MPO 04/2025 MACRO POVERTY OUTLOOK Country-by-country Analysis and Projections for the Developing World © 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. 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MPO MACRO POVERTY OUTLOOK MACRO POVERTY OUTLOOK Spring Meetings 2025 5 6 Cambodia / 8 Central Pacific Islands / 10 China / 12 Fiji / 14 Indonesia / 16 Lao PDR / 18 Malaysia / 20 Mongolia / 22 Myanmar / 24 North Pacific Islands / East Asia and 26 Papua New Guinea / 28 Philippines / 30 Solomon Islands / 32 South Pacific Islands / 34 Thailand / the Pacific 36 Timor-Leste / 38 Viet Nam 41 42 Albania / 44 Armenia / 46 Azerbaijan / 48 Belarus / 50 Bosnia and Herzegovina / 52 Bulgaria / 54 Croatia / 56 Georgia / 58 Kazakhstan / 60 Kosovo / 62 Kyrgyz Europe and Republic / 64 Moldova / 66 Montenegro / 68 North Macedonia / 70 Poland / 72 Romania / 74 Russian Central Asia Federation / 76 Serbia / 78 Tajikistan / 80 Türkiye / 82 Ukraine / 84 Uzbekistan 87 88 Argentina / 90 Bahamas, The / 92 Barbados / 94 Belize / 96 Bolivia / 98 Brazil / 100 Chile / 102 Colombia / 104 Costa Rica / 106 Dominica / Latin America 108 Dominican Republic / 110 Ecuador / 112 El Salvador / 114 Grenada / 116 Guatemala / and the 118 Guyana / 120 Haiti / 122 Honduras / 124 Jamaica / Caribbean 126 Mexico / 128 Nicaragua / 130 Panama / 132 Paraguay / 134 Peru / 136 Saint Lucia / 138 Saint Vincent and the Grenadines / 140 Suriname / 142 Trinidad and Tobago / 144 Uruguay 2 Macro Poverty Outlook / April 2025 147 148 Algeria / 150 Bahrain / 152 Djibouti / 154 Egypt, Arab Republic / 156 Iran, Islamic Republic / 158 Iraq / 160 Jordan / 162 Kuwait / 164 Lebanon / 166 Libya / Middle East and 168 Morocco / 170 Oman / 172 Palestinian territories / 174 Qatar / 176 Saudi Arabia / 178 Syrian Arab North Africa Republic / 180 Tunisia / 182 United Arab Emirates / 184 Yemen, Republic 187 188 Afghanistan / 190 Bangladesh / 192 Bhutan / 194 India / 196 Maldives / 198 Nepal / 200 Pakistan / 202 Sri Lanka South Asia 205 206 Angola / 208 Benin / 210 Botswana / 212 Burkina Faso / 214 Burundi / 216 Cabo Verde / 218 Cameroon / 220 Central African Republic / 222 Chad / Sub-Saharan 224 Comoros / 226 Congo, Democratic Republic / 228 Congo, Republic / 230 Côte d’Ivoire / Africa 232 Equatorial Guinea / 234 Eritrea / 236 Eswatini / 238 Ethiopia / 240 Gabon / 242 Gambia, The / 244 Ghana / 246 Guinea / 248 Guinea-Bissau / 250 Kenya / 252 Lesotho / 254 Liberia / 256 Madagascar / 258 Malawi / 260 Mali / 262 Mauritania / 264 Mauritius / 266 Mozambique / 268 Namibia / 270 Niger / 272 Nigeria / 274 Rwanda / 276 São Tomé and Príncipe / 278 Senegal / 280 Seychelles / 282 Sierra Leone / 284 Somalia / 286 South Africa / 288 South Sudan / 290 Sudan / 292 Tanzania / 294 Togo / 296 Uganda / 298 Zambia / 300 Zimbabwe Macro Poverty Outlook / April 2025 3 The Macro Poverty Outlook is jointly produced by the Poverty and the Economic Policy Global Departments of the World Bank. The cutoff date for information for most countries was April 10, 2025. Cambodia North Pacific Islands Central Pacific Islands Papua New Guinea China Philippines Fiji Solomon Islands Indonesia South Pacific Islands Lao PDR Thailand Malaysia Timor-Leste Mongolia Viet Nam Myanmar East Asia and the Pacific Macro Poverty Outlook / April 2025 5 This outlook reflects information available as of April 10, 2025. 1 CAMBODIA Population Poverty million 17.6 .. 2 3 Life expectancy at birth School enrollment Cambodia's real GDP growth is projected to moderate to 4.0 years primary (% gross) percent in 2025 amid global trade policy shifts, heightened uncertainty and slower global growth. While poverty is ex- 69.9 111.4 4 5 pected to decline gradually, the pace of poverty reduction GDP GDP per capita may be constrained by rising inflation, uneven economic current US$, billion current US$ performance across sectors, and heightened vulnerabilities in labor-intensive export industries. 46.5 2636.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. especially garments, travel goods, footwear, and bicycles exports Key conditions and challenges to the US and the EU markets, grew at 14.3 percent y/y during the first two months of 2025. In addition, services As a small open economy with exports accounting for almost 60 exports also improved, with international arrivals growing by percent of GDP, Cambodia is particularly exposed to the ongo- 23.4 percent in 2024, reaching pre-pandemic levels of over 6 ing shifts in global trade policies and rising uncertainty in the million visitors. However, after excluding business visa hold- external environment. The US is Cambodia’s largest export des- ers and trans-frontier workers, the number of internation- tination, accounting for 39 percent of total exports and 29 per- al tourists accounted for only 2 million in 2024, compared cent of GDP, nearly double the share of exports going to ASEAN to 3.5 million in 2019. Similarly, tourist spending continued at 20 percent and the EU27 at 17 percent, while China accounts to improve, indicated by 25.6 percent y/y growth in Angkor for 47 percent of imports and half of FDI. The domestic value- Temple entrance fees in January 2025, but the level of rev- added embedded in exports to the US amounts to 8 percent of enue from entrance fees remained 44.2 percent below pre- GDP—compared to 6 percent of GDP to Europe and 3 percent pandemic levels. to China. The largest exposure by sector is in travel goods, gar- ments, and footwear, which comprise about half of exports to Job growth remained sluggish. Economic activity in the large the US and employ around one million workers—80 percent of informal sector has experienced slower progress. Stalled whom are women. property construction activities have affected seasonal work- ers. The retail and wholesale sectors saw a decline in de- mand for domestic credit financing, with growth in domestic Recent developments credit slowing to 0.3 percent and 1.3 percent, respectively, in 2024. The uneven performance has resulted in disparities in Economic activity picked up in the first quarter of 2025, but perfor- household welfare improvements. Between 2021 and 2023, mance remained uneven. Amid buoyant external demand, goods, household consumption per capita increased by 8 percent FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Merchandise exports and contributions to exports GDP growth growth Percent, percentage points Percentage points 20 40 Projections 15 4.0 4.5 5.1 30 10 20 5 10 0 -5 0 -10 -10 -15 2012 2014 2016 2018 2020 2022 2024e 2026p -20 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Private consumption Gross fixed investment Exports Imports GTF Others Real growth Agricultural commodities Total exports (YTD, y/y) Sources: Cambodian authorities and World Bank staff projections. Source: Cambodian authorities. Notes: e = estimate; p = projection. Notes: GTF = garment, travel goods, and footwear (and other textile products); YTD = year-to-date; y/y = year-on-year. 6 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. overall, signaling gradual economic gains. However, the bene- fits were unevenly distributed—consumption per capita rose by Outlook 7 percent for the poorest quintile, compared to 10 percent for the richest quintile. Despite improvements witnessed in the first quarter of 2025, real growth is projected to ease to 4.0 percent in 2025 and 4.5 percent On the external side, increasing remittances and tourism rev- in 2026, anticipating adverse impacts from global trade policy shifts enues have helped to counterbalance a sizable merchandise and uncertainty. Jobs and FDI in the labor-intensive manufacturing trade deficit, with the current account deficit expected to export sector, particularly in the garment, travel goods, and widen this year. Sustained FDI inflows enhanced gross inter- footwear industries, would be substantially negatively impacted. national reserves, reaching US$22.2 billion—a 15.5 percent Economic growth is expected to lead to a reduction in poverty, y/y increase in January 2025—adequate to cover around 7 gradually reversing some of the likely increase in poverty caused by months of anticipated imports. the pandemic. However, as the recovery remains uneven, the pace of poverty reduction will vary across regions and sectors. Monetary conditions have become more accommodating due to the easing of US monetary policy. Coupled with the increase in for- The outlook is subject to rising risks. These include challenges from eign currency deposits, this fueled broad money growth at 17.9 heightened global policy uncertainty, slower-than-expected global percent y/y in January 2025. Pressures on the exchange rate also growth, and shifts in trade policy. Given the country’s relatively high eased, and the riel-U.S. dollar exchange rate appreciated in January level of private debt, a faster-than-expected increase in non-perform- 2025, reaching 4,030 riel per U.S. dollar. ing loans, and emerging risks from imported inflation could affect macro-financial stability, while weighing on private investment and However, amid the property sector downturn, banking sector growth. In response, policy measures should focus on maintaining asset quality showed signs of deterioration. By the end of macroeconomic and financial sector stability, accelerating trade and 2024, reported nonperforming loan ratios increased to 7.9 investment reforms, and providing social safety nets to protect vul- percent for the banking sector and 9.0 percent for the mi- nerable households. Over the medium term, Cambodia needs to crofinance sector, compared to 5.4 percent and 6.7 percent rebalance its growth model away from a reliance on construction, in 2023, respectively. real estate, and garment exports toward a more diversified and resilient economy. This transition includes fostering higher value- Fiscal policy tightened mainly due to a slowdown in revenue collec- added manufacturing and service sectors, while improving produc- tion which declined by 9.6 percent y/y in January 2025. Public ex- tivity in agriculture. Strengthening human capital, enhancing in- penditure continued to decline, dropping by 5.8 percent y/y in Jan- frastructure, and improving regulatory transparency and efficiency uary 2025. The fiscal deficit is estimated to have narrowed to 3.0 will be critical to sustaining long-term, inclusive growth. In parallel, percent in 2024. Public debt is low, at 27.3 percent of GDP at the boosting domestic revenue mobilization and reinforcing financial end of 2024. sector resilience will support continued macroeconomic stability. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.1 5.0 6.0 4.0 4.5 5.1 Private consumption 5.2 -0.2 2.5 5.1 6.5 4.7 Government consumption -1.2 35.1 -2.5 17.0 9.5 8.4 Gross fixed capital investment 5.4 -26.7 -0.2 -6.2 -4.8 2.8 Exports, goods and services 21.3 6.9 14.4 11.1 10.6 11.1 Imports, goods and services 18.6 -12.4 7.5 10.5 10.8 11.3 Real GDP growth, at constant factor prices 5.1 5.0 8.8 3.9 4.5 5.1 Agriculture 0.6 1.6 1.0 1.4 1.5 1.6 Industry 8.2 7.6 9.5 6.3 6.4 6.5 Services 3.6 3.4 11.3 2.0 3.2 4.5 Inflation (consumer price index) 5.5 2.1 2.2 4.0 4.0 4.1 Current account balance (% of GDP) -18.8 1.3 -1.1 -5.1 -4.6 -4.6 Net foreign direct investment inflow (% of GDP) 8.7 8.5 8.8 7.6 7.6 7.7 Fiscal balance (% of GDP) -3.2 -5.3 -3.0 -2.7 -2.6 -2.0 Revenues (% of GDP) 17.2 16.5 15.2 15.2 15.0 14.9 Debt (% of GDP) 27.0 28.8 27.0 27.8 27.6 27.1 Primary balance (% of GDP) -3.0 -5.0 -2.6 -2.4 -2.2 -1.7 GHG emissions growth (mtCO2e) 1.2 1.4 1.5 1.1 1.1 1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 7 This outlook reflects information available as of April 10, 2025. KIR NRU TUV CENTRAL PACIFIC Population 1 130.5 11.8 10.0 ISLANDS thousand Poverty 24.2 2.2 2.1 2 3 4 thousand living on less than $3.65/day Medium-term growth is expected to moderate. However, it is 0.22 0.15 0.06 1 projected to remain relatively robust in Kiribati and Tuvalu. In GDP Nauru the Regional Processing Centre (RPC) renewal and Nau- current US$, billion ru-Australia Treaty will delay a fiscal cliff. Each country will 1702 11914 4908 1 need to address a narrow economic base and climate vul- GDP per capita nerability to promote growth and reduce poverty. Asset price current US$ volatility may affect Kiribati and Tuvalu’s fiscal and growth out- Sources: WDI, World Bank. 1/ 2022. 2/ 2019. 3/ 2012. 4/ 2010. look, but the full impact of recent measures is uncertain. Nauru relies on volatile revenue from fishing and revenue from op- Key conditions and challenges erating the RPC for refugees (the latter 67 percent of fiscal rev- enues and 90 percent of GDP in 2024). With RPC earnings uncer- The Central Pacific faces major exogenous challenges like cli- tain, it is important to find sustainable sources of growth. Nauru mate change, small size, and remoteness, and endogenous grapples with environmental challenges from climate change and challenges like concentrated, import-reliant, and volatile phosphate mining. economies, dependent on the public sector. All three coun- tries have ample trust funds to stabilize fiscal revenues Tuvalu faces extreme vulnerabilities due to climate change. Private and provide long-term development financing. However, they sector development is hindered by inadequate infrastructure and must diversify these revenues to reduce volatility and fund limited economies of scale. 2010 estimates indicate that 26 percent high recurrent spending. of the population lived below the national poverty line. Structural reforms are essential to promote resilience, sustain growth, and Kiribati has a centralized economy, with public expenditure at encourage economic diversification. 98 percent of GDP in 2024. Recurrent spending has expanded on public wages, social protection, and the copra subsidy. This has reduced poverty but distorts markets and risks deficits as Recent developments volatile fishing revenues account for over two-thirds of revenues. It is important to curtail recurrent spending, foster private enter- Kiribati’s public wage expansion increased the fiscal deficit In 2024, Kiribati prise, and stabilize fiscal revenues using its Revenue Equalization to 22 percent of GDP and lifted growth to 5.2 percent, funded by Reserve Fund (RERF). withdrawing from cash reserves and the RERF. Inflation declined to FIGURE 1 / Selected fiscal revenues, 2017-2023 FIGURE 2 / Sovereign wealth funds, 2016-2024 Percent of GDP Fund balance, percent of GDP 160 400 140 350 120 100 300 80 250 60 200 40 20 150 0 100 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 50 Kiribati Nauru Tuvalu 0 Fishing license fees Regional Processing Centre 2016 2017 2018 2019 2020 2021 2022 2023 2024 .TV domain Other revenue Grants Kiribati Tuvalu Nauru Sources: Country authorities, and World Bank and IMF staff estimates and projections. Sources: Country authorities, and World Bank and IMF staff estimates and projections. Notes: Nauru data are June years; Kiribati and Tuvalu are calendar years. Notes: Nauru data are June years; Kiribati and Tuvalu are calendar years. The Nauru Trust Fund was established in 2016. 8 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 2.6 percent as post-COVID supply constraints eased. it is estimated do not recover in 2025. This could lead to a substantial fiscal con- that poverty fell to 13.1 percent in 2024 (US$3.65 lower-middle-in- traction because the RERF withdrawal rule, loosened in December come country (LMIC) line), below 19.5 percent in 2019, benefitting 2023, allows withdrawals only if returns exceed 2 percent (nomi- from growth as well as from recent increases in social programs nal). Strict adherence to this rule could also deplete the RERF’s bal- (copra subsidy, unemployment benefits) and public wages. Public ance. A rule spending up to 3 percent of the balance would grow its debt (12 percent of GDP) is sustainable but at high risk of distress. real value and stabilize withdrawals. Depositing volatile fishing rev- The RERF was worth 340 percent of GDP in December 2024 after a enues directly into the RERF could also help. Kiribati plans to better withdrawal worth 17 percent of GDP in 2024. target copra subsidies and rationalize public wages and recurrent spending. Further increases in recurrent spending could jeopardize Nauru’s economy grew by 1.8 percent in FY24. Inflation was 4.7 Nauru fiscal responsibility rules. percent, lifted by supply-side constraints. Grants increased from 16 percent of GDP in FY23 to 33 percent in FY24, including higher Nauru’s growth is projected to moderate to 1.4 percent In FY25, Nauru budget support from China. This contributed to a fiscal surplus of with the new port’s completion. The budget surplus may narrow to 30 percent of GDP. Prepayments were made into the Intergenera- 2 to 7 percent of GDP in the medium term due to increasing ex- tional Trust Fund, which was 152 percent of GDP in March 2024, up penditures on healthcare, education, and social benefits. The fis- from 111 percent in June 2022. Public debt (20.2 percent of GDP) cal responsibility policy was weakened in 2024 moving from requir- is sustainable. Liabilities have been significantly reduced. Poverty ing a surplus every year to a surplus across a 3-year rolling av- data has not been available for Nauru since 2012, but projections erage. In 2026, the East Micronesian Internet Cable could enable suggest an LMIC poverty rate of 15.3 percent in 2024. Nauru to offer online services, leveraging its favorable time zone between Asia and the Americas, English language proficiency, and Tuvalu’s growth is estimated at 3.5 percent in 2024, driven by Tuvalu widespread literacy. Additionally, a new port will provide transship- infrastructure projects, government consumption, and develop- ment opportunities and local value-addition to fishing products. ment partner assistance. Inflation slowed to 1.2 percent in 2024. The current account surplus narrowed from 10.7 percent in Tuvalu’s growth is expected to slow but remain 2.2 percent by Tuvalu 2023 to 4 percent in 2024 and the fiscal balance shifted to a 2027, driven by construction, hospitality, finance, and public ad- 3.9 percent GDP deficit due to declines in fishing license fees ministration. The 2023 Australia-Tuvalu Falepili Union Treaty is and grants. Public debt (6.3 percent of GDP) is sustainable, but expected to accelerate outward migration, increasing remittances at high risk of debt distress. Sovereign wealth funds increased over the medium term but reducing productivity and growth in to 245 percent at end-2024. Poverty data has not been available the long run. Inflation is projected to moderate to 3.1 percent for Tuvalu since 2010, but projections suggest an LMIC poverty by 2027 as global inflation pressures subside. Over the medium rate of 4.6 percent in 2024. A new poverty data point is expect- term, both the current account and fiscal deficits are expected ed by mid-2025. to widen as a result of weaker revenue. The value of sovereign wealth funds is expected to decrease, reaching 223 percent of GDP by 2027, subject to fluctuations in asset valuations and declining Outlook returns on investment. In Kiribati Kiribati, growth is expected to moderate to 3.9 percent in 2025 Risks to the Central Pacific outlook include trade shifts and as fiscal spending stabilizes and global trade slows. The fiscal deficit slowing global growth. Additionally, outwards migration and (15 percent of GDP) will be funded by reserves and the RERF. In volatile revenues, including grants from development part- 2026, growth may moderate further with trade policy uncertain- ners, pose significant challenges. Climate-related disasters ty. This could significantly more pronounced if financial markets further exacerbate these risks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices Kiribati 4.6 2.7 5.2 3.9 3.0 2.2 Nauru 2.8 0.6 1.8 1.4 1.3 1.3 Tuvalu 0.4 3.9 3.5 2.8 2.3 2.2 Poverty rates of Kiribati 1,2 International poverty rate ($2.15 in 2017 PPP) 1.2 1.2 1.0 0.8 0.8 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.7 14.2 13.1 11.8 11.2 10.8 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 64.3 63.4 59.9 58.5 58.0 57.0 Source: Country authorities and World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Nauru data are based on the fiscal year ended June. Kiribati and Tuvalu are calendar years. 1/ Calculations based on EAPPOV harmonization, using 2019-HIES. 2/ Projection using neutral distribution (2019) with pass-through = 1 (High) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 9 This outlook reflects information available as of April 10, 2025. 1 2 CHINA Population Poverty million millions living on less than $6.85/day 1407.6 240.6 3 4 Life expectancy at birth School enrollment Growth is projected to moderate from 5.0 percent in 2024 years primary (% gross) to 4.0 percent in 2025. Higher fiscal stimulus is expected to partly offset the negative growth impact of recent trade poli- 78.6 99.3 5 6 cy shifts. Poverty reduction, measured by the World Bank GDP GDP per capita poverty line for upper middle-income countries, is expected current US$, billion current US$ to continue at a slower pace with moderating growth. 18977.8 13482.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Domestic demand was soft in 2024, even as robust external China's growth moderated to 5.0 percent y/y in 2024, from 5.4 per- demand buoyed exports. Domestic demand weakness was cent in 2023. The property sector remains a key drag on economic driven by the prolonged property sector correction and low activity, with real estate investment contracting by 10.1 percent in consumer confidence. In response, the government progres- real terms last year, even as manufacturing and infrastructure in- sively increased monetary, fiscal, and property sector-related vestment grew by 9.9 percent. Overall investment contributed 1.3 policy support. Trade policy shifts and higher uncertainty are percentage points (ppts) to real GDP growth in 2024. Consumption expected to weigh on China’s exports, manufacturing invest- growth also weakened, with its contribution to growth declining ment, and domestic demand, with the impact partly offset from 4.6 ppts in 2023 to 2.2 ppts in 2024, as falling property prices by accommodative policies. and sluggish income growth weighed on consumer confidence. Ro- bust net exports, on the back of resilient external demand, con- China’s recent growth moderation has been in part driven by tributed 1.5 ppts to real GDP growth. structural factors such as slowing productivity growth, an aging population, high debt levels, and diminishing returns to capital. To address the growth slowdown, the government has ramped A key challenge for policymakers is to balance short-term sup- up policy support since September last year. The authorities low- port to stimulate growth against risks that the measures could ered key monetary policy rates and introduced a total of RMB exacerbate existing structural imbalances. Short-term policy in- 300 billion (0.2 percent of GDP) consumer trade-in and business terventions could be aligned with longer-term objectives such equipment upgrade fiscal subsidy programs. They also allowed as promoting greener growth and rebalancing the economy to- state-financed purchases of idle land and housing inventories ward higher consumption. while increasing liquidity support to viable property developers. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 9 40 100000 35 90000 7 80000 30 5 70000 25 60000 3 20 50000 15 40000 1 30000 10 -1 20000 5 10000 0 0 Private cons. Gov. cons. 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gross capital formation Net exports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: China National Bureau of Statistics and World Bank staff estimates. Source: Word Bank. Notes: See footnotes in table on the next page. 10 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Additionally, the government reduced mortgage rates and down while higher uncertainty could temper manufacturing investment. payment ratios and relaxed home purchase restrictions to stimu- Fiscal policy will be the main lever in mitigating the negative late housing demand. Partly driven by these counter-cyclical poli- impact of trade policy shifts and supporting GDP growth. A sig- cies, as well as stronger exports, growth picked up to 5.4 percent nificant portion of fiscal support is expected to be allocated to y/y in Q4 2024 from 4.6 percent in Q3. infrastructure investment, while some social benefits and the consumer subsidies will also be expanded. Policy support for Poverty reduction has kept pace with aggregate growth. In 2024, the property sector is expected to provide a modest boost to around 26 million people are estimated to have surpassed the con- housing demand, but stabilization in the sector is not anticipat- sumption threshold of US$6.85/day, a standard benchmark used ed until late 2025. as a reference by the World Bank to compare progress on poverty reduction across upper middle-income countries. This is lower Risks to the outlook are broadly balanced. Globally, uncer- than the estimated 29 million people who crossed the same tainty around trade policy and global growth poses risks to threshold in 2023, reflecting the growth slowdown. In real terms, China’s growth outlook. Domestically, prolonged weakness in per capita disposable income in urban areas grew at an annual av- the property sector could further curb investment and local erage rate of 4.1 percent between 2019 and 2024, while real per government revenues. Tighter local government financing, in capita consumption expenditure increased by only 3.5 percent, re- turn, could lead to under-execution of fiscal policies. On the flecting cautious household spending, especially in urban areas. upside, higher-than-expected fiscal spending could lift growth above baseline projections. Outlook Lower growth is also expected to weigh on the pace of poverty re- duction in 2025 and 2026. The poverty rate at the World Bank’s Growth is projected at 4.0 percent in both 2025 and 2026. The benchmark of US$6.85/day is projected to fall to 10.5 percent and growth moderation in 2025 will be driven by a decline in exports, 9.2 percent, respectively, in 2025 and 2026. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.1 5.4 5.0 4.0 4.0 3.9 Private consumption 1.7 9.0 4.3 4.9 4.8 4.7 Government consumption 5.3 7.3 3.3 6.8 6.3 3.7 Gross fixed capital investment 3.4 4.5 3.6 5.6 4.4 3.6 Exports, goods and services -1.9 1.1 11.5 -2.6 -1.1 2.0 Imports, goods and services -5.1 5.6 4.3 4.8 3.8 2.8 Real GDP growth, at constant factor prices 3.1 5.4 5.0 4.0 4.0 3.9 Agriculture 4.2 4.0 3.5 3.0 3.0 2.9 Industry 2.3 4.4 5.3 3.1 3.0 2.9 Services 3.6 6.3 5.0 4.8 4.8 4.7 Employment rate (% of working-age population, 15 years+) 62.0 62.3 62.3 62.2 62.1 62.1 Inflation (consumer price index) 2.0 0.2 0.2 0.5 1.3 2.0 Current account balance (% of GDP) 2.4 1.4 2.2 0.1 0.0 0.1 Net foreign direct investment inflow (% of GDP) -0.1 -0.8 -0.9 -3.0 -1.5 -1.0 1 Fiscal balance (% of GDP) -6.1 -5.5 -6.5 -8.7 -9.0 -8.6 Revenues (% of GDP) 31.7 31.7 30.3 28.9 28.5 28.0 Debt (% of GDP) 49.4 54.7 63.0 71.5 77.8 81.9 Primary balance (% of GDP) -5.1 -4.5 -5.5 -7.6 -7.8 -7.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.7 13.7 11.9 10.5 9.2 8.0 GHG emissions growth (mtCO2e) 1.6 2.5 2.3 1.8 2.0 2.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The adjusted fiscal balance adds up the public finance budget, the government fund budget, the state capital management fund budget and the social security fund budget. 2/ Last grouped data available to calculate poverty is for 2021 provided by NBS. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2021) with pass-through = 0.85 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 11 This outlook reflects information available as of April 10, 2025. 1 2 FIJI Population Poverty million millions living on less than $6.85/day 0.9 0.5 3 4 Life expectancy at birth School enrollment Growth is projected to slow to 3.2 percent GDP by 2027, years primary (% gross) due to sustained tourist arrivals. Fiscal consolidation is expected to support debt reduction. Risks to the outlook 68.3 107.6 5 6 include prolonged trade policy uncertainty, natural disas- GDP GDP per capita ters, skilled labor shortages, and external commodity price current US$, billion current US$ shocks. Investment, productivity, and fiscal consolidation structural reforms are essential risk mitigators, ensuring 5.6 5995.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. sustainable growth and poverty reduction. 4/ 2023. 5/ 2024. 6/ 2024. estimate that poverty fell to 50.1 percent in 2024, which is below Key conditions and challenges the pre-pandemic level of 52.6 percent measured in the 2019/ 20 Household Income and Expenditure Survey. Extreme poverty Fiji achieved upper-middle-income status in 2014 but continue to (US$2.15/day in 2017PPP) has almost been eliminated in Fiji, at 1.3 face challenges in raising living standards to match its income level. percent in 2019/20 and estimated at 1 percent in 2024. Tourism drives its economy, but its small size, remote location, im- port dependence, and climate vulnerability hinder development. To reach high-income status within 20 years, Fiji needs reforms to boost Recent developments investment and productivity. Key strategies include improving the business climate, fostering competition, attracting foreign invest- GDP growth of 3.8 percent is estimated for 2024, tapering off from ment, developing a skilled workforce, and promoting gender equality the strong recovery in 2022-2023 but higher than the 2014-2023 in employment while maintaining macroeconomic stability. average of 2.7 percent. This was attributed to robust tourist arrivals, which was 10 percent above pre-pandemic levels. Primary drivers of The economy recovered fully in 2023, but the legacy left behind by growth include tourism-related sectors such as accommodation, the pandemic combined with multiple disasters, particularly higher transport, financial services, and wholesale and retail industries. Av- debt, limits its ability to respond to future economic shocks. While erage inflation was 4.5 percent due to high prices during the year strong tourism is driving growth, capacity constraints in hotels, la- owing to the increase in minimum wages in August 2024. Monetary bor shortages, and bureaucratic obstacles are expected to hinder policy remains accommodative to support growth with the further progress. overnight policy rate maintained at 0.25 percent since 2020. Full economic recovery has bolstered Fiji’s poverty reduction ef- The current account deficit decreased to 4.2 percent of GDP in forts. Projections of poverty rates, as measured by the upper-mid- 2024, as tourism receipts and remittance inflows increased, partly dle-income country standard of living (US$6.85/day in 2017PPP), due to Fijians participating in various labor mobility schemes in FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 80 14000 20 70 12000 15 60 10 10000 50 5 8000 0 40 6000 -5 30 -10 4000 20 -15 10 2000 -20 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Agriculture Industry Services Real GDP Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance, IMF, and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 12 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Australia and New Zealand. Foreign reserves remained at a com- receipts and remittances. Remittances are expected to stay fortable level of 6 months of retained imports as of end-2024. above a tenth of GDP while tourism earnings moving close to a fifth of GDP. The current account deficit will be largely The fiscal deficit declined to 4 percent of GDP in 2024 from 4.6 financed by official borrowing. Foreign reserves are project- percent in 2023 due to high tax buoyancy from VAT and cor- ed to remain adequate over the medium term at above 5 porate income tax. Revenue gains from measures introduced in months of imports. This is slightly higher than IMF’s rec- 2024 such as departure tax and additional measures on VAT of ommended threshold of 4.9 months which is based on the 0.5 percent of GDP were partly offset by higher recurrent spend- Assessing Reserve Adequacy (ARA) metric for Fiji with high ing. The deficit was financed through external concessional and vulnerability to natural disasters. domestic borrowing. As a result, public debt fell from 81.5 per- cent in 2023 to 79.8 percent of GDP in 2024 owing to lower pri- The fiscal deficit is projected to decrease to 3.4 by 2027, driven mary balance and high growth. by ongoing and planned reforms that promotes revenue gener- ation and rationalization of expenditures. Key initiatives include strengthening compliance, rationalizing tax exemptions, and com- Outlook bating tax evasion and avoidance to boost revenue. Growth is expected to return to trend over the medium term with Initiatives to enhance expenditure management include a zero- 3.2 percent GDP by 2027. Tourist arrivals decreased by 3.8 percent based budgeting approach, review funding allocations for ex- compared to February of last year, but they are expected to re- tra-budgetary units, and focus on high-priority capital projects cover over the course of the year. While outmigration and labor over the medium term. Public debt is projected to decline to mobility have slowed, labor shortages are expected to persist with around 77.5 percent of GDP by 2027, backed by primary sur- growth supported by manufacturing, wholesale and retail trade, pluses. The public debt is considered sustainable but subject and finance sectors. Howvever, it is difficult to gauge the full impact to considerable risks. of recent measures as policy shifts may continue to unfold. The outlook is subject to downside risks, primarily stemming from The growth outlook is projected to reduce poverty to 48.7 percent ongoing global trade policy uncertainty, skilled labor shortages, po- in 2025 and 45.5 percent by 2027 by UMIC standards. Headline in- tential international price shocks, and natural disasters. To mitigate flation is projected to decrease to return to trend to 3 percent over these risks and foster sustainable growth, it is essential to imple- the medium term. ment structural reforms that support investment and productivity, including fiscal consolidation measures. These efforts will be crit- The current account deficit is expected to subside to 2.1 percent ical in enhancing resilience, maintaining macroeconomic stability, of GDP by 2027, driven by reduced trade deficit and stable tourism and supporting poverty reduction. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 19.8 7.5 3.8 2.6 2.9 3.2 Real GDP growth, at constant factor prices 16.0 9.1 3.8 2.6 2.9 3.2 Agriculture 4.0 4.7 1.8 4.5 4.5 4.1 Industry 8.3 -4.9 7.3 2.7 4.5 6.1 Services 20.7 13.9 3.3 2.3 2.2 2.4 Inflation (consumer price index) 3.1 5.1 1.3 3.3 3.1 3.0 Current account balance (% of GDP) -17.3 -7.7 -4.2 -3.2 -3.2 -2.1 Net foreign direct investment inflow (% of GDP) 1.8 1.1 4.2 4.7 5.1 5.0 Fiscal balance (% of GDP) -10.3 -4.6 -4.0 -4.3 -3.7 -3.4 Revenues (% of GDP) 21.7 25.2 28.4 28.4 28.1 28.1 Debt (% of GDP) 85.8 81.5 79.8 79.7 78.8 77.5 Primary balance (% of GDP) -6.6 -0.5 0.0 -0.4 0.2 0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 1.8 1.3 1.0 0.9 0.8 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.7 12.3 11.4 11.0 10.4 9.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 57.1 52.4 50.1 48.7 47.3 45.5 GHG emissions growth (mtCO2e) 19.8 7.5 4.1 3.1 3.0 3.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 13 This outlook reflects information available as of April 10, 2025. 1 2 INDONESIA Population Poverty million millions living on less than $3.65/day 285.1 44.3 3 4 Life expectancy at birth School enrollment Growth remains resilient, poverty and unemployment fell, years primary (% gross) but middle-class job creation lags. Global and domestic poli- cy uncertainties triggered portfolio outflows, pressuring the 68.2 100.2 5 6 Rupiah. Growth is projected to average 4.8 percent through GDP GDP per capita 2027, but uncertainty in trade policy could impact invest- current US$, billion current US$ ment and growth. Structural reforms to accelerate produc- tivity growth, alongside fiscal and monetary prudence, are 1396.3 4897.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2024 (2017 PPPs). 3/ 2022. key to advancing the government’s growth agenda. 4/ 2023. 5/ 2024. 