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Vijit Jain

Johanna Chua

Ronit Ghose

Jamshed Dadabhoy

Surendra Goyal

Rishi V Iyer

Samiran Chakraborty

Anurag Jha

Venkatesh Balasubramaniam

Raashi Chopra

Saurabh Handa

Gaurav Malhotra

Aditya Mathur

Arvind Sharma

Atul Tiwari

Twin Pillars of Investment & Productivity In this report, we look specifically at India and what types of pillars can be identified to drive the country’s growth over the next decade. Although the past does not guarantee future results, we thought the best place to start the journey of how India can transform itself from an emerging economy into one that grows with a sustained GDP growth rate of 8%+, is to look at the lessons learned from countries which have already succeeded in transition. We found that growth in labor productivity of over 6%, growth in investment of over 10% and growth in the overall efficiency of production (the Total Factor Productivity) to 3% were the three primary drivers of GDP growth across our sample of countries. The final piece in the growth puzzle was that poorer economies grow faster in 60% of cases, those countries with 8%+ GDP growth had per capita income of less than $10,000. In order to achieve investment growth in the double digits and to create employment opportunities for its swelling labor force, India will need to industrialize further target manufacturing as a share of GDP to rise to 25% by 2025 from its current level of 18%. To do this, a new potential leading sector in manufacturing must be identified based on size, productivity, employability, and exportability. Our analysis identifies chemicals (including pharmaceuticals and petrochemicals) as a promising candidate to move up the value chain, as well as food processing and textiles & apparel. In a previous Citi GPS report Infrastructure for Growth, we estimated that on average, a 1% increase in infrastructure investment associated with a 1.2% increase in GDP growth. In the case of India, we estimate that total infrastructure spend could be around $3 trillion in the next 10 years bringing the infrastructure (power, ports, roads, rails, telecom), reforms in input markets (land and labor), focus on soft infrastructure (healthcare reforms, education) and the harnessing of resources (oil & gas, coal, cement, iron & steel) would all lead to higher productivity and growth rates. Finally, exports as a productivity driver and employment creator could play a significant role in total factor productivity growth. If India can increase its export-to-GDP ratio (including service exports) to at least 20% by 2021, India’s exports could reach ~700 Billion. The result of all this growth would be higher per capita income, increasing urbanization, and a shift in consumer patterns as India moves up the ladder form a low-growth to a high-growth economy. Authors: Samiran Chakraborty,Anurag Jha,Venkatesh Balasubramaniam,Raashi Chopra, CFA,Johanna Chua,Jamshed Dadabhoy,Ronit Ghose, CFA,Surendra Goyal, CFA,Saurabh Handa,Rishi V Iyer,Vijit Jain,Gaurav Malhotra, CFA,Aditya Mathur,Arvind Sharma,Atul Tiwari,

<h2 id="gps-zoom-subhdg" class="gps-zoom-subhdg">Twin Pillars of Investment &amp; Productivity</h2> <h3>In this report, we look specifically at India and what types of pillars can be identified to drive the country’s growth over the next decade. Although the past does not guarantee future results, we thought the best place to start the journey of how India can transform itself from an emerging economy into one that grows with a sustained GDP growth rate of 8%+, is to look at the lessons learned from countries which have already succeeded in transition. We found that growth in labor productivity of over 6%, growth in investment of over 10% and growth in the overall efficiency of production (the Total Factor Productivity) to 3% were the three primary drivers of GDP growth across our sample of countries. The final piece in the growth puzzle was that poorer economies grow faster in 60% of cases, those countries with 8%+ GDP growth had per capita income of less than $10,000.</h3> In order to achieve investment growth in the double digits and to create employment opportunities for its swelling labor force, India will need to industrialize further target manufacturing as a share of GDP to rise to 25% by 2025 from its current level of 18%. To do this, a new potential leading sector in manufacturing must be identified based on size, productivity, employability, and exportability. Our analysis identifies chemicals (including pharmaceuticals and petrochemicals) as a promising candidate to move up the value chain, as well as food processing and textiles &amp; apparel. In a previous Citi GPS report Infrastructure for Growth, we estimated that on average, a 1% increase in infrastructure investment associated with a 1.2% increase in GDP growth. In the case of India, we estimate that total infrastructure spend could be around $3 trillion in the next 10 years bringing the infrastructure (power, ports, roads, rails, telecom), reforms in input markets (land and labor), focus on soft infrastructure (healthcare reforms, education) and the harnessing of resources (oil &amp; gas, coal, cement, iron &amp; steel) would all lead to higher productivity and growth rates. Finally, exports as a productivity driver and employment creator could play a significant role in total factor productivity growth. If India can increase its export-to-GDP ratio (including service exports) to at least 20% by 2021, India’s exports could reach ~700 Billion. The result of all this growth would be higher per capita income, increasing urbanization, and a shift in consumer patterns as India moves up the ladder form a low-growth to a high-growth economy. Authors: Samiran Chakraborty,Anurag Jha,Venkatesh Balasubramaniam,Raashi Chopra, CFA,Johanna Chua,Jamshed Dadabhoy,Ronit Ghose, CFA,Surendra Goyal, CFA,Saurabh Handa,Rishi V Iyer,Vijit Jain,Gaurav Malhotra, CFA,Aditya Mathur,Arvind Sharma,Atul Tiwari,

Twin Pillars of Investment & Productivity

SECURING INDIA’S GROWTH OVER THE NEXT DECADE

With China’s 19th Party Congress now behind us, the primary takeaway is that President Xi Jinping has cemented his role as the most powerful leader in China since President Mao Zedong. This will pave the way for him to extend his term beyond 2022 and put more weight on the economic policies and priorities that he advocates. Given that the ‘China dependence’ of many countries has risen considerably as China has become the largest contributor to global growth (at 40% vs. the U.S. at 16% in 2016), it is important to take a deeper look into the economic policies and initiatives unveiled at the Party Congress. In the report that follows, we outline what was said, examine the implications for Chinese growth based on the policies announced, and also examine the effect of these policies on the rest of the world. Although specific GDP growth targets weren’t mentioned at the Party Congress, the Communist Party of China has repeatedly affirmed its commitment to doubling China’s 2010 GDP and per capita income by 2020, which we estimate would require annual growth of at least 6.3%, which we view as feasible. Economic stability and risk control will continue to be a high priority for China to avoid a hard-landing scenario and maintain a minimum level of acceptable growth no matter the rhetoric. Given the consolidation of political power, we expect more breakthroughs, in industrial upgrading (e.g., Made in China 2025), rural land reforms, second-round urbanization (e.g., the Xiong’an new district, the Yangtze River economic belt, and the Great Bay area), financial reforms and further opening up (e.g., the Belt Road Initiative) as well as environmental protection. We see the accelerated implementation of the ‘Made in China 2025’ initiative leading to China being best-positioned competitively in the communication equipment, advanced railway equipment, aerospace equipment, new energy vehicles and shipbuilding sectors. If the Chinese government is committed to providing significant state resources, even less well-positioned sectors could make rapid inroads. This could create greater competitiveness challenges in other countries who are already significant players in these targeted industries, and hurting countries with a high percentage of their GDP in these targeted industries, particularly countries in Central & Eastern Europe, countries with a large percentage of vehicle production (e.g., Mexico and Germany) and certain Asian countries (i.e., Singapore, Korea, and Thailand). The emphasis on accelerating financial reforms should lead growth in China’s financial markets to the size of U.S. markets by 2025 — a tripling in the size of the bond market to $37.5 trillion, stock market capitalization rising to $31 trillion and banking assets of $68 trillion. In addition, the implementation of the rural vitalization strategy should unlock $20.6 trillion in rural farm wealth. Finally, the new emphasis on environmental issues and top leadership’s determination to solve prominent environmental problems will have an effect on commodities and those countries that export commodities to China. However, combined with the new industrial manufacturing emphasis, there are countries that are both potential winners and losers.

With China’s 19th Party Congress now behind us, the primary takeaway is that President Xi Jinping has cemented his role as the most powerful leader in China since President Mao Zedong. This will pave the way for him to extend his term beyond 2022 and put more weight on the economic policies and priorities that he advocates.Given that the ‘China dependence’ of many countries has risen considerably as China has become the largest contributor to global growth (at 40% vs. the U.S. at 16% in 2016), it is important to take a deeper look into the economic policies and initiatives unveiled at the Party Congress. In the report that follows, we outline what was said, examine the implications for Chinese growth based on the policies announced, and also examine the effect of these policies on the rest of the world.Although specific GDP growth targets weren’t mentioned at the Party Congress, the Communist Party of China has repeatedly affirmed its commitment to doubling China’s 2010 GDP and per capita income by 2020, which we estimate would require annual growth of at least 6.3%, which we view as feasible. Economic stability and risk control will continue to be a high priority for China to avoid a hard-landing scenario and maintain a minimum level of acceptable growth no matter the rhetoric.Given the consolidation of political power, we expect more breakthroughs, in industrial upgrading (e.g., Made in China 2025), rural land reforms, second-round urbanization (e.g., the Xiong’an new district, the Yangtze River economic belt, and the Great Bay area), financial reforms and further opening up (e.g., the Belt Road Initiative) as well as environmental protection.We see the accelerated implementation of the ‘Made in China 2025’ initiative leading to China being best-positioned competitively in the communication equipment, advanced railway equipment, aerospace equipment, new energy vehicles and shipbuilding sectors. If the Chinese government is committed to providing significant state resources, even less well-positioned sectors could make rapid inroads. This could create greater competitiveness challenges in other countries who are already significant players in these targeted industries, and hurting countries with a high percentage of their GDP in these targeted industries, particularly countries in Central & Eastern Europe, countries with a large percentage of vehicle production (e.g., Mexico and Germany) and certain Asian countries (i.e., Singapore, Korea, and Thailand).The emphasis on accelerating financial reforms should lead growth in China’s financial markets to the size of U.S. markets by 2025 — a tripling in the size of the bond market to $37.5 trillion, stock market capitalization rising to $31 trillion and banking assets of $68 trillion. In addition, the implementation of the rural vitalization strategy should unlock $20.6 trillion in rural farm wealth.Finally, the new emphasis on environmental issues and top leadership’s determination to solve prominent environmental problems will have an effect on commodities and those countries that export commodities to China. However, combined with the new industrial manufacturing emphasis, there are countries that are both potential winners and losers.

