Implications of Slowing Growth for Poverty

This paper examines the impact of the actual and projected slowdown in the world economy since 2012 on the poor and on the potential for achievement of the Social Development Goals (SDGS). It builds on the changes between 2012 and late 2015 in the IMF’s World Economic Outlook projections to provide the basic slowdown scenario. It then uses a global model to assess the impacts of lower rates of productivity growth and consequent lower savings and investment on key price and income variables. The productivity shocks are passed directly to the production activities included in household microsimulation models for more than 300,000 households. These households are also affected by the modeled changes in prices. Simulations allow us to assess the impacts of the slowdown on the real household incomes of the poor, and hence on summary statistics such as the poverty rate. The results suggest that the productivity slowdown—if continued—will slow down the reduction in the global poverty rate, increasing the importance of policy interventions focusing directly on poverty reduction if the SDGs are to be achieved.