## June 2024

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**Canonical URL:** [June 2024](https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2024.pdf)

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### World Economic Outlook — Slowdown in Global Medium-Term Growth: What Will it Take to Turn the Tide?
- Publication: April 2024 edition of the World Economic Outlook (analytical chapter by N. Li, C. Maggi, D. Noureldin, C. Okou, A. B. Sollaci, and R. Zymek).
- Key findings:
  - Identifies a significant and widespread slowdown in total factor productivity (TFP) as a key factor dragging down medium-term growth.
  - Increased misallocation of capital and labor between firms within sectors contributes to the TFP slowdown.
  - Demographic pressures and a slowdown in private capital formation further depress growth prospects.
  - Absent policy action or technological advances, medium-term growth is projected to fall well below pre-pandemic levels.
  - High public debt and geoeconomic fragmentation are additional constraints on future growth.
- Policy prescriptions to bolster growth:
  - Improve resource allocation to productive firms.
  - Boost labor force participation.
  - Leverage artificial intelligence for productivity gains.
- Outreach: The April 2024 edition received worldwide attention through a high-level presentation at the Analytical Corner during the Spring Meetings and global outreach in Africa, Asia and the Pacific, Europe, and Latin America.
- Acknowledgement: Support from the UK FCDO Macroeconomic Policy in Low-Income Countries program is gratefully acknowledged in the chapter.

### Applications of FCDO Toolkits for Guinea — 2024 Article IV Consultation and Selected Issues Paper
- Publication date: May 17, 2024 (Article IV Staff Report and Selected Issues Paper for Guinea).
- Methods and tools:
  - Applications of FCDO-supported analytical toolkits: the Multisector Incomplete Markets Macro-Inequality (MIMMI) app and the IMF’s Debt, Investment, Growth, and Natural Resources (DIGNAR) model.
  - Analysis by A. Badel and A. Sultanov on short- and medium-term macroeconomic and distributional impacts of the Simandou project.
- Conclusions:
  - The Simandou project’s success in boosting growth, reducing poverty, reducing inequality, and addressing climate change would heavily depend on proactive government policy, particularly in infrastructure and education.
  - Without such policies, the impact of the project would likely be limited.
  - Extensions and refinements of the MIMMI app were made, enhancing its analytical utility.

### Natural Disasters and Climate Policies in Guinea
- Context: Increased frequency and severity of natural disasters (especially floods) and potential significant carbon-emissions increases from the large mining sector.
- Modeling approach: IMF’s Debt, Investment, Growth, and Natural Disasters (DIGNAD) model used in a Selected Issues Paper for Guinea.
- Simulation results and recommendations:
  - Ex ante resilience investment, financed by grants and complemented with public investment efficiency reforms, yields the best macroeconomic outcomes after natural disasters.
  - Accelerating implementation of recent technical assistance recommendations on C-PIMA (Climate-Public Investment Management Assessment) is crucial.
  - Improving collaborations between the Ministry of Environment and other project planning/implementation ministries enhances resilience.
  - Authorities should continue efforts to mitigate emissions while ensuring sustainable expansion of Guinea's renewable energy sector.

### Côte d'Ivoire — DIGNAD Country Application in the Context of the Resilience and Sustainability Facility
- Analysis: Several DIGNAD model scenarios run as part of an IMF Country Report for Côte d'Ivoire.
- Model purpose: Dynamic general equilibrium model to study the effects of public investment on economic growth and debt sustainability in the context of natural disasters.
- Key outcomes:
  - Scenarios present macro-fiscal outcomes associated with public adaptation investment, economic growth, and debt, relative to steady state.
  - Findings highlight benefits from investments in resilient infrastructure and greater revenue mobilization to attenuate negative effects of natural disasters on debt sustainability.

### Distributional Implications of Medium-Term Growth Prospects
- Source: Research box in chapter 3 of the April 2024 World Economic Outlook (G. Cugat and C. v. Hombeeck).
- Analysis:
  - Estimates for cross-country income convergence using a broad sample of countries and global inequality estimates.
  - Analysis of GDP and welfare drivers across income groups: advanced economies, emerging markets, and low-income countries.
- Focus: How the medium-term growth slowdown could affect global income inequality and convergence between countries.

### Technical Assistance to the Bank of Ghana — FPAS Processes
- Mission dates: April 22 to May 3, 2024 (IMF Institute for Capacity Development TA mission under FPAS).
- Objectives and outcomes:
  - Build analytical capacity and develop Forecasting and Policy Analysis Systems (FPAS) processes at the Bank of Ghana (BoG).
  - Refinement and extension of the BoG’s Quarterly Projection Model (QPM) with a detailed fiscal sector satellite distinguishing between domestic and foreign debt, and featuring a fiscal authority focused on debt stabilization and countercyclical support.
  - Additional analytical tools broadened model-based assessments.
  - Historical shock decompositions identified driving forces behind recent dynamics in key variables.
  - Counterfactual simulations highlighted monetary policy trade-offs between price stability and economic growth in the recent period.
  - TA supported FPAS-based analytical work to inform the BoG’s forward-looking monetary policy formulation.