The World According to Xi Jinping Thought

CHINA ENTERING A NEW POLITICAL ECONOMY CYCLE

Ebrahim Rahbari

Benjamin Nabarro

Brian Nolan

Matteo Richiardi

Luis Valenzuela Rivera

Addressing a Growing Challenge On average, income inequality within developing economies is very high, particularly in Africa, and higher than in the industrialized world, which creates its own major development challenges. But, in aggregate, global income inequality has declined from the late 1980s, and particularly rapidly from about 2008, as developing economies have, on average, closed some of the gap with industrialized countries. Previously, at least since the early 19th century, global inequality had increased. The driving factors behind this change have included the very real impact of globalization and technology on trade and employment, and also the transition of the formerly Communist bloc in Eastern Europe. In very simple terms, globalization has been a positive force in leveling inter-country inequality over the past 30 years. At the same time, the share of the world’s population estimated to be below the World Bank’s $1.90/day extreme poverty threshold has fallen drastically, from 35% in 1990 to 11% in 2013. Despite a major expansion in world population, the number of people in extreme poverty has fallen dramatically from 1.85 billion to under 800 million. However, within-country inequality in the larger developing countries — the same economies that have enjoyed large income growth and narrowed the differences with rich countries, such as China, India, and Indonesia — has actually increased substantially in recent years. As a result, income inequality within countries now accounts for around a third of global inequality, when it was only one-fifth in 1988. The contribution of inter-country inequality has correspondingly shrunk. Of critical focus to our research, income inequality has increased substantially within many OECD countries over recent decades after a long period of decline. The extent to which income inequality in advanced economies has grown is now widely known, though the relative importance of the range of driving forces producing these trends is less clear, as is their importance to economic growth. Rising inequality is not only a concern from a fairness perspective, in itself and in terms of its impacts on social outcomes such as health, crime, and family structures; it is also now increasingly being seen as a core issue for macroeconomic performance, implicated in the economic crisis and slow recovery from it, and as representing a major threat to long-term growth and prosperity. A range of factors has been identified contributing to the rise in income inequality across OECD countries, including technological change, globalization, changes in labor market institutions, and weakening redistribution via taxes and transfers, as well as specific factors affecting the very top of the income distribution and the distribution of wealth and income arising from this. There remain substantial differences across studies as to the relative contribution of particular elements. What is more surprising, perhaps, is that the search for effective responses is still at an early stage, although recently international organizations such as the OECD and IMF have advanced some broad recommendations to tackle inequality while promoting growth. Against this background, our research program will focus on identifying the impacts of inequality on economic growth potential, social cohesion, and the political process. On the back of this, we shall collaboratively suggest a coherent set of responses that would address rising inequality in a manner that promotes inclusive growth. The Executive Summary of this report summarizes our initial findings and conclusions. Three significant points are worth stressing here. First, it appears increasingly clear to us that if the drivers of inequality are not addressed, then inequality may become an increasing drag on economic growth due to a variety of factors which we assess throughout this report and which we shall investigate further in future research. The drag reflects wasted potential and a skills mismatch within labor forces and also that more unequal societies are less successful at investing productively for the long term. Indeed, we highlight that more unequal countries now seem to be growing less robustly than more equal ones, i.e., growth may be lower and more fragile at higher levels of economic inequality. From an investment perspective, an inequality-driven economic drag could take quite different paths in different countries leading to a consequent impact on longer-term relative asset prices and exchange rates. In other words, and put bluntly, it makes good economic sense to understand and address inequality. Second, economic inequalities are everywhere, which makes addressing the underlying issues with simple policy responses very challenging. We show in this report that inequalities have grown not just between countries but between regions within countries, between generations, between industries, and between firms. In particular, demographic forces, most notably the aging population in the developed markets, are creating a new set of inter-generational inequality challenges that are likely to get worse. Globally, wealth inequality is significantly higher than income inequality. Putting an inter-generational lens on this sharpens the issue. The debate around inequality thus needs to be related to issues such as youth unemployment, social mobility, and pension funding. Third, inequality, as well as the impact of other exacerbating factors such as lower social care budgets and the reduced provision of other government-funded services, is now clearly a critical focus in the mainstream political process and in election campaigns in many countries. In aggregate, it appears that inequality is contributing markedly to declining social trust, the erosion of social cohesion, and the fragmentation of the political process. Inequality will likely be an increasing factor in election outcomes, with social media playing a growing role in shaping perceptions. A consensus urgently needs to be reached between government, the public sector, the private sector, and society at large about how to tackle the challenge of inequality in a way that promotes inclusive and necessary economic growth. At the moment, we risk political paralysis, or worse. Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,Authors: Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,

<h2>Addressing a Growing Challenge</h2> <h3>On average, income inequality within developing economies is very high, particularly in Africa, and higher than in the industrialized world, which creates its own major development challenges. But, in aggregate, global income inequality has declined from the late 1980s, and particularly rapidly from about 2008, as developing economies have, on average, closed some of the gap with industrialized countries. Previously, at least since the early 19th century, global inequality had increased. The driving factors behind this change have included the very real impact of globalization and technology on trade and employment, and also the transition of the formerly Communist bloc in Eastern Europe. In very simple terms, globalization has been a positive force in leveling inter-country inequality over the past 30 years. At the same time, the share of the world’s population estimated to be below the World Bank’s $1.90/day extreme poverty threshold has fallen drastically, from 35% in 1990 to 11% in 2013. Despite a major expansion in world population, the number of people in extreme poverty has fallen dramatically from 1.85 billion to under 800 million.</h3> However, within-country inequality in the larger developing countries — the same economies that have enjoyed large income growth and narrowed the differences with rich countries, such as China, India, and Indonesia — has actually increased substantially in recent years. As a result, income inequality within countries now accounts for around a third of global inequality, when it was only one-fifth in 1988. The contribution of inter-country inequality has correspondingly shrunk. Of critical focus to our research, income inequality has increased substantially within many OECD countries over recent decades after a long period of decline. The extent to which income inequality in advanced economies has grown is now widely known, though the relative importance of the range of driving forces producing these trends is less clear, as is their importance to economic growth. Rising inequality is not only a concern from a fairness perspective, in itself and in terms of its impacts on social outcomes such as health, crime, and family structures; it is also now increasingly being seen as a core issue for macroeconomic performance, implicated in the economic crisis and slow recovery from it, and as representing a major threat to long-term growth and prosperity. A range of factors has been identified contributing to the rise in income inequality across OECD countries, including technological change, globalization, changes in labor market institutions, and weakening redistribution via taxes and transfers, as well as specific factors affecting the very top of the income distribution and the distribution of wealth and income arising from this. There remain substantial differences across studies as to the relative contribution of particular elements. What is more surprising, perhaps, is that the search for effective responses is still at an early stage, although recently international organizations such as the OECD and IMF have advanced some broad recommendations to tackle inequality while promoting growth. Against this background, our research program will focus on identifying the impacts of inequality on economic growth potential, social cohesion, and the political process. On the back of this, we shall collaboratively suggest a coherent set of responses that would address rising inequality in a manner that promotes inclusive growth. The Executive Summary of this report summarizes our initial findings and conclusions. Three significant points are worth stressing here. First, it appears increasingly clear to us that if the drivers of inequality are not addressed, then inequality may become an increasing drag on economic growth due to a variety of factors which we assess throughout this report and which we shall investigate further in future research. The drag reflects wasted potential and a skills mismatch within labor forces and also that more unequal societies are less successful at investing productively for the long term. Indeed, we highlight that more unequal countries now seem to be growing less robustly than more equal ones, i.e., growth may be lower and more fragile at higher levels of economic inequality. From an investment perspective, an inequality-driven economic drag could take quite different paths in different countries leading to a consequent impact on longer-term relative asset prices and exchange rates. In other words, and put bluntly, it makes good economic sense to understand and address inequality. Second, economic inequalities are everywhere, which makes addressing the underlying issues with simple policy responses very challenging. We show in this report that inequalities have grown not just between countries but between regions within countries, between generations, between industries, and between firms. In particular, demographic forces, most notably the aging population in the developed markets, are creating a new set of inter-generational inequality challenges that are likely to get worse. Globally, wealth inequality is significantly higher than income inequality. Putting an inter-generational lens on this sharpens the issue. The debate around inequality thus needs to be related to issues such as youth unemployment, social mobility, and pension funding. Third, inequality, as well as the impact of other exacerbating factors such as lower social care budgets and the reduced provision of other government-funded services, is now clearly a critical focus in the mainstream political process and in election campaigns in many countries. In aggregate, it appears that inequality is contributing markedly to declining social trust, the erosion of social cohesion, and the fragmentation of the political process. Inequality will likely be an increasing factor in election outcomes, with social media playing a growing role in shaping perceptions. A consensus urgently needs to be reached between government, the public sector, the private sector, and society at large about how to tackle the challenge of inequality in a way that promotes inclusive and necessary economic growth. At the moment, we risk political paralysis, or worse. Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,Authors: Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,Authors: Brian Nolan,Ebrahim Rahbari,Matteo Richiardi,Luis Valenzuela Rivera,Benjamin Nabarro,

