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The Mystery of Missing Real Spillovers in Southern Africa
Anecdotal evidence suggests that the economies of South Africa and its neighbors (Botswana, Lesotho, Mozambique, Namibia, Swaziland, and Zimbabwe) are tightly integrated with each other. There are important institutional linkages. Across the region there are also large flows of goods and capital, significant financial sector interconnections, as well as sizeable labor movements and associated remittance flows. These interconnections suggest that South Africa’s GDP growth rate should affect positively its neighbors’, a point we illustrate formally with the help of numerical simulations of the IMF’s GIMF model. However, our review and update of the available econometric evidence suggest ...
Global Value Chains: What are the Benefits and Why Do Countries Participate?
Over the last two decades, world trade and production have become increasingly organized around global value chains (GVC). Recent theoretical work has shown that countries can benefit from participation in GVCs through multiple channels. However, little is known empirically about the economic importance of supply chains. We use the Eora MRIO database to compute different measures of GVC participation for 189 countries and illustrate global patterns of supply chains as well as their evolution over time in order to contribute to this topic. We find that GVC-related trade, rather than conventional trade, has a positive impact on income per capita and productivity, however there is large heterogeneity and the gains appear more signifcant for upper-middle and high-income countries. We document that “moving up” to more high-tech sectors while participating in major supply chains does take place but is not universal, suggesting other factors matter. We confirm the findings of the standard gravity literature for GVC trade; highlighting the key role of institutional features such as contract enforcement and the quality of infrastructure as determinants of GVC participation.
Emerging Markets: Prospects and Challenges
This article documents recent developments in emerging markets in the context of the COVID-19 pandemic, assesses their prospects and challenges, and discusses appropriate policy settings for the medium term. It argues that EM policymakers’ ability to grapple with an incomplete and uneven recovery will be constrained by high public debt and uncertain inflation prospects as well as external risks surrounding capital flows and exchange rate developments. The paper also discusses potential impact of a tightening in global financial conditions and appreciation of the US dollar that could be triggered by a general increase in risk aversion or a reassessment of the likely path of US monetary policy.
The Design of Fiscal Adjustment Strategies in Botswana, Lesotho, Namibia, and Swaziland
Botswana, Lesotho, Namibia, and Swaziland face the serious challenge of adjusting not only to lower Southern Africa Customs Union (SACU) transfers because of the global economic crisis, but also to a potential further decline over the medium term. This paper assesses options for the design of the needed fiscal consolidation. The choice among these options should be driven by (i) the impact on growth and (ii) the specificities of each country. Overall, a focus on government consumption cuts appears to minimize the negative impact on growth, and would be appropriate given the relatively large size of the public sector in each country.
Regional Economic Outlook, October 2016, Sub-Saharan Africa
Economic growth in sub-Saharan Africa this year is set to drop to its lowest level in more than 20 years, reflecting the adverse external environment, and a lackluster policy response in many countries. However, the aggregate picture is one of multispeed growth: while most of non-resource-intensive countries—half of the countries in the region—continue to perform well, as they benefit from lower oil prices, an improved business environment, and continued strong infrastructure investment, most commodity exporters are under severe economic strains. This is particularly the case for oil exporters whose near-term prospects have worsened significantly in recent months. Sub-Saharan Africa remains a region of immense economic potential, but policy adjustment in the hardest-hit countries needs to be enacted promptly to allow for a growth rebound.
Regional Economic Outlook, October 2017, Sub-Saharan Africa
Growth in sub-Saharan Africa has recovered relative to 2016, but the momentum is weak and per capita incomes are expected to barely increase. Further, vulnerabilities have risen in many countries, adding to the urgency of implementing the fiscal consolidations planned in most countries and with stepped up efforts to strengthen growth.
Unconventional Monetary Policies in Emerging Markets and Frontier Countries
The COVID-19 crisis induced an unprecedented launch of unconventional monetary policy through asset purchase programs (APPs) by emerging market and developing economies. This paper presents a new dataset of APP announcements and implementation from March until August 2020 for 27 emerging markets and 8 small advanced economies. APPs’ effects on bond yields, exchange rates, equities, and debt spreads are estimated using different methodologies. The results confirm that APPs were successful in significantly reducing bond yields in EMDEs, and these effects were stronger than those of policy rate cuts, suggesting that such UMP could be important tools for EMDEs during financial market stress.
Regional Economic Outlook, April 2018, Sub-Saharan Africa
The region is seeing a modest growth uptick, but this is not uniform and the medium-term outlook remains subdued. Growth is projected to rise to 3.4 percent in 2018, from 2.8 percent in 2017, on the back of improved global growth, higher commodity prices, and continued strong public spending. About 3⁄4 of the countries in the region are predicted to experience faster growth. Beyond 2018, growth is expected to plateau below 4 percent, modestly above population growth, reflecting continued sluggishness in the oil-exporting countries and sustained growth in non-resource-intensive countries. A number of countries (Burundi, DRC, South Sudan, and parts of the Sahel) remain locked in internal conflict resulting in record levels of refugees and Internally Displaced Persons, with adverse spillovers to neighboring countries.
Republic of Latvia
This 2017 Article IV Consultation highlights that Latvia’s economic growth eased to 2 percent in 2016, as gross investment contracted significantly by 11.7 percent on the back of lower than expected absorption of European Union (EU) funds. This effect was compounded by a drag from net exports, as import volume growth accelerated markedly, while export growth remained modest. Despite a strong rise in imports, the current account recorded a surplus of 1.5 percent in 2016 as the terms of trade, driven largely by falling energy prices, improved by over 4.7 percent. Growth is expected to pick up to 3.2 percent in 2017 on the back of an accelerated pace of disbursement of EU funds and continued robust private credit growth.
Explaining the Shadow Economy in Europe: Size, Causes and Policy Options
This paper examines the drivers, and reestimates the size of shadow economies in Europe, with a focus on the emerging economies, and recommends policies to increase formality. The size of shadow economies declined across Europe in recent years but remains significant, especially in Eastern Europe. In the emerging European economies, the key determinants of shadow economy size are regulatory quality, government effectiveness, and human capital. The paper argues that a comprehensive package of reforms, focused on country-specific drivers, is needed to successfully combat the shadow economy. The menu of policies most relevant for Europe’s emerging economies include: reducing regulatory and administrative burdens, promoting transparency and improving government effectiveness, as well as improving tax compliance, automating procedures, and promoting electronic payments.