6/ 2024. estimated at 6.4 percent of GDP. Closing this gap will expand the Key conditions and challenges fiscal space for funding Indonesia’s Vision 2045. Indonesia achieved upper middle-income status in 2023 and aims for high-income status by 2045. To reach this goal, Indonesia must Recent developments accelerate its growth to at least 6 percent. The Government is tar- geting 8 percent by 2029 through higher investment. While ro- GDP growth in 2024 was maintained at 5.0 percent due to strong bust demand has supported steady economic performance and domestic demand. Election-related spending increased public con- brought poverty down, accelerating growth requires implementing sumption, offsetting the weaker contribution of net exports to structural reforms to boost the country’s growth potential and mit- growth from falling commodity prices. Service sectors drove igate overheating risks. growth, while tradeable manufacturing, especially textiles slowed, leading to a 20.2 percent rise in job cuts. Leading indicators point Despite strong macroeconomic foundations, Indonesia is experi- to a potential moderation in domestic demand in early 2025. encing a slowdown in productivity growth. Structural constraints are impeding a more efficient allocation of resources to the most Inflation eased in the second half of 2024, thanks to a rebound in productive sectors, leading to a continuous decline in total factor agricultural production and price stabilization through fiscal mea- productivity growth, from 2.3 to 1.2 percent between 2011 and sures. On average, yearly inflation declined to 2.3 percent in 2024, 2024. To address this issue, Indonesia could advance efficiency re- from 3.7 percent in 2023. Temporary electricity subsidies in early forms, including through financial sector deepening and improving 2025 have kept inflation low at 1 percent in March. the investment, trade, and business climate. Wages increased by 3.3 percent in 2024, outpacing inflation, with At 12.7 percent, Indonesia’s 2024 revenue-to-GDP is the lowest strong gains in the agriculture sector. The real wage increase among middle-income peer countries. Foregone tax revenues are brought the poverty rate down by 1.9 ppts to 15.6 percent using FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 6 100 60 90 4 50 80 70 2 40 60 50 30 0 40 20 -2 30 20 10 -4 10 2020 2021 2022 2023 2024 2025 2026 2027 0 0 Statistical discrepancy Net exports 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Investment Government consumption International poverty rate Lower middle-income pov. rate Private consumption GDP Upper middle-income pov. rate Real GDP pc Sources: National Statistics Agency and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 14 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. the lower middle-income country (LMIC) poverty line. Lower food confidence. While it is difficult to gauge the full impact of inflation eased the burden on households and contributed to re- recent measures as policy shifts may continue to unfold, ducing poverty. Unemployment fell to 4.8 percent in February growth is projected to moderate to an average of 4.8 per- 2024, below pre-pandemic levels. However, the creation of quality cent over 2025-2027. The announced demand stimulus cou- jobs has lagged, as underemployment recorded 8.5 percent in Feb- pled with planned reforms to boost the capacity of the econ- ruary 2024, a 1.5 ppts increase from the previous year. omy could counterbalance this impact. Capital formation is expected to gradually rise as investments through Danan- The government revised its decision to raise the value-added tax in tara materialize. Private consumption growth will remain 2025, opting instead to optimize the budget through partial spend- resilient, with some moderation as the lack of quality jobs ing cuts. These cuts are being redirected to priority programs and raises precautionary savings. With sustained demand, the the establishment of a new sovereign wealth fund (Danantara), poverty rate, measured at the LMIC line, is projected to maintaining overall spending neutrality. However, tax revenues decline to 11.5 percent by 2027. A positive output gap will contracted by 0.4 ppts, reaching 1.1 percent of GDP in February fuel inflation, which is expected to remain within Bank In- amid moderating commodity prices and technical disruptions in donesia’s target band. the Core Tax Administration System. This led to a fiscal deficit of 0.1 percent of GDP during this period. Spending is projected to accommodate new priority programs, raising the fiscal deficit to 2.7 percent of GDP. Expenditure will shift The current account deficit increased to 0.6 percent of GDP in 2024 further towards social expenditures, including the new Nutritious as terms-of-trade softened. Portfolio equity outflows accelerated Food Program. Debt will stabilize at around 41 percent of GDP, with since February amid global and domestic policy uncertainties. Con- higher borrowing costs pushing interest payments to 19 percent of currently, increased domestic demand for USD, driven by exter- total revenues. nal debt repayments and dividend outflows put additional pres- sure on the Rupiah, which depreciated by 2.3 percent year-to- Amid restrictive global financial conditions and trade policy March. However, the implementation of the mandatory repatria- measures, the current account deficit is projected to widen to tion rule for natural resource export proceeds has partially offset 1.7 percent of GDP by 2027 below pre-pandemic levels. For- the pressure on foreign exchange reserves, which rose and now eign direct investment will remain the main source of external cover 6.7 months of imports. funding, mostly directed towards industrial downstreaming, but will pick up gradually over time as foreign investors seek more policy stability. Outlook Risks to the outlook are skewed to the downside. Trade policy un- Uncertainty over global trade policies and a drop in commodi- certainty, weaker commodity prices, and domestic policy uncer- ties prices will impact Indonesia’s terms-of-trade and investors’ tainties could pose challenges to growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.3 5.0 5.0 4.7 4.8 5.0 Private consumption 5.0 4.9 5.1 4.9 4.9 4.9 Government consumption -4.4 3.0 6.6 -2.1 0.3 0.9 Gross fixed capital investment 3.9 3.8 4.6 6.1 6.2 6.3 Exports, goods and services 16.2 1.3 6.5 4.8 5.1 5.5 Imports, goods and services 15.0 -1.6 7.9 4.5 5.0 5.1 Real GDP growth, at constant factor prices 4.9 5.1 5.1 4.7 4.8 5.0 Agriculture 2.3 1.3 0.7 3.6 3.0 3.0 Industry 4.1 5.0 5.2 3.8 4.0 4.0 Services 6.5 6.1 6.2 5.7 5.9 6.3 Employment rate (% of working-age population, 15 years+) 64.6 65.8 67.2 67.3 67.7 68.5 Inflation (consumer price index) 4.1 3.7 2.3 2.3 2.6 2.6 Current account balance (% of GDP) 1.0 -0.1 -0.6 -1.3 -1.6 -1.7 Net foreign direct investment inflow (% of GDP) 1.4 1.1 1.0 1.2 1.3 1.5 Fiscal balance (% of GDP) -2.4 -1.6 -2.3 -2.7 -2.7 -2.7 Revenues (% of GDP) 13.5 13.3 12.8 11.9 12.3 12.4 Debt (% of GDP) 39.5 39.0 39.2 40.1 40.8 41.4 Primary balance (% of GDP) -0.4 0.5 -0.1 -0.4 -0.4 -0.3 1,2 International poverty rate ($2.15 in 2017 PPP) 2.2 1.8 1.3 1.0 0.8 0.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 19.1 17.5 15.6 14.2 12.8 11.5 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.6 61.8 60.3 58.7 57.2 55.5 GHG emissions growth (mtCO2e) 2.9 2.5 3.1 2.9 3.0 0.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2011-SUSENAS and 2024-SUSENAS. Actual data: 2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2011-2024) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 15 This outlook reflects information available as of April 10, 2025. 1 2 LAO PDR Population Poverty million millions living on less than $3.65/day 7.8 2.3 3 4 Life expectancy at birth School enrollment Despite steady growth and improved macroeconomic condi- years primary (% gross) tions in 2024, high debt continues to limit fiscal space, and the poverty rate stagnated. For 2025, growth is forecast at 69.0 96.8 5 6 3.5 percent, amid rising trade policy uncertainty. Without GDP GDP per capita sustained reforms in revenue, governance, financial stability, current US$, billion current US$ and the business environment, risks to growth and stability are substantial. The poverty rate is projected at 31 percent. 15.4 1977.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Macroeconomic imbalances persist despite recent improvements. In 2024, economic imbalances improved. Laos' economic Public and publicly guaranteed debt (PPG) remains unsustainable growth remained steady, driven by sectors like tourism, at 116 of GDP, including domestic arrears and a currency swap. transport, electricity, mining, agriculture, and manufacturing. From 2020-2023, cumulative external debt service deferrals The average official kip/US$ exchange rate depreciated by amounted to approximately 16 percent of GDP, reducing short- 8 percent year-on-year during July 2024 to February 2025, term pressure on foreign exchange demand but leaving long term while the parallel rate weakened by 1 percent. Indicating re- solvency issues unresolved. External debt repayments are project- duced pressures, the gap between the official and parallel rates ed to average $1.3 billion annually from 2025 to 2027 if there are narrowed to below 1 percent in January. This improvement was no further deferrals. This results in high financing needs, which im- mainly due to tighter monetary policy, increased foreign re- plies a high foreign exchange liquidity risk. serves, stricter foreign exchange management, and fiscal con- solidation, with some debt service deferrals in 2024. Inflation Macroeconomic instability has also had a significant impact on the moderated to 15.5 percent in January 2025, down from 26.2 labor market, household living standards, and human capital de- percent in mid-2024. velopment. High inflation, currency depreciation, and declining re- al wages have driven many workers’ transitions from wage em- Stronger revenue collection offset increased spending in 2024, ployment and unpaid family work to self-employment, while also resulting in a fiscal surplus. Domestic revenue increased to 17.6 increasing outmigration to neighboring countries. The prolonged percent of GDP due to higher VAT, profit taxes, export duties, and inflation has forced over one-third of households to reduce food natural resource taxes, driven by improved economic activity, a consumption and investments in human capital, and limit savings. tax rate increase, and better tax administration. Public spending These pressures pose serious challenges for poverty reduction. rose to 16.7 percent due to higher interest payments. Investment FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 8 90 25 80 6 70 20 4 60 15 50 2 40 10 30 0 20 5 -2 10 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 0 Agriculture Industry 2012 2014 2016 2018 2020 2022 2024 2026 Services Net taxes on production International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: Lao Statistics Bureau and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 16 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. in human capital and infrastructure maintenance remains limited restoration of fuel excise rates) and better administration. High (2.1 percent in 2024 plan). interest obligations could crowd out other essential expenditures. The baseline assumes a primary surplus in coming years, but an The overall balance of payments improved in 2024, supported by a overall fiscal deficit. current account surplus and net financial inflows, helping replenish reserves. Exports, particularly in agriculture, mining, electricity, and Inflation is expected to moderate but remain in the double digits, electronics, continued to grow. Despite improvement, foreign re- reflecting potential depreciation due to high external debt service serves excluding the currency swap, remain precariously low, cov- and imports. ering 1.3 months of imports. Macroeconomic volatility will continue to pose a risk to poverty re- Employment continued to shift from wage and unpaid family jobs duction efforts. High inflation will continue to pressure real house- to self-employment, along with rising outmigration, leading to la- hold incomes and human capital spending. Extreme weather bor shortages in some sectors. The share of self-employment rose events could exacerbate food price increases while reducing farm from 40 percent in 2023 to 59 percent in 2024. Official migration income. The poverty rate is projected to remain steady in 2025. In to Thailand increased from 233,132 to 291,844, while migration the medium term, a contraction in human capital spending could to South Korea doubled from 2,815 to 5,602. Nominal wages and undermine poverty reduction efforts. household income grew by 8 percent and 14 percent, respectively, but lagged inflation. Due to high inflation, half of households re- This outlook faces significant risks. Global trade uncertainty could duced food consumption and one-third cut back on human capital impact external demand and investments from Laos’ key trading investments. The poverty rate (based on the lower-middle-income partners. Domestically, tight foreign exchange liquidity, limited ac- poverty line in 2017 PPP) was estimated at 31 percent in 2024. cess to international capital markets, slow structural reforms, and deteriorating bank balance sheets pose challenges. With low ac- cess to international capital markets, the pressure on domestic fi- Outlook nancing sources could intensify. Outmigration and labor shortages could hinder growth in labor-intensive sectors. Heightened trade policy uncertainty could impact Laos growth in the short term. Real GDP growth is projected to moderate at 3.5 Addressing macroeconomic instability requires five critical re- percent as trade policy shifts and the resulting decline in for- forms: (i) improving revenue mobilization (curbing tax exemptions, eign demand could impact some of the export-oriented manufac- restoring fuel excise rates, and reforming health taxes); (ii) improv- turing and services. Despite improvements in revenue collection ing governance of public and public-private investments; (iii) final- and deferrals, high debt service will continue to constrain fiscal izing debt negotiations; (iv) strengthening financial sector stability; space. Revenue is expected to benefit from tax policy (such as the and (v) improving the business environment. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.7 3.7 4.1 3.5 3.4 3.4 Real GDP growth, at constant factor prices 2.7 3.7 4.1 3.5 3.4 3.4 Agriculture 1.6 2.4 3.0 2.9 2.8 2.8 Industry 3.3 2.6 3.7 2.5 2.5 2.5 Services 2.5 5.5 5.0 4.7 4.5 4.4 Inflation (consumer price index) 22.7 31.2 23.3 11.0 9.8 7.0 Current account balance (% of GDP) -1.7 2.6 1.6 -0.5 -1.7 -2.0 Fiscal balance (% of GDP) -0.2 0.7 0.8 -0.5 -0.4 -0.5 Revenues (% of GDP) 14.7 16.5 18.2 18.1 18.1 18.2 Debt (% of GDP) 130.9 115.9 112.2 112.2 110.3 108.8 Primary balance (% of GDP) 1.3 2.7 3.9 2.8 2.7 2.5 1,2 International poverty rate ($2.15 in 2017 PPP) 6.8 6.7 6.5 6.4 6.3 6.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 31.7 31.4 31.0 30.7 30.4 30.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 69.7 69.3 68.9 68.5 68.2 67.8 GHG emissions growth (mtCO2e) 3.8 4.9 5.6 5.5 5.6 6.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2012-LECS and 2018-LECS. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2012-2018) with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 17 This outlook reflects information available as of April 10, 2025. 1 2 MALAYSIA Population Poverty million millions living on less than $6.85/day 35.6 0.8 3 4 Life expectancy at birth School enrollment Malaysia’s economy grew robustly in 2024, driven by private years primary (% gross) consumption, strong investments, and a rebound in exports. In 2025, growth is projected to slow to 3.9 percent amid a 76.3 98.8 5 6 challenging global environment. Fiscal constraints and in- GDP GDP per capita come inequality remain key challenges. Structural reforms to current US$, billion current US$ enhance fiscal capacity, increase incomes, and promote so- cial mobility are essential for navigating global challenges 422.0 11867.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. and ensuring long-term, inclusive growth. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Malaysia's economy registered strong growth in the last two Malaysia sustained strong economic growth of 5 percent in 4Q quarters of 2024. This expansion was underpinned by re- 2024, bringing overall growth for the year to 5.1 percent. House- silient private consumption, robust investment, and a re- hold consumption remained resilient, driven by sustained employ- bound in exports. However, limited fiscal space remains a ment and wage growth, as well as government income support key challenge for the government, with low tax revenue and measures. Private and public investment expanded strongly, dri- high rigid expenditures. While optimizing public spending ven by capital expenditure in the manufacturing and services sec- can free up budgetary resources, enhancing revenue mobi- tors. Meanwhile, net export growth turned positive amid continued lization remains vital to restore fiscal space and meet future export expansion and slower import growth but was offset by larg- fiscal needs. er inventory drawdowns which weighed on overall growth. The services sector led expansion while manufacturing grew on the Malaysia has made significant progress in reducing poverty. strength of the electrical and electronic (E&E) exports. Agriculture Measured using the international upper-middle income line and mining contracted due to unfavorable weather conditions and of $6.85 (2017 PPP) dollars per day, poverty stood at 2.3 a continued decline in oil output. Construction saw strong growth, percent in 2021 and projected to decline further to 1.2 per- driven by non-residential and specialized projects. cent in 2025. However, income remains highly concentrated at the top, with the richest 20 percent of households hold- Headline inflation has eased to 1.9 percent in Q3 2024 and 1.8 per- ing 41 percent of total income in 2022. Meanwhile, income cent in Q4 2024. This moderation was primarily due to lower infla- mobility remains limited at the bottom, with more than half tion in mobile communication services, though partially offset by of those in the poorest 20 percent remaining in the same higher food prices. Core inflation followed a similar trend, standing income decile. at 1.9 percent in Q3 2024 and 1.7 percent in Q4 2024. The labor FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 30 25 35000 20 30000 20 25000 10 15 20000 0 10 15000 -10 10000 5 5000 -20 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real priv. cons. pc Sources: Bank Negara Malaysia and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 18 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. market continues to show positive trends, with the national unem- Headline inflation is projected to increase to 2.6 percent, reflecting ployment rate remaining at 3.2 percent while nominal wage growth several domestic policy reforms amid moderating cost conditions saw a slight uptick. The central bank maintained the overnight pol- mainly due to lower commodity prices. icy rate at 3 percent and deemed that the monetary policy stance remains supportive of the economy, with inflation expected to re- The growth outlook is subject to several significant downside main manageable in 2025. risks, primarily driven by the increased uncertainty around trade and investment. These developments may exacerbate The government has implemented several new measures to en- trade fragmentation, contribute to further uncertainty, and hance wage growth and support workers amidst rising living lead to a more pronounced deceleration in global economic costs. In February 2025, the monthly minimum wage was in- growth. The impact of commodity price declines may com- creased by 13.3 percent from RM1,500 to RM1,700, benefitting pound the potential effects of trade uncertainty. Domestic risks approximately 4.37 million workers. The government has also al- to Malaysia’s growth stem from inflationary pressures from do- located RM200 million under the Progressive Wage Policy in Bud- mestic policy measures and potential supply disruptions from get 2025, aiming to support 50,000 workers by linking wages to unfavorable weather conditions. productivity and experience. Without further efforts to address inequality and enhance eco- nomic mobility, over half of Malaysians may continue to have Outlook incomes below the high-income threshold even when Malaysia attains high-income country status. Addressing these issues re- In 2025, Malaysia’s growth is projected to moderate to 3.9 percent quires comprehensive measures to promote inclusive growth amid heightened global economic policy uncertainty, especially re- and enhance mobility, including boosting productivity, prioritizing garding trade policy. Growth will be driven mainly by domestic de- quality education and skills training, and increasing investment mand, with private consumption supported by government mea- in human capital development early in the lifecycle. Strengthen- sures. While external challenges are likely to impact investment de- ing social protection through increased spending, improved tar- cisions, private investment is expected to remain supported by on- geting, and reduced fragmentation is also crucial. Additionally, fi- going multiyear investments and the implementation of previous- nancing inclusive investments by expanding health and education ly approved projects. Exports will face considerable external head- investments and creating more fiscal space for equity-enhancing winds arising from the deterioration in the global environment. initiatives is essential. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.9 3.6 5.1 3.9 4.3 4.3 Private consumption 11.3 4.7 5.1 4.7 4.8 5.0 Government consumption 5.1 3.3 4.7 4.7 4.3 3.4 Gross fixed capital investment 6.8 5.5 12.0 4.2 4.2 4.0 Exports, goods and services 14.5 -8.1 8.5 2.3 3.5 3.7 Imports, goods and services 16.0 -7.4 8.9 3.2 3.9 4.0 Real GDP growth, at constant factor prices 8.9 3.5 5.1 3.9 4.3 4.3 Agriculture 1.3 0.7 3.1 1.9 1.8 1.6 Industry 6.7 1.3 4.9 2.8 3.2 3.2 Services 11.4 5.2 5.5 4.9 5.3 5.3 Employment rate (% of working-age population, 15 years+) 62.9 62.7 62.7 62.7 62.6 62.6 Inflation (consumer price index) 3.4 2.5 1.8 2.6 2.5 2.5 Current account balance (% of GDP) 3.2 1.5 1.7 1.7 1.7 1.7 Net foreign direct investment inflow (% of GDP) 0.7 0.0 0.6 0.5 0.5 0.4 Fiscal balance (% of GDP) -5.5 -5.0 -4.1 -3.8 -3.4 -3.1 Revenues (% of GDP) 16.4 17.3 16.8 16.5 16.5 16.2 Debt (% of GDP) 60.2 64.3 64.6 65.0 64.5 64.0 1 Primary balance (% of GDP) -3.2 -2.5 -1.5 -1.2 -0.9 -0.8 2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.1 0.0 0.0 0.0 0.0 0.0 2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 1.6 1.5 1.3 1.2 1.1 1.0 GHG emissions growth (mtCO2e) 3.3 -1.0 1.1 1.3 1.3 0.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The primary balance excludes interest payments received. 2/ Projection using annualized elasticity (2013-2021) with pass-through = 0.7 based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 19 This outlook reflects information available as of April 10, 2025. 1 2 MONGOLIA Population Poverty million millions living on less than $6.85/day 3.5 0.8 3 4 Life expectancy at birth School enrollment Despite global uncertainty, Mongolia's GDP is projected to years primary (% gross) grow by 6.3 percent in 2025, driven by a surge in copper production and a partial recovery of agriculture from a harsh 72.7 95.8 5 6 winter. The poverty rate is expected to decrease modestly GDP GDP per capita from 20.2 percent in 2024 to 19.2 percent in 2025, driven by current US$, billion current US$ income gains but limited by inflation and lingering impacts of agricultural losses. While favorable, the outlook is subject to 23.6 6695.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. sizable uncertainty amid shifting global trade policies. 4/ 2023. 5/ 2024. 6/ 2024. heating, which have been only partly offset by rising wages. Mean- Key conditions and challenges while, the agricultural contraction triggered by the harsh winter challenges rural livelihoods. As a result, poverty reduction is pro- The economy continues to benefit from a mining boom, con- jected to be modest, with the rate declining from 20.2 percent in tributing to strong growth, fiscal surpluses, and public debt 2024 to 19.2 percent in 2025 using the $6.85 line. reduction. However, rapid wage growth, increased fiscal and quasi-fiscal spending, and higher credit growth have boosted domestic demand, increasing inflation and imports. While fiscal Recent developments buffers have improved, strong import demand has contributed to a wider current account deficit and greater vulnerability to Economic growth reached 5.0 percent in 2024, driven by strong external shocks. The 2025 budget’s focus on a structurally bal- mining and services. Coal output hit a record high, while copper anced stance marks a positive shift from recent highly pro- production at Oyu Tolgoi (OT), the largest copper mine, surged un- cyclical policies. However, large SOE-financed investment pro- derground mining expanded. However, growth slowed from 7.2 jects and dividend transfers to the public present continued percent in 2023 due to a sharp contraction in agriculture following quasi-fiscal expansion. the dzud that led to a 15 percent reduction in agricultural incomes in 2024. On the demand side, rising incomes from wage and pen- Mongolia introduced energy tariff reforms that are expected to en- sion hikes and higher public spending boosted consumption. Low- hance the sector's financial sustainability and, if coupled with addi- er inflation earlier in the year and increased household borrowing tional investments and service improvements, to reduce blackouts further supported private spending. Investment was also strong, and inefficiency. Higher energy efficiency would boost productivity, driven by foreign direct investment (FDI), public capital expendi- investment, and growth over the medium term. But, in the short tures, and recovering bank lending. However, strong domestic de- term the tariff hikes have contributed to increased living costs, es- mand promoted imports, particularly consumer durables and in- pecially for residents of urban ger districts reliant on electricity for vestment goods, weighing on net exports. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 25 60 12 20 50 10 15 10 40 8 5 30 6 0 -5 20 4 -10 10 2 -15 -20 0 0 2022 2023 2024 p 2025 f 2026 f 2027 f 2010 2012 2014 2016 2018 2020 2022 2024 2026 Final consumption Gross capital formation International poverty rate Lower middle-income pov. rate Net exports GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Statistics Office and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 20 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Headline inflation averaged 6.8 percent in 2024, down from 10.4 copper production at OT as its underground mining operations percent in 2023 due to lower global food and fuel prices. However, expand. After two years of dzud-related losses, the agriculture inflation had surged to 9.0 percent by year-end, exceeding the cen- sector is also expected to recover moderately. However, private tral bank’s target range of 4–8 percent, driven by supply and de- consumption is anticipated to slow, reflecting rising inflation and mand pressures. The November 2024 energy tariff reform raised a gradual recovery in rural livelihoods—resulting in only a mod- household electricity prices, directly adding 1.4 percentage points est reduction in poverty in 2025. Private investment growth is to inflation and reducing purchasing power. Higher electricity costs also expected to soften due to declining FDI—partly from the also led manufacturers to raise prices. Meanwhile, core inflation tapering of OT-related investment and heightened global uncer- (excluding food and fuel) jumped by 2.7 percentage points in the tainty—along with higher domestic lending rates as the central second half of 2024, reflecting growing demand pressures. In re- bank continues efforts to contain inflation, and rising production sponse, the central bank tightened monetary conditions in Decem- costs, particularly energy. While the direct impact of recent trade ber 2024 and again in January and March 2025 by raising the policy policy shifts is expected to be limited—given Mongolia’s mini- rate and the banks’ reserve requirements. mal trade exposure to the U.S.—the indirect effects of slowing global growth, declining coal and copper prices, and substan- Despite record revenues in 2024, the budget surplus narrowed tial OT-related investment repayments are expected to weigh on due to high fiscal spending. Still, strong GDP growth and the fiscal fiscal revenues and external balances. Still, strong GDP growth surplus led to a decline in the public debt-to-GDP ratio. The im- and higher inflation will contribute to a reduction in the public proved fiscal situation led to sovereign credit rating upgrades. debt-to-GDP ratio. Short-term debt risks eased a partial refinancing of a Eurobond maturing in 2026. Growth is projected to average 5.2 percent in 2026–27, with a sus- tained agricultural recovery, strong industrial expansion, rising in- Surging imports and declining mineral prices resulted in a current comes and high capital spending. As a result, poverty is expected account deficit of 9.3 percent of GDP in 2024, despite strong ex- to decline to 17.8 percent by 2027, though rising cost-of-living pres- ports. However, increased FDI and external bond issuance helped sures may slow further progress. maintain reserves at $5.0 billion (3.4 months of imports) in March 2025, even as the central bank repaid US$622 million of its curren- Risks remain balanced. On the downside, global trade shifts and cy swap line with the People’s Bank of China. uncertainty could dampen global growth, reduce external demand for Mongolia’s key commodities, and exert downward pressure on prices, with adverse implications for exports, fiscal revenues, and Outlook investor sentiment. On the upside, faster completion of key cross- border infrastructure projects could facilitate Mongolian mineral Despite heightened uncertainty stemming from major shifts in exports. Stronger-than-expected fiscal stimulus in China to offset global trade policy, Mongolia’s economy is projected to grow by 6.3 tariff impacts and a quicker resolution of its property sector chal- percent in 2025, largely driven by a projected 70 percent surge in lenges would further support demand for Mongolia’s exports. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.0 7.2 5.0 6.3 5.2 5.2 Private consumption 8.1 9.7 12.9 2.0 8.6 6.8 Government consumption 6.9 3.2 18.4 1.7 5.3 2.4 Gross fixed capital investment 13.2 5.3 19.7 2.0 2.0 4.3 Exports, goods and services 32.3 33.2 0.7 11.4 5.9 2.6 Imports, goods and services 29.1 18.9 17.7 4.1 6.8 3.8 Real GDP growth, at constant factor prices 4.2 7.5 4.9 6.3 5.2 5.2 Agriculture 12.0 -8.9 -28.7 19.0 12.0 6.0 Industry -4.5 12.9 6.5 9.9 5.9 5.3 Services 6.9 9.9 12.7 2.4 3.5 5.0 Inflation (consumer price index) 15.2 10.4 6.8 10.0 8.0 7.5 Current account balance (% of GDP) -13.2 0.6 -9.3 -12.1 -11.4 -11.5 Net foreign direct investment inflow (% of GDP) 13.9 10.6 10.7 7.8 7.5 6.9 Fiscal balance (% of GDP) 0.7 2.6 1.3 -1.1 -1.5 -1.1 Revenues (% of GDP) 33.8 34.3 39.2 35.8 35.4 35.0 1 Debt (% of GDP) 62.0 44.4 43.3 39.3 36.5 33.9 Primary balance (% of GDP) 1.8 4.0 2.6 0.1 -0.5 0.0 2,3 International poverty rate ($2.15 in 2017 PPP) 0.2 0.2 0.2 0.2 0.2 0.2 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.4 2.1 1.9 1.7 1.5 1.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 22.1 20.9 20.2 19.2 18.5 17.8 GHG emissions growth (mtCO2e) 4.7 1.8 -1.1 3.0 3.9 4.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Debt excludes the BoM's liability under the PBOC swap line (3.8% of GDP as of the end of 2024). 2/ Calculations based on EAPPOV harmonization, using 2016-HSES, 2018-HSES, and 2022-HSES. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 3/ Projection using annualized elasticity (2016-2018) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 21 This outlook reflects information available as of April 10, 2025. 1 2 MYANMAR Population Poverty million millions living on less than $3.65/day 54.5 10.2 3 4 Life expectancy at birth School enrollment Natural disasters, conflict, and macroeconomic volatility years primary (% gross) impacted Myanmar's economy. Exchange rate fluctuations, import restrictions, and power outages caused shortages 67.3 118.9 5 6 and rising prices. GDP contracted by 1 percent in the year GDP GDP per capita ending March 2025, 11 percent below FY2018/19 levels. The current US$, billion current US$ economy is projected to grow by 1.5 percent in FY2025/26, down from an earlier forecast of 2 percent, with further 66.8 1224.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. adjustments possible due to earthquake impacts. 4/ 2018. 5/ 2024. 6/ 2024. currency depreciation and shortages attributable to conflict-re- Key conditions and challenges lated trade disruptions and stricter import licensing. The most re- cent consumer price inflation data shows 25.4 percent inflation in Myanmar's economy has faced significant challenges in recent March 2024 (YoY) driven by food prices. The World Food Program months. On March 28, a 7.7-magnitude earthquake struck central food price index rose 60 percent from April to December 2024, and Myanmar, resulting in significant loss of life, widespread damage to fuel prices increased by 12 percent. Attempts to impose price con- buildings and essential energy, water, and transport infrastructure, trols have exacerbated shortages of some products. As of Octo- and severe disruptions to health services. Meanwhile, large-scale ber 2024, 14.3 million people (25 percent of the population) faced labor movements have been driven by conflict, weak economic acute food insecurity, up from 10.7 million the previous year. conditions, disasters, and fears of military conscription, leading to significant internal displacement and exacerbating shortages of workers in some areas. Power generation has also declined in re- Recent developments cent months, reportedly meeting only 50 percent of demand from businesses and households as of mid-March. The earthquake has Real GDP is estimated to have contracted by 1 percent in the exacerbated these shortages, including in Yangon. Night light lumi- year ending March 2025. Typhoon Yagi and flooding negatively im- nosity in industrial zones decreased by 7 percent in 2024, and by 24 pacted crop production while raw material shortages, weak do- percent in non-industrial areas. States like Rakhine, Chin, Kachin, mestic demand, power outages, and labor supply constraints con- and Kayin saw reductions of over a third. strained manufacturing and services activity. The manufacturing purchasing manager's index has been in contractionary territory Macroeconomic volatility and an unpredictable policy environ- since July 2024, except for December, reflecting a decrease in new ment continue to weaken economic activity. In addition, recent orders and raw material shortages. Imports of construction ma- international trade policy shifts are likely to affect Myanmar’s terials from China have also declined, and public infrastructure exports in the coming months. Inflation remains high due to projects have been delayed. The World Bank Firm Survey from FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Manufacturing Purchasing Manager's Index by sector Percent, percentage points Index 10 70 60 5 50 0 40 -5 30 20 -10 10 -15 2018 2019 2020 2021e 2022e 2023e 2024e 2023f 2024f Agriculture Industry Services Real GDP growth Headline Output Employment Sources: Ministry of Planning and Finance, and World Bank staff estimates. Source: S&P Global Market Intelligence. 