Addressing a Growing Challenge

INEQUALITY AND PROSPERITY IN THE INDUSTRIALIZED WORLD

Tina M Fordham

Robert Annibale

Katsuhiko Aiba

Giada Giani

Andrew Labelle

Kiichi Murashima

Dana M Peterson

<h2>How Implementing a Women's Economic Empowerment Agenda Can Shape the Global Economy</h2> <h3>In 2015 we published the Citi GPS report <a style="" href="https://ir.citi.com/gXFwE63ePkx7QlmKPvIWVs5ar8H%2Fc6Hak%2FGoUBFIEE1FobV%2BC6r0NL%2B52Av76Hnt7RM5GHhviyc%3D">Women in the Economy: Global Growth Generators</a>, which made the case that the role of women in the labor force should be incorporated as a mainstream topic within the debate on global growth for both economic as well as social reasons. In our new report, we dig deeper into the economic case for female economic empowerment through some fresh insights on the key issues as well as through a series of country case studies comparing the U.S. with Canada and Italy with Sweden. Alongside this, we have produced a standalone investigation of the issues facing Japan where harnessing the potential of women in the economy will be vital to protecting even modest growth prospects in the country.</h3> We remain wary of the more exaggerated growth estimates driven by the simple assumption that direct female labor force participation and productivity can be raised fully to the current level of males. Instead, we estimate that significant, and in our view achievable, reductions in workplace gender inequalities could perhaps add around 6% to GDP in the advanced economies over the course of one or two decades — a very significant number relative to the potential of other structural reforms or to the relatively depressed growth prospects in advanced economies more generally. The specific measures required to advance economic gender equality differ widely from country to country. However, common themes emerge around government initiatives such as tax, childcare support, and retirement structures as well as workplace flexibility and other employer-led initiatives. The country comparison between the U.S. and Canada is particularly instructive in this context. In Canada, for example, we show that tax reforms as well as federal and provincial government support for parenting initiatives appear to have made a positive different to female employment rates. In the report we also highlight some key elements of the research done by the UN High-Level Panel on Women's Economic Empowerment (UN HLP), which was established in 2016 and included Citi's Chief Global Political Analyst Tina Fordham as one of its 20 senior representatives. To accelerate progress against the constraints that undermine women's economic opportunity in all aspects of work, the UN HLP has made recommendations to address these constraints, which we outline in the report. The recommendations encompass seven drivers of change: tackling adverse norms and promoting positive role models; ensuring legal protection and reforming discriminatory laws; recognizing and redistributing unpaid work and care; building financial, digital, and property assets for women; changing business culture and practices; improving public sector practices in employment and procurement; and strengthening visibility and representation of women. Picking up on one of the themes in the UN HLP work, we include a chapter in the report that looks at the potential of expanding financial access to women by introducing some practical examples which Citi has pioneered through our Inclusive Finance and Community Development teams. We also have two interviews — one with Simona Scarpaleggia, CEO of IKEA Switzerland and one with President Luis Guillermo Solis of Costa Rica — that discuss both the challenges that management has in maximizing corporate female labor participation and what role the government and private sector can play in advancing the UN principles around women's economic empowerment. Finally, we note that the rise in global assets that are managed according to environmental, social, and governance (ESG) criteria has risen dramatically and the UN's Sustainable Development Goals (SDGs) are increasingly being endorsed by institutional investors as a roadmap to help drive progress on ESG issues. Within the SDG's, women's economic empowerment and diversity are the focus of two of the 17 SDGs and we believe the rise in social impact investing will lead to increased interest in both agendas. Tina M FordhamAuthors: Tina M Fordham,Ebrahim Rahbari,Robert Annibale,Katsuhiko Aiba,Giada Giani,Andrew Labelle,Kiichi Murashima,Dana M Peterson,

English

How Implementing a Women’s Economic Empowerment Agenda Can Shape the Global Economy

WOMEN IN THE ECONOMY II

Ashwin Shirvaikar

Rahul Bajaj

Mohammed Khallouf

Jorge Rubio Nava

<h2>Digital Financial Inclusion in Action</h2> <h3>If you live in the developed world, have a think about the last time you went to your local bank branch. Did you feel fortunate to be there? Did you only really get excited if you were able to get in and out of the building in five minutes flat? How about making a payment online? That’s usually an infinitely better experience and time saver versus going to an actual brick and mortar bank, but did you rejoice in the knowledge that your money was sitting safely in a financial institution? In developed markets, a large majority of the population — &gt;93% in almost all cases — is ‘banked’ meaning they have access to banking and credit. But that is not necessarily the case in emerging markets.</h3> According to the World Bank, almost 1.7 billion people — nearly one-third of the global population — weren’t included in the formal financial system in 2017. When asked, people give a whole range of reasons as to why they don’t use financial services — they don’t trust banks, it’s too far to travel to one, it’s too difficult to open an account or the don’t have the proper documentation. But more than 50 percent of the time, the reason they chose to avoid banking was that they didn’t have enough money to meet the minimum balance requirements or they couldn’t afford the fees and charges that were associated with traditional accounts. In the report that follows, we explore several financial inclusion initiatives, with a particular focus on digital initiatives, which are helping to increase the number of ‘banked’ individuals. We believe we’re living in a period of unprecedented growth in financial inclusion and that by 2022, an additional 700-800 million adults will be included in the formal financial system, leaving just 15% of the global population unbanked (down from 49% in 2011). We also talk to a variety of experts from established leaders and policy makers to emerging digital challengers about how they are helping to transform financial inclusion. Several financial sector business models have been at the forefront of trying to bridge the inclusion gap and we explore several traditional and non-traditional initiatives that are playing a key role in bridging the unbanked population gap. While global regulators have generally been supportive of newer models like mobile money or microfinance, identity issues have been a roadblock in several cases. New upcoming unique identity models are changing the way people bank and national identity programs have facilitated biometric information to tackle these issues. Mobile money is a technology that allows people to retrieve, store and spend money using a mobile devices. Thanks to a combination of simplicity, convenience, and safety, mobile money is becoming an alternative to bank accounts and payments in several emerging and frontier markets. Mobile money has grown at a rapid pace and mobile money operators are replacing traditional bank branches. Several BigTech firms today have a larger customer base and broader geographic reach than leading financial institutions and with their robust customer behavior data, could increasingly provide financial products. Finally, microcredit continues to grow, accompanied by new products and enabled by mobile technology. By designing financial products and methodologies based on an understanding of their client needs and capacity, Microfinance Institutions have overcome some of the biggest obstacles to seeking access to credit or savings products. Authors: Ronit Ghose, CFA,Rahul Bajaj, CFA,Mohammed Khallouf, CFA,Ashwin Shirvaikar, CFA,Robert Annibale,Jorge Rubio Nava,

Digital Financial Inclusion in Action

BANKING THE NEXT BILLION

Catherine L Mann

The Economic Cost of Black Inequality in the U.S. In his Letter from a Birmingham Jail, Dr. Martin Luther King Jr. wrote, “We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly, affects all indirectly.” Today, more than at any time since Dr. King’s assassination, we are bearing witness to the grave injustices affecting our fellow citizens. Black, Latinx, and Native Americans have been hospitalized for COVID-19 at a disproportionately high rate, a direct result of what the Centers for Disease Control and Prevention has identified as “long-standing systemic health and social inequities.” Blacks and People of Color are also bearing a disproportionate share of the pandemic’s economic devastation. And the killings of Ahmaud Arbery, Breonna Taylor, and George Floyd have finally shaken the U.S. and the world awake to the egregious racial inequities in our criminal justice system. As Dr. King noted, these injustices affect all of us. Higher rates of infection among some affect the health of all, and the loss of health, life, and livelihood among communities of color diminish everyone’s economic security. No one should want to live in a society that incarcerates or kills so many of its citizens just because they are black or brown. The privileges we enjoy by working for Citi come with responsibilities. While elected officials and community activists must do their part, so must we. One important thing we can do is to show the costs of racial inequality through objective analysis, which is what the authors of this report have sought so effectively to demonstrate. Our overarching goal for the Citi GPS series is to not only tackle the key opportunities and challenges of the 21st century, but to also address complex societal questions and to not shy away from difficult subjects. As such, we believe we have a responsibility to address current events and to frame them with an economic lens in order to highlight the real costs of longstanding discrimination against minority groups, especially against Black people and particularly in the U.S. The analysis in the accompanying report shows if four key racial gaps for Blacks — wages, education, housing, and investment — were closed 20 years ago, $16 trillion could have been added to the U.S. economy. And if the gaps are closed today, $5 trillion can be added to U.S. GDP over the next five years. These gaps exist based on systemic issues that caused and continue to cause discrimination against Blacks over the years. The gaps in many cases remain wide 60 years after the Civil Rights Movement. In some cases, including in homeownership rates and college degree attainment, the gaps are wider now than in the 1950’s and 1960’s. For each of the gaps faced by Blacks, we identify the degree of the gap between Blacks and whites in wages, labor segmentation, education, wealth, housing and investment and identify the impact closing each gap would have on the U.S. economy. Finally, we outline how we believe governments, corporations, and individuals can work together to eliminate these gaps for good. Our ambition is for this analysis to bring sober perspective as well as hope to our readers as we collectively find substantive and sustainable opportunities to address the gaps we identify. Authors: Dana M Peterson,Catherine L Mann,

