Public Investment in infrastructure effects in Public Investment in - - PowerPoint PPT Presentation

December 2013

Public Investment in infrastructure effects in Public Investment in infrastructure effects in the growth and human development of the growth and human development of Nicaragua Nicaragua

Expert Group Meeting Expert Group Meeting “ “Macroeconomic Chalanges to Macroeconomic Chalanges to development policies post development policies post-

• 20125: lessons from recent

20125: lessons from recent country experiences country experiences “ “

Marvin Miranda Banco Central de Nicaragua

Agenda

I . Background I I . Methodology I I I . Results I V. Considerations

Background Background

Banco Central de Nicaragua

The Government objective is to achieve the Millennium Development Goals (MDG) by 2015 It has invested in health, education, and housing But… .. There is an evident necessity to make structural changes in the context in which the population lives Currently, the public fixed capital expenditure in for roads and energy is 2.2% of GDP The purpose is to trigger processes multipliers

Methodology Methodology

Banco Central de Nicaragua

Methodology Methodology

Banco Central de Nicaragua

Transmission mechanism of increasing the public investment in infrastructure

Results Results

Macroeconomic indicators Macroeconomic indicators

Banco Central de Nicaragua

Source: MAMS

(Average growth rate, deviations in percentage points) I ndicator Base Scenario Financing Scenarios Taxation Dom estic Borrow ing External Debt GDP 4.17 0.29

• 0.02

0.38 Private Consum ption 2.98

• 0.38
• 0.05

0.41 Governm ent Consum ption 3.95 0.26 0.26 0.26 Fixed Private I nvestm ent 2.12 0.12

• 3.15

0.46 Fixed Governm ent I nvestm ent 9.66 13.33 12.78 13.48 Exports 6.2

• 0.14
• 0.26
• 1.0

I m ports 3.44 0.28

• 0.31

0.73

Unem ploym ent rate

Desviation from the projected base scenario projected to 2 0 1 5

Source: MAMS.

Unenployment Rate Unenployment Rate

Banco Central de Nicaragua

Base 2 0 0 6 Projetion Base 2 0 1 5

Total

5.17 4.43

Unem ploym ent rate

Percentage

Source: MAMS.

MDG: Base and MDG: Base and alternatives scenarios alternatives scenarios

Banco Central de Nicaragua

MDG and indicators Base Scenario w ithout a shock Goal Financing Scenarios ( 2 0 1 5 ) 2 0 0 6 / 1 2 0 1 5 2 0 1 5 Taxation Dom estic Borrow ing External Debt ODM1 : Population in poverty (% ) 42.5 37.0 38.4 36.8 34.2 ODM1 : Population in extreme poverty (% ) 14.6 12.7 13.6 12.4 10.9

MDG2: Primary School completion rate (%)

10.1 74.5 86.8 76.2 78.2 81.3

MDG4: Infant mortality (rate by thousands)

35.0 17.2 17 16.9 16.4 15.8

MDG5: Maternal Mortality (rate by hundreds of thousands)

89.6 45.2 40 44.1 42.8 40.9

MDG7a: Effective coverage of clean water (%)

63.0 76.6 85.0 78.5 78.9 79.6

MDG7b: Sanitary cover aqueducts (%)

36.1 57.0 73 57.4 58.7 60.6 Fuente: Estimación MAMS

Notas : 1/ Para los indicadores asociados al ODM1 el año base es 2009, y no 2006 como sucede para el resto de los ODM.

Inequality Inequality

Banco Central de Nicaragua

Categories of effects Base Taxation Dom estic Borrow ing External Debt Unem ploym ent rate by group 0.007 0.007 0.007 0.007 Em ploym ent by productive sector ( p,s,t) 0.009 0.008 0.007 0.005 I ncom e Structure ( adjust factor by average labor incom e)

• 0.012
• 0.009
• 0.012
• 0.013

Average level if labor incom e 0.000 0.000 0.000 0.001 Educative calification ( c, nc) 0.009 0.006 0.008 0.008 Total 0.401 0.400 0.399 0.396

Source: Microsimulations using MAMS results.. Note: 2009 Gini is 0.388.

Percentage points

Marginal efects at the GINI indicator

Considerations Considerations

Public investment is a policy instrument that:

• Has a positive effect in the product, private investment, and employment.
• Also increment the acces to education ant health.

It has a transmission mechanism which improve social indicators generating oportunities But… in general the results don’t have the expected magnitude

• The impacts of the increment in the invesment in infraestructure will be

evident in the long run, because it has a cumulative multiplier effect.

The scenerio that presents better performance in the macroeconmic and social sense is the financing with external debt

Banco Central de Nicaragua

Summary Summary

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Banco Central de Nicaragua