Macroeconomic Developments and Prospects in Low-Income Developing Countries - 2016

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This paper is the third in a series assessing macroeconomic developments and prospects in low-income developing countries (LIDCs).
The first paper examined trends during 2000–2014, a period of sustained strong growth across most LIDCs.
The second paper focused on the impact of the drop in global commodity prices since mid-2014 on LIDCs—a story with losers (countries dependent on commodity exports, notably fuel) and winners (countries with a more diverse export base, where growth remained robust).
The overarching theme is incomplete adjustment to the new world of “lower for long” commodity prices, with many commodity exporters still far from a sustainable macroeconomic trajectory (Chapter 1).

Many commodity exporters, notably fuel producers, remain under significant economic stress, with sluggish growth, large fiscal imbalances, and weakened foreign reserve positions.
Countries with a more diversified export base are generally doing well, although several have been hit by declines in remittances, conflict/natural disasters, and the contractionary impact of macroeconomic stabilization programs.
Widening fiscal imbalances, in both commodity and diversified exporters, have resulted in rising debt levels, with severe financing stress emerging in some cases.
Financial sector stresses have emerged in many LIDCs, with expectations that these strains will increase in many commodity exporters over the next 12–18 months.

Chapter 1: Assessment of macroeconomic conjuncture and incomplete adjustment to “lower for long” commodity prices.
Chapter 2: Analysis of risks and vulnerabilities with a focus on financial sector stresses and medium-term fiscal risks; actions and capacity building needed to manage and contain these challenges over time.
Chapter 3: How infrastructure investment can be accelerated in LIDCs to address weaknesses in public infrastructure (such as energy, transportation systems) seen as key constraints on medium-term growth potential, especially in the context of 2016 as the first year of the march towards the 2030 development goals.

Strengthen financial sector oversight to address current and prospective financial stresses in many LIDCs.
Address medium-term fiscal risks to contain rising debt levels and severe financing stress in vulnerable countries.
Accelerate infrastructure investment, with attention to energy and transportation systems, to remove key constraints on medium-term growth potential.
Invest in capacity building to better manage financial sector stresses and fiscal vulnerabilities over time.

Publication date: November 23, 2016
Read Executive Summary in Arabic, Chinese, French, and Spanish (links provided on the original page).

International Monetary Fund — Macroeconomic Developments and Prospects in Low-Income Developing Countries - 2016