<h2>The Economic Cost of Black Inequality in the U.S.</h2> <h3 class="" style="">In his Letter from a Birmingham Jail, Dr. Martin Luther King Jr. wrote, “We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly, affects all indirectly.”</h3> Today, more than at any time since Dr. King’s assassination, we are bearing witness to the grave injustices affecting our fellow citizens. Black, Latinx, and Native Americans have been hospitalized for COVID-19 at a disproportionately high rate, a direct result of what the Centers for Disease Control and Prevention has identified as “long-standing systemic health and social inequities.” Blacks and People of Color are also bearing a disproportionate share of the pandemic’s economic devastation. And the killings of Ahmaud Arbery, Breonna Taylor, and George Floyd have finally shaken the U.S. and the world awake to the egregious racial inequities in our criminal justice system. As Dr. King noted, these injustices affect all of us. Higher rates of infection among some affect the health of all, and the loss of health, life, and livelihood among communities of color diminish everyone’s economic security. No one should want to live in a society that incarcerates or kills so many of its citizens just because they are black or brown. The privileges we enjoy by working for Citi come with responsibilities. While elected officials and community activists must do their part, so must we. One important thing we can do is to show the costs of racial inequality through objective analysis, which is what the authors of this report have sought so effectively to demonstrate. Our overarching goal for the Citi GPS series is to not only tackle the key opportunities and challenges of the 21st century, but to also address complex societal questions and to not shy away from difficult subjects. As such, we believe we have a responsibility to address current events and to frame them with an economic lens in order to highlight the real costs of longstanding discrimination against minority groups, especially against Black people and particularly in the U.S. The analysis in the accompanying report shows if four key racial gaps for Blacks — wages, education, housing, and investment — were closed 20 years ago, $16 trillion could have been added to the U.S. economy. And if the gaps are closed today, $5 trillion can be added to U.S. GDP over the next five years. These gaps exist based on systemic issues that caused and continue to cause discrimination against Blacks over the years. The gaps in many cases remain wide 60 years after the Civil Rights Movement. In some cases, including in homeownership rates and college degree attainment, the gaps are wider now than in the 1950’s and 1960’s. For each of the gaps faced by Blacks, we identify the degree of the gap between Blacks and whites in wages, labor segmentation, education, wealth, housing  and investment and identify the impact closing each gap would have on the U.S. economy. Finally, we outline how we believe governments, corporations, and individuals can work together to eliminate these gaps for good. Our ambition is for this analysis to bring sober perspective as well as hope to our readers as we collectively find substantive and sustainable opportunities to address the gaps we identify. <script async src="https://www.googletagmanager.com/gtag/js?id=DC-6256710"></script> <script> window.dataLayer = window.dataLayer || []; function gtag(){dataLayer.push(arguments);} gtag('js', new Date()); gtag('config', 'DC-6256710'); gtag('event', 'conversion', { 'allow_custom_scripts': true, 'send_to': 'DC-6256710/rerem0/mortg00+unique' }); </script> <noscript> <img src="https://ad.doubleclick.net/ddm/activity/src=6256710;type=rerem0;cat=mortg00;dc_lat=;dc_rdid=;tag_for_child_directed_treatment=;tfua=;npa=;gdpr=${GDPR};gdpr_consent=${GDPR_CONSENT_755};ord=1;num=1?" width="1" height="1" alt=""/> </noscript> Authors: Dana M Peterson,Catherine L Mann,

The Economic Cost of Black Inequality in the U.S.

CLOSING THE RACIAL INEQUALITY GAPS

Elizabeth Curmi

Ying Qin

Miriam Gauer

Jacqueline Gallinetti

Improving Lives, Realizing Potential, Benefitting Everyone Leave no one behind. That was the promise made by governments and international civil society in their commitments to achieve the UN Sustainable Development Goals (SDGs) by 2030. With less than a decade to go it is clear that, if we continue on our current trajectory, we will fall far short of those goals. One challenge is the lack of high-quality and inclusive data enabling us to measure our successes and failures. Globally. women and girls are consistently left out of data collection and analysis. We lack the data to monitor 80 percent of the indicators for SDG 5 on Gender Equality, and only 13 percent of countries dedicate any resources to compiling statistics on gender. Girls and adolescents are even more invisible, as most official sources only collect data about girls and women aged 15-49. This crucial knowledge gap inspired Citi and Plan International to partner and create one of the most holistic data sets yet on the economic and social benefits of investing in adolescent girls and young women. These investments yield triple societal benefits: for girls today; for the adults they will be tomorrow; and for the next generation raised by empowered parents. Existing research on the economic benefits of investing in girls has taken a siloed approach, focusing largely on individual sectors such as education and health. By investing in these sectors, there is proof we can increase economic returns for the individual as well as national GDP. We argue in this report that a comprehensive and fully-costed series of interventions allowing economies to attain 100 percent upper secondary school completion rates for girls by 2030, could lift GDP in emerging economies by 10 percent on average compared to a business-as-usual scenario. Even greater economic returns would be observed beyond 2030, as the benefits are strongly cumulative. The results are staggering, especially when faced with the consequences of inaction. Our Approach Compared to existing studies, we believe the special value of our collaboration is that it brings together in one place the economic and social cases for investing in girls, as well as a multi-component intervention strategy ranging beyond just education, health, and economic empowerment. The analytical framework we created dives deeply into data from eight countries and suggests which combinations of interventions are most appropriate in which settings. Imagine the potential benefits if we could take an integrated approach to investing in girls and young women in all areas of their lives. Making change happen is complex. We argue in this report that structured collaboration between governments, the private sector, NGOs, and philanthropic institutions is paramount to tackling the barriers facing girls. If stakeholders operate in siloes, change will still take place — but it will be achieved at greater cost, with lower impact, and over a longer timeframe. There is no time to waste.Authors: Ying Qin,Elizabeth Curmi,Miriam Gauer,Jacqueline Gallinetti,

<h2>Improving Lives, Realizing Potential, Benefitting Everyone</h2> <h3 class="" style="">Leave no one behind. That was the promise made by governments and international civil society in their commitments to achieve the UN Sustainable Development Goals (SDGs) by 2030. With less than a decade to go it is clear that, if we continue on our current trajectory, we will fall far short of those goals.</h3> One challenge is the lack of high-quality and inclusive data enabling us to measure our successes and failures. Globally. women and girls are consistently left out of data collection and analysis. We lack the data to monitor 80 percent of the indicators for SDG 5 on Gender Equality, and only 13 percent of countries dedicate any resources to compiling statistics on gender. Girls and adolescents are even more invisible, as most official sources only collect data about girls and women aged 15-49. This crucial knowledge gap inspired Citi and Plan International to partner and create one of the most holistic data sets yet on the economic and social benefits of investing in adolescent girls and young women. These investments yield triple societal benefits: for girls today; for the adults they will be tomorrow; and for the next generation raised by empowered parents. Existing research on the economic benefits of investing in girls has taken a siloed approach, focusing largely on individual sectors such as education and health. By investing in these sectors, there is proof we can increase economic returns for the individual as well as national GDP. We argue in this report that a comprehensive and fully-costed series of interventions allowing economies to attain 100 percent upper secondary school completion rates for girls by 2030, could lift GDP in emerging economies by 10 percent on average compared to a business-as-usual scenario. Even greater economic returns would be observed beyond 2030, as the benefits are strongly cumulative. The results are staggering, especially when faced with the consequences of inaction. <h2>Our Approach</h2> Compared to existing studies, we believe the special value of our collaboration is that it brings together in one place the economic and social cases for investing in girls, as well as a multi-component intervention strategy ranging beyond just education, health, and economic empowerment. The analytical framework we created dives deeply into data from eight countries and suggests which combinations of interventions are most appropriate in which settings. Imagine the potential benefits if we could take an integrated approach to investing in girls and young women in all areas of their lives. Making change happen is complex. We argue in this report that structured collaboration between governments, the private sector, NGOs, and philanthropic institutions is paramount to tackling the barriers facing girls. If stakeholders operate in siloes, change will still take place — but it will be achieved at greater cost, with lower impact, and over a longer timeframe. There is no time to waste.Authors: Ying Qin,Elizabeth Curmi,Miriam Gauer,Jacqueline Gallinetti,