22 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. September/October 2024 indicates worsening firm sales and prof- Poverty is estimated to have risen to 32 percent in 2023/24 due to itability, with sales declining by 18 percent in October compared to conflict, natural disasters, high inflation, and negative labor market the same period in the previous year, while profits fell by 25 per- trends. Mandalay and Sagaing, the epicenter of the recent earth- cent. Domestic air travel and international arrivals have dropped quake, had high poverty rates of 50.1 percent and 37.1 percent, re- due to insecurity and conflict, and mineral production has declined spectively, and are now dealing with increased household vulnera- as key mining areas are affected by conflict. bility and hardship due to fatalities and destruction of property. A sharp drop in imports has narrowed the current account and trade deficits to 1.2 and 2.2 percent of GDP, respectively, in FY2024/ Outlook 25. Manufacturing exports fell due to reduced natural gas produc- tion and lower demand for garments from the EU. However, agri- The outlook remains bleak, with the earthquake likely to have sub- cultural exports have been supported by favorable global prices stantial impacts on economic activity in FY2025/26 (year ended for rice and pulses. Conflict-related disruptions to transport and March 2026), while ongoing macroeconomic volatility, trade policy tourism continue to impact service receipts. Remittance incomes uncertainty, and elevated conflict continue to pose constraints. remained stable due to Myanmar’s large migrant workforce and fa- Garments, footwear and apparel-based manufacturing, which ac- vorable exchange rates on remittance transfers. count for about a third of total exports, is expected to be affected by reduced external demand from trade policy shifts. This is ex- Exchange rate volatility persists. The kyat lost 40 percent of its val- pected to reduce growth by around half a percentage point. The ue against the US dollar from January to August due to reduced resulting projection of 1.5 percent growth for FY2025/26 does not foreign exchange receipts, border trade disruption, and higher sea- yet account for the impacts of the earthquake and will be further sonal demand for foreign exchange. However, the exchange rate revised once more data on these impacts becomes available. De- has appreciated by about 21 percent since the end of August 2024, struction of household assets, rising food insecurity and high infla- supported by declining imports and news of financial support from tion are also likely to push more households into poverty. China for public infrastructure projects. This already bleak outlook faces significant downside risks. These The fiscal deficit is estimated to have risen by 0.1 points to 5.5 per- include risks of persistent negative impacts on production and in- cent of GDP in FY2024/25, due to increased recurrent spending. To- adequate support for affected communities and businesses in the tal expenditure is expected to have reached 27.4 percent of GDP in wake of the earthquake (including because of recent disruptions to FY2024/25, a 2.3 percentage point increase from FY2023/24, main- foreign aid flows). Other risks include a potential escalation of con- ly due to higher public sector wages, goods and services, and util- flict in the run up to planned elections (in late 2025 or early 2026) ity costs. Revenues are estimated to be 22.0 percent of GDP in and the risk of another natural disaster, which could further dis- FY2024/25, up from 20.0 percent, primarily due to a 2.0 percentage rupt transport, logistics, and border trade. Further restrictions on point rise in non-tax receipts (including oil and gas) to 15.5 percent trade and foreign exchange transactions would worsen shortages of GDP. Domestic sources dominate deficit financing, accounting of key inputs, raise consumer prices, and reduce business confi- for about 80 percent of total borrowing since FY2023/24. Limited dence. These could worsen food insecurity and impoverish more external borrowing has led authorities to rely mainly on the central households, while recent negative impacts on physical and human bank to finance the fiscal deficit. capital are likely to constrain long-term economic growth. Recent history and projections 2021 2022 2023e 2024e 2025e 2026e Real GDP growth, at constant market prices -8.6 -12.0 4.7 1.0 -1.0 1.5 Real GDP growth, at constant factor prices -9.0 -12.0 4.0 1.0 -1.0 1.5 Agriculture -5.7 -12.8 -2.2 2.0 -3.8 1.8 Industry -11.8 -8.2 8.0 0.0 -0.2 1.8 Services -8.4 -14.7 3.9 1.4 -0.3 1.1 Employment rate (% of working-age population, 15 years+) 52.8 53.5 53.8 53.8 53.8 53.8 Inflation (consumer price index) 2.3 9.6 27.2 27.5 26.0 30.0 Current account balance (% of GDP) -0.4 -2.4 -3.5 -2.2 -1.2 -2.5 Fiscal balance (% of GDP) -9.1 -1.4 -2.8 -5.4 -5.5 -6.0 Revenues (% of GDP) 14.8 11.1 21.3 20.0 22.0 23.3 Public sector debt (% of GDP) 54.2 54.4 58.8 62.2 62.4 62.5 Primary balance (% of GDP) -6.7 0.1 -0.6 -3.2 -3.2 -3.8 GHG emissions growth (mtCO2e) -4.6 -1.1 1.1 1.0 0.8 0.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Estimates and projections are for years ended March. The GDP growth forecast for FY25/26 will be revised once the earthquake's economic impact becomes clearer. Macro Poverty Outlook / April 2025 23 This outlook reflects information available as of April 10, 2025. FSM RMI PLW NORTH PACIFIC Population 1 112.6 38.8 17.7 ISLANDS thousand Poverty thousand living on less 44.4 2 2.7 3 .. than $3.65/day The economies in the North Pacific maintained their growth 0.46 0.23 0.22 1 momentum in FY24 driven by fisheries activity in FSM and GDP RMI, grant-related public investment, and delayed tourism current US$, billion recovery in Palau. Poverty rates are expected to continue 4084 5663 11022 1 their downward trend, contingent on sustained growth and GDP per capita continued U.S. Support. Significant reforms are needed to current US$ enhance long-term growth, reduce high reliance on foreign Sources: WDI, World Bank. 1/ 2023. 2/ 2013. 3/ 2019. aid and ensure fiscal sustainability. Key conditions and challenges Recent developments The North Pacific maintained its economic recovery in FSM, growth is estimated to have strengthened to 1.1 percent in In FSM FY24, driven by fisheries activity in the Federated States FY24, supported by pickup in consumption, activity in the fisheries of Micronesia (FSM) and the Republic of the Marshall sector, and the resumption of investment projects. After reaching Islands (RMI), public investment supported by Compact a decade-high, inflation moderated as energy and food prices be- of Free Association (COFA) grants, and delayed tourism gan to decline, coupled with easing supply-side constraints. FSM is recovery in Palau. While COFA funds are expected re- estimated to have recorded a smaller fiscal surplus of 1.3 percent main stable in the short to medium term, the high re- of GDP in FY24, due to both smaller revenues from fishing royalties liance on grants exposes North Pacific countries to po- and higher capital spending. Government debt declined to 10.6 tential shifts in external funding. Global trade policy un- percent in FY24 with overall debt risk rating upgraded to moderate certainty could impact investment and growth. Popula- from high risk. tion decline presents an existential risk in the region due to elevated levels of out-migration since the pan- RMI, output is estimated to have expanded by 3.4 percent in In RMI demic. To sustain economic momentum, diversification FY24, driven by sustained growth in fisheries activity and robust efforts are critical, including strengthening local indus- construction sector. Inflation remained elevated at over 4 percent, tries and attracting private investment. Poverty in the due to expansionary fiscal policies and an increase in minimum North Pacific rose between 2020–2022 but has declined wages. Despite these challenges, a modest fiscal surplus of 0.1 per- as the economies recover. cent of GDP is estimated in FY24 supported by strong grant inflows. FIGURE 1 / Real GDP, relative to 2019 GDP FIGURE 2 / Fiscal balance Percent of GDP Percent of GDP 140 4.0 3.5 130 3.0 120 2.5 2.0 110 1.5 1.0 100 0.5 90 0.0 -0.5 80 Federated States of Palau Republic of the 2019 2020 2021 2022 2023 2024 2025 2026 2027 Micronesia Marshall Islands North Pacific South Pacific Central Pacific 2023 2024 2025 Sources: National sources, IMF WEO, and World Bank projections. Sources: National sources, EconMap, IMF WEO, and World Bank projections. 24 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. While the debt level remains sustainable at 15.8 percent of GDP, dollars infrastructure project supported by the U.S., and activity the overall risk of debt distress remains high. in the fisheries sector. However, growth in the medium term could moderate to below one percent if structural challenges re- Palau, economic growth is estimated to have peaked at 9.3 per- In Palau main unaddressed, limiting the potential for poverty reduction. cent in FY24, driven by a surge in tourism (contributing roughly 40 Key constraints to sustained growth include high levels of out- percent of GDP pre-pandemic), that, after several years of delay, migration and moderate public investment. Inflation is expected has finally rebounded. This reflects the resumption of flights from to continue easing as commodity prices decline. After recording Asia and the recovery of Asian tourist flows. Inflation has further a surplus in FY24, the fiscal balance is projected to turn into a decreased to around 4 percent due to lower imported energy and small deficit in FY25 and thereafter, amid declining fishing rev- food prices. A substantial fiscal surplus of 3.5 percent of GDP is es- enues and normalizing grants. timated to have been achieved, thanks to higher tax collection from recent goods and services tax reforms and increased revenue from RMI, output is expected to grow by 3.3 percent in FY25, In RMI tourism activities. This follows several years of large fiscal deficits. mainly driven by the continued expansion of the fishery sector Public debt amounts to 78 percent of GDP, primarily concessional and strong construction activity financed by Compact transfers. terms and remains sustainable. Economic activity is expected to exceed pre-pandemic levels in FY25. In line with easing global food and energy prices, inflation in FY24 is expected to subside to 3.5 percent before declining Outlook to 2 percent from FY26 onwards. Modest fiscal surpluses are ex- pected in the medium term due to continued Compact funding. The outlook is subject to significant downside risks. Recent trade Due to population decline, real GDP growth translates to even policy uncertainty could impact the region through depressed glob- higher per capita income growth, which is projected to reduce al demand, weaker growth in trading partners, reduced remit- poverty to FY27. tances and, for Palau, lower tourism flows. However, decline in commodity prices could lower input costs. While Compact funds Palau, tourism recovery is expected to drive robust growth In Palau are not expected to be affected by changes in US development of 8.6 percent in FY25. However, slower-than-anticipated growth aid policy, an unanticipated reduction in non-Compact US federal in advanced economies could hinder this recovery and weaken programs and grants would reduce public investment, social pro- Palau's growth prospects. Inflation is forecast to decrease to 2.8 grams, and ultimately growth. The region’s vulnerability to natural percent and normalize at 2.5 percent in the medium term. A disasters and climate change remains an important underlying ad- fiscal surplus of 1.7 percent of GDP is projected for FY25, driven verse risk to economic growth and people’s welfare. by tourism receipts and tax reforms. A modest fiscal surplus, averaging 1.2 percent of GDP, is expected in the medium term, FSM FSM’s growth is projected to reach 1.3 percent in FY25, supported supported by Compact funding and continued implementation by the resurgence in public investment, including USD 2 billion of tax reforms. Recent history and projections 2022 2023e 2024f 2025f 2026f 2027f Real GDP growth, at constant market prices Federated States of Micronesia -0.9 0.8 1.1 1.3 1.4 0.7 Republic of the Marshall Islands -1.1 -3.9 3.4 3.3 2.7 2.3 Palau -1.3 1.9 9.3 8.6 3.5 2.4 Poverty rates of the Republic of the Marshall Islands 1,2 International poverty rate ($2.15 in 2017 PPP) 0.8 0.9 0.8 0.6 0.4 0.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 5.5 5.9 4.6 3.8 3.5 3.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 29.8 30.3 26.1 23.0 20.5 18.3 Source: Country authorities and World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Values for each country correspond to their fiscal years ending September 30. 1/ Calculations based on EAPPOV harmonization, using 2019-HIES. 2/ Projection using neutral distribution (2019) with pass-through = 1 (High) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 25 This outlook reflects information available as of April 10, 2025. PAPUA NEW 1 2 Population Poverty million millions living on less than $3.65/day 10.6 5.0 GUINEA Life expectancy at birth years 3 School enrollment primary (% gross) 4 The reopening of a major gold mine boosted growth in 2024. 66.0 109.5 5 6 Fiscal consolidation continued to ensure macroeconomic GDP GDP per capita current US$, billion current US$ stability. To make growth more inclusive and reduce high poverty, prudent macroeconomic management, building 31.3 2958.7 human capital and creating a conducive business environ- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2009 (2017 PPPs). 3/ 2022. ment is critical. As a natural-resource exporter, the impact 4/ 2018. 5/ 2024. 6/ 2024. of commodity price declines may compound the potential effects of trade uncertainty. Large segments of the population continue to lag in socio-econom- Key conditions and challenges ic development. The most recent Household Income and Expen- diture Survey, from 2010, revealed that 40 percent of the popula- Since gaining independence in 1975, the economy has more than tion lived below the national poverty line of US$2.15 per day (in tripled. However, real GDP per capita has only seen an annual 2017 PPP terms). Despite the lack of an official poverty rate since increase of 0.9 percent—a sluggish rate compared to other lower 2010, household surveys suggest little change in monetary well-be- middle-income resource-exporting nations. The growth trajecto- ing. Using close monetary correlates, the estimated poverty rate in ry has been marked by pronounced fluctuations, reflecting high 2016/18 was 41 percent. In 2016/18, 74.2 percent of the population susceptibility to shifts in international commodity prices. The in- were multidimensionally poor, one of the highest rates globally, up clusiveness of growth has been limited by the heavy reliance on nearly 3 percentage points since 2010. Due to data limitations, re- capital in the resource sector and the underperformance of the cent estimates of multidimensional poverty are unavailable, but in non-resource sector. 2022, only 19 percent had access to safe drinking water and 15 per- cent to electricity, unchanged from 2016/18. Weak human development outcomes present missed opportuni- ties for faster and more inclusive economic growth. Papua New Guinea (PNG) has some of the poorest nutrition outcomes in the Recent developments world, with 48.2 percent of all children under the age of five being stunted. Furthermore, 26 percent of youth find themselves outside The economy continued to expand, with an above-average of training, education, and employment. Weak governance com- growth rate of 4.5 percent estimated for 2024, driven primarily by pounds the difficulties in effectively addressing these challenges, the reopening of Porgera gold mine in late December 2023. This with external shocks compounding fragility-related risks. is expected to create jobs and boost extractive sector growth, FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Key fiscal and debt indicators Percent, percentage points Percent of GDP 8 60 6 50 40 4 30 2 20 0 10 -2 0 -4 -10 2019 2020 2021 2022 2023 2024 2025 2026 2027 2020 2021 2022 2023 2024 2025 2026 2027 Extractive sector Non-extractive economy Revenue Expenditure Real GDP growth Overall balance Gross government debt Sources: Country authorities, IMF, and World Bank staff estimates and projections. Sources: Country authorities, IMF, and World Bank staff estimates and projections. 26 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. estimated at 5 percent, slightly higher than the 4.4 percent esti- By 2022, food insecurity and employment had both improved, and mated for the non-extractive sector. Improved access to foreign food shortage rates were similar to those in the 2016-2018 DHS. exchange is supporting growth in the non-extractive sector. However, surveys from 2022 and 2023-2024 indicate that many people still face significant challenges to their well-being. The pandemic exacerbated underlying fiscal weaknesses, and the government continued to implement its fiscal consolidation plan. The fiscal deficit is estimated to have narrowed to 3.9 percent of Outlook GDP in 2024 from 4.3 percent of GDP in 2023, supported by im- proved revenue mobilization. In 2024, total revenue increased by Growth momentum is expected to continue in 2025. Supported by 0.8 percentage points of GDP relative to 2023, mostly driven by increased production at the OK Tedi mine and the reopening of the non-resource tax revenue and a rebound in grants. This offset the Porgera gold mine, the economy is projected to grow by 4.3 per- lower-than-expected dividend payments from state-owned enter- cent. The non-resource sector, supported by improved access to prises and entities, foremost by Kumul Petroleum Holding. The foreign exchange, is also expected to drive growth. Medium-term non-resource primary balance also improved in 2024. growth is expected to settle at 3 percent as mining production nor- malizes. Inflation is projected to rise to 5.1 percent in 2025 due to Average headline inflation is estimated to have moderated to base effects and the passthrough of exchange rate depreciation. 0.6 percent in 2024, mostly driven by lower prices for locally However, it is expected to converge towards its historical average produced food items (e.g. betelnut). This more than offset the over the medium term. passthrough of the Kina depreciation to domestic prices. Core inflation is estimated at 3.9 percent at end-2024, below historic The economic outlook appears positive, but risks are tilted to average. The BPNG has implemented a crawl-like exchange rate the downside. Slower growth could result from lower export de- framework, and the Kina has gradually depreciated against the mand, the projected decline in commodity prices, reduced busi- USD. To ensure consistency with the new arrangement and keep ness confidence, political and social instability, and the impact of inflation expectations in check, BPNG tightened monetary policy. droughts and other climate-related events. The impact of com- Since April 2024, BPNG increased the policy rate by cumulative modity price declines may compound the potential effects of 200 basis points, to 4 percent and the cash reserve requirement trade uncertainty. However, it is difficult to gauge the full impact ratio by 200 basis points to 12 percent. These policies were sup- of recent measures as policy shifts may continue to unfold. PNG ported by an IMF program. continues to face risks stemming from conflict and violence. The brief episode of violence and looting in January 2024, although During the early COVID-19 pandemic, poverty likely increased, but short-lived, underscored the potential for such disruptions to ad- it returned to pre-pandemic levels by 2022. Surveys conducted at versely affect economic stability. The outlook does not account the beginning of the pandemic showed that severe food shortages, for potential new resource mega-projects, like Papua LNG. The which is closely linked to extreme poverty, were higher than those final investment decision and construction start present an up- recorded in the 2016-2018 Demographic and Health Survey (DHS). side risk to the outlook. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.7 3.8 4.5 4.3 3.2 3.1 Real GDP growth, at constant factor prices 5.8 3.1 6.1 4.4 3.2 3.1 Agriculture 3.1 1.0 7.1 3.5 3.4 3.4 Industry 6.6 1.6 2.7 3.0 0.6 0.0 Services 6.3 5.0 8.4 5.7 5.0 5.1 Inflation (consumer price index) 5.3 2.3 0.6 5.1 4.3 4.3 Current account balance (% of GDP) 32.8 23.3 23.0 20.4 20.2 19.2 Net foreign direct investment inflow (% of GDP) -1.1 -1.2 -1.2 -1.2 -1.2 -1.2 Fiscal balance (% of GDP) -5.3 -4.3 -3.7 -2.5 -1.3 0.0 Revenues (% of GDP) 16.6 17.9 18.7 19.3 19.7 20.1 Debt (% of GDP) 48.2 52.4 53.9 52.9 50.8 48.6 Primary balance (% of GDP) -2.9 -1.8 -0.5 0.5 1.3 2.5 GHG emissions growth (mtCO2e) 0.1 0.1 0.1 0.0 0.0 0.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 27 This outlook reflects information available as of April 10, 2025. 1 2 PHILIPPINES Population Poverty million millions living on less than $3.65/day 115.8 15.7 3 4 Life expectancy at birth School enrollment The Philippines remains among the region’s top performers years primary (% gross) as domestic conditions improved. In 2024, inflation fell within target, the fiscal deficit narrowed, and poverty de- 72.2 93.4 5 6 clined. Growth is projected to average 5.4 percent through GDP GDP per capita 2027, anchored on private domestic demand. Safeguarding current US$, billion current US$ growth amid heightened external uncertainty and raising growth potential require reforms that strengthen climate 461.7 3985.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. resilience, increase investments, and boost productivity. 4/ 2023. 5/ 2024. 6/ 2024. to keep inflation contained. This is expected to alleviate pressure Key conditions and challenges on households, potentially stimulating consumption growth. It also provides space for the central bank to lower interest rates further. The Philippines has seen broad-based acceleration in economic The government’s commitment to public investment is also expect- growth, driven by capital accumulation, a reallocation of jobs to- ed to support growth. wards higher-productivity sectors, and an expansion of the non- tradables sector. However, faster economic growth has relied on investment rather than productivity gains. Leading firms experi- Recent developments enced weaker job creation and slower output growth, limiting al- locative efficiency and frontier advancements crucial for long-term Growth inched up to 5.7 percent year-on-year in 2024, above growth. The relative decline of the tradables sector also raises con- potential growth of 5.5 percent, reflecting the ongoing economic cern as more globally connected firms outperform their domesti- recovery. On the production side, robust domestic activity and cally oriented counterparts. Finally, the catch-up process is at risk tourism fueled services. On the expenditure side, private con- from increasingly frequent climate events. Addressing these chal- sumption grew slower partly due to high prices of staple com- lenges requires strengthening connectivity, improving local gover- modities, including rice. Yet, consumption remained the main nance, and implementing climate adaptation strategies. Enhancing growth engine, supported by record high remittances and a competition and trade policies while streamlining regulations can healthy labor market. In addition, sustained growth in services also boost productivity and resource allocation. exports and faster disbursements in public spending partially off- set slower private investment growth. Supportive macroeconomic policies and stronger domestic de- mand conditions underpin growth prospects. However, trade poli- The current account deficit widened to 3.8 percent of GDP cy uncertainty could dampen trade and investment prospects.Low- in 2024, fueled by a 0.7 percent of GDP decline in semicon- er rice prices, and a more benign outlook for oil prices are expected ductor exports. In addition, services net exports moderated FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 15 70 180000 10 160000 60 5 140000 50 0 120000 40 100000 -5 30 80000 -10 60000 -15 20 40000 -20 10 20000 2019 2020 2021 2022 2023 2024 Household final cons. exp. Government cons. 0 0 Capital formation Exports 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Imports Statistical disc. International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real priv. cons. pc Source: Philippines Statistics Authority. Source: World Bank. Notes: See footnotes in table on the next page. 28 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. driven by higher spending of Filipino tourists abroad and hinder exports and manufacturing. Yet, growth is still forecast to slower growth in receipts in Information Technology Busi- be among the fastest in the region over the forecast horizon, re- ness Process Outsourcing exports. flecting the positive outlook on private domestic demand. Domes- tic activity will benefit from low and stable inflation, easing mone- Headline inflation remained within the BSP’s 2-4 percent target in tary policy, and a healthy labor market that will boost private con- the first quarter of 2025 (2.2 percent), led by the reduction in rice sumption and services. Meanwhile, investment growth will remain and fuel prices. Core inflation continued to decline, allowing the anchored on public infrastructure and the implementation of re- central bank to lower the policy rate. forms that liberalized investment in key sectors. The fiscal deficit narrowed to 5.7 percent of GDP in 2024. Revenues The fiscal deficit is projected to fall to 5.4 percent of GDP in 2025, increased by 1 percentage point of GDP, due to a surge in dividend led by a reduction in public spending. Infrastructure spending will remittances from government-owned and controlled corporations remain above 5 percent of GDP over the medium term. However, and robust growth in tax collections. The increase in revenues achieving the medium-term fiscal targets will require the passage cushioned the higher-than-programmed disbursements in infra- of additional tax reforms and a commitment to reduce spending. structure and personnel spending. The dynamic labor market and the easing of inflation are likely The labor market continued to improve, supporting higher house- to boost growth in household incomes. Poverty is expected to hold incomes. The unemployment rate remained low at 3.8 percent continue to decline, though extreme climatic events pose risks in February 2025 while underemployment declined to reach 10.1 with La Niña expected in the first quarter of 2025. Poverty inci- percent in February 2025. The reallocation of labor away into wage- dence is projected to fall to 11.6 percent in 2025 and 9.6 per- employment in relatively higher productivity sectors continued. Us- cent in 2027. ing the World Bank’s poverty line for lower-middle-income coun- tries of $3.65/day (2017 PPP), poverty incidence is projected to fall Heightened trade policy uncertainty and their combined impact on from 13.7 percent in 2023 to 12.6 percent in 2024. global growth represents the main downside risk. Financial mar- kets represent a related source of risk: prolonged uncertainty could trigger capital flight. Upside risks to growth include an improve- Outlook ment in domestic activity amid the lower inflationary pressures from declining global commodity prices. Coupled with a negative Growth is forecast to decelerate to 5.3 percent in 2025, weighed external demand shock, this could accelerate the path of monetary by the slowdown in global activity. Trade policy uncertainty may policy loosening, supporting private domestic demand. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.6 5.5 5.7 5.3 5.4 5.5 Private consumption 8.3 5.5 4.9 5.2 5.4 5.5 Government consumption 5.1 0.3 7.3 8.0 7.1 6.7 Gross fixed capital investment 9.8 8.2 6.3 6.4 6.6 6.9 Exports, goods and services 11.0 1.3 3.3 0.7 1.5 1.9 Imports, goods and services 14.0 1.0 4.2 3.4 4.0 4.4 Real GDP growth, at constant factor prices 7.6 5.5 5.7 5.3 5.4 5.5 Agriculture 0.5 1.2 -1.5 1.3 1.1 1.1 Industry 6.5 3.6 5.6 3.8 4.2 4.3 Services 9.2 7.1 6.7 6.6 6.5 6.5 Employment rate (% of working-age population, 15 years+) 56.6 57.2 57.5 58.9 58.9 58.9 Inflation (consumer price index) 5.8 6.0 3.2 3.1 3.0 3.0 Current account balance (% of GDP) -4.5 -2.8 -3.8 -4.2 -3.7 -3.4 Net foreign direct investment inflow (% of GDP) 2.3 2.0 1.9 1.8 1.7 1.7 Fiscal balance (% of GDP) -7.3 -6.2 -5.7 -5.4 -4.9 -4.4 Revenues (% of GDP) 16.1 15.7 16.7 16.2 16.2 16.3 National Government Debt (% of GDP) 60.9 60.1 60.7 60.2 59.7 59.6 Primary balance (% of GDP) -5.0 -3.6 -2.8 -2.4 -2.0 -1.5 1,2 International poverty rate ($2.15 in 2017 PPP) .. 1.6 1.4 1.2 0.9 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 13.7 12.6 11.6 10.6 9.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 51.3 50.6 50.0 49.3 48.6 GHG emissions growth (mtCO2e) 5.2 3.7 5.5 4.4 5.9 6.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2018-FIES and 2023-FIES. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2018-2023) with pass-through = 0.7 based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 29 This outlook reflects information available as of April 10, 2025. SOLOMON 1 2 Population Poverty million millions living on less than $3.65/day 0.8 0.4 ISLANDS Life expectancy at birth years 3 School enrollment 4 primary (% gross) The economy grew by 2.5 percent in 2024, driven by infra- 70.7 84.7 5 6 structure investments and increased mining activity. Medi- GDP GDP per capita current US$, billion current US$ um-term growth is projected to average 2.7 percent of GDP. The fiscal deficit is expected to average 3.2 percent of GDP, 1.7 2121.4 with the risk of debt distress upgraded to low. State fragility, Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2012 (2017 PPPs). 3/ 2022. climate change, and subdued global economic conditions 4/ 2023. 5/ 2024. 6/ 2024. (due to further trade policy shifts) pose downside risks. their finances and food insecurity remains high, with about half the Key conditions and challenges population eating less than they thought they should in the past 30 days. According to the 2012/13 Household Income and Expen- Solomon Islands is a small, remote archipelago with 721,000 inhab- diture Survey (HIES), 61 percent of the population was considered itants spread across 90 inhabited islands. Geographic dispersion, poor based on the lower-middle-income poverty line ($3.65 per day remoteness from global markets, and vulnerability to natural dis- in 2017 PPP). asters all pose significant barriers to growth. Limited state capacity, along with complex political and economic dynamics, often ham- pers the formulation and implementation of effective public policy. Recent developments Poor infrastructure, chronic underemployment, and a small private sector provide substantial growth hurdles. After the growth driven by the Pacific Games in 2023, the economy grew by 2.5 percent in 2024, driven by national election related Solomon Islands are vulnerable to natural disasters such as earth- spending and public investments in the energy and transportation quakes, cyclones, and tsunamis, which can inflict major economic sectors, alongside a surge in mining activity. Increased internation- damage. Historically, the forestry sector has served as a primary al visitor arrivals had a positive impact on accommodation, restau- engine of growth. However, unsustainable exploitation has led to a rant, and transportation sectors. rapid decline in logging activity, underscoring the urgent need for alternative sources of growth. Inflation eased to 3.7 percent in 2024 due to a stabilization of im- port prices. In response, the central bank adopted an accommoda- World Bank phone survey data collected in the first nine months of tive policy stance. Meanwhile, the financial sector remains relative- 2024 indicates that about half of all households are worried about ly stable, with well capitalized banks and adequate liquidity levels. FIGURE 1 / Real GDP FIGURE 2 / Fiscal balance Percent of GDP Index (2019=100) Percent of GDP 4 160 0 3 -0.5 140 2 -1 120 1 -1.5 0 100 -2 -1 -2.5 80 -2 -3 60 -3 -3.5 -4 40 -4 2020 2021 2022 2023 2024 2025 2026 2027 2022 2023 2024 2025 2026 Real GDP, % change Real GDP, Index (2019=100) (rhs) Fiscal balance Primary balance Source: World Bank staff estimates. Source: World Bank staff estimates. 30 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The current account deficit narrowed to 4.3 percent of GDP in may negatively affect growth. Inflation is projected to average 3.6 2024, driven by reduced import demand and rising mineral ex- percent in 2025–27. Poverty is expected to decline with projected ports offsetting the long-term decline in logging exports. The bal- economic growth and increasing remittances. The new 2024/25 ance of payments recorded a slight deficit in 2024, with foreign HIES, which will become available in 2026, will help update the reserves decreasing from 10.1 months of imports in 2023 to 9.1 poverty measure. months in 2024. The current account deficit is projected to average 7.7 percent of The fiscal deficit reached 3.1 percent of GDP in 2024. Total rev- GDP in 2025-27, primarily due to increased import needs from in- enues expanded slightly to 32.7 percent of GDP, with increased frastructure projects and a decline in logging exports. Reserves are mining revenue offsetting declining logging revenue, while total expected to decline to 7 months of imports while remaining within expenditures increased to 35.8 percent in 2024. The government the adequacy range of 3 to 8 months of imports. managed to contain expenditure growth, despite facing substantial spending demands, including the organization of the national gen- The fiscal deficit is projected to remain stable over the medium eral election and large infrastructure investments. Public debt in- term, reaching 3.1 percent of GDP in 2027. This partly reflects the creased from 20.3 in 2023 to 22.3 percent of GDP in 2024, due to a normalization of development grants after the pandemic, the Pa- rising primary fiscal deficit. cific Games, and election preparations. Public debt is sustainable, and the risk of external debt distress was upgraded from moderate to low in February 2025, due to increased export performance. Outlook Increased participation in regional labor mobility programs is likely The economy is expected to grow by 2.7 percent on average to provide further economic benefits, while substantial infrastruc- over the period 2025–27. The continued decrease in logging is ture investments may start generating second-order economic re- anticipated to be offset by a sizable infrastructure pipeline and turns in the medium term. Adverse global economic conditions, in- increased mining activity. Through the remittance channel, the cluding further trade policy shifts, may reduce demand for com- labour mobility program is anticipated to boost economic activ- modity exports, particularly logs. This could negatively impact ity. Since exports to US are negligible, the direct impact of the growth, the current account balance, and government finances. recent trade policy shift is limited. However, as a growing miner- Other downside risks include low levels of cash reserves, societal al commodity exporter, the impact of global commodity declines instability, and climatic shocks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.4 2.7 2.5 2.6 2.7 2.9 Real GDP growth, at constant factor prices 2.3 4.3 2.5 2.7 2.7 3.0 Agriculture 3.3 1.8 1.0 0.8 0.7 1.4 Industry 1.0 12.8 7.2 7.3 5.9 6.4 Services 2.3 3.3 2.0 2.1 2.6 2.6 Inflation (consumer price index) 5.4 5.1 3.7 3.8 3.7 3.4 Current account balance (% of GDP) -13.9 -10.6 -4.3 -7.9 -7.7 -7.6 Net foreign direct investment inflow (% of GDP) 2.7 4.4 0.9 2.3 2.6 2.7 Fiscal balance (% of GDP) -2.4 -3.8 -3.1 -3.2 -3.3 -3.1 Revenues (% of GDP) 38.3 36.3 32.7 32.6 32.8 32.9 Debt (% of GDP) 15.5 20.3 22.3 24.4 26.4 28.0 Primary balance (% of GDP) -2.1 -3.5 -2.6 -2.7 -2.7 -2.4 GHG emissions growth (mtCO2e) 0.0 0.0 0.0 0.0 0.0 0.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 31 This outlook reflects information available as of April 10, 2025. WSM TON VUT SOUTH PACIFIC Population 1 216.7 104.6 320.4 ISLANDS thousand Poverty 21.0 1.7 106.3 2 3 4 thousand living on less than $3.65/day Samoa and Tonga’s economy grew in FY24, driven by 0.93 0.52 1.10 1 tourism, reconstruction, and remittances. Although both are GDP projected to recover to pre-pandemic levels in 2025, uncer- current US$, billion tainties in the global environment pose risks. Vanuatu faced 4114 4886 3323 1 multiple shocks in 2024, leading to subdued growth and ris- GDP per capita ing poverty. Structural reforms and adaptive fiscal policies current US$ are needed to boost investment, growth, and resilience. Sources: WDI, World Bank. 1/ 2023. 2/ 2013. 3/ 2021. 