Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies
Staff Discussion Notes, September 22, 2023
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- Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies
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Bibliographic details
- Authors: Nina Budina, Christian H Ebeke, Florence Jaumotte, Andrea Medici, Marina Mendes Tavares, Bella Yao
- Published: September 22, 2023
- Series: Staff Discussion Notes
- DOI: https://doi.org/10.5089/9798400250095.006
Context and key challenges
- Emerging market and developing economies face: economic scarring, social tension, and reduced policy space in the aftermath of the COVID-19 pandemic.
- High public debt and persistently high inflation have constrained policy space and created difficult policy trade-offs.
- Policy actions are urgently needed to boost growth in the near term and to support the ongoing green transition.
Framework for prioritization, packaging, and sequencing of macrostructural reforms
- Prioritize removal of the most binding constraints on economic activity to front-load reform gains.
- Bundle complementary reforms to amplify impact, specifically:
- Governance reforms
- Business deregulation
- External sector reforms
- Sequence other reforms appropriately to sustain gains, including:
- Labor market reforms
- Credit sector reforms
Estimated impacts of a major reform package
- In emerging market and developing economies with large initial structural gaps, the estimated output effects of a major reform package are:
- about 4 percent in two years
- and 8 percent in four years
Green transition implications
- Achieving higher growth and lower absolute carbon emissions over time requires a well-designed strategy that includes both:
- macrostructural reforms
- and green reforms
Policy recommendations (implied by the analysis)
- Front-load reforms by removing the most binding constraints on activity.
- Bundle governance, business deregulation, and external sector reforms to deliver larger, faster output gains.
- Sequence labor market and credit sector reforms to consolidate and sustain improvements.
- Integrate macrostructural reform strategies with green policies to simultaneously raise growth and reduce absolute carbon emissions.
Source: Nina Budina; Christian H Ebeke; Florence Jaumotte; Andrea Medici; Augustus J Panton; Marina Mendes Tavares; Bella Yao — Staff Discussion Note, September 22, 2023.
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- Staff Discussion Note