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Ms. Natasha X Che and Ms. Patricia Alonso-Gamo

examining Uruguay’s convergence record with advanced countries. Prior to the boom, for 50 years Uruguay’s GDP per capita had been growing at an average annual rate of under 1 percent. Consequently, the GDP per capita relative to the US level had been on a consistent decline since the 1950s, until the trend was sharply reverted in 2004. In other words, the boom greatly facilitated Uruguay’s income convergence with advanced economies. Understanding the causes of this recent boom is valuable for designing a long-term growth strategy. Growth has slowed down significantly

Ms. Natasha X Che
Uruguay experienced one of its biggest economic booms in history during 2004-2014. Since then, growth has come down significantly. The paper investigates the various causes of the boom and discusses the sustainability of these causes. It then compares Uruguay against high-growth countries that were once at a similar income level, across a broad set of structural indicators, to identify priority reform areas that could improve long-term growth prospect.
International Monetary Fund. Western Hemisphere Dept.

annual growth in real GDP per capita averaged 4.9 percent, much higher than the 2.3 percent of Latin America and the Caribbean (LAC). GDP per Capita Growth: LAC vs Uruguay Source: WEO. 2. The boom facilitated income convergence with advanced economies . The significance of the boom can be seen by examining Uruguay’s convergence record with advanced countries. Prior to the boom, for 50 years Uruguay’s GDP per capita had been growing at an average annual rate of under 1 percent. Consequently, the GDP per capita relative to the US level had been on a

Jean Philippe Cotis

—France, Germany, and Italy. As a result of these trends, in 2002 per capita incomes converted using purchasing power parities (PPPs) were almost 30 percent lower in the EU than in the United States (see Chart 1 ). If, on the other hand, the rate of convergence recorded during the 1970s had been maintained, the three major euro area economies would by now have almost the same levels of output per capita as the United States. Chart 1 Wrong convergence Real per capita GDP in the European Union is no longer catching up with that in the United States. 1 Source

International Monetary Fund. European Dept.

conduct a convergence analysis at a more granular level than the previous analysis . We assess the performance of different sectors of the Latvian economy in terms of ability to reduce distance to the technology frontier, and then compare these results against the sectoral convergence record of a large sample of countries. 13. At a sectoral level Latvia’s convergence has been extremely heterogeneous, with a significant number of sectors exhibiting absolute divergence . To see this, we define the DTF of a sector as one minus the labor productivity of the sector

International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper studies economic growth in Uruguay. Following the 2002 crisis, Uruguay had a remarkable economic recovery. The major growth acceleration in 2004–14 was explained by a combination of positive external factors, recovery from crisis, and emergence of new export sectors. With external factors no longer a support for growth, Uruguay needs to leverage its strengths to raise growth sustainably. Uruguay’s high level of institutional quality and social cohesion provides a stable container for growth. A comparison relative to its trading partners and high growth peers helps identify areas that Uruguay can further enhance to unleash its growth potential. These include, a strong, flexible, and equitable labor market, better education outcomes, higher private sector dynamism, and continued macro stability. Structural policy reforms on key constraints to the private sector will help realize the potential of the new export industries and set the stage for inclusive growth. A strong and credible macro policy framework is also essential for growth sustainability. Efforts to reduce debt, inflation, and dollarization and keep them at low levels will lay the foundations for structural reforms to flourish.
International Monetary Fund. European Dept.
This Selected Issues paper examines the prospects for Latvia continuing to rapidly reduce its distance from the productivity frontier. It looks at the empirical record of countries that have in the past attained a similar relative level of income to that of Latvia at present, to gauge the plausibility of the forecast for Latvia’s medium term GDP growth of about 4 percent per year. It highlights that more than one-third of the countries reaching a similar stage of development managed to sustain higher subsequent growth. The paper also confirms the importance of investment and structural reforms for Latvia’s future convergence, using a sector-level analysis.
International Monetary Fund. External Relations Dept.
This paper highlights that 10 new members joined the European Union on May 1, 2004, in the biggest enlargement of the community since its inception. However, the core economic concern is the weak growth performance of Europe—and particularly of the 12 countries at the epicenter of European integration that use the euro as their common currency—relative to the rest of the world and especially the United States. The paper highlights that underlying this concern are the problems of sagging long-term trends in the growth of productivity, and the use of labor resources.