistance ensures that Hungary’s improving economy does not lose progress due to COVID-19.

The Future

Due to policies that were implemented by Hungary’s government and support from the European Commission, Hungary’s improving economy has not been as harshly damaged. However, despite this assistance, the GDP of Hungary has still suffered just as other global GDPs have suffered. But, the future of Hungary’s economy is not as bleak as it may seem. It is expected that the GDP of the nation will grow by 3.5% in 2021, and by 2022, the economy is expected to return to the level it was at prior to COVID-19. While Hungary’s economy is far from perfect, it has no doubt made substantial improvements in recent years.

– Jacob E. Lee
Photo: Flickr

, , ,

Social Safety Nets in Ethiopia: Reducing Urban Poverty

Social Safety Nets in EthiopiaSocial safety nets play a pivotal role in distributing wealth and opportunities to the world’s most at-risk communities. Every nation has one to a certain extent but the strength of those safety nets largely varies. The United States government can afford to transfer non-contributory benefits to low-income U.S. citizens without making much of a dent in the national budget but the opposite is true for less wealthy, developing countries. Though the approach is quite different, social safety nets in Ethiopia exist and work to reduce poverty.

Population Growth and Development

For the last 15 years, Ethiopia has been celebrating strong economic development. Due to its rapid population growth, large pockets of poverty have been popping up more frequently in urban areas. The challenge then becomes building social protection programs fast enough to keep up with the country’s population.

Ethiopia’s problems are structural, meaning that accessibility to labor markets is one of the key reasons urban areas appear to be stuck in a stalemate. Still, in 2016, Ethiopia took its first big step in the right direction by creating its first social protection system to target the urban impoverished and gender inequality.

The Urban Productive Safety Net Project (UPSNP)

According to the World Bank, the objective of the UPSNP “is to support the Government of Ethiopia to improve income of targeted poor households and establish urban safety net mechanisms.” As one of the few programs in sub-Saharan Africa, the UPSNP is a vanguard for social safety and economic relief and has already established many parts of the much larger structural framework envisioned. These include mobile childcare and primary education facilities to inspire mothers’ participation and pilot programs to encourage and empower young workers and behavioral change interventions to establish better business practices.

Results of the UPSNP

The results of this ongoing project have been quite successful in ensuring growth that is both economically sufficient and socially inclusive. Since its start in 2016, the UPSNP has assisted more than 600,000 beneficiaries, 60% of them being women, and distributed livelihood grants to more than 51,000 small business owners. Another accomplishment is the opening of bank accounts through the Commercial Bank of Ethiopia for all its beneficiaries, adding up to more than $11.3 million saved. Additionally, the UPSNP connected more than 60,000 beneficiaries to basic social services such as health insurance and family support and developed COVID-19 adaptable transfer systems.

The Road Ahead

With the overwhelming success of the UPSNP, Ethiopia is carving the way for a new social safety net project called the Urban Productive Safety Net and Jobs project (UPSNJP). This new project focuses on incorporating disadvantaged youth into labor markets and support for refugees and homeless people. In cooperation with its predecessor, these social safety nets in Ethiopia are restructuring the economy to strengthen the bridge between citizens of urban communities, labor markets and the rights that are due to them.

The Government of Ethiopia has come a long way since the early 2000s when it had one of the highest poverty rates in the world. Ethiopia has made significant progress, and with further support of global organizations, Ethiopians can be supported and safeguarded, even in the wake of COVID-19.

– Matthew Hayden
Photo: Flickr

, , , , , , , , ,

Countries that Experienced Economic Growth in 2020

Economic Growth in 2020
“Everyone is growing.” At the end of 2019, this was the World Bank’s outlook of the economic trajectory for the year 2020. The global economy was steadily growing and strengthening, and only a select few countries were facing GDP and economic contractions. Here is a look at the countries that experienced economic growth in 2020.

