Despite significant progress in recent decades, labor markets across the world remain divided along gender lines. Female labor force participation has remained lower than male participation, gender wage gaps are high, and women are overrepresented in the informal sector and among the poor. In many countries, legal restrictions persist which constrain women from developing their full economic potential. While equality between men and women is in itself an important development goal, women's economic participation is also a part of the growth and stability equation. In rapidly aging economies, higher female labor force participation can boost growth by mitigating the impact of a shrinking workforce. Better opportunities for women can also contribute to broader economic development in developing economies, for instance through higher levels of school enrollment for girls.
The right choice between subsidies, vouchers, or in-kind distribution can help countries save precious resources
The question for policymakers is how to seize new opportunities to renew Asia’s economic growth
In a world of frequent shocks, central bank communications should anchor expectations by explaining how policy responds to changing conditions, rather than committing to a fixed path
Many G20 economies face constraints from excessive labor, product-market, or consumer regulations, an IMF survey shows
Authors probe complex issues to shed light on global economic challenges
After restoring stability, Argentina needs to turn hard-won gains into lasting prosperity
© 2026 International Monetary Fund. All rights reserved.
China’s extraordinary economic rise over the past four decades, driven by market-oriented reforms and integration into global value chains, transformed it into one of the world’s largest economies. However, the growth model, that has recently relied heavily on debt-financed investment, is facing mounting challenges, including from rising misallocation, declining labor force, weak domestic demand, elevated financial risks, and increasing geoeconomic tensions. This book argues that China is at a fork in the road and must transition to a new growth model centered on household consumption, services, and productivity gains. The chapters outline a comprehensive reform agenda, including strengthening social safety nets, expanding the service sector, improving business dynamism, scaling back industrial policies, and modernizing fiscal, monetary, financial and insolvency frameworks. Together, these reforms aim to support more balanced and sustainable growth while improving living standards.
This paper examines the effect of alternative digital lending—defined as digital credit provision by non‑bank financial intermediaries (NBFIs)—on bank and systemic risk taking and competition. The paper focuses on Sociedades Financieras Populares (SOFIPOs) which constitute a regulated and well‑documented NBFI segment allowing an empirical assessment of the relationship between digital non-bank lending expansion and bank outcomes. Using a quarterly sample of 53 Mexican banks and 8 of these non-banks for the period 2018Q1–2024Q4, we document that growth in alternative digital lending is associated with lower individual bank risk-taking and stronger competitive pressures, with the latter effect being stronger for small banks. Reflecting the moderate size of digital lenders in Mexico and the compositional reallocation between bank and non‑bank credit, overall systemic risk appears broadly unaltered by the entry of the new players.
Paraguay’s financial system is bank dominated and currently liquid, profitable, and well capitalized. Credit growth has been strong in recent years—outpacing regional peers—in the context of robust economic activity. While it has moderated more recently, consumer credit continues to expand more rapidly, supported by digitalization, strong economic activity, and greater financial inclusion. Although NPLs remain close to historical lows, this raises questions about potential vulnerabilities, especially if combined with other shocks, such as droughts. For instance, in 2019 and 2022, Paraguay experienced two droughts, which coincided with periods of flat economic growth, owing to their negative impact on agricultural and hydroelectric production, as well as river navigation. The particularly severe drought in 2022 reduced agricultural output by 33.6 percent in the first half of the year and was followed by a significant increase in NPLs over the subsequent year. To examine these questions, this paper uses a macro financial modeling tool developed by the IMF Institute for Capacity Development customized for the case of Paraguay. Staff considered two shock scenarios: a drought calibrated to the experiences in 2019 and 2022, and an asset quality deterioration in addition to the endogenous deterioration due to the drought. The results suggest that Paraguay’s financial system is resilient to these scenarios, with buffers sufficient to sustain the provision of credit—and thereby supporting economic growth—even under combined shocks. However, more severe shock combinations could generate amplification effects, including as banks’ efforts to rebuild buffers would be associated with tighter financial conditions. These findings underscore the importance of close supervisory monitoring and strengthening the supervision of climate-related risks. Development of the macroprudential policy toolkit, especially of borrower-based tools (e.g., DSTI limits), would also increase the room of maneuver to contain vulnerabilities from the expansion of consumer credit.
