## Make the Most of What You’ve Got: Small States in the Spotlight _IMF Blog, April 1, 2013_ ## Source details **Canonical URL:** [Make the Most of What You’ve Got: Small States in the Spotlight](https://www.imf.org/en/blogs/articles/2013/04/01/make-the-most-of-what-youve-got-small-states-in-the-spotlight) ## Other formats - [Markdown version](/en/blogs/articles/2013/04/01/make-the-most-of-what-youve-got-small-states-in-the-spotlight/index.md) - [Structured JSON version](/en/blogs/articles/2013/04/01/make-the-most-of-what-youve-got-small-states-in-the-spotlight/index.json) - [Bundle manifest](/en/blogs/articles/2013/04/01/make-the-most-of-what-youve-got-small-states-in-the-spotlight/bundle-manifest.json) ## Bibliographic details - Authors: Min Zhu - Published: April 1, 2013 --- ### Small can be complicated - More than a fifth of IMF members are countries with populations of under 1.5 million. - Three out of four small states are islands or widely dispersed multi-island states; others are landlocked, and some are located far from major markets. - Microstates: populations below 200,000 and face fairly unique and at times more difficult economic circumstances. - Examples: - Tuvalu: land area of 10 square miles, roughly one-seventh the size of Washington, D.C., which makes it difficult to produce agricultural goods. - Kiribati: population of 100,000 people is spread over 3.5 million square kilometers of ocean—an area about the size of the Indian subcontinent. ### Why size matters — intrinsic characteristics and development challenges - Higher fixed and variable costs of providing public goods, with little scope to exploit economies of scale. - Private sector: higher costs have led to concentrated markets with less competition. - Very high shares of imports and exports in most small states help overcome weak competition and invigorate growth, but: - High degree of openness heavily exposes them to external shocks in global markets. - Limited scope to diversify into a wide range of activities, increasing vulnerability to shocks. - Domestic financial markets tend to be shallow. - Less favorable access to global capital as investors often perceive them to be more risky. - Exposure to natural disasters and climate change: - Micro states in the Caribbean and the Pacific suffer annual costs equivalent to some 3 to 5 percent of GDP because of natural disasters. - United Nations Intergovernmental Panel on Climate Change expects Kiribati to be the first country to see its entire territory disappear underwater as a result of global climate change. ### Make the most of what you’ve got — outcomes and strategies - Long-term economic performance: generally good; per capita income levels and social indicators broadly match those of larger peers. - Success factors observed in some small states: - Higher levels of openness. - Improved education. - Financial development. - Key strategy: pursue policies that exploit advantages and offset disadvantages. - Regional integration and cooperation as an offset to size disadvantage: - Example: Eastern Caribbean Currency Union’s Regional Government Securities Market aims to integrate national securities markets into a single regional market to exploit economies of scale in financial markets. - Despite potential, since the late 1990s most small states have experienced slower and more volatile growth than larger peers and, with higher public spending, a number now face high debt burdens. ### IMF engagement, tools, and policy recommendations - Increased IMF engagement driven by internal and Executive Board interest: - Informal working group on economic issues in small states. - Internal small islands group to facilitate sharing of insights and lessons learned by staff working on small states. - Financing instruments and emergency assistance: - Use of IMF financing instruments including the Rapid Credit Facility, a type of emergency assistance, to weather natural disasters and other external shocks. - Capacity building and technical assistance: - Delivery of technical assistance and training, particularly through regional technical centers, plays a vital role in building small states’ capacities. - Staff exchanges involving national governments, regional entities, the IMF, and other international organizations may help strengthen institutions. - Collaboration with other international institutions and development partners to meet small states’ needs and learn from their experiences. - Planned IMF actions: - Pursue analytical work on issues affecting small states. - Maintain an active dialogue with country and regional officials. - Continue to help build capacity. - Over time, these efforts should help reduce small states’ vulnerability and increase their resilience. *Source: Make the Most of What You’ve Got: Small States in the Spotlight — Min Zhu, April 1, 2013.* --- ## Content in this bundle - **1. Small States: Selected Indicators** - [1. Small States: Selected Indicators (Markdown version)](/external/np/pp/eng/2013/022013.pdf.md){rel="alternate" type="text/markdown"} - [1. Small States: Selected Indicators (PDF)](/external/np/pp/eng/2013/022013.pdf){rel="external" type="application/pdf"} - **Executive Summary** - [Executive Summary (Markdown version)](/external/np/pp/eng/2013/022013a.pdf.md){rel="alternate" type="text/markdown"} - [Executive Summary (PDF)](/external/np/pp/eng/2013/022013a.pdf){rel="external" type="application/pdf"} - **Caribbean Small States: Challenges of High Debt and Low Growth; IMF Policy Paper; February 20, 2013** - [Caribbean Small States: Challenges of High Debt and Low Growth; IMF Policy Paper; February 20, 2013 (Markdown version)](/external/np/pp/eng/2013/022013b.pdf.md){rel="alternate" type="text/markdown"} - [Caribbean Small States: Challenges of High Debt and Low Growth; IMF Policy Paper; February 20, 2013 (PDF)](/external/np/pp/eng/2013/022013b.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/blogs/articles/2013/04/01/make-the-most-of-what-youve-got-small-states-in-the-spotlight_