How Low-Income Countries Can Diversify and Grow


By Chris Papageorgiou, Lisa Kolovich, and Sean Nolan 

(Version in Español)

Low-income countries have spent a lot of time thinking about how they can achieve faster growth, and we have done some research to help them. We found that pursuing export diversification is a gateway to higher growth for these economies. Using a newly constructed diversification toolkit, our empirical analysis shows that both the range and quality of the goods a country produces has a direct impact on growth 

Country trends 

Low-income countries have historically depended on a narrow range of primary products and few export markets for the bulk of their export earnings.

But export diversification is associated with higher per capita incomes, lower output volatility, and higher economic stability—relationships that can be tracked using our new publically available  dataset, which gives researchers and policymakers access to measures of export diversification and product quality for 178 countries from 1962-2010.

We have looked at two measures of export diversification and their impact on economic growth.  One measure captures diversification into new product lines, the other development of a more balanced mix of existing products.  Analysis using these measures shows that export diversification in low-income countries is indeed among the most effective drivers of economic growth.

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The New Frontier: Economies on the Rise


Min ZhuBy Min Zhu

(Version in 中文,FrançaisPortuguês, and Español)

There is a group of fast-growing low-income countries that are attracting international investor interest—frontier economies. Understanding who they are, how they are different, and how they have moved themselves to the frontier matters for the global economy because they combine huge potential with big risks. 

Get to know them  

The first thing to note is that some of these countries already have moved to the lower-middle income group. While a working definition of frontier economies is subject to further discussion, broadly speaking, these countries have been deepening their financial markets, such as Bangladesh, Kenya, Nigeria, Mozambique, and Vietnam.

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Targeted Policies Mean True Transformation in Africa


Antoinette SayehBy Antoinette M. Sayeh

In my many travels to sub-Saharan Africa, a frequent question on the lips of policymakers is the following: “Sure, we know that growth has not been inclusive enough and poverty remains high in most of our countries, but what exactly can we do to make growth more inclusive?” This is an important question that the latest edition of the Regional Economic Outlook for sub-Saharan Africa takes a stab at.

It is well known by now that growth in sub-Saharan Africa for the past 15 years or so has on average been quite strong. What is less well known perhaps is that a number of human development indicators such as infant and maternal mortality, primary school enrollment and completion rates, have also improved (see Chart 1).

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For Africa, Good Policies Bring Good Prospects


Antoinette SayehBy Antoinette M. Sayeh

(Version in Français)

Once again, the latest review of growth prospects for sub-Saharan Africa shows that the region’s economy is in strong health. Growth in the region is set to pick up to 5½ percent in 2014 compared to 4.9 percent last year (see Chart 1). My view is that this growth momentum will continue over the medium term if countries rise to new challenges and manage their economies as dexterously as they have over the past decade or so.

So what explains this continued strong growth performance? Apart from good macroeconomic policies in the region, the growth has been underpinned by investment in infrastructure, mining, and strong agricultural output. And favorable global tailwinds—high demand for commodities and low interest rates—have played a major supporting role.

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Socrates & the Pope: Overheard at the IMF’s Spring Meetings


By IMFdirect editors

Socrates’ famous method to develop his students’ intellect was to question them relentlessly in an unending search for contradictions and the truth—or at the very least, a great quote.

The method was alive and well among the moderators, panelists and audiences of the IMF’s Spring Meetings seminars that took place alongside official discussions, where boosting high-quality growth, with a focus on the medium term, was at the top of the agenda.  Our editors fanned out and found a couple of big themes kept coming up.  Here are some of the highlights.

Monetary policy 

Lots of people are talking about what happens when the flood of easy money into emerging markets thanks to low interest rates in advanced economies like the United States slows even more than it has in the past year.

At a seminar on fiscal policy the discussion focused on the challenges facing policymakers as central banks slowly exit from unconventional monetary policy and interest rates begin rising.

