Sub-Saharan Africa is set to enjoy a modest growth uptick. The average growth rate in the region is projected to rise from 2.8 percent in 2017 to 3.4 percent in 2018, with growth accelerating in about two-thirds of the countries in the region. The growth pickup has been driven largely by a more supportive external environment, including stronger global growth, higher commodity prices, and improved market access. While external imbalances have narrowed, the record on fiscal consolidation has been mixed and vulnerabilities are rising: about 40 percent of low-income countries in the region are now assessed as being in debt distress or at high risk of debt distress. On current policies, average growth in the region is expected to plateau below 4 percent—barely 1 percent in per capita terms— over the medium term, highlighting the need for deliberate actions to boost growth potential.
Domestic revenue mobilization is one of the most pressing policy challenges facing sub-Saharan African countries. While the reasons may vary according to country-specific circumstances, there are three aspects of domestic revenue mobilization that make it so important.
Private investment in sub-Saharan Africa is low compared with other countries with similar levels of economic development. The low level of private investment is constraining the region’s efforts to improve social outcomes by holding back labor productivity and the resulting gains in real wages and households’ income. In general, there appears to be a negative association between investment and poverty rates (Figure 3.1). The benefits from increasing investment are well recognized in the region. For example, many countries have engaged in major public investment programs to close large infrastructure gaps with a view to catalyzing private investment. But such a strategy can only be sustained for a limited amount of time, particularly if the private sector growth response is weak. With debt levels high and rising in many countries in the region, there is an increased focus on other options. Countries are participating in external investment initiatives such as the Group of Twenty’s (G20) Compact with Africa, which coordinates efforts to facilitate private investment and increase the provision of infrastructure, and China’s Belt and Road Initiative, which aims to help the region better integrate into global value chains. These initiatives aim to spur private and public investment by improving the business environment and by increasing the availability of financing. These efforts could improve the availability and allocation of resources for investment, and thus have the potential to raise medium-term growth prospects and living standards.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper discusses the optimal management of Citizenship-by-Investment (CBI) program revenues in Dominica. Dominica’s CBI inflows have reached near 10 percent of GDP, increasing the country’s reliance on these revenues. It is argued that given their volatile and unpredictable nature, CBI revenues should be used prudently. Their use should be mindful of the chances of a sudden stop in these flows. It is therefore essential to prioritize investment, debt reduction, and saving in lieu of current expenditure, which is typically more difficult to reverse. Simulation analysis based on fiscal multipliers indicate that such combination of policies would boost GDP and help reach the regional debt target of 60 percent of GDP by 2030 as committed by the government.
This Selected Issues paper analyzes the impact of security crisis in Mali. The 2012 crisis has significant economic, social, and humanitarian impact, especially in the northern regions. The increase in security spending weighs on the budget and reduces space for priority spending. Persistent insecurity hinders investment and growth. The crisis resulted in the interruption and/ or disruption of learning activities in the northern part of the country, dangerously compromising the efforts of the Government of Mali and its partners to achieve Education For All. The security crisis has also slowed progress toward reducing poverty and achieving the Millennium Development Goals.
This paper conducts a firm-level analysis of the effect of taxation on corporate investment
patterns in member states of the Association of Southeast Asian Nations (ASEAN). Using
large-scale panel data on nonfinancial firms over the period 1990–2014, and controlling for
macro-structural differences among countries, we find a significant degree of persistence in
firms’ net fixed investments over time, which vary with firm characteristics, such as size, sales,
profitability, leverage, and age. Our analysis brings up interesting empirical results, including
nonlinear patterns of behavior in firms’ capital investment decisions acrosss ASEAN countries.
Concerning the main variable of interest, we find that a moderate level of taxation does not
hinder business investment, but this effect turns negative as higher tax burden raises the user
cost of capital and distorts resource allocations.
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? percent in 2018, from 2? percent in 2017, on the back of improved global growth, higher commodity prices, and continued strong public spending. About ¾ 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.
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 ¾ 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.
International Monetary Fund. Middle East and Central Asia Dept.
Qatar's economy is driven by high oil and natural gas prices and production, and remains strong with robust nonhydrocarbon growth. Its government has now shifted its focus to economic diversification and growth in nonhydrocarbon sectors through targeted infrastructure investments. The Executive Directors of the International Monetary Fund (IMF) noted the positive regional spillover effects of Qatar’s high growth, public spending, and increased financial assistance. The adoption of a three-year budget framework to help shield government spending from revenue volatility and enable better use of resources is welcomed.