Mr. Mohsin S. Khan, Mr. Stanley Fischer, and Mr. Ernesto Hernández-Catá
This paper examines the experience of Sub-Saharan Africa (SSA) to answer the question of whether the region is at a turning point in its economic fortunes. The improvement in growth reflects in part a rise in the utilization of existing capacity. To be sustained, however, a high rate of growth will require an increase in investment rates and/or an increase in total factor productivity—i.e., an improvement in the technological, political, administrative and economic factors that raise the rate of return on both capital and labor. The close link between investment and growth in developing countries over the long term is evident in the empirical growth literature. For developing countries in general, the elasticity of growth with respect to the investment/GDP ratio has been found to lie within the range of 0.3–0.5. Although increasing investment is crucial, action is also needed in many complementary areas in order to raise productivity and growth.
Globalization has become the focus for a wide range of protests against various features of the world economy. This paper aims to give a concise summary of the economic dimensions of globalization, while leaving to one side other aspects—such as cultural, environmental, or political ones—that are beyond the scope of the IMF. Periods of increased globalization have tended to be associated with technological innovations that reduce transportation and communications costs and with generally rising standards of living. Moreover, countries that have embraced openness to the rest of the world have done better than those that have not. Nevertheless, globalization may also be associated with increased inequality and volatility, which may justify strengthening domestic safety nets and financial supervision and regulation, and enhancing international economic policy coordination. The IMF helps to ensure economic gains from globalization by encouraging trade liberalization, reducing countries’ vulnerability to crises, lending to them when they are in difficulty, and assisting them in putting in place structural reforms that help reduce poverty.