For the two off-target groups, growth during the recent global crisis did not fall below the rates in the reference period (1990–2009), corroborating other economic assessments that low-income countries did relatively well (table 6). Three factors explain why the recent crisis was different for low-income countries. First, policies and institutions improved before the crisis, and economic growth accelerated after the mid-1990s--particularly after 2000. Second, unlike previous crises, the recent one was not caused by domestic policy failure, which would have severe impacts on human development outcomes--particularly on child and maternal mortality. Third, spending on social safety nets was protected by governments with the assistance of international financial institutions and the donor community (World Bank 2010). Even during the peak in 2009, their average growth stayed in positive territory.

The global crisis struck the on-track developing countries much harder. At its peak, growth in this group was negative. However, many of the countries are higher-middle-income ones-particularly in Eastern Europe, where the MDGs were less of a challenge.

Going forward, prospects for the growth factor clearly depend very much on the strength of the global recovery from the recent global economic crisis or the Great Recession. If the financial turmoil in the industrialized countries continue to have limited effects on developing countries and if growth of developing countries returns to the pre-crisis record as expected currently, then the prognosis on the MDGs from the growth factor will be good. There is significant uncertainty and short-term downside risks however. Developing countries are generally more vulnerable to an unfavorable outturn than they were in 2007. Although developing countries’ fiscal position and growth prospects are healthier than developed countries, they have generally less fiscal space and weaker conditions than in 2007 (World Bank 2011b and c).

Where a problem may likely surface is in improving policy and institutions, given the few years left until 2015. A one-standard-deviation improvement in the CPIA is equivalent to a 0.5-point increase, or about the difference between the CPIA for on-target countries and for countries far from the target (see table 5). A 0.5-point increase in a CPIA rating is the normal award for an improvement in any policy area in a country. But to do this consistently for all the 16 questions in the CPIA is much harder. In any given year, a 0.1-point increase in the overall score represents a significant policy improvement for a country; a 0.2- or 0.3-point increase represents a substantial policy shift or regime change--rare for any country.

But it is certainly conceivable over time. The World Bank’s CPIA has undergone changes to improve its assessment and is only broadly consistent over time. For instance, from 1998 to 2003, 32 countries (24 percent of developing countries for which scores are available) experienced an improvement of 0.5 points or better, especially countries in Eastern Europe. More recently, during the period 2004–09 when the new system has been stable, countries that have achieved an improvement of 0.5 include Georgia, Nigeria, and Seychelles. As one of the few broad measures available for policy and institutions, it is a proxy for the point that significant policy reforms are needed, especially for outcome-based or system-oriented MDGs. Because 22