News / Economy

Car Index Indicates Growth Potential High in Developing Nations

The International Monetary Fund hints it may cut global growth forecasts again next month when it updates its projections for the world economy.  The global lending institution says worldwide growth is weaker than expected due to continuing uncertainty in Europe and the US.  But while many agree the global recovery has been weak, some economists point to the rising number of automobiles in developing nations as a sign that the world's economy is moving in the right direction.  
Despite forecasts for a slowdown in the global economy, a little known economic indicator is starting to gain traction. The so called "car index" is an attempt to measure the world's middle class based on the number of people who own cars.
Uri Dadush is head of the global economics program at the Carnegie Endowment for International Peace. "Ownership of cars is going to explode, is exploding at the moment in the developing world, a sign that the middle class is exploding.  And the reason for that is, is there are about 70 countries with a population of about three billion people who are approaching a threshold of income, about $4000 per capita where the middle class really increases very, very rapidly," he said. 
Dadush says the relative rise in average incomes means greater demand for non-essential goods. "Because that's the threshold of income where people begin to have enough to buy all sorts of things.  And it so happens that the things they will buy are the sorts of things that Japan, Germany and the United States excel at producing," he said. 
But the IMF says the economic downturn which began in 2008 has also led to reduced consumer spending in developed nations.  Managing Director Christine Lagarde says uncertainty over the debt crisis in Europe and the possibility that expiring tax cuts and massive government spending reductions could send the U.S. economy into a tailspin - remain the biggest risks to the global economy.
"We clearly still foresee a gradual recovery, but the global growth that we have forecasted 12 months ago, that we have revisited six months ago, is likely to be yet a little bit weaker than we had anticipated," she said. 
Add to that, rising food prices and increased volatility in the Middle East - and Lagarde says economic growth next year is likely to be slower than the group's earlier forecast of 3.9 percent. "Small decimal points for sure, but what is characteristic is that our forecast has trended downward," said Lagarde. 
Although slower growth in China and the challenges in Europe and the U.S. remain problematic, Dadush believes the prospects for global growth may be better than the IMF forecasts would suggest. "Notwithstanding the fact that they're going through a slowdown at the moment, the underlying drivers of growth in developing countries are extraordinary," said Dadush. 
Recent surveys show consumer spending in developing countries has increased three times faster than in advanced economies, with car ownership rising at a sharply higher rate than in developed nations.

You May Like

Map Shows Every US School Shooting Since 2013

There have been at least 150 school shootings in the United States since 2013, an average of nearly one per week More

Video In US, Columbus Day Still Generates Controversy

Holiday marks date Columbus discovered Americas, but some are offended by legacy because he enslaved many natives he encountered More

Video Kickboxing Champion Shares Sport With Young Migrants

Pouring into Europe by hundreds of thousands, some migrants, especially youngsters, are finding sports a way to integrate into new host countries More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemeni
Henry Ridgwell
October 12, 2015 4:03 PM
The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemen

The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video No Resolution in Sight to US House Speaker Drama

Uncertainty grips the U.S. Congress, where no consensus replacement has emerged to succeed Republican House Speaker John Boehner after his surprise resignation announcement. Half of Congress is effectively leaderless weeks before America risks defaulting on its national debt and enduring another partial government shutdown.

Video New Art Exhibit Focuses on Hope

Out of struggle and despair often comes hope. That idea is behind a new art exhibit at the American Visionary Art Museum in Baltimore, Maryland. "The Big Hope Show" features 25 artists, some of whom overcame trauma and loss. VOA’s Deborah Block reports.

Video Columbus Day Still Generates Controversy as US Holiday

The second Monday of October is Columbus Day in the United States, honoring explorer Christopher Columbus and his discovery of the Americas. The achievement is a source of pride for many, but for some the holiday is marked by controversy. Adrianna Zhang has more.

Video Anger Simmers as Turks Begin to Bury Blast Victims

The Turkish army carried out new air strikes on Kurdistan Workers Party (PKK) targets on Sunday, a day after the banned group announced a unilateral cease fire. The air raids apparently are in retaliation for the Saturday bombing in Turkey's capital Ankara that killed at least 95 people and wounded more than 200 others. But as Zlatica Hoke reports, there are suspicions that Islamic State is involved.

Video Bombings a Sign of Turkey’s Deep Troubles

Turkey has begun a three-day period of mourning following Saturday’s bomb attacks in the capital, Ankara, that killed nearly 100 people. With contentious parliamentary elections three weeks away, the attacks highlight the challenges Turkey is facing as it struggles with ethnic friction, an ongoing migrant crisis, and growing tensions with Russia. VOA Europe correspondent Luis Ramirez reports.

Video Afghanistan’s Progress Aided by US Academic Center

Recent combat in Afghanistan has shifted world attention back to the central Asian nation’s continuing civil war and economic challenges. But, while there are many vexing problems facing Afghanistan’s government and people, a group of academics in Omaha, Nebraska has kept a strong faith in the nation’s future through programs to improve education. VOA’s Greg Flakus has more from Omaha, Nebraska.

Video House Republicans in Chaos as Speaker Favorite Withdraws

The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video German, US Officials Investigate Volkswagen

German officials have taken steps to restore some of the reputation their car industry has lost after a recent Volkswagen diesel emissions scandal. Authorities have searched Volkswagen headquarters and other locations in an effort to identify the culprits in the creation of software that helps cheat on emission tests. Meanwhile, a group of lawmakers in Washington held a hearing to get to the bottom of the cheating strategy that was first discovered in the United States. Zlatica Hoke reports.

Video Why Are Gun Laws So Hard for Congress to Tackle?

Since taking office, President Barack Obama has spoken out or issued statements about 15 mass shootings. The most recent shooting, in which 10 people were killed at a community college, sparked outrage over the nation's gun laws. But changing those laws isn't as easy as many think. VOA's Carolyn Presutti reports.

Video In 'He Named Me Malala,' Guggenheim Finds Normal in Extraordinary

Davis Guggenheim’s documentary "He Named Me Malala" offers a probing look into the life of 18-year-old Malala Yousafsai, the Pakistani teenager who, in 2012, was shot in the head by the Taliban for standing up for her right to education in her hometown in Pakistan's Swat Valley. Guggenheim shows how, since then, Malala has become a symbol not as a victim of brutal violence, but as an advocate for girls’ education throughout the world. VOA’s Penelope Poulou has more.

Video Paintable Solar Cells May Someday Replace Silicon-Based Panels

Solar panels today are still factory-manufactured, with the use of some highly toxic substances such as cadmium chloride. But a researcher at St. Mary’s College, Maryland, says we are close to being able to create solar panels by painting them on a suitable surface, using nontoxic solutions. VOA’s George Putic reports.

VOA Blogs

World Currencies


Rates may not be current.