Income inequality has loomed in emerging economies, with 84% of them registering a decline in poverty as intergenerational Equity and Sustainability- which are largely driven by growing fiscal and demographic pressures- witnessed a decline in emerging markets, stated the World Economic Forum (WEF).
According to WEF, the emergence of a worldwide consensus on the need for a more inclusive and sustainable model of growth and development that promotes high living standard for all, is resulting from slow progress in living standards and widening inequality that have contributed to political polarization and erosion of social cohesion in many advanced and emerging economies.
After taking into account investments in human capital, depletion of natural resources, and damage caused by pollution, the decline witnessed in adjusted net savings measured the true rate of savings in an economy.
Other than labor, productivity and healthy life expectancy, data revealed that the GDP per capita is rather weakly correlated compared with performance on Inclusive Development Index (IDI) indicators. Although, recent performance indicates that 64% of the 103 economies have seen their IDI scores improve over the past five years, attesting to recent efforts by policymakers to broaden socioeconomic progress.
So far, there has been a disconnect between GDP growth and inclusion in emerging economies. Of the 30 economies in the top two quintiles of GDP growth performance during the past 5 years, 6 economies scored well on a majority of Inclusion indicators, 13 were no better than mediocre, while 11 economies registered outright poor performances, explained the report.
Nigeria which ranked 63rd on the list, faces significant challenges in achieving inclusive Growth and Development. The economy has witnessed growth as it recovers from receding oil production which plunged it into recession.
Despite recording growth, the growth has not been beneficial to Nigerians as the poverty rate in the country stands at 77.6% and the daily median income level is still as low as $1.80.
Geopolitical instability due to ethnic and religious factions has and will continue to impede the Nigerian government’s efforts to translate investments in infrastructure into inclusive growth, as well as reduce the high level of informal employment, irrespective of ranking second-lowest in public debt among emerging economies (18.6%).
On the list at 69th position sits South Africa. The countries inclusive growth and development has improved slightly from 5 years ago, but it still faces challenges in the area of low employment, subpar health conditions and high inequality which drives its IDI to an overall low.
South Africa’s economy is top notch compared to some other emerging economies, but in terms of healthy life expectancy, it ranks low with only 54 years as the healthy life expectancy. One of the lowest levels among countries with a GDP per capita of at least $5,000.
When it comes to inequality, the South African economy is quite concentrated in terms of both wealth (86.7) and income (57.7). At the same time almost 36% of the population is poor and lives with a median consumption level of about $5 per day.
In addition, South Africa’s economy is relatively carbon intensive, has better control of public finance (debt is roughly 50% of GDP), and maintains a good balance between elder and younger populations, with a dependency ratio of 52.4.
According to the report, these analyses suggests that GDP growth is a necessary but not sufficient condition for achieving the broad-based progress in living standards on which polities ultimately judge their countries’ economic success. The structural policies and institutions in these domains collectively represent the system through which modern market economies diffuse gains in living standards.