4/ 2019. supported by tourism, remittances, and easing global commodity Key conditions and challenges prices. However, risks remain from slowing growth in tourism markets, commodity price volatility, supply chain disruptions, and The tourism and remittance-dependent countries in the South Pa- rising minimum wages. cific are highly vulnerable to external shocks like COVID-19 and nat- ural disasters, which have hindered economic growth and fiscal Tonga, the economy grew by 1.8 percent in FY24, driven In Tonga stability. Post-disaster supply bottlenecks and rising demand, espe- by reconstruction efforts, resilient consumption, and a gradual cially for reconstruction, drive up prices and threaten livelihoods. tourism rebound. Inflation fell to 4.6 percent as global com- Fiscal policy should strengthen social protection while building re- modity prices declined, despite a temporary rise in June 2024 silience to shocks. Boosting growth requires structural reforms due to El Niño's impact on food prices. The current account to enhance investment and private sector development. In the deficit increased to 7.4 percent of GDP due to high imports near term, reconstruction in Vanuatu from multiple natural haz- for reconstruction and reliance on imported fuel and commodi- ards should be prioritized. ties, despite modest export improvements. The fiscal balance remained in surplus at 3.5 percent in FY24, even with higher reconstruction expenses after slower execution in FY23. Pover- Recent developments ty rates in 2021 were 1.6 percent based on the lower-middle- income line and 21.5 percent using the upper-middle-income In Samoa Samoa, growth reached 9.4 percent in FY24, driven by tourism line. The declining number of Tongan seasonal workers in Aus- recovery and strong remittances. Inflation fell from 12.0 percent tralia (52.6 percent drop between June 2023 and November in FY23 to 3.6 percent in FY24 due to lower food and energy 2024) might have reduced the remittances and slowed the pace prices and base effects. The current account recorded a surplus, of poverty reduction. FIGURE 1 / Overall fiscal balance FIGURE 2 / Inflation (annual average) Percent of GDP Percent 12 14 10 12 8 10 6 8 4 6 2 4 0 -2 2 -4 0 -6 -2 -8 -4 FY2018 FY2020 FY2022 FY2024f FY2026f FY2017 FY2019 FY2021 FY2023e FY2025f FY2027f Samoa Tonga Vanuatu Samoa Tonga Vanuatu Sources: National sources and World Bank projections. Sources: National sources and World Bank projections. 32 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Vanuatu, the economy grew by an estimated 0.9 percent in FY24 In Vanuatu account balance is expected to return to a deficit in FY25 due to a due to two shocks: the liquidation of Air Vanuatu in May and a sizeable increase in imports, which partially offsets higher tourism 7.3 MW earthquake in December. The airline’s collapse disrupt- earnings but remain below 2 percent of GDP over the medium- ed tourism, while the earthquake caused capital stock damages of term. The fiscal deficit is expected to widen but remain below 2 17.5 percent of GDP, mainly in Port Vila. Inflation fell to 4.2 per- percent in the medium term as revenues decline with lower grants cent due to lower food and energy prices and monetary tightening. and tax normalization, while capital spending rises. Poverty worsened, particularly in Shefa Province, where food se- curity, employment, and income declined for households affected Tonga, growth is expected to accelerate to 2.2 percent in FY25 In Tonga by the earthquake. For example, 55 percent of Shefa households due to strong domestic demand, public investments, and a re- faced difficulties in accessing markets due to the earthquake, and bound in agriculture as El Niño effects fade. Headline inflation is the proportion of the population in moderate food insecurity in- projected to ease to 3.2 percent and stay below 5 percent in FY25 creased from 29 percent in December 2024 to 48 percent in Janu- and beyond. The current account deficit is forecast to widen to 7.8 ary/February 2025. A current account deficit of 7.4 percent of GDP percent of GDP in FY25 as grants and remittances normalize. The resulted from tourism receipts plunging from 14.2 percent in 2023 fiscal balance is expected to shift to a deficit of 1 percent of GDP to 3.5 percent. The fiscal deficit rose to 6.4 percent of GDP due to in FY25 as grant revenues decrease towards its pre-pandemic lev- revenue declines and Air Vanuatu-related expenditures. els. With projected economic growth, the poverty rate measured by the upper-middle-income poverty line is likely to decline to around 16.9 percent in 2025. Outlook Vanuatu, the economy is expected to contract by 1.8 percent In Vanuatu The outlook for the South Pacific considers trade policy uncer- in 2025 before recovering in the medium term. The loss of cap- tainty that could affect global growth. While the direct impacts ital stock and disruption in supply chains due to the earthquake may be limited, the decline of commodity prices might com- will likely result in a reduction in output in the first quarter of pound the effects of trade uncertainty. It remains challenging to 2025 alongside an increase in inflation. However, the need to assess the full impact of recent measures as policy changes may rebuild infrastructure and replace capital stock will result in in- continue to develop. creases in government and private spending, stimulating domes- tic economic activity amid a challenging global environment. The In Samoa Samoa, growth is projected at 5.3 percent in FY25, then 2.4 per- near-term growth outlook is subject to considerable uncertainty, cent in the medium term (FY26–27), driven by continuing remit- with early signs of infrastructure recovery pointing to potential tance inflows, public investment and increased expenditure relat- upside risks. The fiscal deficit is forecasted at 7.5 percent of GDP ed to the Commonwealth Heads of Government Meeting (CHOGM). due to reduced non-tax revenues and reconstruction spending. Inflation is expected to decline to 3.0 percent in FY25 and is pro- Poverty is expected to rise to 48.9 percent by 2027 as income jected to remain at 3 percent over the medium term. The current growth remains weak. Recent history and projections 2022 2023e 2024f 2025f 2026f 2027f Real GDP growth, at constant market prices Samoa -5.3 9.2 9.4 5.3 2.6 2.1 Tonga 0.0 2.0 1.8 2.2 1.8 1.6 Vanuatu 5.2 2.2 0.9 -1.8 2.3 2.6 1,2 Poverty rate Tonga (Upper-middle-income poverty rate, $6.85 in 2017 PPP) 21.5 19.9 18.0 16.9 16.2 15.4 Vanuatu (Lower-middle-income poverty rate, $3.65 in 2017 PPP) 41.5 42.1 43.9 47.5 48.2 48.9 Source: Country authorities and World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Financial years for Samoa and Tonga are July-June, for Vanuatu it is January-December. Samoa improved the methodology for GDP calculation and revised the historical data in March 2022 GDP release. 1/ Calculations based on EAPPOV harmonization, using 2021 HIES for Tonga and 2019 NSDP Baseline Survey for Vanuatu. 2/ Projection using neutral distribution with pass-through = 1 (High) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 33 This outlook reflects information available as of April 10, 2025. 1 2 THAILAND Population Poverty million millions living on less than $6.85/day 71.9 6.1 3 4 Life expectancy at birth School enrollment After accelerating to 2.5 percent in 2024, real GDP growth years primary (% gross) is projected to slow to 1.6 percent in 2025, as global trade policy shifts and heightened uncertainty weigh on exports 79.7 103.5 5 6 and investment. Amid slower growth, the pace of poverty GDP GDP per capita reduction is expected to decelerate with the poverty rate current US$, billion current US$ declining to 7.1 percent in 2024. Amid high uncertainty, risks to the outlook are high. 526.0 7316.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. public debt remains fiscally sustainable but faces the challenge of Key conditions and challenges rising spending pressure to meet aging-related public services and investment to boost growth. Public debt is projected to approach The economy grew by 2.5 percent in 2024, surpassing expectations the ceiling of 70 percent of GDP in the next five years. due to an unexpected improvement in goods exports and the roll- out of fiscal stimulus (THB 10,000 cash transfer) which offset slow- ing private consumption and tourism arrivals. Tighter credit condi- Recent developments tions and high household debt weighed on car purchases and man- ufacturing. As a result, manufacturing weakened. The latest GDP release showed that growth picked up at 3.2 per- cent year-on-year in 2024 Q4. Public investment returned to the Due to sluggish growth in household incomes, poverty alleviation fore as a growth driver following several quarters of delayed bud- has slowed. Policy measures to boost consumption among low- get execution amid the political transition. Goods exports bene- income households is estimated to reduce poverty in the short fited from the electronics upcycle. Private consumption accelerat- term, but structural challenges pose risks to medium and long- ed marginally as the fiscal stimulus (THB 10,000 cash transfers) term poverty reduction. helped offset the effects of tightened credit and high household debt. However, manufacturing remained flat and private invest- Despite the recent uptick in GDP growth, Thailand’s recovery con- ment contracted. Tourism recovery also showed signs of slowing; tinued to lag behind peers with GDP remaining below its potential arrivals reached only 88 percent of pre-pandemic levels in 2024. level. Potential growth is expected to decrease by around 0.5 per- centage points to 2.7 percent in 2022-30. At this rate, Thailand will In January, headline inflation edged up to 1.3 percent, marking not achieve its high-income aspirations by 2037. Raising competi- the fifth consecutive month of increase, due to the effect of stim- tiveness can help attract investments and move economic activity ulus and reduction in fuel subsidy. Given anchored inflation ex- into more innovative or productive global value chains. Thailand’s pectations, the Bank of Thailand (BOT) lowered the policy rate FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 8 35 180000 6 160000 30 4 140000 25 2 120000 0 20 100000 -2 15 80000 -4 60000 10 -6 40000 5 20000 -8 2018 2019 2020 2021 2022 2023 2024f 2025f 2026f 2027f 0 0 Private consumption Government consumption 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Gross Fixed Investment Net exports International poverty rate Lower middle-income pov. rate Change in inventories* GDP Upper middle-income pov. rate Real GDP pc Sources: World Bank staff calculations and NESDC. Source: World Bank. Notes: See footnotes in table on the next page. Note: *Includes statistical discrepancy. 34 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. to 2.0 percent in February to alleviate household debt-servicing central bank’s target range in 2025. The general government deficit pressure amid recent tightening credit standards. The current ac- is projected to increase to 3.1 percent in FY25. This is mainly due count surplus rose to 6.7 percent of GDP as tourism receipts to fiscal stimulus spending and acceleration in public investment mounted and the trade balance continued to benefit from ro- in FY25, leading to higher public debt. The current account bal- bust global demand. ance is expected to increase to 3.4 percent of GDP in 2025, driven by services trade. The goods trade balance is projected to decline. Labor market trends were generally stable until 2024 Q3, with only Poverty is estimated to have declined to 7.1 percent in 2024, dri- a 0.1 percent reduction in total employment in 2024. However, ven by stronger economic growth. The one-time cash transfer to employment in blue chip manufacturing sectors contracted by 1.4 14.6 million state welfare cardholders, introduced under the first percent while tertiary services sectors, such as transport, storage, round of the Digital Wallet program, likely boosted consumption accommodation and food services registered strong growth. The and contributed to an estimated 3 percentage point reduction in patterns underscore Thailand’s challenges in supporting workforce headcount rates. To enhance fiscal resilience, Thailand should re- transitions from traditional to more modern sectors. Additionally, duce energy subsidies, implement tax reforms to raise revenue while household debt growth decelerated in 2024 Q2, personal and promote equity, provide targeted transfers to support vulner- consumer loans continued to rise in 2024 Q4 and accounted for able households, and accelerate public investments in infrastruc- a third of household debt. The absence of continued deleveraging ture, technology, and human capital. could threaten future prospects for poverty reduction. Risks to the outlook are tilted to the downside, driven by the recent earthquake and heightened trade policy uncertainty. The earth- Outlook quake may dampen growth through a potential slowdown in tourism, as uncertainty around the full extent of the damage per- Recent trade policy shifts and increased global uncertainty are pro- sists. Uncertainty surrounding unfolding trade policy is also expect- jected to slow Thailand’s growth to 1.6 percent in 2025, due to ed to weigh on investment and growth. While it is difficult to gauge weaker exports and private investment. Tourism may also soften the full impact of recent measures, impacts are potentially signif- amid a global slowdown. Private consumption will ease with declin- icant given Thailand’s openness and integration into global value ing earnings and deleveraging, though fiscal stimulus—especially chains. With value added from exports accounting for 10 percent the Digital Wallet and targeted business support—will cushion the of GDP, Thailand’s economy is vulnerable to shifts in trade policy impact. Private investment will slow amid uncertainty. Growth is and global economic activity. A slowdown in the US, China, or EU expected to remain subdued at 1.8 percent in 2026. Annual infla- could weaken demand for Thai exports and tourism, which will al- tion is projected to increase to 0.8 percent but remain below the so affect business investments. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.6 2.0 2.5 1.6 1.8 2.0 Private consumption 6.2 6.9 4.4 2.6 2.1 2.0 Government consumption 0.1 -4.7 2.5 1.9 1.6 1.5 Gross fixed capital investment 2.2 1.2 0.0 -0.8 0.4 1.6 Exports, goods and services 6.2 2.4 7.8 -1.3 2.0 3.0 Imports, goods and services 3.4 -2.5 6.3 -1.4 1.9 3.0 Real GDP growth, at constant factor prices 3.4 0.9 2.5 1.6 1.8 2.0 Agriculture 1.2 2.0 -1.0 2.3 2.0 2.1 Industry 4.1 -5.7 0.7 -1.2 1.0 2.0 Services 3.3 4.6 3.9 3.0 2.1 1.9 Inflation (consumer price index) 6.1 1.2 0.4 0.8 1.2 1.1 Current account balance (% of GDP) -3.5 1.4 2.4 3.7 4.1 4.1 Net foreign direct investment inflow (% of GDP) 0.8 -1.4 -1.0 -1.2 -1.1 -1.1 Fiscal balance (% of GDP) -4.4 -2.0 -1.3 -3.1 -2.8 -2.7 Revenues (% of GDP) 19.8 20.7 21.3 21.2 21.4 21.4 Debt (% of GDP) 59.7 62.0 63.3 66.0 68.0 70.1 Primary balance (% of GDP) -3.4 -1.1 -0.5 -2.3 -2.0 -1.8 1,2 International poverty rate ($2.15 in 2017 PPP) 0.0 0.0 0.0 0.0 0.0 0.0 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.4 0.2 0.1 0.1 0.0 0.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 11.0 8.5 7.1 6.3 5.6 4.8 GHG emissions growth (mtCO2e) 1.6 1.9 1.2 2.1 2.5 1.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2016-SES and 2023-SES. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2016-2023) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 35 This outlook reflects information available as of April 10, 2025. 1 2 TIMOR-LESTE Population Poverty million millions living on less than $3.65/day 1.4 0.8 3 4 Life expectancy at birth School enrollment Timor-Leste’s economy rebounded in 2024, supported by years primary (% gross) public spending and a strong recovery in tourism. Inflation eased, but food prices remained high, straining vulnerable 69.1 123.3 5 6 households. Medium-term growth will depend on infrastruc- GDP GDP per capita ture, Greater Sunrise negotiations, and membership of the current US$, billion current US$ Association of Southeast Asian Nations. A widening external deficit and heavy reliance on the Petroleum Fund pose risks 1.8 1289.0 Sources: WDI, PiP, and official data. 1/ 2024. 2/ 2014 (2017 PPPs). 3/ 2022. 4/ 2023. to long-term fiscal and economic stability. 5/ 2024. 6/ 2024. base—dominated by coffee—offers little buffer against oil mar- Key conditions and challenges ket fluctuations. Reduced oil production has further widened the trade gap. Heavy reliance on imports, driven by weak Over the past decade, growth has stagnated at an average domestic production, exacerbate the current account deficit. of just 1 percent annually, reflecting deep-rooted structural Though remittances and positive net primary income offer par- weaknesses. The economy remains heavily dependent on tial relief, they remain insufficient to offset the widening exter- public expenditure, with government spending exceeding 80 nal imbalance. The country has been relying heavily on with- percent of GDP since 2007—one of the highest levels glob- drawals from the Petroleum Fund to finance its current ac- ally. The non-oil economy remains small and undiversified, count deficit, raising concerns about long-term sustainability. resulting in a stagnant labor market and persistent external The Petroleum Fund, the primary source of state funding and imbalances. This has compounded challenges in job creation foreign exchange reserves, faces potential depletion within the and income diversification, leaving large portions of the pop- next decade. This is due to excessive withdrawals and the de- ulation vulnerable to economic shocks. The impact on pover- cline in oil production. This presents a critical fiscal sustainabil- ty remains uncertain, as the first living standards survey in ity risk, potentially leading to severe spending cuts over the ten years has only just been completed and the updated coming decade that could undermine public service delivery poverty statistics are still being processed. Nevertheless, a and social stability. To safeguard long-term economic stabili- recent labor force survey indicates very low workforce par- ty, Timor-Leste must implement comprehensive fiscal reforms. ticipation (around 30 percent) and declining labor productiv- These should focus on broadening the domestic tax base, ra- ity between 2013 and 2021 (-2.1 percent per year). tionalizing public expenditure, and enhancing spending efficien- cy. Equally crucial is to build an environment that encourages Timor-Leste faces deep external vulnerabilities due to a private sector investment, supports job creation, and fosters persistent trade deficit. The country’s narrow non-oil export economic diversification. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 60 80 1600 40 70 1400 60 1200 20 50 1000 0 40 800 -20 30 600 -40 20 400 -60 10 200 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0 Gov. cons. Exports GFCF 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Real GDP pc Sources: Timor-Leste’s Statistics Office (INETL) and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 36 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Recent developments Outlook In 2024, the economy grew by an estimated 4.1 percent, driven by Timor-Leste is expected to maintain steady growth through strong public spending and a rebound in the services sector, partic- 2025–2027, with average growth projected at 3.5 percent. Infra- ularly tourism. Foreign tourist arrivals surged by 25 percent year- structure development, particularly road construction, will be a on-year, boosting hospitality and retail sectors. Growth was further primary growth driver. The anticipated 2025 agreement on the supported by gains in telecommunications and transportation. Greater Sunrise gas field with Australia could strengthen long-term prospects, while tourism, remittances, and an expanding digital Improved budget execution contributed to this performance. Capi- economy—supported by fiber-optic infrastructure—are expected tal spending increased by nearly 50 percent (19.3 percent of GDP), to contribute to growth. surpassing pre-pandemic levels due to preparations for national events. Transfer payments also rose by 5 percent (32 percent of However, structural constraints persist. The narrow export base GDP), further stimulating domestic demand and household con- and heavy reliance on imports will continue to limit non-oil sector sumption. However, total government spending remained excep- expansion and deepen external vulnerabilities. While it is diffi- tionally high at 91 percent of GDP. cult to gauge the full impact of recent measures, uncertainty in trade policy could impact investment and growth. The current ac- Inflation eased to an average of 2.1 percent in 2024, though food count deficit is expected to widen as high import levels persist. prices remained elevated due to weak agricultural production and Although ASEAN integration offers opportunities for trade diver- adverse weather. A stronger U.S. dollar (legal tender) helped lower sification and foreign investment, high import dependence and non-food prices. While overall inflation moderated, its cumulative exposure to global market fluctuations may limit its ability to fully impact over the past two years has disproportionately affected leverage these opportunities. poor and vulnerable households. The full extent of these effects awaits the 2024 Living Standards Survey. Inflation is expected to ease but vulnerabilities remain. Heavy reliance on imports leaves the economy exposed to global The current account deficit surged to 29 percent of GDP in 2024, price shocks, especially in food and energy. The use of the from 10 percent in 2023, driven by falling oil exports and rising U.S. dollar as the national currency further restricts the gov- imports. Oil revenues fell by 73 percent as the Bayu-Undan field ernment’s ability to implement monetary policy responses to neared depletion, while non-oil exports dropped by 30 percent external shocks. from an already low base. As a dollarized economy, Timor-Leste lacks monetary policy tools to mitigate external shocks. While a The fiscal deficit remains a critical concern, projected to average 58 stronger U.S. dollar boosts purchasing power, it also increases re- percent of GDP over 2025–2027, financed by continued excessive liance on imports and deepens external vulnerabilities. Although withdrawals from the Petroleum Fund. Without substantial fiscal tourism, remittances, and net primary income provided some re- reforms, the fund faces potential depletion within the next decade, lief, they were insufficient to offset the widening gap. posing serious risks to long-term stability. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.0 2.4 4.1 3.5 3.4 3.5 Private consumption 14.0 3.4 3.3 5.8 5.8 5.9 Government consumption -0.3 -0.8 2.6 2.0 2.4 2.6 Gross fixed capital investment 27.0 11.5 33.6 6.8 3.2 3.3 Exports, goods and services 30.3 31.9 34.0 1.8 1.8 1.8 Imports, goods and services 22.9 4.9 12.5 4.9 5.0 5.3 Real GDP growth, at constant factor prices 3.6 2.5 4.1 3.5 3.5 3.4 Agriculture 5.4 2.3 2.3 2.9 2.9 2.9 Industry 36.5 -22.4 10.0 2.4 2.4 2.4 Services 2.4 3.3 4.4 3.6 3.6 3.6 Inflation (consumer price index) 7.0 8.4 2.1 3.0 2.5 2.5 Current account balance (% of GDP) 16.3 -20.6 -49.3 -53.8 -58.4 -63.6 Net foreign direct investment inflow (% of GDP) 1.7 1.7 1.8 1.8 1.7 1.6 1 Fiscal balance (% of GDP) -59.5 -40.9 -50.5 -55.3 -54.1 -53.9 Revenues (% of GDP) 43.6 41.2 40.8 41.2 41.3 41.5 Debt (% of GDP) 15.1 14.4 14.3 15.1 14.7 13.4 Primary balance (% of GDP) -59.3 -40.6 -50.2 -55.0 -53.9 -53.8 2,3 International poverty rate ($2.15 in 2017 PPP) 28.8 28.3 27.0 26.1 25.2 24.4 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 73.0 72.6 71.6 70.8 70.1 69.5 GHG emissions growth (mtCO2e) -0.4 -1.2 -1.6 -1.6 -1.4 -1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The ESI is part of total revenue, while excess withdrawals from the PF is a financing item. 2/ Calculations based on EAPPOV harmonization, using 2014-TLSLS. Actual data: 2014. Nowcast: 2015-2024. Forecasts are from 2025 to 2027. 3/ Projection using annualized elasticity (2007-2014) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 37 This outlook reflects information available as of April 10, 2025. 1 2 VIET NAM Population Poverty million millions living on less than $3.65/day 101.0 4.2 3 4 Life expectancy at birth School enrollment After real GDP growth of 7.1 percent in 2024, GDP growth years primary (% gross) is projected to slow to 5.8 percent in 2025 given increased uncertainties due to recent trade policy shifts and a pro- 74.6 122.5 5 6 jected slowdown of global growth. The share of the popu- GDP GDP per capita lation living on less than $3.65 per day is expected to current US$, billion current US$ decline to 3.6 percent. 462.1 4576.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. demand in 2024 led to the recovery of manufacturing and ser- Key conditions and challenges vices exports from a contraction in 2023. The real estate sector showed signs of improvement, contributing to recovery of private As a trade-oriented economy (imports and exports represent al- domestic investment, as the supply of newly licensed property most 170 percent of GDP), Viet Nam is particularly exposed to projects and apartment units picked up in 2024 while more at- ongoing shifts in global trade policies and associated uncertainty tractive mortgage rates for new loans increased demand. which would impact exports, investment, and growth. The US re- mains the largest export destination of Viet Nam, accounting for Amid higher growth, labor market conditions improved. Manu- 30 percent of total exports, compared to 15 percent to China, 13 facturing employment growth strengthened to 3.4 percent (y/ percent to the EU and 8 percent to ASEAN countries, while China y) by November 2024 from -2.3 percent a year earlier. Real in- accounts for 38 percent of its imports. Uncertainty may also further come grew by 4.8 percent compared to 1.3 percent in 2023, weaken consumer confidence and spending which has lagged GDP due to improved labor market conditions and public sector growth in recent years. Meanwhile, financial sector vulnerabilities wage hikes. However, income growth has not fully translated persist with the average loan-loss coverage ratio among 26 banks at into private consumption, and gross savings rate remains high 83 percent compared to 150 percent in 2022. While the government at 37.2 percent in 2024. Headline inflation inched up to 3.6 has fiscal space to support demand, effective implementation may be percent in 2024 compared to 3.3 percent in 2023, well below hampered by chronic under-disbursement in public investment. the State Bank of Viet Nam (SBV) target of 4-4.5 percent, dri- ven by food, transport, and administered prices for health and education. Core inflation remained subdued at 2.7 percent for Recent developments the year. Strong GDP growth, easing inflation, and improved labor market conditions in 2024 are expected to have con- GDP growth accelerated from 5.1 percent in 2023 to 7.1 percent tributed to poverty reduction. The poverty rate declined from in 2024, buoyed by a strong rebound in exports. Higher external 4.0 to 3.8 percent (lower middle-income country line), driven FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 10 90 80 8 80 70 6 70 60 60 4 50 50 2 40 40 0 30 30 -2 20 20 -4 10 10 2017 2018 2019 2020 2021 2022 2023 2024 2025f 2026f 2027f 0 0 Gov. cons. GFCF Inventories 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Private cons. Net exports Statistical disc. International poverty rate Lower middle-income pov. rate GDP Upper middle-income pov. rate Real GDP pc Sources: Viet Nam’s General Statistics Office and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 38 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. by real income growth. However, lower growth in the agriculture transactions have remained limited, they are expected to recover sector suggests more limited gains among the poorest. in 2025-26. Headline inflation is set to remain within target of 4.5-5 percent as oil and commodity prices are projected to continue eas- Viet Nam’s external position deteriorated with the current account ing. The projected economic growth augurs well for poverty reduc- surplus being offset by financial outflows and large unrecorded tion efforts in the country. Nevertheless, external economic uncer- capital outflows amid continued interest rate differentials. Further, tainties pose risks that could lead to job losses among unskilled global strengthening of the US dollar added pressure on the local workers and might put in jeopardy some of the recent gains in currency. In response, the SBV intervened by drawing down cur- poverty reduction. rent reserves to about 2.5 months of imports by Q3-2024 while withdrawing liquidity through OMOs and issuance of T-bills. This outlook is subject to increasing downside risks, particularly on the external side. These include challenges from adverse trade Credit growth improved during 2024, reaching the government’s policy shifts, slower-than-expected global growth, and global policy target of 15 percent by the end of the year, driven by credit to the uncertainty. Given the country’s exposure to the external environ- wholesale and retail trade, manufacturing, and real estate sectors. ment, stronger-than-expected distortions in trade policy could ad- However, non-performing loans have remained at 4.6 percent by versely impact exports and growth. A slower-than-expected glob- September 2024, while the average loan-loss coverage ratio among al growth could also reduce external demand and affect exports 26 banks declined to 83 percent in Q3–2024, well below the peak and private investments including FDI. Further, higher-than-expect- of 151 percent in 2022. ed policy uncertainty could weigh down on investment and growth. Reduced recurrent expenditures, under-disbursement of public Policy measures should focus on expanding public investment, investment and higher than planned revenue collection led to mitigating fiscal sector risks, and structural reforms. While space fiscal tightening in 2024, with the fiscal account registering an for monetary policy intervention remains restrained, fiscal policy estimated surplus of 1.8 percent of GDP. Execution of public in- could still support growth especially through investment to close vestment was constrained by regulatory and land clearance de- emerging infrastructure gaps. Building on recent reforms, such lays while the government continued its planned annual savings as the revision of Law on Credit institutions, further steps to in recurrent expenditures. mitigate financial sector risks and vulnerabilities remain crucial to promote financial sector resilience and stability. Accelerating structural reforms to strengthen the regulatory environment in Outlook critical backbone services (information and communication tech- nology, electricity, transport), to green the economy, build human Viet Nam’s GDP growth is forecast to moderate to 5.8 percent in capital, and improve the business environment are crucial to sus- 2025 due to increased trade policy uncertainty. While real estate tain long-term growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.5 5.1 7.1 5.8 6.1 6.4 Private consumption 7.9 3.4 6.6 6.3 7.0 7.0 Government consumption 3.0 4.6 4.0 5.5 4.9 2.5 Gross fixed capital investment 5.9 4.6 7.3 6.1 7.5 7.7 Exports, goods and services 6.2 -2.5 15.5 6.2 8.7 9.0 Imports, goods and services 3.5 -4.5 16.1 6.8 9.5 9.5 Real GDP growth, at constant factor prices 8.8 5.3 7.3 5.9 6.0 6.3 Agriculture 3.7 3.9 2.7 3.0 3.0 3.0 Industry 8.2 3.7 9.1 6.0 6.5 6.5 Services 10.7 6.9 6.9 6.4 6.2 6.8 Employment rate (% of working-age population, 15 years+) 72.0 71.8 71.6 71.5 71.3 71.0 Inflation (consumer price index) 3.1 3.2 3.5 3.5 3.5 3.5 Current account balance (% of GDP) 0.3 6.0 1.9 1.6 1.7 2.1 Net foreign direct investment inflow (% of GDP) 3.7 4.6 4.4 4.3 4.3 3.9 Fiscal balance (% of GDP) 0.7 -2.3 1.8 -2.2 -1.8 -1.6 Revenues (% of GDP) 18.9 17.0 18.4 16.4 16.2 16.0 Debt (% of GDP) 36.9 36.6 37.5 36.9 35.0 33.8 Primary balance (% of GDP) 1.7 -1.5 2.7 -1.2 -0.8 -0.6 1,2 International poverty rate ($2.15 in 2017 PPP) 1.0 0.9 0.9 0.9 0.8 0.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.2 4.0 3.8 3.6 3.4 3.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 19.7 19.1 18.2 17.5 16.8 16.1 GHG emissions growth (mtCO2e) 6.1 4.4 6.1 5.0 5.3 5.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on EAPPOV harmonization, using 2016-VHLSS and 2022-VHLSS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2016-2022) with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 39 Albania Moldova Armenia Montenegro Azerbaijan North Macedonia Belarus Poland Bosnia and Herzegovina Romania Bulgaria Russian Federation Croatia Serbia Georgia Tajikistan Kazakhstan Türkiye Kosovo Ukraine Kyrgyz Republic Uzbekistan Europe and Central Asia Macro Poverty Outlook / April 2025 41 This outlook reflects information available as of April 10, 2025. 1 2 ALBANIA Population Poverty million millions living on less than $6.85/day 2.4 0.4 3 4 Life expectancy at birth School enrollment Growth remained strong in 2024, at around 3.9 percent, dri- years primary (% gross) ven by private consumption, tourism, and construction, while inflation pressures eased. Poverty slightly declined amid 76.8 93.7 5 6 ongoing job and wage expansion. Rising geopolitical tensions GDP GDP per capita and uncertainty in trade policy pose risks to the medium-term current US$, billion current US$ outlook, as prospects hinge on external demand and continu- ity in structural reforms. European Union (EU) accession efforts 27.3 11389.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2024 (2017 PPPs). 3/ 2022. are expected to support convergence and long-term growth. 4/ 2023. 5/ 2024. 