Improving Lives, Realizing Potential, Benefitting Everyone

THE CASE FOR HOLISTIC INVESTMENT IN GIRLS

David Lubin

Li-Gang Liu

Oscar Choi

Xiaowen Jin

Jin-Wook Kim

Tracy Xian Liao

Michel Nies

Jerry Peng

Xiangrong Yu

The World According to Xi Jinping Thought With China’s 19th Party Congress now behind us, the primary takeaway is that President Xi Jinping has cemented his role as the most powerful leader in China since President Mao Zedong. This will pave the way for him to extend his term beyond 2022 and put more weight on the economic policies and priorities that he advocates. Given that the ‘China dependence’ of many countries has risen considerably as China has become the largest contributor to global growth (at 40% vs. the U.S. at 16% in 2016), it is important to take a deeper look into the economic policies and initiatives unveiled at the Party Congress. In the report that follows, we outline what was said, examine the implications for Chinese growth based on the policies announced, and also examine the effect of these policies on the rest of the world. Although specific GDP growth targets weren’t mentioned at the Party Congress, the Communist Party of China has repeatedly affirmed its commitment to doubling China’s 2010 GDP and per capita income by 2020, which we estimate would require annual growth of at least 6.3%, which we view as feasible. Economic stability and risk control will continue to be a high priority for China to avoid a hard-landing scenario and maintain a minimum level of acceptable growth no matter the rhetoric. Given the consolidation of political power, we expect more breakthroughs, in industrial upgrading (e.g., Made in China 2025), rural land reforms, second-round urbanization (e.g., the Xiong’an new district, the Yangtze River economic belt, and the Great Bay area), financial reforms and further opening up (e.g., the Belt Road Initiative) as well as environmental protection. We see the accelerated implementation of the ‘Made in China 2025’ initiative leading to China being best-positioned competitively in the communication equipment, advanced railway equipment, aerospace equipment, new energy vehicles and shipbuilding sectors. If the Chinese government is committed to providing significant state resources, even less well-positioned sectors could make rapid inroads. This could create greater competitiveness challenges in other countries who are already significant players in these targeted industries, and hurting countries with a high percentage of their GDP in these targeted industries, particularly countries in Central & Eastern Europe, countries with a large percentage of vehicle production (e.g., Mexico and Germany) and certain Asian countries (i.e., Singapore, Korea, and Thailand). The emphasis on accelerating financial reforms should lead growth in China’s financial markets to the size of U.S. markets by 2025 — a tripling in the size of the bond market to $37.5 trillion, stock market capitalization rising to $31 trillion and banking assets of $68 trillion. In addition, the implementation of the rural vitalization strategy should unlock $20.6 trillion in rural farm wealth. Finally, the new emphasis on environmental issues and top leadership’s determination to solve prominent environmental problems will have an effect on commodities and those countries that export commodities to China. However, combined with the new industrial manufacturing emphasis, there are countries that are both potential winners and losers. Authors: Li-Gang Liu,Johanna Chua,Oscar Choi,David Lubin,Xiaowen Jin,Jin-Wook Kim,Tracy Xian Liao,Michel Nies,Jerry Peng, CFA,Xiangrong Yu,Authors: Li-Gang Liu,Johanna Chua,Oscar Choi,David Lubin,Xiaowen Jin,Jin-Wook Kim,Tracy Xian Liao,Michel Nies,Jerry Peng, CFA,Xiangrong Yu,Authors: Li-Gang Liu,Johanna Chua,Oscar Choi,David Lubin,Xiaowen Jin,Jin-Wook Kim,Tracy Xian Liao,Michel Nies,Jerry Peng, CFA,Xiangrong Yu,

<h2>The World According to Xi Jinping Thought</h2> <h3>With China’s 19th Party Congress now behind us, the primary takeaway is that President Xi Jinping has cemented his role as the most powerful leader in China since President Mao Zedong. This will pave the way for him to extend his term beyond 2022 and put more weight on the economic policies and priorities that he advocates.</h3> Given that the ‘China dependence’ of many countries has risen considerably as China has become the largest contributor to global growth (at 40% vs. the U.S. at 16% in 2016), it is important to take a deeper look into the economic policies and initiatives unveiled at the Party Congress. In the report that follows, we outline what was said, examine the implications for Chinese growth based on the policies announced, and also examine the effect of these policies on the rest of the world. Although specific GDP growth targets weren’t mentioned at the Party Congress, the Communist Party of China has repeatedly affirmed its commitment to doubling China’s 2010 GDP and per capita income by 2020, which we estimate would require annual growth of at least 6.3%, which we view as feasible. Economic stability and risk control will continue to be a high priority for China to avoid a hard-landing scenario and maintain a minimum level of acceptable growth no matter the rhetoric. Given the consolidation of political power, we expect more breakthroughs, in industrial upgrading (e.g., Made in China 2025), rural land reforms, second-round urbanization (e.g., the Xiong’an new district, the Yangtze River economic belt, and the Great Bay area), financial reforms and further opening up (e.g., the Belt Road Initiative) as well as environmental protection. We see the accelerated implementation of the ‘Made in China 2025’ initiative leading to China being best-positioned competitively in the communication equipment, advanced railway equipment, aerospace equipment, new energy vehicles and shipbuilding sectors. If the Chinese government is committed to providing significant state resources, even less well-positioned sectors could make rapid inroads. This could create greater competitiveness challenges in other countries who are already significant players in these targeted industries, and hurting countries with a high percentage of their GDP in these targeted industries, particularly countries in Central &amp; Eastern Europe, countries with a large percentage of vehicle production (e.g., Mexico and Germany) and certain Asian countries (i.e., Singapore, Korea, and Thailand). The emphasis on accelerating financial reforms should lead growth in China’s financial markets to the size of U.S. markets by 2025 — a tripling in the size of the bond market to $37.5 trillion, stock market capitalization rising to $31 trillion and banking assets of $68 trillion. In addition, the implementation of the rural vitalization strategy should unlock $20.6 trillion in rural farm wealth. Finally, the new emphasis on environmental issues and top leadership’s determination to solve prominent environmental problems will have an effect on commodities and those countries that export commodities to China. However, combined with the new industrial manufacturing emphasis, there are countries that are both potential winners and losers. Authors: Li-Gang Liu,Johanna Chua,Oscar Choi,David Lubin,Xiaowen Jin,Jin-Wook Kim,Tracy Xian Liao,Michel Nies,Jerry Peng, CFA,Xiangrong Yu,Authors: Li-Gang Liu,Johanna Chua,Oscar Choi,David Lubin,Xiaowen Jin,Jin-Wook Kim,Tracy Xian Liao,Michel Nies,Jerry Peng, CFA,Xiangrong Yu,Authors: Li-Gang Liu,Johanna Chua,Oscar Choi,David Lubin,Xiaowen Jin,Jin-Wook Kim,Tracy Xian Liao,Michel Nies,Jerry Peng, CFA,Xiangrong Yu,

What We Know, What We Don't Know

CHINA IN TRANSITION

The relevance of gender to economic growth as a mainstream research question is a relatively new field. There is an impressive and growing body of literature on women and the economy most notably from global institutions such as the IMF, the OECD, the United Nations and the World Bank. This year the G20 has also included women as a driver of growth as part of its overall progress agenda. Despite this, most of the work produced by leading economists on global growth and, in particular, on whether we face a future of secular stagnation, still concentrates on monetary and fiscal policy responses. This report in our Citi GPS series is a statement that we at Citi believe that the role of women in the global labor force should be incorporated as a mainstream topic within the debate on global growth for both economic as well as social reasons. We shall be building on this report by developing a deeper research work stream on gender economics. In this report, our global economics team has partnered with Heidi Crebo-Rediker to analyze the dynamics of global female labor force participation. We are delighted to work with Heidi who has enjoyed a distinguished career in both business and government, including as Chief Economist at the State Department under Hillary Clinton where she worked and lectured on the topic of female labor force participation. Average female labor force participation has flat-lined over the past 20 years. In this report, our economists revisit the “Global Growth Generators” thesis that we outlined when we launched our Citi GPS series in 2011 and argue that fresh policy responses, as well as learning from best practice, could improve female labor force participation with significant benefits that are not just economic but also social as well. Looked at purely through an economic lens, greater female labor force participation would drive productivity, reduce the economic drag of adverse demographics and substantially improve the skill mix of the global economy. Of course, our authors point out that much work currently done in the informal economy cannot be ignored and does not get adequately captured in conventional economic measurements. Moreover, there are many cultural and societal issues that lie behind the gender composition of the global labor force, especially in developing economies. These issues also need to be analyzed and understood. In advanced economies, education gaps have largely been closed but other barriers still remain, some in legislation, that impact the gender balance of the workforce. We observe significant progress in countries such as Canada, the Netherlands and Sweden which may offer models that can be leveraged more widely. In Japan, Prime Minister Abe is embracing “Womenomics” as a core pillar of his reform strategy. In developing economies, there is a markedly widespread variance in female economic participation with many social and cultural factors impacting gender equality. The potential for policies and practices – and therefore for economic opportunities for women to improve – is likely highest, on average, in the developing markets. The unlocking of women’s potential in the global economy may well prove to be the key factor that tips the balance from a future of weak growth to one of sustained, inclusive and improving growth over time. I would like to thank our authors for their impactful contribution to this critical global debate and we look forward to developing further research in this area as well as to contributing to the public policy debate on gender economics.