We look at the effects of debt and primary fiscal balances on sovereign credit ratings through the lens of a simple model. We find that the ratings differ from the implications of the model in three important ways. They give much more weight to debt relative to forecast primary balances. They understate the effects of the difference between the interest rate and the growth rate. They give a very large role to country effects. For the same level of debt and forecast primary balances, they imply extremely different ratings across countries, and imply extremely different levels of debt needed to reach a given rating.
The paper examines opportunities for deeper economic integration between the EU and the Western Balkans and assesses their potential economic impact. It documents key non-tariff barriers to Western Balkan–EU industrial goods trade—covering regulatory, customs, and border-logistics frictions—amounting to around 8–14 percent ad valorem equivalent. Reducing these barriers, alongside deeper agri-food and services integration, could generate substantial gains, allowing the Western Balkans to capture roughly one-quarter to one-half of the economic benefits of full EU membership while supporting EU objectives related to nearshoring, supply-chain resilience, regional integration, and connectivity.
The Gambia faces rising fiscal risks from recurrent droughts, floods, and storms, which increasingly strain its limited fiscal space and heavily exposed sectors such as agriculture and tourism. While recent efforts to improve data systems and disaster risk financing have strengthened preparedness, fragmented risk assessments, inconsistent loss data, and weak PFM practices continue to undermine effective planning. Disaster related liabilities could reach up to 2.3 percent of GDP for a 50-year event, and events like the 2022 floods have already caused economic losses. Existing contingency instruments offer only partial protection, leaving frequent shocks to trigger costly ad hoc responses. Strengthening fiscal resilience will require better disaster loss data, improved macro fiscal analysis, more disciplined budgeting, and strategic use of risk layering approaches to integrate disaster risk into fiscal planning.
Using firm-level panel data on cross-border sales for 27 African economies (2002-2022), we study how the African Continental Free Trade Area (AfCFTA) reshaped firms’ international trade. Guided by a heterogeneous-firm model with two short-run channels, export-network history and capital adjustment frictions, linked through goods-services input linkages, we document that the 2018 signing raised the ratio of international to total sales by 2.7 percentage points (pp) by 2022. The gains were uneven: firms with prior export experience outside Africa gained 2.8 pp, versus 1.2 pp for Africa-only exporters, and goods-producing firms and those facing lower adjustment frictions responded most. Network history and adjustment frictions thus shape who benefits from continental integration and how gains propagate across the goods-services linkage, so that an intra-continental agreement disproportionately rewards extra-continental traders.
Domestic markets can be far from fully integrated within a country: Canada's interprovincial trade is half the size of its international trade. We estimate internal trade costs using bilateral flows across hundreds of products and sectors and decompose them into geographic and non-geographic components. Embedding these estimates in a multi-region, multi-sector general equilibrium model with input–output linkages and interprovincial migration, we find that removing all non-distance barriers raises real GDP by 6.8 percent in our baseline scenario, with the largest gains accruing to smaller provinces. We also identify services as the sectors generating the largest liberalization gains. Further, sequential provincial liberalization can generate a virtuous cycle, where a province's liberalization increases the gains from (and incentives for) subsequent liberalization for most other following provinces. Finally, we show that the potential gains from domestic market integration can offset the GDP losses from increases in external trade costs.
This paper examines the origins and evolving use of the concept of Gross National Happiness (GNH) in the Kingdom of Bhutan, and the relationship between measured well-being and macroeconomic indicators across four decades of data. The paper incorporates the 2022 GNH Survey, alongside substantially updated macroeconomic data capturing Bhutan’s experience through the COVID-19 pandemic, and the launch of its ambitious 13th Five-Year Plan (2024–2029). The evidence continues to show that Bhutan’s rapid increase in national income remains only weakly associated with improvements in measured happiness—a pattern that is suggestive of the Easterlin Paradox. The updated GNH index indicates continued progress in well-being alongside sustained economic growth. Drawing on the literature linking cultural norms to economic development, we argue that Bhutan’s cultural endowment is on balance an asset for its growth prospects. GNH exemplifies how a culture-neutral well-being measure becomes more effective for policymaking when assimilated to relevant local cultural norms and values.
