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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The Time is Nigh: How Reforms Can Bring Back Productivity Growth in Emerging Markets

By  Era Dabla-Norris and Kalpana Kochar

(Version in Español)

The era of remarkable growth in many emerging market economies fueled by cheap money and high commodity prices may very well be coming to an end.

The slowdown reflects not just inadequate global demand, but also structural factors that are rendering previous growth engines less effective, and the fact that economic “good times” reduced the incentives to implement further reforms to enhance productivity. With the end of the period of favorable global financing and trade conditions, the time is nigh for governments to make strong efforts to increase productivity—the essential foundation of sustainable growth and rising living standards. Continue reading

Japan’s Three Arrows―Will They Fly?

Jerry SchiffBy Jerry Schiff 

(Versions in 日本語l and 中文)

Discussions in Japan of the “three arrows” of Abenomics—the three major components of Prime Minister Shinzo Abe’s economic plan to reflate the economy—are rampant among its citizens as well as economists, journalists and policy-makers worldwide. Even J-Pop groups are recording paeans to the economic policy named after the newly-elected premier.  It is clear that “Abenomics” has been a remarkable branding success. But will it equally be an economic triumph?

We think it can be, and initial signs are positive.  But such success is not assured. It will require difficult decisions as the country moves into largely uncharted territory. And much will depend on changing expectations within the country.

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Africa: Second Fastest-Growing Region in the World

Antoinette SayehBy Antoinette M. Sayeh 

Sub-Saharan Africa is the second fastest-growing region of the world today, trailing only developing Asia.  This is remarkable compared to the current complicated state of the global economy, with Europe still struggling and the United States slowly on the mend.

In 2012, Sub-Saharan Africa maintained solid growth, with output growth at 5 percent on average. The factors that have supported the region through the Great Recession—strong investment, favorable commodity prices, and generally prudent macroeconomic management—continued to be at play.

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On A Roll: Sustaining Strong Growth in Latin America

By Sebastián Sosa, Evridiki Tsounta, and Hye Sun Kim

(Versions in Español and Português)

Latin America has enjoyed strong growth during the last decade, with annual growth averaging 4½ percent compared with 2¾ in the 1980s and 1990s. What is behind this remarkable economic performance and will this growth be sustainable in the years ahead?

Our recent study (see also our working paper) looks at the supply-side drivers of growth for a large group of Latin American countries, to identify what’s behind the recent strong output performance.

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A Missing Piece In Europe’s Growth Puzzle

moghadamsmallBy Reza Moghadam

Even before the latest euro area GDP numbers and Italian elections cast a shadow over the continent, economists were struggling to reconcile the steady improvement in market sentiment with the more downbeat data on the economy, production, orders, and jobs.

This video looks at this puzzle from a somewhat different perspective than the usual—and still correct—narrative of weak banks and over-indebted public sectors caught in a vicious cycle. More specifically, we examine the role of household and corporate balance sheets in the countries under financial market stress and the implications for policy priorities.

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Latvia’s Economic Potential: Recovery and Reforms

david moore

by David Moore

Latvia’s economy has attracted international attention out of all proportion to its size. Many observers know that Latvia returned to strong economic growth after a severe downturn in 2008 and 2009 and a tough austerity program.  In late 2012, Latvia even repaid the IMF in full, several years early.

But the international consensus ends there. Critics of Latvia’s economic strategy point to continuing high rates of unemployment and poverty; advocates point to the benefits of frontloading spending cuts and tax increases to lay the foundations for recovery.

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