The relevance of gender to economic growth as a mainstream research question is a relatively new field. There is an impressive and growing body of literature on women and the economy most notably from global institutions such as the IMF, the OECD, the United Nations and the World Bank. This year the G20 has also included women as a driver of growth as part of its overall progress agenda. Despite this, most of the work produced by leading economists on global growth and, in particular, on whether we face a future of secular stagnation, still concentrates on monetary and fiscal policy responses.This report in our Citi GPS series is a statement that we at Citi believe that the role of women in the global labor force should be incorporated as a mainstream topic within the debate on global growth for both economic as well as social reasons. We shall be building on this report by developing a deeper research work stream on gender economics.In this report, our global economics team has partnered with Heidi Crebo-Rediker to analyze the dynamics of global female labor force participation. We are delighted to work with Heidi who has enjoyed a distinguished career in both business and government, including as Chief Economist at the State Department under Hillary Clinton where she worked and lectured on the topic of female labor force participation. Average female labor force participation has flat-lined over the past 20 years.In this report, our economists revisit the “Global Growth Generators” thesis that we outlined when we launched our Citi GPS series in 2011 and argue that fresh policy responses, as well as learning from best practice, could improve female labor force participation with significant benefits that are not just economic but also social as well. Looked at purely through an economic lens, greater female labor force participation would drive productivity, reduce the economic drag of adverse demographics and substantially improve the skill mix of the global economy.Of course, our authors point out that much work currently done in the informal economy cannot be ignored and does not get adequately captured in conventional economic measurements. Moreover, there are many cultural and societal issues that lie behind the gender composition of the global labor force, especially in developing economies. These issues also need to be analyzed and understood.In advanced economies, education gaps have largely been closed but other barriers still remain, some in legislation, that impact the gender balance of the workforce. We observe significant progress in countries such as Canada, the Netherlands and Sweden which may offer models that can be leveraged more widely. In Japan, Prime Minister Abe is embracing “Womenomics” as a core pillar of his reform strategy.In developing economies, there is a markedly widespread variance in female economic participation with many social and cultural factors impacting gender equality. The potential for policies and practices – and therefore for economic opportunities for women to improve – is likely highest, on average, in the developing markets. The unlocking of women’s potential in the global economy may well prove to be the key factor that tips the balance from a future of weak growth to one of sustained, inclusive and improving growth over time.I would like to thank our authors for their impactful contribution to this critical global debate and we look forward to developing further research in this area as well as to contributing to the public policy debate on gender economics.

Global Growth Generators

WOMEN IN THE ECONOMY

Helen Krause

Jason Channell

Nardin Baker

Ana Vaz

The Importance of a Multidimensional Approach in Tackling SDG 1 The first of the United Nation’s Sustainable Development Goals (UN SDGs) is to end poverty. While one of the benefits of globalization over the past 30 years has been the reduction in absolute rates of poverty worldwide, poverty is often still simply measured in terms of income levels. Yet poverty is multifaceted and reflects more than a deficiency of income and productive resources. It encompasses economic, social, cultural, and political elements and is inherently interwoven with a lack of fundamental human rights. According to the UN, its manifestations include hunger and malnutrition, inequality, social discrimination and exclusion, deprivation, inadequate access to education and basic services, as well as lack of participation in decision-making. To make progress towards poverty reduction, we need to consider ways to mobilize more investors and businesses to adopt this goal. This report represents an exciting collaboration between Citi and SOPHIA Oxford, which was formed by Oxford University as a not-for-profit partner of the Oxford Poverty and Human Development Initiative (OPHI). Over the past decade, OPHI has developed the field of multidimensional measurement, focused primarily on poverty and well-being, expanding its research and social policy uses. The OPHI multidimensional poverty approach has been adopted in official measures of poverty by the United Nations Development Programme, the World Bank, and more than 30 countries. In this report, Citi’s researchers and data scientists have partnered with the SOPHIA Oxford team to help bring this world class methodology more broadly to the business world. Eliminating poverty and reducing inequalities can deliver substantial growth, and the private sector has a key role to play in making this happen. The good news is that investors are increasingly embracing the UN SDGs and aligning their investment strategies to the 17 goals. The challenge is for these funds to be effectively targeted and their impact measured. This is more important than ever as the world starts to recover from the COVID-19 crisis because the pandemic has increased the gap to achieving several SDGs, including SDG 1 — No Poverty. We provide an overview of measures of poverty in the global economy and then address how the OPHI methodology allows for more nuanced and effective interventions, which can drive both economic growth and social inclusion. We include case studies of where the OPHI approach has been used successfully at a country level and at the corporate level, and in the last chapter we propose using it to harness finance to realize the ambition of SDG 1. We hope you gain fresh insights from this Citi GPS report and are challenged to consider how you can support the adoption of SDG 1. We look forward to sharing the results of the collaboration between Citi and SOPHIA Oxford in future reports and events.Authors: Jason Channell,Ying Qin,Helen Krause,Nardin Baker,Jamie Coats,Ana Vaz,

<h2>The Importance of a Multidimensional Approach in Tackling SDG 1</h2> <h3 class="" style="">The first of the United Nation’s Sustainable Development Goals (UN SDGs) is to end poverty. While one of the benefits of globalization over the past 30 years has been the reduction in absolute rates of poverty worldwide, poverty is often still simply measured in terms of income levels. Yet poverty is multifaceted and reflects more than a deficiency of income and productive resources. It encompasses economic, social, cultural, and political elements and is inherently interwoven with a lack of fundamental human rights. According to the UN, its manifestations include hunger and malnutrition, inequality, social discrimination and exclusion, deprivation, inadequate access to education and basic services, as well as lack of participation in decision-making. To make progress towards poverty reduction, we need to consider ways to mobilize more investors and businesses to adopt this goal.</h3> This report represents an exciting collaboration between Citi and SOPHIA Oxford, which was formed by Oxford University as a not-for-profit partner of the Oxford Poverty and Human Development Initiative (OPHI). Over the past decade, OPHI has developed the field of multidimensional measurement, focused primarily on poverty and well-being, expanding its research and social policy uses. The OPHI multidimensional poverty approach has been adopted in official measures of poverty by the United Nations Development Programme, the World Bank, and more than 30 countries. In this report, Citi’s researchers and data scientists have partnered with the SOPHIA Oxford team to help bring this world class methodology more broadly to the business world. Eliminating poverty and reducing inequalities can deliver substantial growth, and the private sector has a key role to play in making this happen. The good news is that investors are increasingly embracing the UN SDGs and aligning their investment strategies to the 17 goals. The challenge is for these funds to be effectively targeted and their impact measured. This is more important than ever as the world starts to recover from the COVID-19 crisis because the pandemic has increased the gap to achieving several SDGs, including SDG 1 — No Poverty. We provide an overview of measures of poverty in the global economy and then address how the OPHI methodology allows for more nuanced and effective interventions, which can drive both economic growth and social inclusion. We include case studies of where the OPHI approach has been used successfully at a country level and at the corporate level, and in the last chapter we propose using it to harness finance to realize the ambition of SDG 1. We hope you gain fresh insights from this Citi GPS report and are challenged to consider how you can support the adoption of SDG 1. We look forward to sharing the results of the collaboration between Citi and SOPHIA Oxford in future reports and events.Authors: Jason Channell,Ying Qin,Helen Krause,Nardin Baker,Jamie Coats,Ana Vaz,

The Importance of a Multidimensional Approach in Tackling SDG 1

ELIMINATING POVERTY

Andrew Pitt

Amy Thompson

Karen Kardos

Berit Ashla

Tyler Hall

Shaady Salehi

Nick Tedesco

Matt Whittaker

Opportunities in a World of Transition Philanthropy, and within it the broad impact of foundations, charities, and the voluntary sector, are important but not widely understood contributors to the global economy. The recovery from the COVID-19 pandemic creates an opportune moment to assess the key trends in philanthropy, and to ask how the role of philanthropy can better contribute to a healthy and inclusive world as well as to support the delivery of the UN Sustainable Development Goals. Philanthropy has existed through most of human history, with the word philanthropy itself being derived from Ancient Greek with the meaning of “love of humankind.” The notion of philanthropy can stir up controversy for those who think that it is the role of the state to invest and to provide for its citizens, or for others who believe that individual philanthropists can exert too much power and influence through the causes that they support. However, it is important to understand that public and private funding play different and complementary roles. If the two are harnessed successfully, progressive outcomes are achieved. On narrow definitions, the stock of philanthropy equates to just under 3% of global GDP. However, as we show in this report, in some advanced economies the fully adjusted value is 10% or even higher. The scale of this contribution needs to be more broadly recognized, especially within the policymaking world. Many of the world’s greatest challenges can be better overcome by a broader partnership between the public, private, and charity sectors. Philanthropy is going through multiple transitions of which the response to the pandemic is only one. We believe that philanthropy can play a much larger role in the green transition and the move to net zero. There will also be material changes in the global supply of philanthropic capital driven by growing wealth in emerging economies. In addition, there are some notable other transitions, among the most significant of which are the changing aspirations of younger donors; the growing role of female philanthropists; and, critically, the impact that technology will have on the management and targeting of philanthropy. We review each of these transitions and several more in this report. In this report our Citi GPS team has partnered with the Philanthropic Advisory team of Citi’s Private Bank as well as with outside experts to review the role that philanthropy plays in the global economy and what the future may bring. We have conducted an extensive literature review and participated in multiple sessions with expert commentators. We are particularly grateful to the experts listed in the author block of this report for their detailed contributions to our study.Authors: Andrew Pitt,Amy Thompson,Karen Kardos,Berit Ashla,Tyler Hall,Laura MacDonald,Shaady Salehi,Nick Tedesco,Matt Whittaker,