The right choice between subsidies, vouchers, or in-kind distribution can help countries save precious resources
The question for policymakers is how to seize new opportunities to renew Asia’s economic growth
In a world of frequent shocks, central bank communications should anchor expectations by explaining how policy responds to changing conditions, rather than committing to a fixed path
Many G20 economies face constraints from excessive labor, product-market, or consumer regulations, an IMF survey shows
Authors probe complex issues to shed light on global economic challenges
After restoring stability, Argentina needs to turn hard-won gains into lasting prosperity
China’s extraordinary economic rise over the past four decades, driven by market-oriented reforms and integration into global value chains, transformed it into one of the world’s largest economies. However, the growth model, that has recently relied heavily on debt-financed investment, is facing mounting challenges, including from rising misallocation, declining labor force, weak domestic demand, elevated financial risks, and increasing geoeconomic tensions. This book argues that China is at a fork in the road and must transition to a new growth model centered on household consumption, services, and productivity gains. The chapters outline a comprehensive reform agenda, including strengthening social safety nets, expanding the service sector, improving business dynamism, scaling back industrial policies, and modernizing fiscal, monetary, financial and insolvency frameworks. Together, these reforms aim to support more balanced and sustainable growth while improving living standards.
This paper examines the effect of alternative digital lending—defined as digital credit provision by non‑bank financial intermediaries (NBFIs)—on bank and systemic risk taking and competition. The paper focuses on Sociedades Financieras Populares (SOFIPOs) which constitute a regulated and well‑documented NBFI segment allowing an empirical assessment of the relationship between digital non-bank lending expansion and bank outcomes. Using a quarterly sample of 53 Mexican banks and 8 of these non-banks for the period 2018Q1–2024Q4, we document that growth in alternative digital lending is associated with lower individual bank risk-taking and stronger competitive pressures, with the latter effect being stronger for small banks. Reflecting the moderate size of digital lenders in Mexico and the compositional reallocation between bank and non‑bank credit, overall systemic risk appears broadly unaltered by the entry of the new players.
Paraguay’s financial system is bank dominated and currently liquid, profitable, and well capitalized. Credit growth has been strong in recent years—outpacing regional peers—in the context of robust economic activity. While it has moderated more recently, consumer credit continues to expand more rapidly, supported by digitalization, strong economic activity, and greater financial inclusion. Although NPLs remain close to historical lows, this raises questions about potential vulnerabilities, especially if combined with other shocks, such as droughts. For instance, in 2019 and 2022, Paraguay experienced two droughts, which coincided with periods of flat economic growth, owing to their negative impact on agricultural and hydroelectric production, as well as river navigation. The particularly severe drought in 2022 reduced agricultural output by 33.6 percent in the first half of the year and was followed by a significant increase in NPLs over the subsequent year. To examine these questions, this paper uses a macro financial modeling tool developed by the IMF Institute for Capacity Development customized for the case of Paraguay. Staff considered two shock scenarios: a drought calibrated to the experiences in 2019 and 2022, and an asset quality deterioration in addition to the endogenous deterioration due to the drought. The results suggest that Paraguay’s financial system is resilient to these scenarios, with buffers sufficient to sustain the provision of credit—and thereby supporting economic growth—even under combined shocks. However, more severe shock combinations could generate amplification effects, including as banks’ efforts to rebuild buffers would be associated with tighter financial conditions. These findings underscore the importance of close supervisory monitoring and strengthening the supervision of climate-related risks. Development of the macroprudential policy toolkit, especially of borrower-based tools (e.g., DSTI limits), would also increase the room of maneuver to contain vulnerabilities from the expansion of consumer credit.
