Infrastructure Investment Inversin en Infraestructura Para Impulsar - - PowerPoint PPT Presentation

Joaquim Levy

Enhancing Resilience and Re-balancing Economic Growth: Infrastructure Investment

Inversión en Infraestructura Para Impulsar la Resiliencia y Re-equilibrar el Crecimiento Económico

Enhancing Resilience and Re-balancing Economic Growth

Joaquim Levy

Paraguay has been resilient to global and regional shocks …

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Feeble and uneven global growth and sluggish recovery amid high political and policy uncertainty Weak global trade and persistently low commodity prices weigh on near- term outlook of emerging markets Growth in Latin America still below pre-crisis levels, afflicted by declining terms-of-trade and decelerating external demand Paraguay defies regional trend Robust growth in trade-related sectors and construction Weaker private demand offset by higher exports and public investment

Enhancing Resilience and Re-balancing Economic Growth

Joaquim Levy

… with improving terms of trade …

3 Enhancing Resilience and Re-balancing Economic Growth

Commodity Terms of Trade (2011-16)

(Percent Change)

Sources: Gruss (2014) and staff calculations.

–30 –20 –10 10 20 VEN BOL ECU COL PER BRA CHL ARG SUR URY PRY GUY

Change from February 2016 to August 2016 Change from December 2011 to February 2016

Joaquim Levy

… thanks to substantial improvements in its macro policy mix.

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Three major developments Price stability and fiscal discipline Diversification of products and markets Structural transformation But stalled poverty reduction due to less dynamic growth Improve welfare and raise shared prosperity through new sources of inclusive growth

Enhancing Resilience and Re-balancing Economic Growth

Joaquim Levy

Infrastructure is critical to inclusive growth and enhanced resilience.

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Paraguay’s “blessing” of substantial natural resources and “social dividend” of young population Infrastructure … Supports productive capacity, competitiveness, and export capacity Enhances preparedness for natural disasters and climate risk

Enhancing Resilience and Re-balancing Economic Growth

Joaquim Levy

Mostly private investment but public spending above regional trend …

6 Enhancing Resilience and Re-balancing Economic Growth

Real Public/Private Investment (Gross Fixed Capital Formation): Latin America and Caribbean vs. Paraguay

(U.S. dollar billion and indexed (2007=100))

80 100 120 140 160 180 200 220 200 400 600 800 1,000 1,200 1,400 2007 2008 2009 2010 2011 2012 2013

Latin America and the Caribbean

Public Investment Private Investment Public Investment (indexed, rhs) Private Investment (indexed, rhs) 80 100 120 140 160 180 200 220 0.0 1.0 2.0 3.0 4.0 5.0 6.0 2007 2008 2009 2010 2011 2012 2013

Paraguay

Public Investment Private Investment Public Investment (indexed, rhs) Private Investment (indexed, rhs)

Joaquim Levy

… but efficiency of public investment is below that of regional and global peers.

7 Enhancing Resilience and Re-balancing Economic Growth

Infrastructure Efficiency Frontier (2013)

Infrastructure Hybrid Indicator (x-axis: public capital stock, in U.S. dollars; y-axis: infrastructure indicator, higher = better)

Sources: Center for International Comparisons (2013); IMF, World Economic Outlook database; OECD (2014); World Economic Forum (2014); World Bank, World Development Indicators database.

Rest of the world Latin America and the Caribbean (LAC) Paraguay

Joaquim Levy

Substantial infrastructure gap relative to countries with similar level of income

8 Enhancing Resilience and Re-balancing Economic Growth

Infrastructure Quality Relative to GDP per Capita (2014)

(x-axis: GDP per capita, PPP dollars, log-scale; y-axis: infrastructure quality index (0=worst, 7=best))

Sources: World Economic Forum; IMF Western Hemisphere DepartmentRegional Economic Outlook (April 2016). Note: PPP = purchasing power parity.

Rest of the world Latin America and the Caribbean (LAC) Paraguay

Joaquim Levy

Fiscal constraints will require more PPPs …

9 Enhancing Resilience and Re-balancing Economic Growth Sources: IMF, World Bank PPI Database.

PPP Investment and Capital Stock

Paraguay vs. Latin America and the Caribbean (LAC) (2007=100)

100 110 120 130 140 150 160 170 2007 2008 2009 2010 2011 2012 2013 LAC PPP Investment Paraguay PPP Investment

Joaquim Levy

… but there is still some room for improving the PPP environment.

10 Enhancing Resilience and Re-balancing Economic Growth

Overall Public-Private Partnership Environment (2014)

Ranking of PPP Favorability, By Country (Rank)

Source: Economist Intelligence Unit (2014).

2 4 6 8 10 12 14 16 18 20 CHL BRA PER MEX COL GTM HND URY JAM PRY CRI SLV NIC TTO ARG DOM PAN ECU VEN

Joaquim Levy

Upgrading Paraguay’s infrastructure needs to focus on …

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Three areas of concern: Energy paradox Landlocked syndrome Urbanization spillovers Closing infrastructure gap not an end in itself Also education and governance critical to effective re-balancing of long- term growth Need to understand long-term socio-economic trends and challenges

Enhancing Resilience and Re-balancing Economic Growth

Joaquim Levy

Thank you!

Enhancing Resilience and Re-balancing Economic Growth