UNCTAD's Igor PaunovicThe Vi videoconference on the Trade and Development Report (TDR) 2016 for Vi affiliate South African member, North West University, gathered eight students and lecturers for a discussion on structural transformation November 25.

Igor Paunovic, of UNCTAD's Division on Globalization and Development Strategies, presented an overview of global economic trends in 2016 and UNCTAD’s recommendations for inclusive and sustained economic growth.

According to the report, global growth is likely to drop below 2.5 percent, and developed countries have been facing even slower growth.

“Advanced economies should opt for proactive fiscal policies, including investment in infrastructure, in order to dynamize economic growth, and continue their supportive monetary policies,” Paunovic said.

“One of the issues with the current crisis is that real wages have been stagnant for the last three decades and have been growing less than productivity,” he added.

Given the slowdown in the growth of international trade, developing countries should rebalance toward domestic and regional demand.

Turning to structural transformation in the last three decades, “the share of manufacturing in GDP has been steadily growing in countries of South-East Asia, while in other countries it has been stagnant, and in Africa the share has gone down to only 9 percent,” he said.

He went on to stress that manufacturing is vital to developing countries because it creates employment and income which are higher than in other parts of economy, and this in turn creates demand.

According to the report, countries need macroeconomic, financial, trade and industrial policies which are coherent to support the countries’ structural transformation as well as efficient institutions.

“These institutions need to be connected, and at the same time independent, of the business community so that they are able to withdraw support to the industry if there are no results, in order to move on to another sector.

“Development requires structural change in which employment is reallocated to higher productivity sectors and with stronger production and income linkages. This requires strong investment in all sectors, particularly in manufacturing and modern services,” he concluded.