We look at the effects of debt and primary fiscal balances on sovereign credit ratings through the lens of a simple model. We find that the ratings differ from the implications of the model in three important ways. They give much more weight to debt relative to forecast primary balances. They understate the effects of the difference between the interest rate and the growth rate. They give a very large role to country effects. For the same level of debt and forecast primary balances, they imply extremely different ratings across countries, and imply extremely different levels of debt needed to reach a given rating.
The paper examines opportunities for deeper economic integration between the EU and the Western Balkans and assesses their potential economic impact. It documents key non-tariff barriers to Western Balkan–EU industrial goods trade—covering regulatory, customs, and border-logistics frictions—amounting to around 8–14 percent ad valorem equivalent. Reducing these barriers, alongside deeper agri-food and services integration, could generate substantial gains, allowing the Western Balkans to capture roughly one-quarter to one-half of the economic benefits of full EU membership while supporting EU objectives related to nearshoring, supply-chain resilience, regional integration, and connectivity.
The Gambia faces rising fiscal risks from recurrent droughts, floods, and storms, which increasingly strain its limited fiscal space and heavily exposed sectors such as agriculture and tourism. While recent efforts to improve data systems and disaster risk financing have strengthened preparedness, fragmented risk assessments, inconsistent loss data, and weak PFM practices continue to undermine effective planning. Disaster related liabilities could reach up to 2.3 percent of GDP for a 50-year event, and events like the 2022 floods have already caused economic losses. Existing contingency instruments offer only partial protection, leaving frequent shocks to trigger costly ad hoc responses. Strengthening fiscal resilience will require better disaster loss data, improved macro fiscal analysis, more disciplined budgeting, and strategic use of risk layering approaches to integrate disaster risk into fiscal planning.
Using firm-level panel data on cross-border sales for 27 African economies (2002-2022), we study how the African Continental Free Trade Area (AfCFTA) reshaped firms’ international trade. Guided by a heterogeneous-firm model with two short-run channels, export-network history and capital adjustment frictions, linked through goods-services input linkages, we document that the 2018 signing raised the ratio of international to total sales by 2.7 percentage points (pp) by 2022. The gains were uneven: firms with prior export experience outside Africa gained 2.8 pp, versus 1.2 pp for Africa-only exporters, and goods-producing firms and those facing lower adjustment frictions responded most. Network history and adjustment frictions thus shape who benefits from continental integration and how gains propagate across the goods-services linkage, so that an intra-continental agreement disproportionately rewards extra-continental traders.
Domestic markets can be far from fully integrated within a country: Canada's interprovincial trade is half the size of its international trade. We estimate internal trade costs using bilateral flows across hundreds of products and sectors and decompose them into geographic and non-geographic components. Embedding these estimates in a multi-region, multi-sector general equilibrium model with input–output linkages and interprovincial migration, we find that removing all non-distance barriers raises real GDP by 6.8 percent in our baseline scenario, with the largest gains accruing to smaller provinces. We also identify services as the sectors generating the largest liberalization gains. Further, sequential provincial liberalization can generate a virtuous cycle, where a province's liberalization increases the gains from (and incentives for) subsequent liberalization for most other following provinces. Finally, we show that the potential gains from domestic market integration can offset the GDP losses from increases in external trade costs.
This paper examines the origins and evolving use of the concept of Gross National Happiness (GNH) in the Kingdom of Bhutan, and the relationship between measured well-being and macroeconomic indicators across four decades of data. The paper incorporates the 2022 GNH Survey, alongside substantially updated macroeconomic data capturing Bhutan’s experience through the COVID-19 pandemic, and the launch of its ambitious 13th Five-Year Plan (2024–2029). The evidence continues to show that Bhutan’s rapid increase in national income remains only weakly associated with improvements in measured happiness—a pattern that is suggestive of the Easterlin Paradox. The updated GNH index indicates continued progress in well-being alongside sustained economic growth. Drawing on the literature linking cultural norms to economic development, we argue that Bhutan’s cultural endowment is on balance an asset for its growth prospects. GNH exemplifies how a culture-neutral well-being measure becomes more effective for policymaking when assimilated to relevant local cultural norms and values.