<h2>Opportunities in a World of Transition</h2> <h3 class="" style="">Philanthropy, and within it the broad impact of foundations, charities, and the voluntary sector, are important but not widely understood contributors to the global economy. The recovery from the COVID-19 pandemic creates an opportune moment to assess the key trends in philanthropy, and to ask how the role of philanthropy can better contribute to a healthy and inclusive world as well as to support the delivery of the UN Sustainable Development Goals.</h3> Philanthropy has existed through most of human history, with the word philanthropy itself being derived from Ancient Greek with the meaning of “love of humankind.” The notion of philanthropy can stir up controversy for those who think that it is the role of the state to invest and to provide for its citizens, or for others who believe that individual philanthropists can exert too much power and influence through the causes that they support. However, it is important to understand that public and private funding play different and complementary roles. If the two are harnessed successfully, progressive outcomes are achieved. On narrow definitions, the stock of philanthropy equates to just under 3% of global GDP. However, as we show in this report, in some advanced economies the fully adjusted value is 10% or even higher. The scale of this contribution needs to be more broadly recognized, especially within the policymaking world. Many of the world’s greatest challenges can be better overcome by a broader partnership between the public, private, and charity sectors. Philanthropy is going through multiple transitions of which the response to the pandemic is only one. We believe that philanthropy can play a much larger role in the green transition and the move to net zero. There will also be material changes in the global supply of philanthropic capital driven by growing wealth in emerging economies. In addition, there are some notable other transitions, among the most significant of which are the changing aspirations of younger donors; the growing role of female philanthropists; and, critically, the impact that technology will have on the management and targeting of philanthropy. We review each of these transitions and several more in this report. In this report our Citi GPS team has partnered with the Philanthropic Advisory team of Citi’s Private Bank as well as with outside experts to review the role that philanthropy plays in the global economy and what the future may bring. We have conducted an extensive literature review and participated in multiple sessions with expert commentators. We are particularly grateful to the experts listed in the author block of this report for their detailed contributions to our study.Authors: Andrew Pitt,Amy Thompson,Karen Kardos,Berit Ashla,Tyler Hall,Laura MacDonald,Shaady Salehi,Nick Tedesco,Matt Whittaker,

Opportunities in a World of Transition

PHILANTHROPY AND THE GLOBAL ECONOMY

The Dawn of a New Multi-Trillion Dollar Asset Class Throughout history, economic and social development have gone hand in hand with infrastructure development, be it the road networks and sanitation advances of the Romans (what did they do for us?), the Silk Road, or the maritime advances which led to the age of exploration and resulting global trade. Our modern era has been similarly transformed by the availability of energy, electronic communications, and modern travel which have made the world a much smaller place. However, the amount which we spend on infrastructure has gradually been falling as a percentage of GDP, and, while there are justifications for this, the stock of infrastructure compared to global GDP has fallen. At the same time, there is an enormous social need for infrastructure investment. Over 1.5 billion people have no access to electricity; just under 1 billion still live without safe drinking water, and over 2.5 billion are without access to basic sanitation. If the UN are right, and we need to accommodate an additional 1.5 billion people in the next 20 years, most of whom will be in emerging markets, and most of them in infrastructure-heavy urban centers, then there will be an ever more pressing need for infrastructure investment. The global economy though seems mired in a period of sluggish growth. With interest rates close to zero, or in some cases negative in real terms, and the bazooka of QE already widely deployed, policymakers are running out of monetary levers to pull. This leaves us with the potential of fiscal stimulus, one aspect of which is infrastructure spending which can boost growth using both short-term demand effects, and longer-term supply effects, with the so-called multiplier effect implying that, if done correctly, the resulting GDP boost is larger than the initial investment. However, developed market governments find themselves with debt at typically 100% of GDP, and hence limited capacity to spend, and, while emerging markets are less indebted at 40%, they are reluctant to boost debt and place sovereign ratings at risk. Traditional sources of infrastructure finance such as banks find themselves constrained by regulations such as Basel III, while insurance companies are constrained by Solvency II. Two factors, however, offer an enormous opportunity for the world. Firstly, governments can borrow at historically low rates (if not for free) for incredibly long durations. Perhaps most importantly, though, and the focus of this report, is the potential offered by private sector investment. Returns on equities and bonds have in recent years been at historic lows, and Investors are crying out for yield, in particular for long-dated, stable cashflows and income streams. Infrastructure assets lend themselves perfectly to this need, with often predictable operating characteristics, and very long, multi-decade, useful lives. Moreover, the scale of the opportunity is vast — we estimate a global need for infrastructure spending of $58.6 trillion over the next 15 years. In this report we examine why now could be the time for a global infrastructure push, and where the most exciting opportunities are by region and industry. Most importantly, though, with a need for infrastructure from a social and economic perspective and with funding keen to participate, we examine why it isn’t happening, and what stakeholders, both government and financial, need to do to make it happen. We are faced with a rare opportunity to create and grow a new asset class, build a better world that is fit for the future, and create millions of jobs in the process; and who knows, we may just kick-start the global economy in the process. Authors: Authors: Jason Channell,Elizabeth Curmi, PhD.,David Lubin,Ebrahim Rahbari,

<h2>The Dawn of a New Multi-Trillion Dollar Asset Class</h2> <h3>Throughout history, economic and social development have gone hand in hand with infrastructure development, be it the road networks and sanitation advances of the Romans (what did they do for us?), the Silk Road, or the maritime advances which led to the age of exploration and resulting global trade. Our modern era has been similarly transformed by the availability of energy, electronic communications, and modern travel which have made the world a much smaller place.</h3> However, the amount which we spend on infrastructure has gradually been falling as a percentage of GDP, and, while there are justifications for this, the stock of infrastructure compared to global GDP has fallen. At the same time, there is an enormous social need for infrastructure investment. Over 1.5 billion people have no access to electricity; just under 1 billion still live without safe drinking water, and over 2.5 billion are without access to basic sanitation. If the UN are right, and we need to accommodate an additional 1.5 billion people in the next 20 years, most of whom will be in emerging markets, and most of them in infrastructure-heavy urban centers, then there will be an ever more pressing need for infrastructure investment. The global economy though seems mired in a period of sluggish growth. With interest rates close to zero, or in some cases negative in real terms, and the bazooka of QE already widely deployed, policymakers are running out of monetary levers to pull. This leaves us with the potential of fiscal stimulus, one aspect of which is infrastructure spending which can boost growth using both short-term demand effects, and longer-term supply effects, with the so-called multiplier effect implying that, if done correctly, the resulting GDP boost is larger than the initial investment. However, developed market governments find themselves with debt at typically 100% of GDP, and hence limited capacity to spend, and, while emerging markets are less indebted at 40%, they are reluctant to boost debt and place sovereign ratings at risk. Traditional sources of infrastructure finance such as banks find themselves constrained by regulations such as Basel III, while insurance companies are constrained by Solvency II. Two factors, however, offer an enormous opportunity for the world. Firstly, governments can borrow at historically low rates (if not for free) for incredibly long durations. Perhaps most importantly, though, and the focus of this report, is the potential offered by private sector investment. Returns on equities and bonds have in recent years been at historic lows, and Investors are crying out for yield, in particular for long-dated, stable cashflows and income streams. Infrastructure assets lend themselves perfectly to this need, with often predictable operating characteristics, and very long, multi-decade, useful lives. Moreover, the scale of the opportunity is vast — we estimate a global need for infrastructure spending of $58.6 trillion over the next 15 years. In this report we examine why now could be the time for a global infrastructure push, and where the most exciting opportunities are by region and industry. Most importantly, though, with a need for infrastructure from a social and economic perspective and with funding keen to participate, we examine why it isn’t happening, and what stakeholders, both government and financial, need to do to make it happen. We are faced with a rare opportunity to create and grow a new asset class, build a better world that is fit for the future, and create millions of jobs in the process; and who knows, we may just kick-start the global economy in the process. Authors: Authors: Jason Channell,Elizabeth Curmi, PhD.,David Lubin,Ebrahim Rahbari,

