We examine the impact of resource windfall on the standard of living both in the short-run and long-run, using a sample of 130 countries, 1963-2007. Then, we systematically investigate the effect of resource windfall on welfare in three different groups of countries: We find that in the short-run resource windfall is welfare enhancing in the whole sample, especially via increases in income and decreases in inequality. However, in
SSA countries, the size of welfare improvement is small and it is smaller and almost zero
after one year in fragile Sub-Saharan African (SSA) countries. In the whole sample, a
resource windfall shock leads to significant welfare growth even in the long-run, but we
couldn’t find any significant long-run effect of resource windfall in SSA countries.
The global economy is embarking on a lengthy path to recovery with modest growth expected for 2021, after a severe contraction this year. The global forecast is subject to unusually large risks. Emerging markets and developing economies face an uphill battle. Low-income developing countries are in an especially vulnerable position and risk a persistent and significant deterioration in development prospects.
Controlling the pandemic and cushioning the impact on the economy are key. LIDCs should adopt targeted containment measures and strictly prioritize spending and refrain from policies that could create long term damage. Multilateral cooperation and extensive support from the international community are indispensable.
The IMF has helped EMDEs through emergency lending and debt service relief. Targeted surveillance and capacity development will tackle new policy challenges and react nimbly to the needs of the membership including fragile and small states.