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Low‐income developing country group: diverse
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LIDC Sub-Groups by GNI per Capita and Population, 2014
Macroeconomic Developments and Prospects in Low Income Developing - - PowerPoint PPT Presentation
Macroeconomic Developments and Prospects in Low Income Developing - - PowerPoint PPT Presentation
Macroeconomic Developments and Prospects in Low Income Developing Countries Min Zhu Deputy Managing Director Carnegie Endowment for International Peace February 18, 2016 Low income developing country group: diverse LIDC Sub-Groups by GNI
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Low‐income developing countries’ economic performance in historical perspective
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LIDCs sustained strong growth for over a decade, notwithstanding the global crisis
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LIDC: Real GDP Growth
(PPP weighted average, percent)
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And thanks in part to tighter monetary policies and reduced fiscal imbalances, inflation was stabilized…
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LIDC Inflation
(PPP weighted average, percent)
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Public debt burdens eased reflecting debt relief, strong growth, and improved economic policies
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Public Debt
(PPP weighted average, percent of GDP)
25 35 45 55 65 75
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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Global challenges facing LIDCs
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Real GDP Growth
(weighted avg., percent)
The global economy has weakened, with global growth slower than previously expected
1 2 3 4 5 6 7 World Advanced Economies Emerging Economies 2010-2012 2013 2014 2015
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And commodity prices have fallen sharply since mid‐2014
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75 100 125 150 175 200 225 250
2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4
Total Non-energy Crude Oil (US$ per barrel)
Commodity Price Indices
(Index, 2005 =100)
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Recent global financial volatility has been among historical highs
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Episodes of Sustained U.S. Dollar Appreciation
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Macroeconomic challenges in LIDCs
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Commodity price changes has had varied effects across LIDCs…
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The first-round income effect of recent commodity price declines
(Percent of GDP, December 2015 / June 2014, Annualized)
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- 9
- 6
- 3
3 Commodity exporters Oil exporters Diversified exporters June 2014-December 2015
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External financing conditions have also tightened for LIDCs with market access
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EMBIG Sovereign Spread
(Basis Points, USD-denominated, As of 2/03/2016)
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…resulting in significant currency depreciation
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- 50
- 40
- 30
- 20
- 10
Zambia Malawi Mozambique Nigeria Papua New Guinea Afghanistan Mauritania Mongolia Moldova Uganda Madagascar Ghana Gambia, The Rwanda Tanzania Commodity Exporters Diversified Exporters
Depreciation of Currencies
(Selected LIDCs, June 2014-December 2015)
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The share of vulnerable LIDCs now highest since the global crisis
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Growth Decline Vulnerability Index, 2009-16
(LIDCs with low, medium and high vulnerabilities; in percent of total) unweighted)
20 40 60 80 100 2011 2012 2013 2014 2015 2016 Low Medium High
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Looking ahead: three mega trends
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Megatrend (1): Climate change
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Medium‐term vulnerabilities : LIDCs are more exposed to natural disasters
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Average Annual Number of Droughts, Floods, Storms
(Per million square kilometers)
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Megatrend (2): Technological change
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Megatrend (3): Demographic change
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LIDCs: Per Capita GDP in U.S. Dollars, 1980-2015
300 600 900 1200 1500 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
LIDCs, on average, have been growing at a rapid pace
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Domestic policy challenges remain: growth has been largely driven by factor accumulation, not productivity gains
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Contribution to Real GDP Growth
(Percent, average 2000s)
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- 1
1 2 3 4 5 6 All LIDCs Fragile Non-Fragile Commodity Exporters Diversified Exporters
TFP Human capital Labor Capital Sources: PRMED growth accounting database, and IMF staff estimates.
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Policy priorities—different for diverse groups
- Key commodity prices are unlikely to rebound; commodity
exporters need to recalibrate policies
– Short term: smooth adjustment where there is some policy room – Medium term: adjustment cannot be avoided; boost domestic revenue mobilization, achieve diversification, increase TFP through structural reform – Key lesson: build macroeconomic policy space during good times to allow countercyclical action during downswings
- Diversified exporters still enjoying strong growth should rebuild
eroded policy buffers for timely countercyclical policy action
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Policy priorities that are relevant more generally
- Improve domestic revenue mobilization, rationalize spending,
- Address key infrastructure gaps without endangering public debt sustainability
- Modernize monetary frameworks
- Enhance economic resilience (short and medium term)
– Structural reforms are a must
- Be aware of double‐edge nature of capital inflows
– Build economic policy resilience and sound debt management – Consider appropriate pace and sequencing of capital account liberalization
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The IMF stands ready to help
- Countercyclical financial support for balance of payments needs
- Continuous and ongoing policy advice and capacity building
- Key IMF deliverables to boost countries’ resilience as they pursue their development
goals under the 2030 development agenda
- Reforms to IMF concessional facilities
- Boost support for capacity building in domestic revenues and international taxation
- Help countries address the macroeconomic dimensions of infrastructure gap;
- Address specific needs of fragile States and small developing countries;
- Enhance policy analysis on equity, inclusion, and environmental sustainability and bring it to
- perational work;
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