Macroeconomic Developments and Prospects in Low-Income Developing Countries - 2016
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Summary:
This paper is the third in a series assessing macroeconomic developments
and prospects in low-income developing countries (LIDCs). The first of
these papers (IMF, 2014a) examined trends during 2000–2014, a period of
sustained strong growth across most LIDCs. The second paper (IMF, 2015a)
focused on the impact of the drop in global commodity prices since mid-2014
on LIDCs—a story with losers (countries dependent on commodity exports,
notably fuel) and winners (countries with a more diverse export base, where
growth remained robust).
The overarching theme in this paper’s assessment of the macroeconomic
conjuncture among LIDCs is that of incomplete adjustment to the new world
of “lower for long” commodity prices, with many commodity exporters still
far from a sustainable macroeconomic trajectory (Chapter 1). The analysis
of risks and vulnerabilities focuses on financial sector stresses and
medium-term fiscal risks, pointing to the actions, including capacity
building, needed to manage and contain these challenges over time (Chapter
2). With 2016 the first year of the march towards the 2030 development
goals, the paper also looks at how infrastructure investment can be
accelerated in LIDCs, given that weaknesses in public infrastructure (such
as energy, transportation systems) in LIDCs are widely seen as a key
constraint on medium-term growth potential (Chapter 3).
With the sharp adjustment in commodity prices now into its third year, some
of the key messages of the paper are familiar: a) many commodity exporters,
notably fuel producers, remain under significant economic stress, with
sluggish growth, large fiscal imbalances, and weakened foreign reserve
positions; b) countries with a more diversified export base are generally
doing well, although several have been hit by declines in remittances,
conflict/natural disasters, and the contractionary impact of macroeconomic
stabilization programs; c) widening fiscal imbalances, in both commodity
and diversified exporters, have resulted in rising debt levels, with severe
financing stress emerging in some cases; and d) financial sector stresses
have emerged in many LIDCs, with expectations that these strains will
increase in many commodity exporters over the next 12–18 months. Key
messages on financial sector oversight, on medium-term fiscal risks, and on
tackling infrastructure gaps are flagged below.
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Spanish
Series:
Policy Papers
English
Publication Date:
November 23, 2016
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