The dawn of a new multi-trillion dollar asset class

INFRASTRUCTURE FOR GROWTH

Ronak S Shah

Catalyzing Growth, Innovation, and Equality Demonstrating and championing the economic case for gender equality in the global workplace has been a consistent feature of the Citi GPS series over many years. In this new report, we have turned our attention to advocating the business case for supporting women entrepreneurs to start and grow businesses. As the world seeks to build back from the pandemic, transition to a low carbon economy, and achieve the potential of the UN Sustainable Development Goals, we believe that building a gender-balanced playing field for entrepreneurs is critical. Supporting women entrepreneurs and women-led businesses is not just the right thing to do socially, it is one of the smartest things that governments, corporations, and the finance community could do economically. Today, women participate in entrepreneurship at 80% the rate of men, according to Global Entrepreneurship Monitor (GEM). This marks a significant improvement over the past 20 years: the equivalent report in 2001 found that women participated in entrepreneurship at roughly half the rate that men did across the countries included in that year’s data set. However, while the pick-up in the simple participation rate is welcome, it masks the fact that women still face many more challenges than men in starting and growing a business. Moreover, much of the growth in participation has been in developing economies where women often start businesses with minimal capital as solo-entrepreneurs in part because they find it even harder to access suitable employment in the formal economy. The International Labour Organization (ILO) estimates that, in 2021, women’s participation in employment was 63% that of men, meaningfully lower than the participation rate as entrepreneurs. There is sadly no shortage of worrying statistics to demonstrate the barriers that many female entrepreneurs face. Lack of access to finance is one of the greatest challenges that women entrepreneurs face around the world. The barrier is perhaps best documented at the venture capital stage: global venture capital funding that went to women-led businesses reached 2.8% of all VC funding in 2019 and fell to 2.3% in 2020.[1] On other statistics, women-owned micro, small, and medium-sized enterprises (MSMEs) make up 23% of the total number of enterprises but account for 32% of the total MSME finance gap. While critical in itself, access to finance is only part of the story, and simply improving access to finance is no guarantee that the entrepreneurial gender gap will close. Women’s entrepreneurial capacity is also materially under-leveraged. The ILO, for example, estimates that 50% of women’s entrepreneurial potential is underused, compared with just 22% of men’s.[2] And, according to the World Bank, 104 out of 190 countries still have legal barriers to women's entrepreneurship. Women entrepreneurs face a series of other barriers in accessing the full business ecosystem. These barriers come with different considerations in different countries, especially in developing economies, but range across legal, cultural and practical limitations on women’s participation in commerce; the difficulty of accessing national and international markets; challenges in building personal networks, with links to mentors who can help navigate the business ecosystem; less access to education and training, especially in business and digital skills; and disproportionate caring and domestic responsibilities, especially among married women. In aggregate, our analysis finds that closing the gender gap in business growth globally could add up to $2.3 trillion to GDP and up to 433 million jobs on a conservative estimate of the substitution effect in the labor market. In addition to simple gains in economic growth and output, women’s economic empowerment also drives much wider social and economic multiplier benefits across families and communities. Women-owned or led businesses generally employ more women employees, which can help drive a virtuous circle in further boosting women’s economic empowerment. In addition, women tend to invest more of their income than men in the health, education, and welfare of their families and communities. Women entrepreneurs can also play a decisive role in achieving the UN Sustainable Development Goals more broadly. Empowering women entrepreneurs is itself an exercise in development as they will create jobs, generate income, build human capital, and drive growth while reducing inequalities leading to reductions in poverty and hunger, and improving health and wellbeing. In addition, women are also an underused source of knowledge, perspective, and innovation, and the businesses they create can provide innovative solutions to global challenges. Having surveyed the global entrepreneurial landscape, we set out a series of recommendations for legislators and also for both public and private capital to help promote more gender-balanced outcomes. Financial institutions, including microfinance initiatives, banks, venture capital and private equity firms, and institutional investors, will be key to unlocking the opportunities around women entrepreneurs. We are here encouraged by two growing trends: the rapid transfer in wealth to women and the rise of environmental, social, and governance (ESG) and gender lens investing. We discuss these trends throughout this report. Unlocking the potential of women’s entrepreneurship requires micro-level interventions alongside a dismantling of macro-level constraints. It also requires concerted actions across the law, public policy and the private sector. Only by partnerships can we put all our resources to productive use and achieve scalable and sustainable impact. [1] Ashley Bittner and Brigette Lau, “Women-Led Start-Ups Received Just 2.3% of VC Funding in 2020,” Harvard Business Review, February 25, 2021. [2] International Labour Organization, Women at Work Trends, March 8, 2016. Authors: Ying Qin,Amy Thompson,Ronit Ghose, CFA,Ronak S Shah,

<h2>Catalyzing Growth, Innovation, and Equality</h2> <h3 class="" style="">Demonstrating and championing the economic case for gender equality in the global workplace has been a consistent feature of the Citi GPS series over many years. In this new report, we have turned our attention to advocating the business case for supporting women entrepreneurs to start and grow businesses. As the world seeks to build back from the pandemic, transition to a low carbon economy, and achieve the potential of the UN Sustainable Development Goals, we believe that building a gender-balanced playing field for entrepreneurs is critical. Supporting women entrepreneurs and women-led businesses is not just the right thing to do socially, it is one of the smartest things that governments, corporations, and the finance community could do economically.</h3> Today, women participate in entrepreneurship at 80% the rate of men, according to Global Entrepreneurship Monitor (GEM). This marks a significant improvement over the past 20 years: the equivalent report in 2001 found that women participated in entrepreneurship at roughly half the rate that men did across the countries included in that year’s data set. However, while the pick-up in the simple participation rate is welcome, it masks the fact that women still face many more challenges than men in starting and growing a business. Moreover, much of the growth in participation has been in developing economies where women often start businesses with minimal capital as solo-entrepreneurs in part because they find it even harder to access suitable employment in the formal economy. The International Labour Organization (ILO) estimates that, in 2021, women’s participation in employment was 63% that of men, meaningfully lower than the participation rate as entrepreneurs. There is sadly no shortage of worrying statistics to demonstrate the barriers that many female entrepreneurs face. Lack of access to finance is one of the greatest challenges that women entrepreneurs face around the world. The barrier is perhaps best documented at the venture capital stage: global venture capital funding that went to women-led businesses reached 2.8% of all VC funding in 2019 and fell to 2.3% in 2020.<a href="#_ftn1" name="_ftnref1">[1]</a> On other statistics, women-owned micro, small, and medium-sized enterprises (MSMEs) make up 23% of the total number of enterprises but account for 32% of the total MSME finance gap. While critical in itself, access to finance is only part of the story, and simply improving access to finance is no guarantee that the entrepreneurial gender gap will close. Women’s entrepreneurial capacity is also materially under-leveraged. The ILO, for example, estimates that 50% of women’s entrepreneurial potential is underused, compared with just 22% of men’s.<a href="#_ftn2" name="_ftnref2">[2]</a> And, according to the World Bank, 104 out of 190 countries still have legal barriers to women's entrepreneurship. Women entrepreneurs face a series of other barriers in accessing the full business ecosystem. These barriers come with different considerations in different countries, especially in developing economies, but range across legal, cultural and practical limitations on women’s participation in commerce; the difficulty of accessing national and international markets; challenges in building personal networks, with links to mentors who can help navigate the business ecosystem; less access to education and training, especially in business and digital skills; and disproportionate caring and domestic responsibilities, especially among married women. In aggregate, our analysis finds that closing the gender gap in business growth globally could add up to $2.3 trillion to GDP and up to 433 million jobs on a conservative estimate of the substitution effect in the labor market. In addition to simple gains in economic growth and output, women’s economic empowerment also drives much wider social and economic multiplier benefits across families and communities. Women-owned or led businesses generally employ more women employees, which can help drive a virtuous circle in further boosting women’s economic empowerment. In addition, women tend to invest more of their income than men in the health, education, and welfare of their families and communities. Women entrepreneurs can also play a decisive role in achieving the UN Sustainable Development Goals more broadly. Empowering women entrepreneurs is itself an exercise in development as they will create jobs, generate income, build human capital, and drive growth while reducing inequalities leading to reductions in poverty and hunger, and improving health and wellbeing. In addition, women are also an underused source of knowledge, perspective, and innovation, and the businesses they create can provide innovative solutions to global challenges. Having surveyed the global entrepreneurial landscape, we set out a series of recommendations for legislators and also for both public and private capital to help promote more gender-balanced outcomes. Financial institutions, including microfinance initiatives, banks, venture capital and private equity firms, and institutional investors, will be key to unlocking the opportunities around women entrepreneurs. We are here encouraged by two growing trends: the rapid transfer in wealth to women and the rise of environmental, social, and governance (ESG) and gender lens investing. We discuss these trends throughout this report. Unlocking the potential of women’s entrepreneurship requires micro-level interventions alongside a dismantling of macro-level constraints. It also requires concerted actions across the law, public policy and the private sector. Only by partnerships can we put all our resources to productive use and achieve scalable and sustainable impact. <a href="#_ftnref1" name="_ftn1">[1]</a> Ashley Bittner and Brigette Lau, “Women-Led Start-Ups Received Just 2.3% of VC Funding in 2020,” Harvard Business Review, February 25, 2021. <a href="#_ftnref2" name="_ftn2">[2]</a> International Labour Organization, Women at Work Trends, March 8, 2016. Authors: Ying Qin,Amy Thompson,Ronit Ghose, CFA,Ronak S Shah,

Catalyzing Growth, Innovation, and Equality

WOMEN ENTREPRENEURS

Ashwin Shirvaikar, CFA QA

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Ashwin Shirvaikar, CFA

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