Fragile and Conflict-Affected Economies Are Falling Further Behind

IMF Blog, January 21, 2022

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Even before the pandemic, fragile and conflict-affected states (FCS) confronted some of the greatest challenges among the world’s economies.
While not all FCS face active conflict, most are at risk: global levels of violence are at a 30-year high and more than 80 million people had been forcefully displaced prior to the discovery of the coronavirus.
The continuing pandemic poses a significant risk that the divergence between these countries and the rest of the world will widen—and persist.
The IMF classifies more than 40 economies as fragile and conflict-affected. Examples include Libya, Yemen, Chad, Democratic Republic of Congo, Somalia, Haiti and Papua New Guinea.

Per capita incomes in fragile states won’t recover to near their 2019 levels until 2024, IMF projections show.
By 2024, the gap with pre-crisis per capita income trends is set to remain larger for FCS than for other countries.
In these vulnerable economies, slower recovery has followed an especially hard hit from the pandemic:
- Their per capita gross domestic product contracted 7.5 percent last year.
Debt and inflation pressures are mounting:
- Compared to pre-pandemic projections, public debt rose by 17 percentage points to 78 percent of gross domestic product in 2020.
- Fragile states saw consumer prices surge 9 percentage points above their pre-pandemic projections.
- Global food prices rose 23.1 percent last year, according to the United Nations Food and Agriculture Organization.

Fragile states are already home to nearly 1 billion people and are on course to be home to 60 percent of the world’s poor by 2030.
Fragility characteristics:
- Reduced institutional capacity and limited service provision for the population.
- Limited ability to manage or mitigate social, economic, political, security or environmental risks.
- Conflict-affected states have active armed violence leading to civilian or military deaths.
Fragility and conflict interact with—and are often exacerbated by—global trends such as climate change, soaring food prices and gender inequality.
Food inflation particularly exacerbates food security challenges and is reversing past progress.

These challenges underscore how fragile states risk falling even further behind the rest of the world—and why supporting them, more than ever, must be an international priority.

Source: Fragile and Conflict-Affected Economies Are Falling Further Behind (IMF, January 21, 2022).