6/ 2024. risks. Addressing these challenges requires raising addi- Key conditions and challenges tional government revenues and increasing spending ef- ficiency, alongside accelerating EU- aligned reforms to en- Albania is an open economy, leveraging its EU proximity for hance productivity, the business environment, and market exports, investment, and remittances. Growth has averaged integration. While poverty has declined, inclusive growth 3 percent annually over the 10 years, yet Albania’s per capi- policies and stronger social protection are needed to support ta income remains one-third of the EU average (2021 real vulnerable groups. US$). Despite structural challenges, the economy has shown resilience to 2019-2022 crises, averaging 4.2 percent growth per annum in 2022–2024, supported by increased trade with Recent developments the EU, a strong tourism sector, and hydropower production, which meets up to 90 percent of energy demand in normal Growth held steady at 4 percent in the first three quarters rainfall years. of 2024, mirroring the 2023 performance. Services and con- struction led the expansion, while industry and agriculture The exchange rate has appreciated significantly in recent slowed. On the demand side, private consumption and invest- years, reflecting sustained inflows from export earnings, ment drove growth, while net exports weighed negatively, due remittances, and foreign investment. While signaling to a slowdown in goods exports. Economic sentiment indica- economic strength, this also made Albanian goods less tors suggest higher domestic confidence (Figure 1). The em- competitive abroad. ployment rate averaged 68.6 percent in 2024, with male and fe- male employment rates rising by 2.0 and falling by 0.3 percent- Structural challenges restraining long-term growth and income age points, respectively. Unemployment declined to 9.4 per- convergence include outmigration, an aging population, weak cent, with youth unemployment (15–29) remaining high at 18.9 labor force skills, and fiscal pressures from weather-related percent. Administrative data shows that the average wage grew FIGURE 1 / Economic sentiment index (ESI) and GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Real GDP growth (percent, y/y, not sa) ESI Poverty rate (%) Real GDP per capita (constant LCU) 7 115 45 900000 6 40 800000 110 35 700000 5 30 600000 4 105 25 500000 3 100 20 400000 2 15 300000 95 10 200000 1 5 100000 0 90 0 0 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate GDP growth (lhs) ESI (rhs) Upper middle-income pov. rate Real GDP pc Sources: INSTAT and Bank of Albania. Source: World Bank. Notes: See footnotes in table on the next page. 42 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. by 9.8 percent in 2024, with increases across all economic sectors. Overall, poverty declined by 1.7 percentage points to Outlook reach 17.3 percent. Economic growth is expected to moderate to 3.2 percent in 2025 In 2024, inflation more than halved relative to 2023, averaging and 3.1 percent in the medium-term, amidst global trade policy un- 2.2 percent, mainly due to lower import-driven pressures. Do- certainty and the evolving global outlook. Poverty is projected to mestic inflationary pressures are now the main driver of rising decline to 16 percent. Inflation is expected to increase and reach consumer prices. As of December 2024, fiscal performance re- the 3 percent target and fluctuate around that level in the medium- mained robust, with revenues growing by 10.4 percent versus term. This trajectory will be shaped by ongoing domestic pressures, 8.0 percent for expenditures. Capital spending was sluggish but including wage growth, as well as disrupted supply chains driven by gained momentum late in the year, ending 2024 with an 87 shifts in trade policy. percent execution rate. Cash balances remained stable, ensur- ing ample liquidity. The primary surplus adhered to fiscal rules, The current account deficit is expected to fluctuate around 3.7 per- while the overall budget deficit stayed low at 0.8 percent of cent of GDP from 2025, rising to 4.1 percent by 2027 but remain be- GDP. Public debt continued to decline, reaching 54.2 percent low the historical average. While major public capital investments of GDP in 2024, driven by fiscal consolidation and exchange will drive higher imports, continued improvements of service ex- rate appreciation. ports will help keep the deficit below historical levels. Albania’s pri- mary fiscal balance is expected to remain positive from 2025 on- Credit expansion remained strong through December 2024, ward, averaging 0.4 percent of GDP. This projection assumes par- growing by 12 percent y-o-y, with double-digit increases for tial execution of capital expenditures and does not fully reflect both private businesses and households. Gross non-perform- the Medium-Term Revenue Strategy 2025- 2027. Meanwhile, pub- ing loans declined to 4.2 percent in December 2024 from lic debt will decline further, reaching an average of 52.8 percent of 4.7 percent in 2023. During Q1-Q3 2024, the current account GDP over 2025–2027. deficit widened to an estimated 1.5 percent of GDP but re- mained below the five-year average. This was mainly due to Risks to the outlook include heightened geopolitical tensions and a rising trade deficit resulting from the continued decline in further uncertainty surrounding global trade and economic poli- goods exports and rising goods imports, while primary and cies. These factors could further impact near-term growth in secondary income balances improved. Net foreign direct in- the EU, which remains Albania’s key economic partner. Domes- vestment (FDI) continued performing strongly, increasing by tic fiscal risks from public-private partnerships and state-owned 6.1 percent y-o-y. Foreign currency reserves reached USD 6.6 enterprises add to vulnerabilities. However, effective EU Growth billion as of December 2024, up from USD 6.4 billion in the Agenda implementation and strong tourism receipts represent previous year. upsides to the uncertainty. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.8 3.9 3.9 3.2 3.1 3.1 Private consumption 6.1 3.2 4.2 3.4 3.2 3.3 Government consumption 2.3 4.9 6.8 0.7 0.9 0.6 Gross fixed capital investment 1.6 1.0 6.1 7.0 5.3 5.2 Exports, goods and services 17.0 9.5 0.6 3.5 3.5 3.7 Imports, goods and services 11.5 0.2 3.8 5.5 4.5 4.5 Real GDP growth, at constant factor prices 5.1 4.9 3.9 3.2 3.0 3.0 Agriculture -4.8 -1.8 0.2 0.3 0.3 0.3 Industry 4.3 -2.4 1.8 2.9 3.2 3.6 Services 8.2 7.9 5.2 3.9 3.5 3.5 Employment rate (% of working-age population, 15 years+) 52.9 53.9 53.5 53.5 53.5 53.5 Inflation (consumer price index) 6.7 4.8 2.2 3.0 3.0 3.0 Current account balance (% of GDP) -5.9 -1.2 -2.4 -3.7 -4.0 -4.1 Net foreign direct investment inflow (% of GDP) 6.6 5.8 5.0 5.6 5.9 6.2 Fiscal balance (% of GDP) -3.6 -1.3 -0.8 -2.1 -1.6 -1.9 Revenues (% of GDP) 26.6 27.2 28.1 28.4 28.5 28.3 Debt (% of GDP) 64.1 57.5 54.2 53.7 52.7 51.9 Primary balance (% of GDP) -1.8 0.7 1.3 0.2 0.6 0.3 1,2 International poverty rate ($2.15 in 2017 PPP) 1.5 1.2 1.0 0.8 0.7 0.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.8 3.8 3.3 2.8 2.5 2.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 21.7 19.0 17.3 16.0 14.9 13.8 GHG emissions growth (mtCO2e) -5.3 -4.4 -2.3 -2.1 -2.0 0.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2017-SILC-C and 2019-SILC-C. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Projection using point-to-point elasticity (2016-2018) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 43 This outlook reflects information available as of April 10, 2025. 1 2 ARMENIA Population Poverty million millions living on less than $3.65/day 3.0 0.3 3 4 Life expectancy at birth School enrollment Armenia’s growth eased to 5.9 percent in 2024, driven by years primary (% gross) private consumption and investment, while unemployment picked up. Average inflation declined to 0.3 percent in 73.4 93.8 5 6 2024, mainly due to lower food prices. Growth is projected GDP GDP per capita to slow to 4 percent in 2025 and reach the potential rate current US$, billion current US$ (4.5 percent) in the medium term. The fiscal deficit is pro- jected to expand in 2025 and then consolidate over the 25.8 8500.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. medium term. 4/ 2023. 5/ 2024. 6/ 2024. contracted (down 8.3 percent, yoy). Meanwhile, agriculture Key conditions and challenges sector growth remained modest (up 1 percent, yoy). Since 2020, Armenia has shown resilience driven by sound Unemployment rose to 13.3 percent in Q3 2024, up from 12 per- macroeconomic management. Re-routed exports and the cent in Q3 2023, driven by rural and female unemployment and, in large inflows of funds and migrants, which supported ex- part, by the influx of refugees. Poverty at the upper-middle-income ceptional growth in 2022 and 2023, have started to unwind. line (US$ 6.85, 2017 purchasing power parity [PPP]) edged up to 52 Challenges include low private investment, limited market percent in 2023 from 51.3 percent in 2022. competition, low firm productivity in most sectors, and a shortage of skilled workers. The government is boosting Average inflation fell to 0.3 percent in 2024, down from 2 per- skills, competition, and digitalization, but implementation ca- cent in 2023, driven by 2-percent food deflation; nonetheless, pacity remains a constraint. price pressures increased towards the end of the year. The Cen- tral Bank cut the policy rate by 225 basis points in 2024, to 7 percent by year-end. Recent developments The current account deficit is estimated to have reached 3.8 per- In 2024, GDP expanded by 5.9 percent (yoy), down from 8.3 cent of GDP in 2024, compared with 2.3 percent in 2023. Exports percent in 2023, driven by private consumption (up 6.8 per- and imports of goods surged 53.1 percent (yoy) and 33.7 percent cent) and investment (up 11 percent), while government con- (yoy), respectively, in nominal terms, with the trade deficit narrow- sumption decelerated. On the supply side, growth was led by ing 5.5 percent. Growth in re-exports of precious stones and met- trade (up 17 percent, yoy), real estate (up 19 percent, yoy), als eased in H2 2024. Growth in traditional exports continued, in- financial services (up 18 percent, yoy), and construction (up cluding in agriculture commodities (up 30 percent), ready foods 14 percent, yoy). Mining was the only sector where activity (up 15 percent), and minerals (up 7 percent). However, trade in FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 15 70 3.5 10 60 3.0 5 50 2.5 0 40 2.0 30 1.5 -5 20 1.0 -10 10 0.5 -15 2020 2021 2022 2023 2024e 2025f 2026f 2027f 0 0.0 Private Consumption Government Consumption 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Investment Net Export International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real GDP pc Sources: Statistical Committee of Armenia and World Bank staff projections. Source: World Bank. Notes: See footnotes in table on the next page. 44 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. services weakened, with a 4.7 percent reduction in tourist arrivals 3.5 percent prior to stabilizing at around 3 percent, which is the (driven by a reduction of 17.5 percent in arrivals from Russia). Re- new Central Bank target as of January 2025. mittances (measured by net non-commercial transfers) also de- clined by 35 percent (yoy) in 2024. During 2024, the AMD:US$ ex- The fiscal deficit is expected to climb to 5.3 percent of GDP change rate appreciated by 2 percent and international reserves in 2025, fueled by higher spending on defense, infrastructure, increased slightly (by US$60 million), with import cover reaching social security payments, and debt service, prior to gradually de- 2.4 months by end-2024. clining in the medium term to 3.8 percent by 2027. Public debt is projected to increase from 48.3 percent of GDP in 2024 to 56.6 The budget deficit reached 3.5 percent of GDP in 2024, higher than percent of GDP by 2027. the 1.9 percent recorded in 2023. Both current and capital expen- ditures underperformed against the budget plan, by 4 percent and The current account deficit is expected to deteriorate to 4.9 per- 22 percent, respectively. Tax revenues increased slightly, from 24 cent of GDP in 2027, as export volumes decline following a deceler- percent of GDP in 2023 to 24.2 percent in 2024. VAT collection de- ation in external demand (for both goods and services) and a slow- clined from 8.1 percent of GDP in 2023 to 7.5 percent of GDP in down in remittances. 2024, reflecting a decline in imports from non-Eurasian countries. The poverty rate (as measured by the upper-middle-income pover- Armenia's financial system remains sound. In 2024, deposits and ty line of US$ 6.85 per day, 2017 PPP) is projected to fall from 52 loans grew by 11.4 and 20.7 percent (yoy), respectively, in nom- percent in 2023 to 48 percent in 2027. However, several factors, inal terms. This was mostly driven by AMD-denominated funds, such as the rising unemployment in rural areas, slow growth in bringing credit dollarization to 33.4 percent, down from 35.6 the agricultural sector, and higher inflation, may limit the pace of percent at end-2023. poverty reduction. Armenia's outlook faces downside risks, including geopolitical risks, Outlook a faster unwinding of re-exports, and challenges in integrating refugees. Should global growth and investor sentiment deteriorate Growth is projected to ease to 4 percent in 2025, before reaching more than anticipated, Armenia’s growth would further decelerate. the medium-term potential growth rate of 4.5 percent, as domestic On the upside, normalization of relations with neighbors and demand moderates and Armenia is modestly impacted by shifts in progress in European Union (EU) visa-liberalization talks could sup- global trade policy. Inflation is anticipated to increase in 2025 to port growth and economic diversification. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 12.6 8.3 5.9 4.0 4.2 4.5 Private consumption 5.6 5.6 6.8 5.0 5.0 4.7 Government consumption -2.2 28.3 -22.3 0.8 4.9 6.2 Gross fixed capital investment 14.0 10.1 11.1 9.9 6.6 6.0 Exports, goods and services 59.9 30.7 35.6 -19.9 1.7 2.1 Imports, goods and services 35.0 30.2 31.4 -16.0 3.8 3.5 Real GDP growth, at constant factor prices 13.1 8.0 6.9 4.0 4.2 4.5 Agriculture -2.8 2.9 1.0 2.1 2.5 3.1 Industry 9.8 2.7 6.2 4.5 4.5 4.5 Services 18.1 11.4 8.1 4.1 4.3 4.7 Employment rate (% of working-age population, 15 years+) 50.9 52.8 51.1 51.5 51.5 51.5 Inflation (consumer price index) 8.6 2.0 0.3 3.5 3.2 3.0 Current account balance (% of GDP) 0.3 -2.3 -3.8 -4.1 -4.6 -4.9 Net foreign direct investment inflow (% of GDP) 4.7 2.2 2.0 2.1 2.1 2.1 1 Fiscal balance (% of GDP) -2.2 -1.9 -3.5 -5.3 -4.5 -3.8 Revenues (% of GDP) 25.1 26.0 26.6 26.7 26.7 27.1 2 Debt (% of GDP) 46.7 48.4 48.3 51.3 53.7 56.6 Primary balance (% of GDP) 0.1 0.7 -0.8 -2.0 -0.9 -0.1 3,4 International poverty rate ($2.15 in 2017 PPP) 0.8 0.6 0.6 0.6 0.6 0.7 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 10.0 8.4 8.2 7.9 7.7 7.4 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 51.3 52.0 51.0 50.1 49.2 48.2 GHG emissions growth (mtCO2e) 4.0 11.0 9.7 7.4 7.7 7.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Represents the consolidated fiscal balance. 2/ Excludes CBA debt. 3/ Calculations based on ECAPOV harmonization, using ILCS. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 4/ Projection based on poverty-to-growth elasticity model using annualized elasticity (2011-2018) with pass-through = 0.69. Macro Poverty Outlook / April 2025 45 This outlook reflects information available as of April 10, 2025. 1 AZERBAIJAN Population Poverty million 10.2 .. 2 3 Life expectancy at birth School enrollment Growth accelerated to 4.1 percent in 2024, supported by years primary (% gross) strong consumption and public investment. Average inflation stood at 2.1 percent in 2024 as external pressures subsided. 73.5 102.0 4 5 The external and fiscal surpluses narrowed, due to slowing GDP GDP per capita energy prices. Growth is estimated to hover at around 2.5 current US$, billion current US$ percent in the medium term as extraction of oil and gas moderates; tightening fiscal conditions could further slow 73.5 7195.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. non-hydrocarbon sector growth. hydrocarbon sector growth. Production of natural gas continued to Key conditions and challenges increase in 2024, and the decline in crude oil production was less pronounced, contributing positively to hydrocarbon sector output. Azerbaijan’s continued reliance on hydrocarbons as a major A 9.6 percent increase in the construction sector, owing to sig- source of export and fiscal revenue remains its main vulnera- nificant public investment in reconstruction projects, drove high bility. Declining oil production, oil price volatility, and the glob- growth in the non-hydrocarbon sector. Growth in service sectors al transition away from fossil fuels are challenges to long-term also contributed (with transport up 14.1 percent; ICT up 11.4 per- growth prospects. cent; and hospitality up 12.9 percent). On the demand side, private consumption remained robust, supported by a 5.8 percent in- Private sector development is constrained by the economy’s large crease in real wages. The unemployment rate fell to 5.3 percent in state footprint, an uneven playing field for companies, shallow 2024, down from 5.6 percent in 2023. financial markets, and a weak human capital base. While Azer- baijan has reduced the gap with developed countries in terms of Average inflation stood at 2.1 percent in 2024, within the target of per capita capital stock, convergence of per capita income has 4+/–2 percent. Prices picked up in H2 2024, with annual inflation lagged, pointing to low productivity. Azerbaijan needs to make reaching 4.9 percent by end-December. This was due to increases reforms to foster greater allocation of productive resources and in food prices, driven by higher agricultural production and ad- technology infusion across businesses and sectors. ministrative prices. The Central Bank has kept the policy rate un- changed at 7.25 percent. The nominal effective exchange rate (NEER) appreciated in 2024, helping to contain inflation. Recent developments The fiscal surplus halved compared with 2023, reaching 4.1 percent The economy expanded by 4.1 percent in 2024, driven by 6.2 per- of GDP. Revenues fell 6.7 percent (yoy, in real terms) to 37.9 per- cent real growth in the non-hydrocarbon sector and an uptick in cent of GDP, primarily due to reduced hydrocarbon sector receipts FIGURE 1 / Non-oil-and-gas GDP growth and oil price FIGURE 2 / Official poverty rate, unemployment rate, and real wage growth US$ per bbl Percent Percent, percentage of population Percent 120 12 8 15 100 9 10 6 80 6 5 4 60 3 0 40 0 2 -5 20 -3 0 -10 0 -6 Official poverty rate (lhs) Unemployment rate (lhs) Crude oil price, avg (lhs) Non-oil&gas GDP growth (rhs) Real wage growth (rhs) Sources: State Statistical Committee and World Bank. Source: State Statistical Committee. Notes: The World Bank has not yet reviewed the official national poverty rates for 2013–2023. *Preliminary. 46 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. caused by lower prices. In 2024, government expenditure rose 4.1 hydrocarbon sector is also projected to decline in 2024–2026, but percent in real terms, to 34 percent of GDP, driven by a 5.4 per- more slowly than previously anticipated. This is due to an action cent increase in current expenditure in real terms. Consistent with plan agreed with the major oil companies to contain the decrease robust growth, tax collection in the non-hydrocarbon sector in- in crude oil extraction from the aging major oilfield. Natural gas creased by 8 percent in real terms. The non-hydrocarbon primary production is expected to stabilize. Without structural reforms to deficit narrowed to 20 percent of non-hydrocarbon GDP, 2 percent- boost private investment, growth is projected to gradually decline age points lower than in 2023. to around 2.3 percent by 2027. The trade surplus contracted to 7.4 percent of GDP in 2024, with Inflation is expected to increase in 2025, while remaining within exports tumbling 22 percent (in US$ terms), due to lower oil and the Central Bank’s target (4+/–2 percent). In the medium term, gas prices. Meanwhile, imports surged 21.8 percent, driven by in- inflation will moderate hovering around 3 percent amid slowing creased public sector purchases. Central Bank reserves fell 5.4 per- domestic demand. cent to US$10.9b by the end of 2024, equivalent to 5.6 months of import cover. The lower outlook for energy prices, due to the increased global headwinds, is expected to result in a larger primary fiscal deficit av- Credit to the economy rose by 19.6 percent in 2024 in real eraging 3.3 percent in the next three years. As authorities aim to terms, with consumer and business lending expanding 19.2 per- adhere to the non-hydrocarbon primary fiscal balance targets, set cent and 14.7 percent, respectively. The non-performing loan at 15.5 percent of non-hydrocarbon GDP for 2028, expenditure is (NPL) ratio decreased to 1.5 percent, and deposit dollarization expected to continue moderating. receded to 38 percent. The current account surplus is expected to turn into a deficit of 1.9 percent in 2025 and 1.2 percent in 2027, due to declining energy Outlook prices and robust demand for imports. GDP growth is projected to slow to 2.6 percent in 2025, as a re- Risks to the outlook are building up. Protracted trade uncertainty sult of headwinds from shifts in trade policy and global uncertain- could result in higher fiscal spending and a steeper reduction in en- ty, together with lower budgeted growth in public expenditures ergy prices, which in turn could exert pressure on fiscal and exter- (which is expected to affect non-hydrocarbon sector output). The nal accounts and pose risks to overall macroeconomic stability. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.6 1.1 4.1 2.6 2.4 2.3 Private consumption 4.9 4.0 7.0 4.4 4.3 4.5 Government consumption 6.3 8.1 11.3 3.7 5.3 3.7 Gross fixed capital investment 5.7 9.6 -0.7 6.3 2.4 2.0 Exports, goods and services 3.3 -2.9 1.2 0.4 0.2 0.1 Imports, goods and services 3.2 1.9 3.1 2.6 2.1 1.9 Real GDP growth, at constant factor prices 4.6 1.1 4.1 2.6 2.4 2.3 Agriculture 3.4 3.2 1.4 2.5 2.6 2.6 Industry 2.4 -0.9 1.1 1.1 1.0 0.9 Services 8.5 3.8 9.1 4.7 4.2 4.0 Employment rate (% of working-age population, 15 years+) 66.1 66.3 66.3 66.3 66.3 66.3 Inflation (consumer price index) 13.8 9.0 2.1 4.6 3.0 2.8 Current account balance (% of GDP) 29.7 11.6 8.1 -1.9 -1.1 -1.2 Net foreign direct investment inflow (% of GDP) -1.4 -1.1 -1.1 -1.1 -1.0 -0.9 Fiscal balance (% of GDP) 5.4 8.2 4.1 -3.5 -3.2 -3.2 Revenues (% of GDP) 30.6 39.5 37.9 30.5 30.7 30.9 Debt (% of GDP) 11.7 21.9 23.5 23.1 24.7 24.6 Primary balance (% of GDP) 5.8 8.4 4.3 -2.7 -2.5 -2.4 GHG emissions growth (mtCO2e) -1.8 -0.5 1.3 1.1 1.4 1.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 47 This outlook reflects information available as of April 10, 2025. 1 2 BELARUS Population Poverty million millions living on less than $6.85/day 9.1 0.1 3 4 Life expectancy at birth School enrollment Growth in 2024 was robust at 4 percent but is expected years primary (% gross) to slow due to weaker economic activity in Russia and an unfavorable external environment, including sanctions and 73.1 94.7 5 6 global uncertainties. Long-term growth will be hindered by GDP GDP per capita the efficiency of stimulus measures, high inflation, and current US$, billion current US$ currency challenges. Continued isolation from the global economy will further reduce competitiveness and produc- 75.0 8226.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2020 (2017 PPPs). 3/ 2022. tivity, limiting growth potential. 4/ 2023. 5/ 2024. 6/ 2024. rate volatility, plans to ease price controls, and inefficiencies in Key conditions and challenges the state-dominated economy heighten inflationary risks. Belarus has seen stronger-than-expected economic growth in re- cent years, with the government relying on extensive administra- Recent developments tive measures to control prices, along with favorable monetary and fiscal policies to sustain domestic demand. However, sanc- In 2024, GDP growth reached 4 percent, surpassing the 3.8 percent tions and restricted access to advanced technology has weighed target. This growth was driven by private consumption, investment, on growth. Persistent labor shortages, economic overheating, and a record-low unemployment rate of 3 percent. Strong demand and a worsening trade balance have emerged as key structur- from Russia, especially in the defense sector, supported exports al challenges. In response to sanctions, Belarus has redirected and economic activity. Rising wages, alongside fiscal measures and trade through Russia and sought new routes, though this has in- investment incentives, fueled domestic demand, increasing im- creased logistical costs and caused payment delays. The govern- ports and contributing negatively to net exports. Domestic trade, ment is encouraging local production through import substitu- particularly retail and wholesale, saw growth from high consumer tion, backed by Russian investments and subsidies. While boost- spending. The industrial sector thrived due to Russian demand, ing resilience, these measures increase Belarus’s dependence on agriculture benefited from favorable weather, and construction Russia, making it more vulnerable to weaker demand. Additional- surged, aided by Russian investments and import substitution. The ly, uncertainty in trade policy could indirectly impact growth and IT sector showed signs of stabilization. exports. Addressing structural issues such as labor market rigidi- ties and limited diversification is crucial for boosting long-term Despite administrative price controls, inflation reached 5.7 percent, growth and economic resilience. Balancing accommodative poli- driven by rising non-regulated prices, while government controls cies with social benefits, wage growth, and stability remains chal- kept regulated prices stable. To manage inflation and excess liquid- lenging. Additionally, a deteriorating current account, exchange ity, the National Bank of Belarus raised the overnight lending rate FIGURE 1 / Quarterly real GDP growth and contributions to real FIGURE 2 / Actual and projected poverty rates and real private quarterly GDP growth consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 40 18 7000 30 16 6000 20 14 10 5000 12 0 10 4000 -10 8 3000 -20 -30 6 2000 -40 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2 1000 2021 2022 2023 2024 0 0 Final consumption Gross capital formation 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Exports Imports International poverty rate Lower middle-income pov. rate Stat discrepancy GDP growth Upper middle-income pov. rate Real priv. cons. pc Source: World Bank based on national statistics. Source: World Bank. Notes: See footnotes in table on the next page. 48 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. by 0.5 percentage points to 11percent and increased the reserve less dynamic due to declining Russian demand. The construction requirement for foreign currency liabilities to 20 percent. These sector will remain a key contributor, supported by government measures tightened monetary conditions to prevent overheating. stimulus measures and infrastructure projects. Domestic trade is The Belarusian ruble depreciated moderately due to sanctions, re- expected to benefit from supportive monetary conditions and la- duced trade inflows, and its correlation with the Russian ruble. bor shortages that sustain wage growth, albeit at a slower pace. The financial sector remained stable, with banks benefiting from Consumption is expected to remain a primary driver of growth on increased investments in government bonds. The trade balance the demand side, although it is likely to moderate due to the ero- worsened, leading to a 3.1percent current account deficit in the sion of purchasing power from high inflation. Investments are ex- first three quarters of 2024, despite a 3 percent increase in re- pected to contribute positively but face limitations from resource mittances. The deficit was mainly financed through foreign direct constraints and absorption capacities. Net exports may act as a investment. Public and private external debt slightly decreased to drag on growth due to Belarus's reliance on the Russian market 47.9 percent of GDP, while foreign reserves rose to $9.3 billion and ongoing sanctions coupled with logistical challenges. by February 2025. Inflationary pressures are expected to remain high, with prices Real wages increased by 13 percent in 2024, continuing the forecasted to rise by 6.5 percent in 2025. Elevated inflation, strong double-digit growth from 2022–2023. Driven by real wage coupled with declining profits, increasing losses, and structural growth, poverty, based on the World Bank’s UMIC threshold inefficiencies, may reduce the effectiveness of economic stimu- (US$6.85/day, 2017 PPP), is projected to decline from 0.56 per- lus measures. In the medium term, the planned easing of price cent in 2024 to 0.49 percent in 2025. controls will keep inflation above 6 percent. Shifts in global trade policy, ongoing trade logistics issues and sanctions will limit export potential, strain the current account, and create Outlook currency pressures, worsening the fiscal outlook due to an ex- pansionary fiscal stance. Growth is projected to slow to 2.2 percent in 2025, driven by a fore- casted slowdown in Russia's economy, which would reduce demand In the medium term, while administrative measures to control in- for Belarusian exports and negatively impact overall growth. Pro- flation and the state's significant role in the economy aim to main- duction facilities are already operating at full capacity, making it dif- tain macroeconomic stability, Belarus's growth is likely to fall short ficult to increase output without substantial investment in capacity of its potential due to external challenges and domestic con- expansion. Moreover, Belarus faces significant labor shortages. straints. Strategic partnerships with Russia, state lending pro- grams, and support for state-owned enterprises are expected to Despite these constraints, certain sectors are expected to still sustain growth momentum. New sanctions on Belarus would fur- grow. Manufacturing will continue to be a growth driver, although ther limit exports and dampen economic activity. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -4.7 3.9 4.0 2.2 1.2 0.8 Private consumption -1.2 4.1 7.1 3.2 2.5 1.8 Government consumption -0.1 1.4 0.6 0.4 0.2 0.0 Gross fixed capital investment -13.3 12.1 6.3 3.0 1.3 1.2 Exports, goods and services -12.3 23.1 3.0 2.7 2.5 2.4 Imports, goods and services -11.4 29.1 5.7 3.9 3.8 3.5 Real GDP growth, at constant factor prices -4.7 3.7 4.1 2.2 1.2 0.8 Agriculture 4.4 -0.4 6.1 3.2 3.1 2.3 Industry -6.2 8.0 5.7 1.8 1.0 0.8 Services -5.1 1.1 2.4 2.4 1.0 0.5 Inflation (consumer price index) 15.2 5.1 5.7 6.5 6.2 6.0 Current account balance (% of GDP) 3.6 -1.5 -3.2 -3.5 -3.5 -3.7 Net foreign direct investment inflow (% of GDP) 1.9 2.7 1.9 1.8 1.8 1.8 Fiscal balance (% of GDP) -1.5 1.2 1.2 1.0 0.8 0.8 Revenues (% of GDP) 36.0 41.1 40.9 39.8 39.4 39.3 Debt (% of GDP) 38.7 37.7 37.3 36.6 36.4 33.9 Primary balance (% of GDP) 0.0 2.7 2.7 2.4 2.2 2.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.1 0.1 0.0 0.0 0.0 0.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 1.0 0.7 0.6 0.5 0.4 0.4 GHG emissions growth (mtCO2e) -3.3 0.9 2.1 0.8 0.2 -0.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2020-HHS. Actual data: 2020. Nowcast: 2021-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2020) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 49 This outlook reflects information available as of April 10, 2025. BOSNIA AND 1 Population Poverty million 3.2 .. HERZEGOVINA Life expectancy at birth years 2 School enrollment primary (% gross) 3 75.3 87.2 4 5 Real growth improved to 2.6 percent in 2024, driven by GDP GDP per capita current US$, billion current US$ increased consumption and investment. Commodity prices remained high, but overall inflation slowed to 1.7 percent 24.4 7711.1 owing to drop in energy prices. The fiscal deficit widened Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. due to higher spending on wages, goods and services. Public debt levels remained moderate. Despite achieving real income growth of 3 percent annu- Key conditions and challenges ally since 2015, per capita GDP remains only one-third of the EU27 average. The official poverty rate fell from 16.9 To begin EU accession negotiations, Bosnia and Herzegovina percent in 2015 to 13.5 percent in 2021, but significant (BiH) must address 14 predominantly political measures concern- vulnerability to economic shocks remains, with 40 percent ing democracy, the rule of law, fundamental rights, and public of adult population reporting not being able to make ends administration. Concurrently, advancements in internal market meet for more than 1 month in the case of loss of the integration, state institutional consolidation, enhancing state su- main source of household income. Higher poverty rates pervisory and regulatory institutions, and reducing an excessively are linked to lower labor market participation and edu- large public sector are required to complete economic criteria. cational attainment, with all-elderly households, and those with more than 2 children or members with disability being BiH has benefited from macroeconomic stability over the past most vulnerable. decade through three key policy anchors: the Euro-linked cur- rency board, the nationwide collection of indirect taxes, and EU Low investment rates and a private consumption-led accession prospects. growth model create challenges for achieving faster eco- nomic convergence with the EU27. Accelerating key struc- Macroeconomic stability has been supported by fiscal prudence: tural reforms, including improving the oversight and man- during 2015-2019, fiscal surpluses were 1-3 percent of GDP. Al- agement of state-owned enterprises, enhancing the busi- though fiscal deficits have re-emerged during, and after, the pan- ness environment, improving youth employment policies, demic, public debt levels remain relatively low, at approximately reducing labor costs, and transitioning from coal to green 34 percent of GDP. energy, is crucial. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Labor market indicators Percent, percentage points Percent 8 45 40 6 35 4 30 25 2 20 0 15 10 -2 5 -4 0 2020 2021 2022 2023 2024f 2025f 2026f 2027f Emp. Rate (15-89) Unemp. Rate (15-74) Agriculture Industry Services GDP Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Sources: BiH Agency for Statistics (BHAS) and World Bank staff calculations. Sources: LFS 2023 – 2024 report, and World Bank staff calculations. 50 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Recent developments Outlook In 2024, real growth improved to 2.6 percent, up from 1.9 percent Real GDP growth in BiH is projected to increase to 2.7 percent in in 2023, reflecting two offsetting forces. First, domestic demand in- 2025, and 3.1 percent in 2026, with stronger real incomes boosting creased by 4.4 percent due to higher consumption and investment. private consumption. Inflation is expected to increase mainly dri- Second, net exports decreased by 23 percent owing to worsen- ven by an increase in the price of food and services, triggered by ing terms-of-trade and an increase in investment-driven imports. the global economic uncertainty and implementation in 2025 of the A slowdown in inflation bolstered real disposable income, and pri- FBiH Government Decision to increase the minimum wage by 60 vate consumption. Average monthly net wages increased by 7.8 percent. The introduction of subsidies in 2025 to compensate em- percent y-o-y in December 2024. However, industrial production ployers for contributions (health and pension) will also add to the growth continued to decline, contracting 4 percent annually. deficit, as will the expected set of fiscal laws intended to reduce the aggregate contribution rate from 41.5 to 36 percent. In the short- Inflation slowed to 1.7 percent in 2024, from 6.1 percent the year term the attention of policy makers is on meeting the legislative re- before. Prices of most goods and services increased faster than quirements for initiating EU accession negotiations, with only little food prices, resulting in core inflation (2.8 percent) outpacing food space for economic structural reforms in 2025, besides fiscal. inflation (2.1 percent) in 2024. This deceleration in inflation result- ed from a drop in transport prices and a deceleration in prices of By 2027, real output growth is projected to reach 3.5 percent, sup- housing, water, electricity, and gas. ported by investments and consumption stemming from improved economic conditions in the EU and strengthening domestic labor Labor force participation improved during the first three quarters markets. Robust growth in private consumption and higher im- of 2024 (LFS). Unemployment fell to 12.2 percent, a 0.5 pp drop ports of consumer goods are expected to see the CAD deterio- compared to the end of 2023, while the economic activity rate in- rate slightly but stabilize below 4.8 percent of GDP despite some creased by 1 pp to 49.6 percent. However, improvements were dri- medium-term pickup in exports of goods and services. ven by those with at least tertiary education; with more subdued improvements among those with lower educational attainment. The outlook has significant downside risks. A potential escalation of global economic uncertainty and domestic political frictions, could Higher government spending contributed to an estimated consol- lead to lower investments and delay essential economic structural idated fiscal deficit of 2.5 percent of GDP in 2024, 0.9 pp larger reforms. Ongoing conflicts in Ukraine and the Middle East could than the year before, owing to high wages and spending on also constrain the EU's economy, further affecting demand for goods and services. Meanwhile, the current account deficit (CAD) BiH exports, FDI and remittances. Inflation, reduced aggregate de- widened to 4.6 percent of GDP in 2024 – 2.3 pp higher than in mand, and limited remittance inflows pose additional challenges 2023 – as the merchandise trade deficit widened to 22.2 percent for poverty reduction. Maintaining pro-poor growth and improve- of GDP. In 2024 almost three-fourths of the CAD was financed ments in welfare at the bottom of the income distribution, as well by the FDI inflows, mainly into the foreign-owned banking sector. as improving the sustainability of the pension fund and the well-be- Nevertheless, total external debt remains relatively low, below 50 ing of the elderly, will require improved labor market participation, percent of GDP. particularly at the lower end of educational attainment. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.7 1.9 2.6 2.7 3.1 3.5 Private consumption 3.0 2.0 2.5 2.8 3.0 3.1 Government consumption 2.7 4.1 9.4 5.0 0.8 2.9 Gross fixed capital investment 17.4 1.6 3.0 4.3 3.7 2.7 Exports, goods and services 9.9 -6.0 -1.5 -1.4 2.8 3.2 Imports, goods and services 12.0 -3.0 2.5 1.7 1.9 1.8 Real GDP growth, at constant factor prices 4.2 2.0 2.6 2.7 3.1 3.5 Agriculture 3.5 3.1 3.0 3.2 3.4 3.2 Industry 1.4 -3.4 0.5 1.8 1.5 1.5 Services 5.4 4.0 3.3 3.0 3.6 4.2 Employment rate (% of working-age population, 15 years+) 43.8 44.1 44.1 44.1 44.1 44.1 Inflation (consumer price index) 14.0 6.1 1.7 3.0 1.8 1.4 Current account balance (% of GDP) -4.4 -2.3 -4.1 -4.9 -4.7 -4.8 Net foreign direct investment inflow (% of GDP) 3.0 3.2 3.2 3.1 3.1 3.4 Fiscal balance (% of GDP) 0.5 -1.6 -2.5 -2.2 -1.1 -0.1 Revenues (% of GDP) 42.6 40.8 42.7 43.6 44.1 44.6 Debt (% of GDP) 33.0 32.1 33.7 34.7 35.4 36.3 Primary balance (% of GDP) 1.2 -0.6 -1.5 -1.2 -0.1 0.9 GHG emissions growth (mtCO2e) -3.0 -2.1 0.2 1.2 1.8 2.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 51 This outlook reflects information available as of April 10, 2025. 1 2 BULGARIA Population Poverty million millions living on less than $6.85/day 6.4 0.3 3 4 Life expectancy at birth School enrollment In 2024, the Bulgarian economy weathered the stagnation of its years primary (% gross) largest export market, Germany, thanks to strong domestic consumption. Growth is likely to decelerate markedly in 2025 74.4 95.9 5 6 on increased global uncertainty. Bulgaria met the inflation cri- GDP GDP per capita terion for eurozone accession in February 2025, reinforcing current US$, billion current US$ the government’s bid for euro adoption in 2026. A regular gov- ernment was formed in early 2025 after a prolonged political 112.8 17605.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. hiatus, raising hopes for reinvigorated impetus for reform. 4/ 2022. 5/ 2024. 6/ 2024. A 3-year period of political instability until early-2025 had trans- Key conditions and challenges lated into lost momentum for the reform agenda, including limited progress on the National Recovery and Resilience Plan. Even if Bulgaria has been characterized by gradual convergence Following full-fledged Schengen Area accession from start-2025, to average European Union (EU) incomes since the turn of the the new government has stepped up efforts to deliver on other century, its development path has remained uneven. By 2023, policy goals such as the euro adoption in 2026 and near-term its Gross Domestic Product (GDP) per capita reached 64 per- OECD accession. cent of the average GDP per capita in the EU in purchasing power parity (PPP) terms. Bulgaria has also seen significant poverty reduction, with absolute poverty ($6.85/day PPP) drop- Recent developments ping 9.5 percentage points (2015-2022). However, the at-risk-of- poverty rate and income inequality remain among the highest Preliminary GDP data for 2024 surprised on the upside, with GDP in the EU. growth accelerating to 2.8 percent against 1.9 percent in 2023. De- spite the underperformance of exports, strong domestic consump- Institutional and governance weaknesses continue to hinder the tion—both on the household and the government side—propped country’s faster productivity growth and development. Rapid loss up growth, supported by build-up of inventories. Individual con- of working-age population further caps its growth potential, sumption was fed by a consumer credit boom, particularly in the while exerting growing pressure on public services. Long-term mortgage segment, and unabating wage growth. The latter al- growth is projected to decline to 1.3 percent by 2050 under the most doubled y/y to real 11.2 percent in 2024 due to a 19-per- baseline scenario. If ambitious reforms are undertaken, howev- cent hike of the minimum wage and a tight labor market. Be- er, Bulgaria’s growth could exceed 4 percent and help the coun- tween one quarter and one third of employers in key sectors see try converge to average real EU incomes before the end of the labor shortages as a key hindrance to their expansion, according next decade. to the national statistics. FIGURE 1 / General government budget expenditure, revenue, FIGURE 2 / Actual and projected poverty rates and real GDP per and balance capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 45 4 16 30000 40 3 14 25000 35 2 12 30 1 20000 10 25 0 8 15000 20 -1 6 15 -2 10000 4 10 -3 5000 2 5 -4 0 0 0 -5 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Budget balance (rhs) Revenues (lhs) Expenditures (lhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 52 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Following gradual deceleration since 2023, annual average infla- The worsened economic outlook for 2025 is expected to weigh on tion—as measured by the Harmonized Index of Consumer Prices, revenue collection and threaten the attainment of the 3 percent declined to 2.6 percent in February, meeting the corresponding budget deficit target, unless the government takes measures to Maastricht criterion of 2.7 percent. The positive outturn followed curb expenditure. Moreover, the budget for 2025 foresees debt- shortly after the government requested extraordinary conver- financed capitalization of several state-owned enterprises, gence reports from the European Commission and the European which—together with deficit-financing needs—will increase public Central Bank, supporting the country’s bid to join the eurozone debt above 30 percent of GDP, against 24 percent in 2024. Deterio- from start-2026. rated growth prospects suggest that fiscal consolidation is unlikely to start before 2027-2028. In 2025, poverty reduction is expected to Bulgaria’s fiscal position has loosened since the onset of the multi- slow due to weaker growth and fiscal constraints, which may limit ple crises in 2020. Despite that, the headline deficit was contained pro-poor spending. at 3 percent of GDP in both 2023 and 2024, while the public debt- to-GDP ratio continued to rank among the lowest in the EU. If Bulgaria joins the eurozone in 2026—contingent on the conclu- sions of the convergence reports—this is anticipated to positive- The poverty rate (at $6.85/day 2021 PPP poverty line) is expected ly influence the country’s medium-term economic outlook. The ex- to decline gradually to 4 percent in 2024, but progress remains pected reduction of transaction costs related to currency conver- slow. Bulgaria’s strong 2024 growth, fueled by rising wages and sion, and interest rate premia is likely to enhance the overall invest- robust consumption, may help reduce poverty by boosting ment climate, tourism, and foreign trade. Yet, this impact may be household incomes. While minimum wage hikes could benefit overshadowed by the ongoing global uncertainties. low-income workers, potential job losses may limit employment opportunities. Declining inflation is easing cost-of-living pres- Going forward, external risks remain tilted to the downside due sures, and household consumers are still protected from energy to a complex geopolitical environment. Domestically, the unabated price increases by regulated prices. growth of credit to households, mirrored by an ongoing construc- tion boom, remains on the radar, particularly in the context of a slowing economy. This nexus fuels concerns about the build-up of Outlook a construction-credit bubble, which may be followed by a painful correction and increase of non-performing loans. Recent central Economic growth is forecast to slow down markedly in 2025-2026 bank measures to curb mortgage credit growth are yet to bear due to global trade uncertainty. Bulgaria will feel the impact most- fruit. Political risks have subsided following the formation of a ly through the indirect effect on the EU economy, global activity regular government in January 2025, after a series of snap elec- and investment sentiment. As raw materials represent 40 percent tions since 2021. It is hoped that the new government will rein- of Bulgaria’s exports, the economy will be affected through the vigorate the reform agenda to support development goals and commodity price channel, too. stronger absorption of EU funds. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.0 1.9 2.8 1.6 2.1 2.4 Private consumption 3.9 1.4 4.3 1.9 2.0 2.2 Government consumption 8.0 1.1 4.5 1.7 0.5 1.1 Gross fixed capital investment 6.5 10.2 -0.7 0.9 1.9 2.3 Exports, goods and services 12.1 0.0 -0.7 -2.7 1.0 1.5 Imports, goods and services 15.3 -5.5 1.3 -1.2 1.9 2.4 Real GDP growth, at constant factor prices 5.5 1.3 2.5 1.6 2.1 2.4 Agriculture -7.2 -15.3 -7.0 3.1 1.0 1.0 Industry 12.8 -3.9 1.9 3.2 4.8 5.3 Services 3.9 4.1 3.2 1.0 1.2 1.5 Employment rate (% of working-age population, 15 years+) 53.2 53.3 53.5 53.7 54.0 53.9 Inflation (consumer price index) 15.3 9.5 2.4 2.5 2.1 2.0 Current account balance (% of GDP) -2.6 0.9 1.6 1.0 0.9 0.6 Net foreign direct investment inflow (% of GDP) 4.0 2.8 1.0 1.7 1.8 2.0 Fiscal balance (% of GDP) -0.8 -3.0 -3.0 -4.1 -3.7 -3.0 Revenues (% of GDP) 38.5 36.2 35.3 37.2 38.4 39.3 Debt (% of GDP) 22.5 22.9 24.0 30.8 33.0 34.6 Primary balance (% of GDP) -0.4 -2.6 -2.6 -3.6 -3.1 -2.3 1,2 International poverty rate ($2.15 in 2017 PPP) 0.8 0.8 0.7 0.7 0.7 0.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.7 1.5 1.4 1.4 1.4 1.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 4.6 4.4 4.0 3.9 3.7 3.6 GHG emissions growth (mtCO2e) 5.8 -0.9 16.9 -1.3 -0.6 -0.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2023-EU-SILC. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 53 This outlook reflects information available as of April 10, 2025. 1 2 CROATIA Population Poverty million thousands living on less than $6.85/ day 3.9 74.7 3 4 Croatia's economic growth, at 3.8 percent in 2024, remained Life expectancy at birth School enrollment years primary (% gross) well above the EU average, driven by strong domestic de- mand. Remaining robust overall, momentum is expected to 77.6 100.5 ease in the medium term due to slowdown in investment 5 6 and private consumption growth, with additional downside GDP GDP per capita current US$, billion current US$ risks related to uncertainty in trade policy and emerging competitiveness issues. Poverty is expected to marginally 92.5 23931.0 decline to 1.6 percent in 2025. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. 4/ 2022. 5/ 2024. 6/ 2024. could adversely affect Croatia’s export of goods and services, no- Key conditions and challenges tably through weaker EU demand. Croatia’s strong growth performance post-COVID is under- pinned by robust domestic demand, including public spending Recent developments and investment. However, the fiscal impulse is likely to recede as government moves towards a more neutral fiscal stance. In Croatia's economic activity continued to expand robustly in 2024, addition, tight labor market conditions, low productivity, and a with a real GDP growth rate of 3.8 percent, significantly outpacing substantial rise in public sector wages contributed to a sharp both the EU and eurozone growth rates. GDP growth has been dri- increase in unit labor costs, accompanied by relatively high ven by strong domestic demand, supported by EU funding. Also, inflation. This has led to growing concerns about cost com- after a sharp decline in 2023, exports of goods began to recover, petitiveness of the Croatian economy. Further price and cost especially in the second half of 2024, recording an annual growth increases compared to key trading partners and competitors of 5.4 percent. On the other hand, exports of services declined for could put additional pressure on the tourism and other export the first time since 2020, reflecting stagnating activity in tourism. sectors. This could potentially reverse the trend of slowly rising Robust domestic demand and recovery of goods exports has also market share that has been present since Croatia joined the led to a strong rise in imports (5.3 percent on an annual basis), re- European Union (EU). sulting in a significant drag on headline growth from net exports. Substantial downside risks to growth stem from external factors. The labor market remained tight throughout 2024, with continued The uncertainty in trade policy could lead to postponement of acceleration of employment growth and record high labor market some private sector investment and households’ consumption of participation rate. This—together with rising public salaries—has durables due to confidence effects, that would weigh on Croatia’s put further upward pressure on wages, after double-digit growth in growth prospects. In addition, further shifts in global trade policy 2023. While the inflation rate decelerated in 2024, strong domestic FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 9 20000 8 18000 10 7 16000 5 14000 6 12000 5 0 10000 4 8000 -5 3 6000 2 4000 -10 1 2000 0 0 Final consumption Gross fixed capital formation 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Changes in inventories Net exports International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real GDP pc Sources: Croatian Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 54 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. demand and pressures from the labor market kept it significantly of 2025 when inflation is expected to decelerate more significant- above the euro area average (4 percent in Croatia compared to 2.4 ly. Moreover, measures introduced by the central bank will re- percent in the euro area as a whole). duce demand for new loans that have been supporting strong household consumption. Also, as the implementation of the Re- The general government fiscal deficit widened from 0.9 percent of covery and Resilience Facility supported projects comes to an end GDP in 2023 to estimated 2.5 percent of GDP in 2024. While rev- in 2026, government investments are set to decrease. Trade pol- enue collection was strong, total expenditures increased due to the icy shifts could slow down the expected recovery of external de- reform of the wage setting system in the public sector, boosting the mand in the medium term, affecting both exports of goods and wage bill. Furthermore, the indexation of pensions based on recent services, with a negative contribution of net exports throughout price and wage developments resulted in a significant rise in social the forecast horizon. Inflation is likely to remain elevated in 2025 benefits. Nevertheless, public debt remained firmly on a downward before starting to converge towards the ECB’s target of 2 percent. path and by the end of 2024 had fallen below 60 percent of GDP for the first time since 2010. Expansionary procyclical fiscal policy is anticipated to be re- versed. The fiscal deficit is expected to decline gradually to 2 Poverty in Croatia is expected to have modestly declined from 1.9 percent by 2027, as the effects of the public sector wage re- to 1.6 percent in 2023–2025. However, 19.3 percent of the popula- form fade in 2026 and overall price pressures ease. In parallel, tion remains below 60 percent of the median income. robust growth will continue to support buoyant revenue col- lection. Public debt is expected to reach 55 percent of GDP in 2027. Risks to the baseline economic outlook seem negative Outlook mainly due to the uncertainties related to trade policy that loom over the global economy. After strong performance in 2024, real growth is expected to moderate but remain robust at an average annual growth rate Poverty is projected to decline to 1.4 percent by 2027. Sustained around 3 percent between 2025–27. Domestic demand remains employment and wage growth are expected to drive reductions in a key driver, however, both private consumption and investment the at-risk-of-poverty rate in the coming years; however, persistent are expected to decelerate, only partly due to shifts in global inflation is likely to erode some of these gains, slowing the overall trade policy. Wage pressures will ease already in the second half pace of progress. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.3 3.3 3.8 3.1 3.0 2.8 Private consumption 6.9 3.0 5.6 3.4 2.9 2.8 Government consumption 2.2 7.1 4.5 3.2 2.9 3.2 Gross fixed capital investment 10.4 10.1 9.9 7.2 5.6 2.1 Exports, goods and services 27.0 -2.9 0.9 1.5 2.2 2.1 Imports, goods and services 26.5 -5.3 5.3 3.5 3.2 2.0 Real GDP growth, at constant factor prices 8.4 3.5 3.6 3.3 3.1 2.8 Agriculture 1.3 2.0 0.4 1.0 1.0 0.8 Industry 5.9 0.6 2.1 2.2 2.2 1.6 Services 9.6 4.5 4.2 3.8 3.4 3.3 Employment rate (% of working-age population, 15 years+) 49.2 49.9 52.3 53.5 54.5 55.3 Inflation (consumer price index) 10.7 8.4 4.0 3.4 2.4 2.1 Current account balance (% of GDP) -3.5 0.4 -0.9 -1.5 -1.9 -1.7 Net foreign direct investment inflow (% of GDP) 6.1 2.3 2.0 1.5 1.5 1.5 Fiscal balance (% of GDP) 0.1 -0.9 -2.5 -2.4 -2.1 -2.0 Revenues (% of GDP) 45.0 45.8 45.7 46.1 46.1 45.5 Debt (% of GDP) 68.5 61.8 59.0 56.9 55.8 55.0 Primary balance (% of GDP) 1.4 0.4 -1.2 -1.1 -0.9 -0.8 1,2 International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.3 0.3 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.5 0.5 0.5 0.5 0.5 0.5 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 1.9 1.9 1.6 1.6 1.5 1.4 GHG emissions growth (mtCO2e) -2.0 -0.2 1.1 0.1 -0.2 0.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2023-EU-SILC. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 55 This outlook reflects information available as of April 10, 2025. 1 2 GEORGIA Population Poverty million millions living on less than $3.65/day 3.7 0.4 3 4 Life expectancy at birth School enrollment The economy grew by 9.4 percent in 2024, accompanied years primary (% gross) by a reduction in poverty and unemployment. Growth is expected to slow to 5.5 percent in 2025, as domestic 71.6 103.3 5 6 consumption, investment and net exports weaken. The GDP GDP per capita delay of European Union (EU) accession talks to 2028 and current US$, billion current US$ the ongoing civil unrest following the disputed October 2024 parliamentary elections pose a downward risk to 33.8 9090.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. the outlook. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Over the past decade, Georgia has enjoyed significant Despite some deceleration toward the end of the year, Georgia’s growth and poverty alleviation following market reforms economy expanded by 9.4 percent in real terms in 2024. Robust and sound macroeconomic management. Nevertheless, domestic demand was driven by real wages, which rose 15.3 per- structural challenges persist: notably, weak firm-level pro- cent, and by strong real credit growth (up 16.2 percent). On the ductivity and limited high-quality job creation. About a supply side, growth was broad-based, driven by services such as third of workers remain engaged in low-productivity agri- IT, education, and public services. Strong economic growth was culture. Firms face critical obstacles, including access to accompanied by an estimated 5.1 percentage point reduction in finance, particularly for small and medium enterprises, poverty at US$ 6.85 in 2017 PPP, to 35.6 percent in 2024, driven by and skills mismatches. Education reform and institution- increases in real wages and employment. Unemployment fell from al strengthening are needed to help the country grow to 16.4 percent in 2023 to 13.9 percent in 2024. Annual inflation in- high income. creased from 0.5 percent in March 2024 to 3.5 percent in March 2025, with food and healthcare as the top contributors. The policy The November 2024 announcement of the suspension of EU rate was reduced to 8 percent in early 2024 and has since re- accession talks triggered civil unrest and impacted on busi- mained unchanged given inflationary pressures. ness confidence. In parallel, regional geopolitical risks are on the rise. Against this backdrop, two of the main credit rating Financial sector indicators remain healthy, with non-performing agencies changed Georgia’s outlook to negative and affirmed loans at 2.6 percent, return on equity at 20.5 percent, and return its current credit ratings. on assets at 3.5 percent, as of February 2025. FIGURE 1 / Gross money transfers from abroad and tourism FIGURE 2 / Actual and projected poverty rates and real GDP per proceeds capita Million US$ Poverty rate (%) Real GDP per capita (constant LCU) 1800 80 25000 1600 70 1400 20000 60 1200 1000 50 15000 800 40 600 30 10000 400 20 200 5000 0 10 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 0 0 2020 2021 2022 2023 2024 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate EU US RF Others Tourism proceeds Upper middle-income pov. rate Real GDP pc Sources: Geostat. NBG, and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 56 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The current account deficit narrowed from 5.6 percent of GDP in consumption, investment, and external demand amid global eco- 2023 to 4.4 percent in 2024. Services drove the improvement, but nomic uncertainty. This may lead to a slowdown in job creation. the goods trade balance worsened. In nominal US$ terms, imports Poverty reduction is expected to continue, provided the deceler- rose by 6.3 percent (yoy), and exports grew by 6.2 percent (yoy), ation is broad-based and not concentrated in sectors that mainly supported by a 10.3 percent rise in re-exports. Tourism revenues employ the poor and vulnerable. increased 7.2 percent (yoy). Workers’ remittances fell 14.2 percent (yoy) in 2024, due to falling inflows from Russia, which were only As remittances from Russia dwindle and exports slow down, the partly offset by rising remittances from the EU and the US. Net for- current account deficit is forecast to widen to 5.7 percent of GDP in eign direct investment inflows fell from 5.2 percent of GDP in 2023 2025 and stabilize around 6 percent in the medium term. to 2.7 percent of GDP in 2024, reflecting weaker investor confi- dence. As of end-March 2025, the GEL had depreciated against the On the fiscal side, revenue collection is projected to remain US$ by 2.7 percent as compared to March 2024. Official reserves robust in the medium term, at around 27.9 percent of GDP, fell 10.8 percent (yoy), from US$4.7b in February 2024 to US$4.2b above pre-2022 levels, supported by enhanced digitalization of in February 2025, equivalent to 2.9 months of imports. VAT collection, a streamlined labor tax, and progressive for- malization of the economy. Total expenditure is expected to Tax collection increased 18 percent (yoy, in nominal terms) in 2024, remain at around 30.5 percent of GDP, while the fiscal deficit reaching 25.4 percent of GDP. Total expenditure grew 15.8 percent is projected to stay below 3 percent of GDP in the medium (yoy) in 2024, to 31.3 percent of GDP. This was driven by a 17.3 term, in line with the fiscal rule. percent (yoy) rise in current expenditure and an 11.3 percent (yoy) rise in capital expenditure. The fiscal deficit reached 2.9 percent Risks to the outlook are tilted to the downside. Heightened of GDP in 2024 and was mainly financed from domestic sources. global uncertainty and shifts in trade policy could further By end-2024, the external public debt fell to 25.1 percent of GDP, weigh on Georgia’s economic activity through spillover ef- whereas domestic debt increased slightly to 11 percent of GDP. fects. Domestic tensions and polarization, which intensified in Q4 2024, are expected to continue, potentially impacting economic activity, tourism, and investor confidence. Faltering Outlook reform momentum in the absence of the EU accession an- chor could also result in slower growth. On the upside, the Georgia’s growth is projected to slow to 5.5 percent in 2025 and reopening of the Azerbaijan border could boost trade and converge to 5.0 percent over the medium term, reflecting weaker tourism inflows. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 11.0 7.8 9.4 5.5 5.0 5.0 Private consumption -2.8 4.7 11.0 5.7 5.5 4.5 Government consumption -0.8 7.5 17.1 5.3 8.7 9.9 Gross fixed capital investment 9.9 29.4 5.7 2.8 4.5 6.1 Exports, goods and services 37.4 9.5 5.9 5.1 5.5 6.0 Imports, goods and services 16.9 10.0 8.5 4.3 6.7 6.8 Real GDP growth, at constant factor prices 9.8 8.4 9.4 5.5 5.0 5.0 Agriculture -1.8 -3.4 2.8 2.5 3.0 3.0 Industry 15.1 4.3 4.3 5.0 5.0 5.0 Services 9.6 10.9 11.5 5.9 5.2 5.2 Employment rate (% of working-age population, 15 years+) 52.0 52.3 53.9 54.7 54.9 54.9 Inflation (consumer price index) 11.9 2.5 1.1 4.5 4.0 3.5 Current account balance (% of GDP) -4.4 -5.6 -4.4 -5.7 -6.0 -6.0 Net foreign direct investment inflow (% of GDP) 7.7 5.2 2.7 2.6 3.0 3.0 Fiscal balance (% of GDP) -3.5 -2.8 -2.9 -2.7 -2.6 -2.4 Revenues (% of GDP) 26.6 27.4 28.0 27.8 28.0 27.9 Debt (% of GDP) 39.1 38.8 36.1 35.0 34.0 33.6 Primary balance (% of GDP) -2.4 -1.3 -1.5 -1.2 -1.0 -0.9 1,2 International poverty rate ($2.15 in 2017 PPP) 4.3 2.3 1.8 1.4 1.2 1.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 15.0 11.5 9.5 8.4 7.6 6.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 47.7 40.7 35.6 32.8 30.4 28.2 GHG emissions growth (mtCO2e) 0.6 -1.2 1.1 -0.4 0.2 0.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2023-HIS. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2023) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 57 This outlook reflects information available as of April 10, 2025. 1 2 KAZAKHSTAN Population Poverty million millions living on less than $6.85/day 20.6 2.1 3 4 Life expectancy at birth School enrollment years primary (% gross) Economic growth reached 4.8 percent in 2024 and is projected at 4.5 percent in 2025, driven by new oil pro- 74.4 100.5 5 6 duction, before slowing toward its long-term potential rate. GDP GDP per capita Inflation is expected to increase to 10 percent in 2025, current US$, billion current US$ before starting to moderate. The poverty rate is projected to decrease to 6.1 percent in 2025. 288.1 13991.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Kazakhstan has set an ambitious target of doubling its economy by GDP grew by 4.8 percent in 2024, driven by strong consumer 2030 from 2023 levels, a goal that hinges on accelerating growth. spending and investment. Retail spending accelerated to 9.1 per- However, low and stagnant productivity and the continued domi- cent yoy in real terms (compared to 7.9 percent in 2023); this was nance of extractive industries remain key obstacles. supported by a rise in consumer loans (+14.1 percent in real terms) and real income growth (+1.9 percent). Investment expanded by The economy remains heavily state-driven, with SOEs maintaining 7.5 percent in real terms, buoyed by a strong housing market, while a strong presence even in competitive markets. Excessive state in- FDI inflows declined. On the supply side, industrial production grew tervention—ranging from direct state control to discretionary cap- by 2.8 percent in 2024 (+4.4 percent in 2023); this was hampered ital allocation—stifles competition, discouraging genuine entrepre- by a 2.7 percent decline in volume of oil output, while services in- neurship, innovation, and productivity growth. creased by 4.7 percent (+5.2 percent in 2023). To unlock stronger growth, the authorities must foster competi- Unemployment held steady at 4.6 percent in 2024. The govern- tion, particularly in key network sectors, by reducing the state’s ment raised the minimum wage by 21.4 percent in 2024 in nom- footprint, liberalizing domestic markets, and ensuring a level play- inal terms, contributing to a reduction in the poverty rate to 7.0 ing field by enforcing competitive neutrality in the use of state aid percent (US$6.85/day). and in public procurement. Building infrastructure, investing in hu- man capital, and advancing decarbonization efforts will also con- Inflation eased to 8.6 percent by end-2024 but increased to 9.4 per- tribute to enhance firms’ competitiveness. Global decarbonization cent in February 2025 following utility price hikes, well above the efforts pose an additional long-term challenge, warranting a faster National Bank’s 5 percent target. As a result, the policy rate was pace of bold structural reforms. raised by 125 bps to 16.5 percent in March 2025. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rate and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 40 1000000 5 35 900000 800000 4 30 700000 3 25 600000 20 500000 2 15 400000 1 300000 10 0 200000 5 100000 -1 0 0 2022 2023 2024 2025e 2026f 2027f 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Non-oil sector Oil sector Upper middle-income pov. rate Real GDP pc Net taxes Real GDP growth Sources: Statistical Office of Kazakhstan and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 58 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The current account deficit narrowed to 1.5 percent of GDP in 2024 a VAT hike, before subsiding in the following years. In addition, (from -3.3 percent in 2023), reflecting lower FDI profit repatriation. the positive output gap—estimated to have widened in 2025—is Despite this, National Bank reserves grew to US$45.8 billion, aid- expected to persist, keeping inflation above the National Bank ed partly by the higher price of gold (covering 7 months of import). target beyond 2027. The tenge depreciated 13.5 percent via-a-vis the US dollar during 2024 but it had partially recovered in early 2025. Declining oil prices and the ongoing outflow of investment income from FDI in the mining sector will widen the current account in Fiscal policy shifted to an expansionary stance in 2024, pushing the deficit, averaging 2.6 percent of GDP in the 2025–2027 period. deficit up to 3.7 percent of GDP (from 1.6 percent in 2023), dri- ven by weaker oil revenues (due to stagnant production and flat Fiscal policy is expected to remain expansionary, with the deficit prices). While remaining low by global standards, the government at 3.7 percent of GDP in 2025. While the new Tax Code is ex- debt climbed to 23.7 percent of GDP in 2024, and debt service pected to boost non-oil revenues over time, this will be partially surged to a historic high of 1.6 percent of GDP. offset by lower oil-related receipts. To bridge the gap, the gov- ernment is likely to rely on increased domestic borrowing and Real bank lending expanded by 11.7 percent yoy, with household further drawdowns from its National Oil Fund. Spending on social borrowing accounting for three-quarters of this growth. The house- programs and infrastructure will remain a priority in the govern- hold debt-to-wage ratio at 49 percent in 2024 surpassed levels ment’s 2025–2027 fiscal plan. seen during the 2008–2009 global banking crisis. Driven by the in- crease in consumer lending, the banking sector is enjoying record The poverty rate is projected to decline gradually to 4.9 percent profitability. Return on equity rose to 32.8 percent in 2024. by 2027 (at the US$6.85/day threshold). However, higher-than-pro- jected inflation could disproportionately impact low-income house- holds and delay poverty reduction. Outlook Risks to the growth outlook are tilted to the downside. At this point In 2025, growth is projected to moderate to 4.5 percent supported it remains difficult to assess the full impact of global trade mea- by a one-off oil production and further fiscal stimulus, before slow- sures on outlook as policy shifts continue to unfold. A decision ing further towards its 3.5 percent growth potential. by OPEC+ to lift output cuts could flood the market with crude and push oil prices down, while recent drone attacks on a Black Household spending is expected to remain resilient in 2025, sup- Sea pumping station threaten to disrupt a vital pipeline, potentially ported by social transfers and steady consumer borrowing. Exports constraining Kazakhstan’s oil exports. Either scenario would deliver are expected to expand, driven by strong crude oil shipments. a significant shock to the economy. Domestically, continued expan- sionary fiscal policy – particularly through quasi-fiscal operations Inflation is set to pick up in 2025 boosted by the increase in util- misaligned with the economic cycle – risks stoking already high in- ity and fuel prices (due to the reduction of subsidies), along with flation and undermining monetary tightening efforts. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.2 5.1 4.8 4.5 3.6 3.5 Private consumption 3.9 4.6 5.0 4.5 5.3 5.0 Government consumption 4.3 10.3 0.4 0.6 0.5 0.6 Gross fixed capital investment 3.8 20.7 2.4 3.0 4.2 4.1 Exports, goods and services 9.6 1.9 0.7 5.7 1.8 1.4 Imports, goods and services 13.1 14.7 3.8 3.5 3.8 3.8 Real GDP growth, at constant factor prices 2.9 4.9 4.8 4.4 3.6 3.5 Agriculture 9.1 -7.4 13.7 3.0 3.0 3.0 Industry 2.7 5.7 3.4 5.7 3.8 3.8 Services 2.5 5.6 5.0 3.7 3.4 3.4 Employment rate (% of working-age population, 15 years+) 65.4 65.3 65.3 65.3 65.3 65.3 Inflation (consumer price index) 20.3 9.8 8.6 10.0 8.7 7.5 Current account balance (% of GDP) 3.1 -3.3 -1.5 -2.6 -2.5 -2.1 Net foreign direct investment inflow (% of GDP) -2.2 -2.0 -0.9 -1.6 -1.9 -1.7 Fiscal balance (% of GDP) -0.2 -1.6 -3.7 -3.7 -2.5 -2.3 Revenues (% of GDP) 21.5 21.6 19.0 19.4 19.8 19.9 Debt (% of GDP) 22.5 22.1 23.7 25.4 26.0 26.7 Primary balance (% of GDP) 0.8 -0.5 -2.5 -2.6 -1.5 -1.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 9.9 8.4 7.0 6.1 5.5 4.9 GHG emissions growth (mtCO2e) -1.1 0.7 0.3 1.7 1.8 1.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2021-HBS. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 59 This outlook reflects information available as of April 10, 2025. 1 2 KOSOVO Population Poverty million millions living on less than $6.85/day 1.7 0.3 3 4 Life expectancy at birth School enrollment Economic performance in 2024 was positive, amid a years primary (% gross) declining trend in poverty, strong private consumption and decreasing inflation. Prudent fiscal policy has helped keep 79.5 97.4 5 6 the fiscal deficit and debt low. GDP growth in the medium GDP GDP per capita term is expected to reach 3.8 percent, supported primarily current US$, billion current US$ by consumption. However, economic uncertainty, especially in global trade policy, could impact exports and growth in 11.2 6642.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2024 (2017 PPPs). 3/ 2022. 2025 and 2026. 4/ 2023-2024. 5/ 2024. 