A live poll of the audience found 63 percent said the global economy remains weak and unconventional monetary policies should remain in place.

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Arab Economic Transformation Amid Political Transitions


Masood Ahmed #2By Masood Ahmed

(version in عربي)

The International Monetary Fund released today a new paper entitled “Toward New Horizons—Arab Economic Transformation amid Political Transitions.”

The paper makes the case for the urgency of launching economic policy reforms, beyond short-term macroeconomic management, to support economic stability and stronger, job-creating economic growth in the Arab Countries in Transition—Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen.

These countries face the risk of stagnation if reforms are delayed further.Economic conditions have deteriorated from transition-related disruptions, regional conflict, an unclear political outlook, eroding competitiveness, and a challenging external economic environment.

As economic realities fall behind peoples’ expectations, there is a risk of increased discontent. This could further complicate the political transitions, impairing governments’ mandates and planning horizons and, consequently, their ability to implement the policies necessary to catalyze the much-needed economic improvements.

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As Demand Improves, Time to Focus More on Supply


2010 WEO BLANCHARD By Olivier Blanchard

(Version in  FrançaisEspañol, Русский, عربي中文  and 日本語)

The dynamics that were emerging at the time of the October 2013 World Economic Outlook are becoming more visible. Put simply, the recovery is strengthening.

In our recent World Economic Outlook, we forecast world growth to be 3.6 percent this year and 3.9 percent next year, up from 3.0 percent last year.

In advanced economies, we forecast growth to reach 2.2 percent in 2014, up from 1.3 percent in 2013.

The recovery which was starting to take hold in October is becoming not only stronger, but also broader.  The various brakes that hampered growth are being slowly loosened.   Fiscal consolidation is slowing, and investors are less worried about debt sustainability. Banks are gradually becoming stronger. Although we are far short of a full recovery, the normalization of monetary policy—both conventional and unconventional—is now on the agenda.

Brakes are loosened at different paces however, and the recovery remains uneven.

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If China Sneezes, Africa Can Now Catch a Cold


By Paulo Drummond and Estelle Xue Liu

(Version in  中文)

Growing links with China have supported economic growth in sub-Saharan Africa. But the burgeoning commercial and financial ties between the developing subcontinent and the world’s second-biggest economy carry risks as well. These links also expose sub-Saharan African countries to potentially negative spillovers from China if the Asian giant’s growth slows or the composition of its demand changes.

The old aphorism “If America sneezes, the world catches a cold” referred to the U.S. economy’s role as a locomotive for the global economy, but it can now apply to any symbiotic relationship between a dominant economy and its clients. China has become a major development partner of sub-Saharan Africa. It is now the subcontinent’s largest single trading partner and a key investor and provider of aid.

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Mali – At the Dawn of a New Year


MD's Updated HeadshotBy Christine Lagarde

(Version in Français)

My second stop on this trip to Africa, after Kenya, was Mali—a country that is facing an extraordinarily difficult transition: from restoring political stability to securing economic stability—from crisis to recovery.

Having gone through massive turmoil in 2012, Mali is emerging successfully, thanks to the perseverance and fortitude of its people. Parliamentary and presidential elections have been held, and the newly elected government has put forth a new economic program aimed at increasing growth and reducing poverty.

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A New Frontier for Kenya and Africa


MD's Updated Headshot By Christine Lagarde

For yet a third year I have kept my tradition of starting the New Year with a visit to Sub-Saharan Africa—a region that truly offers great promise! As the world economy has remained focused on the crisis of the advanced economies, Africa has quietly forged ahead with strong growth led by a vibrant private sector and surging foreign investment. Over the past decade Sub-Saharan Africa has posted growth averaging 5.6 percent a year.

The countries of East Africa have done especially well. So what better place to begin my travels this year than in Kenya, which has emerged as one of the region’s “frontier economies”—countries whose recent performance is propelling them toward middle-income status.

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