### Column: “Global Gender Gaps May Never Close on their Own”
- Publication date: May 16, 2024 (column by A. Badel, S. Fabrizio, and R. Goyal on VoxEU).
- Basis: Findings from the FCDO-supported IMF paper ‘When Will Global Gender Gaps Close?’
- Key assertions:
  - Despite progress, there appears to be no imminent prospect of gender equality.
  - Based on labour force participation data over the last 30 years, current trends and policies would narrow gender gaps but are unlikely to close them.
  - Preventing reversals and accelerating reforms are necessary to decisively close gender gaps and unleash benefits of female economic empowerment.

### Do Capital Inflows Spur Technology Diffusion? — Embodied Technology Imports Indicator (ETI)
- Publication date: March 1, 2024 (IMF working paper by G. Cugat and A. Manera).
- Methodology and dataset:
  - Introduces the Embodied Technology Imports Indicator (ETI) measuring technological intensity of imports by leveraging patent data from PATSTAT and product-level trade data from COMTRADE.
  - ETI covers 181 countries, including most low-income countries, over the period from 1970 to 2020; the indicator will soon be available online.
- Empirical findings (local projection difference-in-differences approach):
  - Variations in statutory capital flow regulations increase technological intensity between 7 and 9 percentage points over 5 to 10 years.
  - Accompanied by a significant 28-33 percentage point rise in the volume of gross capital inflows.
  - Foreign direct investment accounts for a 21 percentage point increase.
  - Associated with a 9-12 percentage point shift in the level of real GDP per capita in purchasing power parity terms.
- Dissemination: A high-level summary featured in the May 2024 IMF Research Perspectives newsletter.

### At the Threshold: The Increasing Relevance of The Middle-Income Trap
- Publication date: April 26, 2024 (IMF working paper by P. A. Imam and J. R. W. Temple).
- Approach: Uses finite state Markov chains, constant growth thresholds, and mean passage times to investigate the middle-income trap.
- Findings:
  - Upward mobility observed for the capital-output ratio and human capital, but not for relative TFP.
  - Lack of upward mobility in relative TFP, at least from an intermediate level, suggests escaping the middle-income category can take many years.
  - Middle-income traps may become increasingly apparent in the future.

### Mobile Internet, Collateral, and Banking
- Publication date: March 29, 2024 (IMF working paper by A. D’Andrea, P. Hitayezu, K. R. Kpodar, N. Limodio, and A. F. Presbitero).
- Context and data: Administrative data on credit, internet penetration, and land reform in Rwanda.
- Mechanisms and findings:
  - Complementarity between technology and law can overcome financial frictions.
  - Quasi-experimental variation in 3G availability from lightning strikes and incidental coverage shows mobile connectivity steers borrowers from microfinance to commercial banks and improves loan terms.
  - 3G internet facilitates acquisition of land titles from the reform, which are used as collateral for bank loans and mortgages.
  - Availability of collateral mediates 35% of the overall effect of mobile internet on credit and 80% for collateralized loans.

### Foreign Aid and Big Shocks; Foreign Aid and Conflicts
- Foreign Aid and Natural Disasters:
  - Presentation date: April 26, 2024 (R. Arezki, IMF seminar series; upcoming IMF Working Paper).
  - Preliminary findings:
    - Aid commitment increases following natural disasters; humanitarian aid precedes structural aid.
    - Quantitatively small effect overall.
    - The poorest countries or those facing the most damaging natural disasters do not necessarily receive the most aid.
    - No evidence that foreign aid commitment disburses faster following natural disasters.
    - Political alignment with donors is important, especially in recipient countries with low state capacity.
- Foreign Aid and Conflicts — Effects of 9/11 on Donor Behavior:
  - Presentation date: April 24, 2024 (R. Arezki, seminar at the Austrian Institute of Economic Research).
  - Findings:
    - Relationship between bilateral aid commitments and the onset of armed conflicts shifted from negative to positive after 2001.
    - Grants, rather than loans, and aid for health and humanitarian purposes drive the result.
    - Results robust to checks including substituting armed conflicts with terror attacks, accounting for debt relief initiatives, and using different estimators.
    - Interpretation: A shift in donors’ preferences after the 9/11 attacks toward supporting conflict-affected countries, reflecting the primacy of donors’ interests over recipient needs.

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_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2024.pdf_