Foreign aid and economic growth in the developing countries - a  (Page 7/21)

Understanding the characteristics of each specific region of the developing world is useful for thisdiscussion. Therefore before proceeding, it is necessary to briefly go over each region’s profile.

3.1. East Asia and the Pacific

East Asia and the Pacific has the largest population (1.8 billion) and this region is the most dynamic in thedeveloping world with average GDP growth of 6%. Consequently, the percentage of the population below the poverty line (US$1) in thisregion fell from 26.6% in 1987 to 15.3% in 1998. Even though the region has suffered from the 1997-1998 crisis, most countries,including Indonesia, the Philippines, and Thailand have now recovered. After the financial crisis, East Asia has reestablisheditself as the fastest growing region in the world with a growth rate of 6.7%, which is a surprisingly robust given the slow pace ofglobal recovery and high levels of uncertainty in the world economy. China continued to emerge as a key regional locomotive,growing by 8% and attracting nearly 40% of the growth in exports of other East Asian economies.

Even though the recovery in the region has been affected by a number of unexpected shocks such as the eventsof September 11, SARS, the Iraq war, higher oil prices etc., regional growth exceeded 5% in 2003. In the future, the outlook forthe region remains positive, provided countries continue to focus on improving institutions, maintaining sound macroeconomicmanagement, and strengthening governance. Furthermore, countries need to complete the restructuring agendas left over from thecrisis, improve financial sector supervision and regulation, andundertake broader reforms to strengthen the investment climate.

3.2. Europe and Central Asia

The economies of Europe and Central Asia showed a good performance in 2002 with average GDP growth of 4.6%.Sub-regional growth differed, with 2.9% and 4.7% for Central and Eastern European and the former Soviet Union countriesrespectively. The Turkish economy showed an impressive return from the recession of 2001, with 7.8 % growth in 2002. Eight of theregion’s economies exceeded 5%, except the Kyrgyz Republic, which suffered a setback (0.5% decline in GDP) as a result of temporarydeclines in gold and power production. Nevertheless, there are still huge differences in the levels of poverty and humandevelopment and in the conditions necessary for sustainable growth. Per capita income ranges from $200 to $10,070 in Tajikistan andSlovenia respectively, and the extent of poverty varies from more than 50% of the population in the poorer countries of the region tolow single-digit levels in most countries in Central and Eastern Europe.

3.3. Latin America and the Caribbean (LAC)

LAC is a region of vast diversity, with 526 million people who speak many different languages and dialects. Itincludes the entire continent of South America, the Central American isthmus, the Caribbean islands and Mexico. LAC is the mosturbanized region in the developing world, with three-quarters of its people living in and around cities, but natural resources andagriculture remain crucial elements of many LAC economies.