COVID-19’s Impact on the Economy

At the end of 2020, the World Bank sang a much different tune than what it did at the end of 2019. After the onset of a global pandemic, the majority of the world’s economies have taken a turn for the worst, the year turning out to be one of the worst in terms of economic growth and development. A far cry from the projected global GDP growth of 2.5%, as in June 2020, the International Monetary Fund (IMF) predicted that the world would close out the year with a GDP growth rate of -4.9%.

For some countries such as Spain, the U.K. and Tunisia, economic growth in 2020 had already fallen by around 20% by the year’s second quarter compared to the same period of 2019, a record quarterly fall for many countries. In other countries such as Taiwan, Finland, Lithuania and South Korea, the economic impact was much less than 5% contractions in GDP.

However, while the problem of economic recession was common for most nations, there were a select few that were not only able to ward off a negative growth pattern but steadily grew in the face of a global crisis. According to reports from the International Monetary Fund (IMF), in October 2020, only 16 countries would sustain economic growth in 2020 of more than 1%, and 11 would grow at a rate between zero and 1%. That leaves a whopping 167 nations facing economic contraction.

5 Countries that Experienced the Highest Economic Growth in 2020

  1. Guyana: Guyana currently has the fastest growing economy globally, with an economic growth rate of approximately 26.21% in 2020. The mainland country serves as home to one of the most promising newly discovered oil basins globally and a vast supply of other natural resources. The recent oil discoveries and new production began in late 2019. Guyana’s economy is expanding fast and expects the GDP to more than double by 2025. Therefore, while it is likely that the Guyanese economy did face setbacks due to the COVID-19 pandemic, the explosion of its oil industry has been able to keep the country’s economy heading in the right direction.
    2. South Sudan: After facing stunted economic growth in the 2010s due to civil unrest, the relatively newly independent South Sudan faced harsh humanitarian and food insecurity crises. However, in 2018, the country signed a new peace agreement, followed by the reopening of many of its oil wells, boosting its main revenue source. Between 2018 and 2019, the country gradually maneuvered itself back into a steady growth pattern that maintained a 4.11% growth in GDP in 2020.
    3. Bangladesh: Over the years 2016 to 2020, the Bangladesh economy has recorded a 7.6% growth in GDP. Such rapid expansion has allowed the country to graduate from the U.N.’s list of Least Developed Countries (LDC). Because of its now stable macroeconomic environment, buoyant domestic demand and export-oriented industry-led growth, Bangladesh has been able to maintain an approximate 5.2% growth rate during 2020, with predictions that it will see an increasing growth rate of 6.8% in 2021 and the coming years.
    4. Egypt: Similar to Guyana, the Egyptian economy has recently benefitted greatly from lucrative natural gas discoveries. Though the pandemic and global economic crisis hit the country’s economic growth in 2020 due to a sudden fall in tourism, remittances and exports, its previous main sources of income, the revenue from its oil discoveries, was enough to stabilize growth in the economy. Already, the Egyptian economy is on the path to recovery with a projected 2.76% growth in 2021, before returning to its previous growth levels averaging at 5.28% in the coming years.
    5. Benin: Due to intentional and effective key economic and structural reforms in recent years, Benin reached a growth rate of 6.41% between the years 2017 and 2019. Therefore, while economic activity did slow for the country heavily dependent on re-export and transit trade, it was able to sustain economic growth in 2020 at a rate of approximately 2%. As the world adapts to and moves towards the end of the pandemic and global economic crisis, expectations have determined that Benin’s economy will return to faster growth rates of around 5% to 7% in the upcoming years.

Looking Forward

It was low- and middle-income emerging economies that were better able to sustain a growth trajectory throughout the 2020 global economic crisis. In fact, China, which the COVID-19 pandemic hit first, has been the only trillion-dollar economy that sustained positive economic growth in 2020. Economic growth is crucial for reducing and eradicating poverty and can lead to social improvements in affected countries. Therefore, the hope is that the countries that are not on the above list will return to pre-pandemic growth rates, and the five fastest-growing nations of 2020 keep developing at this level.

– Rebecca Harris
Photo: Flickr