6/ 2024. requires further diversification of its production and export base. Key conditions and challenges The recent performance of the ICT and other business services sectors represents a positive change in this direction. Despite a Kosovo’s economy continued its robust performance during 2024, declining trend, poverty remains high and characterized by signifi- although structural challenges hinder faster progress in income cant regional disparities. Poverty is more prevalent among people growth and poverty reduction. A track record of prudent fiscal with lower education and families with children, hence accelerat- management and continued improvements in revenue generation, ing human capital accumulation remains a priority. Gains in gen- framed within a solid rule-based fiscal framework, have supported der equality have been modest. Low labor force participation and stability over the course of the years. Balancing sustainability with employment, especially among women, remain key constraints to development objectives requires further efforts in enhancing tax poverty reduction. Accelerating convergence with EU per capita in- revenue mobilization. Kosovo needs to generate additional re- come levels requires improvements in the governance framework sources for its growing investment needs, including in the areas of and higher investments in human and physical capital, and the im- energy, infrastructure, human capital and connectivity. Improving plementation of the structural reform agenda. the effectiveness of public financial management remains critical to sustained revenue mobilization. Low firm dynamism and access to finance continue to hamper private sector development and em- Recent developments ployment creation. Net exports subtracted from growth in the last decade driven by low export competitiveness and import depen- Despite a challenging external environment, real GDP growth re- dence. Economic uncertainty—especially regarding global trade mained robust in 2024, averaging 4.4 percent supported by declining policy—could impact prospects for investment and growth. inflation and higher wages. Private consumption continued to sus- tain growth in Q4 (4.2 percent), alongside a pickup in gross capital To create a more conducive environment for private sector de- formation (9 percent). Exports of goods and services continued to velopment and increase competitiveness, Kosovo’s growth model increase in Q4 (11.1 percent). On the supply side, manufacturing FIGURE 1 / Fiscal balance and public debt FIGURE 2 / Actual and projected poverty rate and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 25 0.0 70 8000 -0.2 60 7000 20 -0.4 6000 50 15 -0.6 5000 40 -0.8 4000 30 10 -1.0 3000 20 -1.2 2000 5 10 1000 -1.4 0 0 0 -1.6 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2022 2023 2024 2025f 2026f 2027f Upper middle-income pov. rate Real GDP pc Public and publicly guaranteed debt (lhs) Fiscal balance (rhs) Sources: Kosovo Statistics Agency and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 60 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. and construction activity growth remained strong in Q4 (4.3 per- wages, credit growth and a high level of public transfers are cent and 3.9 percent, respectively). After averaging 1.6 percent in expected to support consumption. An increase in social spend- 2024, consumer inflation reached 1.7 percent by February 2025. ing and wages, and increased execution of public investment However, domestic price pressures continued to persist, as reflected is expected to drive the fiscal deficit to 1 percent of GDP in in the increase in the production and construction cost index during 2025. The outlook is subject to a high degree of uncertainty 2024. Formal employment increased by 2.4 percent between January and risks. A further slowdown in EU activity, as well as height- and September 2024. The current account deficit (CAD) increased, ened trade uncertainty, has the potential to negatively affect reaching 9 percent of GDP in 2024, driven by a deterioration of the growth through reduced demand of goods and services exports goods balance. Remittances inflow growth was modest (1.4 percent), and decreased inward investment flows. At the domestic level, reflecting weaker activity in origin countries. Fiscal outturns have delays in forming a new government could negatively impact been positive with preliminary data for 2024 indicating a deficit of investment and the implementation of the structural reform 0.2 percent of GDP. Robust tax revenue growth (9.3 percent), par- agenda. Geopolitical uncertainty, and that associated with the ticularly from indirect taxes (10.6 percent), combined with rising, domestic political context, also entail risk. Kosovo has a lower but still under-executed capital expenditures (16.7 percent) con- elasticity of poverty reduction in response to economic growth tributed to this outcome. The financial sector remains stable and compared to its peers. Therefore, further progress in reduc- financial deepening continues. In 2024, the average (y/y) increase ing poverty will depend on the ability to sustain higher growth of new loans was 22 percent. Bank asset quality remains satisfac- rates in the future. A tighter labor market could help boost tory, with non-performing loans remaining stable at 2 percent by wages, but policies to increase the quality of education and September 2024. Poverty reduction is projected to have continued, skills of lower educated workers could provide an additional with a decline of 3 percentage points in 2024 due to higher growth. boost. The decline in population, partly due to outmigration, could be offset by increasing female labor force participation, currently constrained by factors such as lack of childcare ser- Outlook vices. Expanding childcare services would improve labor market opportunities for women and enhance children's school readi- GDP growth is expected to reach 3.8 percent in 2025 and ness through better early childhood education (ECE), while also 2026, driven by consumption and investment activity. Higher creating additional job opportunities. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.3 4.1 4.4 3.8 3.8 3.8 Private consumption 3.4 3.1 4.5 4.4 4.6 4.5 Government consumption 0.2 5.9 2.2 2.5 2.6 3.0 Gross fixed capital investment -3.2 4.5 5.2 4.3 4.1 4.2 Exports, goods and services 18.9 7.2 4.8 3.3 2.8 2.8 Imports, goods and services 5.4 4.7 4.6 4.3 4.2 4.2 Real GDP growth, at constant factor prices 5.2 3.6 4.4 3.8 3.8 3.8 Agriculture 4.5 -3.0 2.1 2.0 1.8 1.8 Industry 4.0 3.3 3.9 3.9 3.9 4.0 Services 6.1 4.8 5.0 4.0 4.0 3.9 Inflation (consumer price index) 11.6 4.9 1.6 1.9 2.0 2.0 Current account balance (% of GDP) -10.3 -7.6 -9.0 -8.7 -7.8 -7.3 Net foreign direct investment inflow (% of GDP) 6.3 6.8 6.1 6.0 6.0 6.0 Fiscal balance (% of GDP) -0.5 -0.3 -0.2 -1.0 -1.3 -1.5 Revenues (% of GDP) 27.9 29.3 29.9 30.1 29.8 29.5 Debt (% of GDP) 19.7 17.2 16.6 17.4 17.9 18.8 Primary balance (% of GDP) -0.2 0.1 0.2 -0.7 -0.9 -1.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 22.2 19.5 16.4 14.4 12.4 10.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2017-HBS. Actual data: 2017. Nowcast: 2018-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2017) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 61 This outlook reflects information available as of April 10, 2025. 1 2 KYRGYZ REPUBLIC Population Poverty million millions living on less than $3.65/day 7.2 0.8 3 4 Life expectancy at birth School enrollment Economic growth reached 9.0 percent in 2024, though it is years primary (% gross) expected at 6.8 percent in 2025. Poverty is projected to have decreased from 7.1 percent in 2023 to 4.4 percent in 72.0 96.2 5 6 2024. Bold reforms to level the playing field, strengthen GDP GDP per capita regulatory and legal institutions, liberalize the telecoms current US$, billion current US$ and aviation sectors, remove trade barriers, and attract foreign direct investment (FDI) are essential to boost 17.5 2423.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. growth and jobs creation. 4/ 2023. 5/ 2024. 6/ 2024. weak and arbitrary law enforcement, including in the abuse of tax Key conditions and challenges inspections. Households are increasingly worried about employ- ment, while urban poverty exceeds poverty in rural areas. The Kyrgyz Republic remains one of the poorest and most econom- ically vulnerable countries in the Europe and Central Asia region, as a small, undiversified economy. Economic growth and current ac- Recent developments count deficits are dependent on gold exports and remittances. Strong economic growth in 2024, was supported by re-exports and Since Russia’s invasion of Ukraine, the country has benefitted rising remittance inflows. In real terms, GDP grew by 9 percent from the transit trade of goods (“re-exports”) from third countries in 2024, driven by consumption growth (11.3 percent growth), ex- to Russia, mainly from China. This has generated robust growth ports (42.7 percent), and investment (26.7 percent). On the produc- and fiscal outcomes. The large output gap, however, is causing tion side, growth was supported by construction (18 percent), ser- inflationary pressures and due to supply-side constraints, growth vices (9.6 percent), and agriculture (6.3 percent) in real terms. is expected to slow. Average inflation declined to 5 percent in 2024 (from 10.8 percent The government is embarking on several large infrastructure a year earlier), as food price pressure weakened, but rebounded megaprojects, notably the Kambarata-1 HPP and Uzbekistan-Kyr- since September 2024 to 6.9 percent as of February 2025. The Na- gyzstan-China railway, which will boost growth provided macro-fis- tional Bank cut the policy rate to 9 percent by May 2024. In the cal sustainability is maintained. banking sector, capital adequacy and liquidity ratios were 22.3 per- cent and 78.8 percent, respectively, above requirements. Private sector productivity and jobs are constrained by an uncom- petitive business environment and an uneven playing field, largely The current account deficit was 38.7 percent of GDP in Q1–Q3 due to the privileged role of state-owned enterprises (SOEs), and 2024 (versus 52.8 percent in Q1–Q3 2023). This was driven by the FIGURE 1 / Headline, food, and fuel inflation FIGURE 2 / Real GDP growth and poverty rate Percent Percent of population Percent 80 30 12 25 60 8 20 40 4 15 20 0 10 0 -4 5 -20 0 -8 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 2008 2010 2012 2014 2016 2018 2020 2022 2024e 2026f Headline Food Fuel GDP growth (rhs) Poverty rate, USD 3.65/day PPP (lhs) Source: Kyrgyz authorities. Sources: Kyrgyz authorities and World Bank staff. 62 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. under-reporting of re-exports reflected in “Errors and Omissions” of 33.8 percent of GDP in Q1–Q3 2024. Exports grew by 49.8 per- Outlook cent in Q1–Q3 2024 due to gold, tourism, and logistics services, while imports increased by 11.6 percent. Remittances declined GDP growth is projected to slow to 6.8 percent in 2025, slightly from 17.8 percent of GDP in 2023 to 17.1 percent in 2024. as re-exports subside—reducing service sector growth and dampening consumption growth—and moderated investment The currency strengthened by 2.3 percent against the US dollar and export growth. Construction and services will likely keep in 2024, and the real effective exchange rate appreciated by 3.6 driving growth on the production-side. Growth is expected percent. Gross international reserves increased to 3.4 months of to slow to 5.5 percent in 2026, as gold production falls, be- imports as of end-2024 (versus 2.4 months by end-2023), as the fore rebounding to 5.8 percent in 2027 as large megaproject National Bank purchased gold. investments commence. The fiscal surplus increased in 2024 to 1.8 percent of GDP (versus Assuming monetary policy remains prudent, inflation is projected 1.1 percent in 2023), as total revenues increased to 35.8 percent of at below 7 percent by end-2025 and to stabilize at 6 percent GDP (versus 34.3 percent in 2023). Higher tax revenues were facil- in the medium term—within the National Bank’s target range of itated by simplified taxes, corporate income tax, and customs du- 5–7 percent. The current account deficit is projected at 8.1 per- ties, which accounted for a 63 percent tax increase, resulting from cent of GDP in 2025, 8.3 percent in 2026 with a decline in gold rising imports, mining company activities, and improved tax admin- exports, and 7.2 percent in 2027 with stronger external demand istration. Government expenditures rose to 34.0 percent of GDP in and remittance inflows. 2024 (versus 33.2 percent in 2023), driven by increased spending on health, pensions, and interest payments. Yet capital spending The fiscal balance is projected to turn to a deficit of 2.2 percent of declined to 6.1 percent of GDP, from 6.9 percent in 2023. Public debt GDP in 2025 as revenues decline and expenditures rise, then in- decreased to 37.5 percent of GDP in 2024, from 42 percent in 2023. crease in the medium term with higher social spending and capital outlays. Poverty is expected to decline to 3.3 percent in 2025 and In 2024, the US$3.65 per day poverty rate dropped to 4.4 percent, 2.6 percent in 2026, supported by social protection programs, pen- from 7.1 percent in 2023, supported by lower inflation and robust sions, and lending to vulnerable households. economic growth. However, rising urban poverty is concerning: by 2022/23, urban poverty levels surpassed rural areas. According to Risks to this outlook arise from tighter sanctions against Russia, im- the L2KGZ survey, 50 percent of respondents viewed jobs as the pacting trade and remittances, resulting in fuel and food price ris- top economic challenge, while real household incomes stagnated es, and adverse impacts from slowing Chinese growth due to US- in the latter half of 2024. China trade tensions. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 9.0 9.0 9.0 6.8 5.5 5.8 Private consumption 17.0 18.6 11.3 6.4 5.4 5.1 Government consumption 4.4 0.2 0.6 1.3 1.0 0.6 Gross fixed capital investment 6.9 30.6 26.5 9.9 11.8 13.2 Exports, goods and services 59.2 -3.0 42.7 7.7 5.7 7.8 Imports, goods and services 66.7 37.6 4.8 9.2 9.6 10.4 Real GDP growth, at constant factor prices 12.1 7.9 9.0 6.8 5.6 5.8 Agriculture 7.3 0.6 6.3 2.2 2.5 2.3 Industry 11.9 4.8 5.6 7.0 4.0 6.6 Services 16.0 14.4 11.9 9.6 7.8 7.4 Employment rate (% of working-age population, 15 years+) 67.6 67.1 67.3 67.4 67.4 67.5 Inflation (consumer price index) 13.9 10.8 5.0 6.8 6.0 6.0 Current account balance (% of GDP) -42.4 -44.9 -24.9 -8.1 -8.3 -7.2 Net foreign direct investment inflow (% of GDP) 4.2 1.0 2.8 2.9 2.7 2.9 Fiscal balance (% of GDP) -1.3 1.1 1.8 -2.2 -2.5 -2.9 Revenues (% of GDP) 34.6 34.3 35.8 32.3 31.7 31.4 Debt (% of GDP) 46.8 42.0 37.5 36.0 35.1 33.8 Primary balance (% of GDP) -0.2 2.1 2.9 -1.2 -1.4 -1.9 1,2 International poverty rate ($2.15 in 2017 PPP) 0.3 0.1 0.0 0.0 0.0 0.0 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 11.3 7.1 4.4 3.3 2.6 2.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 60.1 51.0 43.0 38.3 35.0 31.8 GHG emissions growth (mtCO2e) -0.1 1.2 2.3 1.7 1.6 2.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2017-KIHS and 2022-KIHS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using point-to-point elasticity (2017-2022) with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 63 This outlook reflects information available as of April 10, 2025. 1 2 MOLDOVA Population Poverty million millions living on less than $6.85/day 2.3 0.5 3 4 Life expectancy at birth School enrollment Moldova’s economic recovery remains fragile due to energy years primary (% gross) price shocks and the ongoing impact of Russia’s invasion of Ukraine. Growth is expected to remain modest in 2025 with 68.6 107.0 5 6 a gradual recovery expected in the medium term. Significant GDP GDP per capita risks include prolonged hostilities, energy price volatility, current US$, billion current US$ and upcoming parliamentary elections. Tackling poverty, low productivity, and climate vulnerabilities requires struc- 18.2 7774.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. tural reforms and deeper EU integration. 4/ 2022. 5/ 2024. 6/ 2024. resulting in marginal overall growth of 0.1 percent in 2024. Private Key conditions and challenges consumption and investment drove expansion, while public con- sumption and net exports—affected by rising imports and declin- Moldova's economic recovery remains fragile due to energy price ing fuel and grain re-exports to Ukraine—contracted. The industrial shocks from the non-renewal of the gas transit contract through and IT sectors contributed positively to overall growth, with the IT Ukraine in January 2025 and the ongoing impact of Russia's inva- sector benefiting from strong external demand. The financial sec- sion of Ukraine. Despite meeting energy needs through European tor also saw gains due to favorable interest rates. However, the Union (EU) imports, Moldova faces higher energy prices and in- transport and real estate sectors contracted, and agriculture was creased fiscal costs. While the outlook is moderately positive, risks negatively impacted by a summer drought. include prolonged conflict, energy price volatility, the 2025 parlia- mentary elections, and slower growth in key trade partners amid The current account deficit (CAD) widened from 11.9 percent of an uncertain global trade outlook. Poverty persists, particularly in GDP in 2023 to 16 percent in 2024. Key factors included an 18 per- rural areas, while declines in remittances and an aging population cent increase in trade deficit, a reduced primary surplus, and a add pressure to the economy. Low labor participation hampers 4.5 percent drop in remittances, particularly from Commonwealth employment growth. Progress on EU accession and structural re- of Independent States countries. The CAD was mainly financed forms is crucial for long-term growth, with the EU offering signifi- through debt, deposits, and limited foreign direct investment. Total cant support for reforms and energy independence. public and private external debt declined by 4.4 percentage points to 56.1 percent of GDP by end-2024, while foreign reserves re- mained stable at US$5.5 billion. Recent developments Average annual inflation decreased from 13.4 percent in Moldova’s economy showed mixed results in 2024. After a strong 2023 to 4.7 percent in 2024, driven by falling regulated food start, the economy contracted in the second half of the year, prices, lower import prices, and moderate currency appreciation. FIGURE 1 / Actual and projected macroeconomic indicators FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent, percent of GDP Poverty rate (%) Real private consumption per capita (constant LCU) 15 40 80000 10 35 70000 5 30 60000 0 25 50000 20 40000 -5 15 30000 -10 10 20000 -15 5 10000 -20 0 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Real GDP growth rate Current account balance International poverty rate Lower middle-income pov. rate Fiscal deficit Upper middle-income pov. rate Real priv. cons. pc Source: World Bank, based on national statistics. Source: World Bank. Notes: See footnotes in table on the next page. 64 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Inflation fell below the target range in Q2, then exceeded the up- lower investor confidence. Weak exports, particularly to Roma- per limit in the second half of the year, peaking in December due nia, will continue to weigh on growth. to gas tariff hikes. The National Bank of Moldova (NBM) raised the base interest rate to 6.5 percent in early 2025 to curb infla- In the medium term, Moldova’s economy is expected to recover tion. The NBM’s prudent exchange rate policy helped maintain gradually, underpinned by reforms that enhance competitiveness stable foreign reserves. and diversification, aligning with EU accession objectives. Con- sumption is expected to remain the primary growth driver, while The fiscal deficit fell from 5.1 percent of GDP in 2023 to 4 percent investment increases as Moldova strengthens its ties with the EU. in 2024, supported by higher revenues from social contributions, The IT and other services sectors will lead growth, while the indus- value-added tax, excise duties, and personal income taxes. These try sector stabilizes. The financial and construction sectors are like- revenues gains offset rising expenditures on wages, goods, ser- ly to benefit from lower interest rates. Agriculture growth will re- vices, and social programs. However, spending on non-financial as- main constrained by low productivity. The poverty rate is projected sets declined, highlighting weaknesses in public investment man- to decline to 12.4 percent in 2025, supported by improved private agement. The deficit was mainly financed through foreign sources. consumption and government support to households. Public and publicly guaranteed debt is expected to reach 37.5 per- cent of GDP by end-2024. The CAD is expected to remain elevated in 2025 due to the persistent goods trade deficit and high energy prices, while remittances and FDI Driven by positive private consumption and government support will remain constrained by Russia’s invasion of Ukraine and election- during the winter, poverty in Moldova, measured against the World related uncertainties, further exacerbated by shifts in global trade Bank’s global UMIC poverty line of US$6.85 (2017 PPP), is expected policy. Over the medium term, the CAD is expected to improve to decrease from 14.7 percent in 2017 to 13.9 percent in 2024, gradually as import prices stabilize and trade logistics strengthen. which represents a slower pace of poverty reduction than in the past due to a rise in poverty in 2022. Despite government support cushioning households, inflation is expected to remain high in 2025, exceeding the target of 5 percent, driven by energy price pressures. Inflation is expected to stabilize Outlook near the 5 percent target by 2027. Growth for 2025 is expected to only reach 0.9 percent due to The fiscal deficit is projected at 4.5 percent of GDP in 2025, reflect- the energy price shocks that erode household purchasing pow- ing continued spending on energy subsidies and wage support. The er and weaken economic activity, which is only partly mitigat- government will sustain elevated spending to protect households ed by government measures to support vulnerable households and businesses from energy price hikes, with EU financial sup- and firms. Private consumption is expected to grow slowly, port helping to offset some of these costs. In the medium term, while public consumption will play a larger role. Private invest- the deficit is expected to decline to 3 percent of GDP by 2027, as ment will remain subdued due to elevated interest rates and fiscal support measures are gradually phased out. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -4.6 1.2 0.1 0.9 2.4 4.4 Private consumption -4.8 -1.7 2.4 1.4 2.5 3.8 Government consumption 4.8 0.0 -1.7 0.3 0.2 0.2 Gross fixed capital investment -10.5 0.0 8.0 3.6 5.6 6.2 Exports, goods and services 29.7 4.8 -5.0 3.3 4.5 6.0 Imports, goods and services 18.2 -5.1 5.2 3.8 4.3 4.5 Real GDP growth, at constant factor prices -4.2 2.4 0.1 0.9 2.4 4.4 Agriculture -23.5 26.7 -18.9 2.9 3.8 4.1 Industry -10.3 -8.8 3.3 1.4 3.4 5.2 Services 3.0 1.8 3.5 0.4 1.8 4.3 Inflation (consumer price index) 28.7 13.4 4.7 7.8 6.1 4.9 Current account balance (% of GDP) -17.1 -11.8 -16.0 -14.2 -12.8 -12.3 Net foreign direct investment inflow (% of GDP) 3.7 2.5 1.7 2.5 2.8 2.7 Fiscal balance (% of GDP) -3.2 -5.1 -3.9 -4.5 -3.6 -3.1 Revenues (% of GDP) 33.3 33.7 34.1 34.0 33.5 33.4 Debt (% of GDP) 35.9 35.6 38.8 38.5 38.2 34.8 Primary balance (% of GDP) -2.2 -3.3 -2.7 -2.9 -2.5 -2.1 1,2 International poverty rate ($2.15 in 2017 PPP) 0.0 .. .. .. .. .. 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.4 0.3 0.2 0.2 0.2 0.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 18.1 16.2 13.9 12.4 11.1 9.5 GHG emissions growth (mtCO2e) 0.2 7.2 6.5 6.4 7.9 3.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2022-HBS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 65 This outlook reflects information available as of April 10, 2025. 1 2 MONTENEGRO Population Poverty thousand thousands living on less than $6.85/ day 623.5 75.5 3 4 Montenegro experienced strong post-pandemic growth, Life expectancy at birth School enrollment years primary (% gross) which moderated to 3 percent in 2024 and is projected to remain at 3 percent in 2025, amid global uncertainties. 76.2 106.1 While public debt is sustainable, expected to average 65.6 5 6 percent of GDP from 2025-2027, uneven debt repayments GDP GDP per capita current US$, billion current US$ pose a vulnerability that requires careful fiscal manage- ment. EU accession remains a strategic priority, amidst 8.1 12941.7 progress on economic reforms and political stability. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. increased indirect tax collections, are expected to keep the budget Key conditions and challenges deficit at above 3 percent in the medium term. Even though Mon- tenegro successfully reduced its public debt from 103.5 percent of Montenegro, with its small open economy and European Union GDP in 2020 to 61.3 percent in 2024, a lumpy debt repayment pro- (EU) aspirations, has demonstrated resilience despite being sus- file in 2025-2027 further adds to the fiscal challenges. ceptible to external and domestic shocks. As a euroized economy, it relies heavily on fiscal policy for macroeconomic stability. The After three years of political instability following the 2020 elec- country's heavy dependence on tourism, coupled with environ- tions which represented the first major power shift in 30 years, mental degradation, highlights the need for an improved ap- Montenegro's government, formed in October 2023 and reshuf- proach to sustainable development. Following a 15.3 percent con- fled in July 2024, has made EU accession its priority. In June 2024, traction in 2020, the economy recovered quickly in 2021-23, aver- a positive Interim Benchmark Assessment Report marked a cru- aging an annual growth of 8.6 percent. However, growth slowed cial step toward closing chapters and moving closer to EU mem- to 3 percent in 2024, primarily due to a weaker-than-expected bership. Yet, the delay in the 2025 budget adoption highlights tourism season. continuing political challenges. In 2022, Montenegro initiated significant fiscal reforms to stim- ulate job creation and raise wages under the Europe Now pro- Recent developments gram, which included abolishing healthcare contributions, adopt- ing progressive income taxation, introducing a tax allowance, and GDP growth slowed from 6.3 percent in 2023 to 3.0 percent in increasing the minimum wage. In 2024, the government imple- 2024. Although private consumption and investment remained ro- mented the second phase of this program, further raising min- bust, supporting growth, a 5 percent decline in tourist overnight imum pensions and wages, and halving pension contributions. stays and stagnant industrial production due to a decline in elec- These measures, while leading to a tax revenue shortfall, even with tricity production, negatively impacted net exports and overall FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 20 30 8000 15 7000 25 10 6000 5 20 5000 0 15 4000 -5 3000 -10 10 2000 -15 5 1000 -20 2019 2020 2021 2022 2023 2024e 2025f 2026f 2027f 0 0 Final consumption Gross fixed capital formation 2012 2014 2016 2018 2020 2022 2024 2026 Change in inventories Net exports International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real priv. cons. pc Sources: MONSTAT and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 66 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. growth. Meanwhile, employment continued to expand across all sectors. 2024 LFS data show an employment rate of 56.4 percent Outlook and an activity rate of 64.3 percent, with unemployment falling to 11.5 percent. By December 2024, average net monthly wages had Amid an unfavorable global outlook and trade policy uncertainties, risen to €1,012, marking a 21.7 percent y/y real increase following GDP growth is projected to average 3 percent during 2025-27, the pension contributions cuts. Inflation dropped to 3.4 percent in primarily driven by private consumption and investments. Higher 2024, a significant decrease from 8.6 percent in 2023. Poverty (in- net real wages, credit growth, and solid employment are expect- come below $6.85/day in 2017 PPP) is projected to have declined ed to drive a 3 percent growth in 2025, despite the closure of to 8.9 percent in 2024. the thermal power plant for reconstruction, which will require in- creased energy imports. The CAD is projected to widen to 18.5 The financial sector remains robustly capitalized and liquid, with percent of GDP in 2025 due to higher energy imports, with just strong credit growth. As of December 2024, the capital adequacy over a third of it financed by net FDI, the rest financed through ratio stood at 19.4 percent, and non-performing loans dropped to new borrowing. Inflation is expected to soften to 2.9 percent in 4.1 percent from 5.8 percent a year ago. 2025 and further to 2.3 percent in 2026. Poverty is projected to decline to 7.5 percent in 2027. Most of the poor are chronical- In 2024, the current account deficit (CAD) widened due to lower ly unemployed, students, or out of the labor force, mainly in the service exports and a decline in net income accounts. Net foreign northern region. Thus, reducing poverty requires targeted policies direct investment (FDI) grew by 13 percent, covering just over a alongside sustained economic growth. third of the CAD, with the remainder covered by new debt. The fiscal deficit is expected to increase in 2025 to approximately The fiscal deficit rose to 3.1 percent of GDP in 2024. Despite the 4 percent of GDP before gradually declining to 3.6 percent in 2027. absence of one-off revenues that contributed to a budget surplus Implementing additional fiscal consolidation measures would en- of 0.6 percent of GDP in 2023, revenues still grew strongly by 7 hance fiscal performance. Public debt is expected to rise to around percent. The largest contributions to revenue growth came from 65.8percent of GDP in 2027. Ensuring debt sustainability will ne- VAT and CIT. Meanwhile, expenditures increased by 17 percent, cessitate fiscal discipline, particularly given the significant financing primarily due to higher social spending (including higher mini- needs over 2025-27 and elevated external financing costs. Down- mum pensions) and increased capital expenditures. Public debt is side risks include extended geopolitical and trade uncertainties estimated at 61.3 percent of GDP, with around 4 percent of GDP that could have significant additional adverse indirect effects on held in deposits. Montenegro’s growth through its main trading partners. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.4 6.3 3.0 3.0 2.9 3.0 Private consumption 9.7 6.5 8.7 5.7 3.9 3.6 Government consumption 1.5 3.1 1.7 1.4 1.3 1.4 Gross fixed capital investment 0.1 6.9 9.3 4.1 3.1 3.2 Exports, goods and services 22.7 9.0 -3.2 0.1 3.4 3.7 Imports, goods and services 21.3 5.9 5.5 4.3 4.0 3.8 Real GDP growth, at constant factor prices 6.3 5.7 1.7 3.0 2.9 3.0 Agriculture -2.9 -0.3 0.0 0.2 0.2 0.2 Industry -5.2 5.1 -3.5 -3.1 3.4 3.8 Services 10.6 6.5 3.1 4.6 3.1 3.1 Employment rate (% of working-age population, 15 years+) 50.3 55.6 56.4 57.2 57.9 58.7 Inflation (consumer price index) 13.0 8.6 3.4 2.9 2.3 2.0 Current account balance (% of GDP) -12.9 -11.4 -17.3 -18.5 -18.1 -17.4 Net foreign direct investment inflow (% of GDP) 13.2 6.2 6.6 6.9 6.9 6.9 Fiscal balance (% of GDP) -3.7 0.6 -3.1 -4.0 -3.8 -3.6 Revenues (% of GDP) 39.2 42.2 42.7 41.4 41.8 41.9 Debt (% of GDP) 69.2 59.3 61.3 64.6 66.5 65.8 Primary balance (% of GDP) -2.1 2.4 -1.1 -1.8 -1.3 -1.2 1,2 International poverty rate ($2.15 in 2017 PPP) 1.9 1.8 1.7 1.6 1.5 1.5 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.1 2.9 2.8 2.6 2.6 2.5 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 10.5 9.3 8.9 8.5 8.0 7.5 GHG emissions growth (mtCO2e) 2.2 1.3 -0.2 -1.1 1.8 1.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2022-SILC-C. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 67 This outlook reflects information available as of April 10, 2025. NORTH 1 2 Population Poverty million millions living on less than $6.85/day 1.8 0.4 MACEDONIA Life expectancy at birth years 3 School enrollment primary (% gross) 4 Growth in 2024 edged up, supported by services and highway 74.4 97.5 5 6 construction, while industrial production declined due to GDP GDP per capita current US$, billion current US$ falling external demand for automotive supply-chain products. Inflationary pressures resurfaced at the end of 2024, despite 16.7 9136.9 efforts to control domestic prices. As public sector wages, Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. pensions, and subsidies increased, fiscal consolidation has 4/ 2022. 5/ 2024. 6/ 2024. been postponed. The growth outlook supports further poverty reduction, but underlying vulnerabilities are rising. eliminating anti-competitive practices, and enabling enforcement Key conditions and challenges of competition rules can foster competition and reduce markups and thus price pressures. Growth strengthened in 2024, predominantly driven by public in- vestment and public consumption. Poverty, as measured by the The long-term growth prospects are strongly tied to the pace of upper middle-income poverty line of USD 6.85 per day, is estimated reform implementation and structural transformation of the econ- to have declined marginally in 2024 due to easing inflation and ris- omy. Implementation of the Reform Plan that would advance the ing real wages vis-à-vis 2023. European Union (EU) accession process, as well as focusing on la- bor, energy, digital, and governance reforms could bring important Fiscal sustainability remains a key challenge. The average fiscal growth dividends. deficit with the State Roads Enterprise, which has remained at 5 percent of GDP since 2021, is expected to decrease to 4 per- cent—by the end of the projection horizon. Newly introduced fiscal Recent developments rules on the deficit and debt were breached in 2024 led by higher social transfers, public sector wages, and interest payments. Fiscal After a significant revision of national accounts, real GDP consolidation efforts will be needed ahead of large Eurobond re- growth moved up to 2.8 percent in 2024. Output growth was payments due in 2026–2028. driven by government consumption and investments, while net exports dived into negative territory. On the production side, At the same time, a continuous buildup of price pressures, includ- growth was led by services and construction, largely related to ing due to real wage growth above productivity increases, pro- highways, while manufacturing battled with weak external demand longed inflationary pressures. Containing further wage growth, for car-supply parts. FIGURE 1 / Fiscal performance FIGURE 2 / Actual and projected poverty rate and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 70 2.0 45 350000 60 40 300000 1.5 35 50 250000 30 40 25 200000 1.0 20 150000 30 15 20 100000 0.5 10 5 50000 10 0 0 0 0.0 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Upper middle-income pov. rate Real GDP pc PPG debt (lhs) Interest payments (rhs) Sources: North Macedonia State Statistics Office, Ministry of Finance, and World Bank Source: World Bank. Notes: See footnotes in table on the next page. staff calculations. 68 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Labor market indicators (15+) improved further in 2024, with a 0.4 and remittances. External debt stood at 76.9 percent of GDP in pp increase in the employment rate and 0.1 pp increase in the Q3 2024, of which 56.4 percent is long-term. participation rate to 45.8 percent and 52.3 percent, respectively, but gains were not uniform. While the total unemployment rate dropped to 12.4 percent, this was driven by those with primary and Outlook secondary education. The unemployment rate among those with higher education increased by 1.7 pp. The youth unemployment The medium-term outlook remains positive, but underlying vulner- rate (15–24) remains high at 28.9 percent. abilities are rising. The recent shifts in global trade policy and in- creased uncertainty, while having a low direct impact, will indirectly Headline inflation went up from a 3-year low of 2.2 percent in Au- affect the economy through multiple channels. Growth is expect- gust 2024 to 5 percent in February 2025, in part due to high food ed to average 2.8 percent during 2025–2027, below earlier projec- prices despite the introduction of price and margin caps for over tions, as higher spending on public investment projects is offset by 1,000 products. Both core inflation and producer prices surged slowing private consumption and exports. Headline inflation is pro- above 5 percent, as wages, albeit decelerating, continued growing. jected to remain above the long-term average until 2027, but to fall As inflation decelerated to 2.7 percent in March 2025, the Central towards the 2 percent target thereafter. Bank kept the main policy rate unchanged at 5.35 percent. Supported by the positive growth outlook, the USD 6.85 poverty The fiscal deficit (general government) increased to 4.6 percent rate is projected to decline by a further 1.4pp by the end of 2027, of GDP in 2024, with significant under-execution of capital spend- but implications of rising trade policy costs on the labor market and ing and reallocation to rising current spending. The public debt poverty remain uncertain in the short-term, and improvements in to GDP ratio surged to 62.4 percent, with arrears at 4.1 percent the labor market participation among youth and those with lower of GDP in 2024. levels of education would be needed to sustain poverty reduction in the medium-to-long term. The stability of the banking sector has been strengthened with an increase in the capital adequacy ratio to a historical high of The medium-term growth forecast relies on the assumption of the 19 percent in Q3 2024, and solvency at above pre-pandemic val- accelerated pace of EU accession negotiations and stronger reform ue, while the liquidity rate has been steady, around 20 percent. effort to support the structural transformation of the economy. Credit growth, at 11.2 percent at end-2024, picked up by close Low diversification of products and markets undermines the focus to 6 pp relative to end-2023, while the NPL ratio remained sta- of an export-led long-term growth strategy. Moreover, the persis- ble at 2.6 percent at end-2024. tence of low productivity, inefficient capital allocation, weaker ex- ternal demand, and inflation-suppressed consumption continue to The current account deficit deepened to 2.25 percent of GDP in overshadow the projection horizon. In this context, advancing on 2024, as the trade deficit widened to 20 percent, financed by the EU Reform Plan, including on green transition goals, is crucial strong foreign direct investment (FDI) inflows, services exports for fostering sustainable growth over the medium to long term. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.8 2.1 2.8 2.6 2.7 2.8 Private consumption 5.5 1.2 1.2 1.3 1.3 1.4 Government consumption -4.3 -1.8 9.1 5.1 4.9 4.7 Gross fixed capital investment 2.7 12.9 0.6 7.5 5.2 5.4 Exports, goods and services 10.6 -0.6 -3.8 -1.5 2.5 3.4 Imports, goods and services 13.6 -5.8 -0.6 -1.0 2.2 2.9 Real GDP growth, at constant factor prices 2.9 2.3 2.6 2.6 2.7 2.8 Agriculture -6.4 -3.0 -2.0 -0.9 -0.4 -0.1 Industry -5.6 -1.1 -0.9 -0.1 0.2 0.3 Services 6.5 3.8 4.0 3.6 3.6 3.6 Employment rate (% of working-age population, 15 years+) 45.0 45.4 45.8 46.1 46.2 46.3 Inflation (consumer price index) 14.2 9.4 3.5 2.6 2.3 2.1 Current account balance (% of GDP) -6.1 0.4 -2.3 -2.8 -2.4 -2.0 Net foreign direct investment inflow (% of GDP) 4.9 3.3 7.1 2.5 2.3 2.0 Fiscal balance (% of GDP) -4.3 -4.4 -4.6 -4.2 -4.0 -3.6 Fiscal balance with the state roads (% of GDP) -4.6 -4.6 -4.8 -4.4 -4.2 -3.8 Revenues (% of GDP) 31.6 32.7 34.0 34.5 34.5 34.8 Debt (% of GDP) 58.0 58.1 62.4 64.0 63.6 63.1 Primary balance (% of GDP) -3.2 -2.9 -2.7 -2.3 -1.8 -1.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 17.7 17.4 16.6 16.0 15.7 15.2 GHG emissions growth (mtCO2e) -1.6 -1.8 0.4 1.0 1.3 1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. NA data is adjusted for residuals and LFS data is smoothed for methodological changes. 1/ Calculations based on ECAPOV harmonization, using 2020-SILC-C. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2019) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 69 This outlook reflects information available as of April 10, 2025. 1 2 POLAND Population Poverty million millions living on less than $6.85/day 37.8 0.5 3 4 Life expectancy at birth School enrollment years primary (% gross) Poland's growth is projected to accelerate to 3.2 percent in 2025. Investment, particularly of the public sector, is 77.3 100.6 5 6 expected to be boosted by the disbursement of European GDP GDP per capita Union (EU) funds. Inflationary pressures in a tight labor current US$, billion current US$ market and fiscal challenges remain a concern. Downside risks stem from political cycles in the shorter term and 924.7 24450.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. global economic uncertainty in the longer run. 4/ 2022. 5/ 2024. 6/ 2024. committed to a Medium-Term Fiscal Structural Plan to converge Key conditions and challenges with EU fiscal deficit rules by 2028. The Polish economy has shown resilience thanks to a well-diver- sified economic structure, integrated into regional value chains, Recent developments macroeconomic stability, a sound financial sector, strong domestic labor markets and generous social programs combined with reac- After a sharp deceleration in 2023, real GDP growth picked up in tive protective measures. Over the medium term, continued eco- 2024, reaching 2.9 percent. Private consumption was the prima- nomic success hinges on technological transitions. A growth mod- ry driver of growth, supported by increases in nominal and real el driven by innovation, leveraging Poland’s strengths in clean val- income. While private consumption is expected to remain strong ue-chains and advanced manufacturing capabilities will require fi- in 2025, public consumption is anticipated to moderate. Invest- nancial deepening. The rapidly aging population remains a signif- ments are projected to drive growth, with double-digit growth icant challenge to growth, inclusion and fiscal sustainability. The possible in the public sector due to the implementation of EU- technological transformation, with the fast evolution of Artificial funded projects. Private investment could be lower than earlier Intelligence (AI), creates leapfrogging opportunities but requires anticipated due to trade uncertainty weighing down on invest- adequate planning. ment decisions. On the supply side, services will remain solid in 2025. At the end of 2024, inflation increased to 4.7 percent The administration elected in October 2023 has made efforts to (y/y), primarily due to the elimination of the zero VAT rate on strengthen institutions, the predictability of the regulatory frame- staple food products and the statutory price caps on fuels dur- work and the rule of law. In 2024, Poland was placed in Excessive ing the second half of the year. The National Bank halted its Deficit Procedure (EDP) as its fiscal deficit exceeded the threshold monetary easing cycle, maintaining unchanged interest rates af- partly due to the large increase in defense spending (to around ter two reductions in 2023. This widening rate differential with 4 percent of GDP). Under the new EU Fiscal Framework, it has the European Central Bank has resulted in continued real-term FIGURE 1 / Potential output growth and contributions to potential FIGURE 2 / Actual and projected poverty rate and real GDP per output growth capita. Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 5.0 80000 5 4.5 70000 4.0 4 60000 3.5 3 3.0 50000 2 2.5 40000 2.0 30000 1 1.5 20000 0 1.0 0.5 10000 -1 0.0 0 -2 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Upper middle-income pov. rate Real GDP pc TFP Capital Labour Potential Source: World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 70 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. appreciation of the zloty. A gradual decline in inflation is expected medium term, partly because of the uncertainty over trade policy in the second half of 2025. and indirect effects via German supply-chains. With large invest- ment expenditures, a rebound is expected in the construction sec- The current account weakened while remaining slightly in surplus, tor, with manufacturing also expected to accelerate. The govern- as exports were constrained by subdued growth in the Euro area. ment announced fiscal consolidation measures over the medium On the fiscal front, Poland’s fiscal deficit exceeded 6 percent of GDP term aiming for a deficit of 2.9 percent of GDP by 2028. If defense in 2024 on the back of large defense spending and the fulfillment spending were to be excluded from the EDP calculations, Poland of election promises. Record high defense expenditures will cause would gain some fiscal space in the medium term. the deficit to remain above 5 percent also in 2025. National extreme poverty rates are expected to return to 2022 lev- Poverty rose in 2023 both in extreme and relative terms, as nom- els by 2025 after an increase in minimum-income thresholds fol- inal wage growth lagged inflation and several benefits declined lowing three years of real depreciation. Income growth among low- in real terms due to unindexed transfers or thresholds. While er-income households is projected to slow, driven by moderate relative poverty rose 0.5pp to 12.2 percent, muted by real pen- increases in pensions and wages, inflation, and declines in non- sion growth, extreme poverty increased to 6.6 percent, partly indexed benefits. The long-term decline of minimum-income pro- reflecting declines in the coverage of means-tested benefits. In grams has strained resilience, highlighting the need to strengthen 2024, strong labor markets, a 21.5 percent rise in minimum social protection. Rising labor market participation among poorer wages, robust pension increases, and expanded child benefits households should persist. However, rising life expectancy, early are expected to drive household income growth. This should retirement—particularly among women—and declining replace- reduce relative poverty, though extreme poverty may remain ment rates present a medium-term risk of elderly poverty. elevated as vulnerable households continue to face reduced minimum-income support. Poland must speed up its transition to cleaner energy sources to stay competitive in the EU, embrace new technology, and prepare its workforce for job market changes. Additionally, Poland's public Outlook finances will be strained over the long term due to more extreme and frequent weather events, an ageing population, and the ne- Over the medium term, growth is expected to stabilize close to cessity for increased investment. Risks exist both to the downside 3 percent. Inflation should continue its downward trend, moving and upside due to regional and global geopolitical developments closer to the NBP target of 2.5 percent (+/- 1 percent), while wage and global trade uncertainty. Under a high fiscal deficit, a flexible growth should persist due to a tight labor market. The contribution exchange rate and monetary policy may prove to be crucial in of net exports to growth is expected to remain negative in the mitigating global. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.3 0.1 2.9 3.2 3.0 2.9 Private consumption 5.2 -0.3 3.1 3.3 3.0 2.6 Government consumption 0.6 4.0 6.7 3.1 3.0 2.5 Gross fixed capital investment 1.7 12.6 1.5 8.3 5.3 3.1 Exports, goods and services 7.4 3.7 1.2 3.2 3.4 4.2 Imports, goods and services 6.8 -1.5 3.3 4.5 4.3 3.9 Real GDP growth, at constant factor prices 5.5 1.2 2.1 3.1 3.0 3.0 Agriculture 1.0 14.3 1.0 1.0 1.0 1.0 Industry 6.2 -0.5 -0.8 3.0 3.3 2.9 Services 5.2 1.6 3.5 3.3 3.0 3.0 Employment rate (% of working-age population, 15 years+) 56.9 57.3 58.0 58.0 58.5 58.7 Inflation (consumer price index) 14.4 11.4 3.6 4.5 2.9 2.9 Current account balance (% of GDP) -2.3 1.8 0.1 -0.1 -0.4 -1.2 Net foreign direct investment inflow (% of GDP) 4.2 2.4 1.3 2.2 2.0 1.9 Fiscal balance (% of GDP) -3.6 -5.3 -6.6 -5.5 -4.8 -4.5 Revenues (% of GDP) 39.8 41.8 44.7 44.0 44.1 43.9 Debt (% of GDP) 48.8 49.5 55.3 58.2 59.8 61.6 Primary balance (% of GDP) -2.6 -3.9 -5.0 -3.7 -3.0 -2.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 1.3 1.3 1.3 1.2 1.2 1.1 GHG emissions growth (mtCO2e) -3.7 -3.6 5.3 5.6 5.4 5.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2013-EU-SILC and 2023-EU-SILC. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using point-to-point elasticity (2012-2022) with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 71 This outlook reflects information available as of April 10, 2025. 1 2 ROMANIA Population Poverty million millions living on less than $6.85/day 19.0 1.4 3 4 Life expectancy at birth School enrollment Romania’s growth decelerated to 0.9 percent in 2024, slow- years primary (% gross) ing poverty reduction and reflecting anemic private invest- ment and a worsening trade deficit. Global economic uncer- 75.3 84.9 5 6 tainty is expected to affect growth and poverty reduction in GDP GDP per capita 2025 and over the medium term. The fiscal deficit is expect- current US$, billion current US$ ed to decline. Despite wage and pension gains, job prospects for low-skilled workers may shrink. 388.4 20488.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. 4/ 2022. 5/ 2024. 6/ 2024. by 5 percent y-o-y, supported by wage and pension increases. Key conditions and challenges Investment declined by 1.7 percent y-o-y, reversing the double- digit expansion in 2023, reflecting negative dynamics in equip- Romania has advanced its economic development and EU conver- ment and new construction works components, and reduced gence but needs more inclusive and sustainable growth. Growth business confidence in construction. The trade deficit worsened obstacles include regional disparities, institutional weaknesses, as the goods deficit widened and the services surplus shrank, skilled labor shortages, a declining working-age population, vul- with exports falling by 3.6 percent y-o-y and imports rising nerabilities to natural hazards and climate change. Pro-cyclical by 3.4 percent y-o-y. On the supply side, construction growth fiscal measures have fueled consumption, leading to consistently turned negative, down 2.4 percent y-o-y, compared to a 12 high twin deficits. Although Romania has achieved high-income percent expansion in 2023, reflecting a 22.1 percent decrease status, it still has some of the highest poverty and inequality rates in residential construction while civil engineering projects grew in the EU, with significant regional disparities. The main short- modestly by 2 percent. Industry stagnated mainly due to a 4.7 term challenge is balancing fiscal and trade pressures while ad- percent y-o-y decline in one of its main activities, the energy dressing persistent social inclusion issues. Implementing structur- sector, on account of reduced hydroelectric production and low- al reforms and investment priorities under the National Recovery er energy exports. Unemployment remains contained at 5.4 per- and Resilience Plan (NRRP) is vital for sustainable recovery and cent in December 2024, below the EU average of 5.9 percent. fiscal consolidation. Nominal net wages grew by 11.1 percent y-o-y in December 2024, above headline inflation, driven by public sector wage in- creases. The National Bank of Romania reduced the monetary Recent developments policy rate from 7 percent to 6.5 percent through two 25-basis- point cuts in July and August 2024, as inflation fell from 7.4 per- Romania’s economic growth decelerated to 0.9 percent y-o-y in cent in January to 4.9 percent in June 2024. However, the pol- 2024. Private consumption remained the main growth driver, rising icy rate has remained unchanged since then as the disinflation FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 20 40 60000 15 35 50000 10 30 5 40000 25 0 20 30000 -5 15 20000 -10 10 -15 10000 5 -20 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Gov. cons. GFCF Private cons. International poverty rate Lower middle-income pov. rate Imports Exports GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 72 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. process stalled, with annual inflation at 5.1 percent in Decem- ber, driven by strong household demand, reflecting public wage Outlook and pension increases, and the impact of the severe drought af- fecting the food component of the consumer price index. Private Increasing headwinds from uncertainty around global trade will sector credit growth accelerated to 8.9 percent y-o-y in 2024, likely dampen short-term growth, mainly through the current ac- from 6.4 percent in 2023, driven by household loan dynamics count position. Potential curtailment and delays in private invest- (up 9.3 percent y-o-y). ment driven by uncertainty are expected to further weaken growth prospects. However, private consumption and EU-financed invest- The fiscal deficit reached 8.6 percent of GDP in 2024, 3 percent- ment, primarily in infrastructure, are expected to support medium- age points higher than in 2023. The increase reflects expenditure term growth. Industrial output is anticipated to benefit from a base growth (up 19.1 percent), outpacing revenue increases (up 10.4 effect after two consecutive years of decline. Full accession to the percent) in the context of the current political cycle. Notably, ma- Schengen Area from January 2025 will further support land trans- jor expenditure items, such as personnel expenditure, grew by port and, to some extent, exports. Additional risks to growth stem 24 percent in 2024, and the average monthly pension rose by from fiscal consolidation challenges and political uncertainty in the 39 percent y-o-y as of December 2024. Romania’s public debt- context of the current political cycle. to-GDP ratio was 54.3 percent in November 2024, below the EU average of 81.6 percent in Q3 2024. However, it has significant- The EU's endorsement of Romania's medium-term fiscal and struc- ly risen from 35 percent at end-2019, highlighting vulnerability to tural plan in January 2025 should strengthen credibility in reducing economic shocks, fiscal slippages and political uncertainty. the fiscal deficit to below 3 percent by 2031. Reducing the deficit is feasible but requires measures on both the revenue and expen- Poverty projections for the near term are mixed. While poverty diture sides. Several taxes that contribute significantly to the bud- ($6.85/day 2017 PPP) is expected to decline slowly to 6.9 percent get have rates below the EU average. Curbing and eliminating inef- in 2024, economic growth has slowed, unemployment is ris- ficient expenditures would yield additional fiscal space. ing among less-educated workers, and the contraction in resi- dential construction and industry may disproportionately impact Poverty reduction is expected to slow in 2025 and in the medium low-income workers. These factors could hinder poverty reduc- term, due to subdued short-term growth driven by global trade tion. However, strong real wage growth—particularly in construc- uncertainty, necessary fiscal consolidation and persistent labor tion—along with pension increases and easing inflation should market challenges. Recent fiscal reforms—such as ongoing pen- boost household incomes and purchasing power, partially off- sion changes—have made the system more pro-poor and slightly setting the effects of slower job growth. Despite lower energy more redistributive, but there is still room to strengthen more prices in 2024 relative to 2023, energy poverty remains high equitable fiscal policies through a balanced mix of revenue and among disadvantaged groups. expenditure measures. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.0 2.4 0.9 1.3 1.9 2.5 Private consumption 5.1 3.0 5.0 4.3 5.0 5.1 Government consumption -1.4 6.3 -2.4 0.9 1.1 1.1 Gross fixed capital investment 5.4 14.5 -1.7 0.8 1.9 2.6 Exports, goods and services 9.3 -0.8 -3.6 -2.2 -1.1 0.1 Imports, goods and services 9.3 -1.1 3.4 3.3 3.3 3.7 Real GDP growth, at constant factor prices 3.1 2.1 0.9 1.3 1.9 2.5 Agriculture -14.1 9.6 -10.5 3.2 1.1 1.1 Industry -11.4 -2.2 0.0 1.1 1.9 2.5 Services 11.1 3.2 1.9 1.3 1.9 2.6 Employment rate (% of working-age population, 15 years+) 48.9 48.7 48.7 48.7 48.7 48.7 Inflation (consumer price index) 13.8 10.4 5.6 4.9 3.4 3.1 Current account balance (% of GDP) -9.2 -6.6 -8.3 -8.8 -8.2 -7.6 Net foreign direct investment inflow (% of GDP) 3.5 2.1 1.6 1.9 2.4 3.1 Fiscal balance (% of GDP) -6.4 -6.5 -8.6 -7.5 -6.8 -5.9 Revenues (% of GDP) 33.9 33.7 33.8 34.1 34.5 35.0 Debt (% of GDP) 47.9 48.9 54.6 58.1 61.2 63.4 Primary balance (% of GDP) -5.1 -4.8 -6.9 -5.7 -4.9 -3.9 1,2 International poverty rate ($2.15 in 2017 PPP) 1.1 1.0 1.0 1.0 0.9 0.9 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.7 2.6 2.6 2.5 2.4 2.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 7.3 7.0 6.9 6.6 6.4 6.0 GHG emissions growth (mtCO2e) -5.9 -6.2 -4.5 -3.1 -1.9 -1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2014-EU-SILC and 2023-EU-SILC. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using point-to-point elasticity (2013-2022) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 73 This outlook reflects information available as of April 10, 2025. RUSSIAN 1 2 Population Poverty million millions living on less than $6.85/day 143.1 2.9 FEDERATION Life expectancy at birth years 3 School enrollment primary (% gross) 4 The economy expanded by 4.1 percent in 2024 driven by ro- 72.5 97.7 5 6 bust aggregate demand, bolstered by fiscal stimulus, elevat- GDP GDP per capita current US$, billion current US$ ed real wage growth, and state-directed credit expansion. As a result, inflation continued to rise, remaining considerably 2172.3 15177.3 above the central bank’s target. Growth is projected to de- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. celerate to 1.6 percent in 2025, towards potential output lev- 4/ 2023. 5/ 2024. 6/ 2024. el, as restrictive monetary policy measures are expected to temper domestic demand. Key conditions and challenges Recent developments Economic performance continues be shaped by the country’s inva- The economy grew by 4.1 percent in 2024, driven by robust con- sion of Ukraine and resulting sanctions. Economic growth is upheld sumption. Household consumption rose by 4.8 percent, though it by the sizable economic stimulus which amounted to 11 percent decelerated compared to 2023, amid tightening of consumer cred- of GDP during last 3 years largely comprising of soft lending and it conditions from higher interest rates. Government consumption proceeds from National Wealth Fund (NWF). This growth model is growth accelerated to 4.6 percent in line with increased fiscal ex- not sustainable in the medium term amid rising strain on public fi- penditures. Investment demand also grew, financed by an up- nances and accumulation of vulnerabilities in the financial sector. surge in corporate lending, supported by state-sponsored pro- grams primarily targeted at military enterprises. On the supply Russian businesses and households continue to be affected by side, strong growth in manufacturing underpinned economic ac- great uncertainty, restrictions on export of a wide range of goods, tivity, particularly in military-related and import-substituting in- persisting gaps in supply of labor and of some technological equip- dustries. The labor market remained tight, with the unemploy- ment, and higher trade costs. ment rate falling to 2.2 percent in 2024. This pushed up real wages' growth to 13.2 percent in 2024. In the short term the main policy challenge is to narrow the positive output gap and bring inflation down to the central bank’s target, while Robust demand growth kept inflation elevated in 2024, with the CPI minimizing the slowdown in growth. In the medium-to-long term, the increasing to 9.4 percent, well above the Central Bank of Russia's growth potential is limited due to the adverse labor market dynamics (CBR) target. The CBR increased the policy rate from 16 percent at and the restrictions on access to foreign markets and technology. end-2023 to 21 percent in October 2024. Fiscal spending increased FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Current account balance and export and import growth Percent, percentage points Percent Percent of GDP 12 45 12 9 10 30 6 8 3 15 6 0 0 -3 4 -6 -15 2 -9 -30 0 2020 2021 2022 2023 2024 2025 2026 2027 2019 2020 2021 2022 2023 2024 2025 2026 Private consumption Government consumption Gross fixed investment Exports Export growth (lhs) Import growth (lhs) Imports GDP growth Current account balance (rhs) Sources: Russian Federal State Statistics Service and World Bank. Sources: Central Bank of the Russian Federation and World Bank. 74 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. by 8.6 percent in real terms in 2024 to 37 percent of GDP from 35.7 Growth is projected to decelerate to 1.4 percent in 2025, and 1.2 percent in 2023, fueling demand, while fiscal revenues rose by 10.7 percent in 2026, towards the economy’s long term growth potential percent in real terms, buoyed by strong growth in oil and gas rev- of just above one percent. Private consumption growth is antici- enues, as well as non-oil and gas revenues. The fiscal deficit im- pated to decelerate as the tight monetary stance and sluggish real proved slightly in 2024 to 1.6 percent of GDP, from 2.2 percent in wage growth dampen private demand. Labor shortages resulting 2023, partially financed by proceeds from liquid assets of the NWF. in higher labor costs will constrain supply. The current account surplus was 2.5 percent of GDP in 2024, com- Fiscal expansion and state-led corporate lending will moderate the pared to 2.4 percent in 2023. The trade surplus was stable at 6.1 pace of the slowdown but announced fiscal consolidation plans percent of GDP as a decline in exports was offset by a reduction could reduce the extent of state support to the economy. Gross in imports. Credit growth decelerated to 6 percent in 2024, from fixed capital formation growth is set to ease in the medium term, 15.6 percent in 2023, driven by growth in corporate lending mostly averaging 1.5 percent during 2025-2027, as rising financing costs directed to defense related sectors while household lending dampen private sector investment. plateaued due to high borrowing costs. Elevated interest rates also fostered savings, as holdings in bank deposits surged by 17 percent Inflation is projected to decline in the medium term, as the tight in 2024 in real terms. monetary policy is expected to persist, softening domestic demand pressures. The current account surplus is expected to moderate to The poverty rate (at the US$6.85-2017 PPP international line) average of 1.1 percent of GDP in 2025-27, owing to declining com- decreased slightly from 2 percent in 2021 to 1.6 percent in modity prices stemming from trade and global uncertainty. Exports 2025.However, a significant portion of the population—around are expected to rise at a moderate pace in the medium term, with 15 percent—remains vulnerable to poverty in the event of an oil production growth constrained by OPEC+ quotas. Conversely, economic shock. imports are projected to decelerate due to slowing domestic de- mand and tightening sanctions on payments for imports. Outlook Elevated public expenditures are expected to widen the general government deficit in the medium term, averaging 2.9 percent, It is presently difficult to produce growth forecasts for Russia due to the which is expected to be financed by domestic borrowing. significant changes to the economy associated with Russia’s invasion of Ukraine, and the decision by Russia to limit publication of economic Downside risks from global uncertainty and weaker commodity data, notably related to external trade, financial and monetary sectors. prices are significant, and fiscal buffers could be utilized to soften Available data limits our ability to assess the economic performance. the impact on domestic growth in the short-term. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -1.4 4.1 4.1 1.4 1.2 1.2 Private consumption -0.6 6.0 4.8 1.9 1.3 1.2 Government consumption 3.0 3.7 4.6 2.0 2.1 2.1 Gross fixed capital investment 4.6 12.7 2.2 0.9 1.7 2.0 Exports, goods and services -13.9 -8.2 1.0 1.1 1.5 1.5 Imports, goods and services -11.0 16.9 1.5 1.4 1.3 1.3 Real GDP growth, at constant factor prices -0.5 3.9 4.1 1.4 1.2 1.2 Agriculture 7.0 0.5 1.2 1.2 1.2 1.2 Industry 0.4 1.5 2.0 1.4 1.4 1.4 Services -1.4 5.3 5.3 1.4 1.1 1.1 Employment rate (% of working-age population, 15 years+) 59.8 59.1 59.1 59.1 59.1 59.1 Inflation (consumer price index) 13.7 7.3 9.5 7.5 4.4 4.3 Current account balance (% of GDP) 10.5 3.3 2.4 1.2 1.1 1.1 Net foreign direct investment inflow (% of GDP) -1.2 -1.2 -1.0 -0.9 -0.8 -0.8 1 Fiscal balance (% of GDP) -1.3 -2.2 -1.6 -2.9 -3.0 -2.9 Revenues (% of GDP) 37.6 33.4 35.4 33.9 34.0 34.1 Debt (% of GDP) 13.4 13.5 13.5 13.7 13.8 13.7 1 Primary balance (% of GDP) -0.4 -1.3 -0.7 -2.0 -2.1 -2.0 2,3 International poverty rate ($2.15 in 2017 PPP) 0.2 0.2 0.2 0.2 0.2 0.2 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.4 0.4 0.4 0.4 0.3 0.3 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 2.1 1.8 1.6 1.6 1.5 1.5 GHG emissions growth (mtCO2e) -2.2 3.6 4.4 2.1 2.0 1.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal and Primary Balance refer to general government balances. 2/ Calculations based on ECAPOV harmonization, using 2022-VNDN. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 75 This outlook reflects information available as of April 10, 2025. 1 2 SERBIA Population Poverty million millions living on less than $6.85/day 6.6 0.6 3 4 Life expectancy at birth School enrollment years primary (% gross) The growth rate of the Serbian economy in 2024 is estimat- ed at 3.9 percent. Growth of GDP is expected to slow down 75.5 98.9 5 6 in 2025, with risks tilted to the downside. The incidence of GDP GDP per capita poverty declined to 7.7 percent in 2024 and is projected to current US$, billion current US$ continue to decline albeit at slower rate, as the remaining poor are often characterized by chronic unemployment and 88.9 13514.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. thus not benefiting from economic growth. 4/ 2022. 5/ 2024. 6/ 2024. packages, structural reforms are needed to accelerate private Key conditions and challenges sector-led growth. Growth in 2024 is estimated at 3.9 percent, y/y, higher than the previously projected 3.5 percent, thanks to a better-than-expect- Recent developments ed performance of the construction and services sectors in the first half of the year. However, a severe drought that hit Serbia in Relatively strong growth in 2024 was driven by a recovery of private the summer of 2024 significantly impacted agriculture and con- sector consumption and investment. On the other hand, net ex- tributed to a growth slowdown in the second half of the year. ports made a small negative contribution to growth in 2024 due On the expenditure side, consumption and investment were the to lower-than-expected export growth, as external demand weak- main drivers of growth in 2024 while net exports had a marginal- ened, and imports remained at a high level (in part explained by ly negative contribution. Consumption started to recover due to increased investment). Manufacturing remained resilient to exter- the continued increase in real incomes (both in the public and nal developments (i.e. lower demand from the EU), with output private sectors). However, there is still a high degree of volatili- growing by 3.1 percent y/y. ty associated with agriculture (and related food industry) output. This underscores the critical need for Serbia to introduce policy Labor market indicators continued to improve in 2024. The un- and investment measures to mitigate the negative impact of in- employment rate averaged 8.6 percent in 2024, and the em- creasing weather shocks and to promote private sector participa- ployment rate continued to increase (reaching a record high tion in these measures. level of 51.4 percent) even though informal employment de- clined marginally. Wages increased by 14.2 percent in nominal Over the medium term, under the baseline scenario, the Serbian terms (9.2 percent in real terms) in 2024 compared to 2023. economy is expected to grow at around 3.5-4 percent, based on Pensions on average were 19.4 percent higher in 2024 than in higher public investment. With limited space for future stimulus 2023 (in nominal terms). FIGURE 1 / Indexes of the level of sectoral GDP FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Value Added Index 1=2010 Poverty rate (%) Real private consumption per capita (constant LCU) 3.0 35 900000 30 800000 2.5 700000 25 600000 2.0 20 500000 15 400000 1.5 300000 10 200000 1.0 5 100000 0 0 0.5 2012 2014 2016 2018 2020 2022 2024 2026 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 International poverty rate Lower middle-income pov. rate Agriculture Services Industry Upper middle-income pov. rate Real priv. cons. pc Source: World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 76 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The poverty level (based on the upper-middle income line of by 31 percent. Net FDI inflows continued to perform strongly, in- $6.85/day in 2017 PPP), stayed at an estimated 7.3 percent be- creasing by 7.9 percent in euro terms (to reach EUR 4.6 billion tween 2022 and 2023, as private consumption growth was mod- in 2024). Foreign currency reserves increased to a record high level est, affected by the high inflation and the phasing out of gov- of EUR 29.3 billion by year-end. Overall credit increased by 10 per- ernment support programs, which had fueled the strong post- cent (y/y) through December 2024. However, loans to businesses COVID-19 recovery of 2021. increased by only 5.6 percent by year-end (y/y). Gross nonperform- ing loans declined to 2.5 percent in December 2024. Inflation started to decline gradually in the first half of 2024 before increasing again in the second half of the year. The inflation index edged up again due to an increase in food prices, rents, and com- Outlook munal services. The NBS lowered the key policy rate to 5.75 per- cent in September 2024 and has kept it unchanged since. The Serbian economy is expected to grow at around 3.5-4 percent over the medium term, driven primarily by consumption and, to Budgetary revenues overperformed significantly in 2024 (up 13.5 some extent, by investment. However, there are downside risks. percent in nominal terms, or 8.5 percent in real terms, y/y), pri- Downside risks relate to the performance of state-owned enter- marily thanks to a higher-than-planned collection of contributions prises (SOEs) which might require support from the budget, exter- for social insurance, VAT, and excises. Over the same period, ex- nal demand for Serbian exports might decrease given uncertain- penditures increased by 13.1 percent in nominal terms (8.1 per- ty in trade policy, and the impact of extreme weather on agricul- cent in real terms). As a result, the consolidated fiscal deficit in- ture and infrastructure could be significant. Inflation is expected creased only slightly in nominal terms but remained the same as to decline gradually and stay within the NBS target band over the a share of GDP at 2 percent. Public debt hovered around 48 per- medium term. The fiscal deficit is now projected to increase com- cent of GDP throughout 2024 and reached 47.6 percent at the pared to 2023/2024 since the government embarked on large- end of December. scale public infrastructure spending plans. The current account deficit increased significantly in 2024 to reach Sustained economic growth will continue to lift more Serbians out 6.3 percent of GDP (compared to 2.4 percent in 2023). The trade of poverty. However, the remaining poor are increasingly concen- balance widened by 22 percent in euro terms in 2024, to reach 9.8 trated among pensioners, the long-term unemployed, or those percent of GDP. At the same time the surplus in services trade completely out of the labor force. Thus, targeted social assistance decreased by 11 percent in euro terms, while the surplus in net or other direct channels will become essential to ensure further transfers declined by 5 percent. The net income deficit increased poverty reduction. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.6 3.8 3.9 3.5 3.9 4.2 Private consumption 3.5 0.5 4.2 3.9 4.3 4.2 Government consumption 1.3 -2.4 5.6 6.9 6.2 4.9 Gross fixed capital investment 2.2 9.7 12.5 6.4 4.0 3.6 Exports, goods and services 17.0 2.7 3.2 3.5 5.5 6.5 Imports, goods and services 16.2 -1.6 8.3 4.6 6.2 6.1 Real GDP growth, at constant factor prices 2.5 4.8 2.2 3.5 3.9 4.2 Agriculture -7.6 7.4 -5.5 3.0 2.0 4.0 Industry 1.2 3.7 2.3 1.5 2.0 2.9 Services 4.1 5.1 2.9 4.4 4.9 4.7 Employment rate (% of working-age population, 15 years+) 49.5 50.2 51.4 52.0 52.3 52.9 Inflation (consumer price index) 11.9 12.1 4.6 3.1 3.0 3.0 Current account balance (% of GDP) -6.5 -2.4 -6.3 -7.0 -6.7 -6.5 Net foreign direct investment inflow (% of GDP) 6.8 5.6 5.4 5.1 4.9 4.7 Fiscal balance (% of GDP) -2.9 -2.0 -2.0 -3.0 -3.0 -3.0 Revenues (% of GDP) 41.3 39.4 40.9 41.2 41.1 41.2 Debt (% of GDP) 52.9 48.4 47.5 47.5 47.1 46.7 Primary balance (% of GDP) -1.4 -0.3 -0.4 -1.5 -1.4 -1.4 1,2 International poverty rate ($2.15 in 2017 PPP) 1.5 1.5 1.5 1.4 1.4 1.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.1 3.0 2.8 2.7 2.5 2.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 8.3 8.2 7.7 7.0 6.2 5.8 GHG emissions growth (mtCO2e) 0.6 2.5 5.8 0.3 1.8 2.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2023-EU-SILC. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 77 This outlook reflects information available as of April 10, 2025. 1 2 TAJIKISTAN Population Poverty million millions living on less than $3.65/day 10.6 2.2 3 4 Life expectancy at birth School enrollment The economy grew by 8.4 percent in 2024, driven by remit- years primary (% gross) tance inflows. Growth is projected to attenuate to 6.5 per- cent in 2025 and slow over the medium term. Poverty is esti- 71.3 100.6 5 6 mated to have declined to 9.1 percent in 2024 (projected, at GDP GDP per capita US$3.65/day poverty line). Boosting growth and jobs re- current US$, billion current US$ quires improved competition, state-owned enterprise (SOE) governance, energy sector operation, transport and digital 14.2 1340.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2015 (2017 PPPs). 3/ 2022. connectivity, and education quality. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Despite strong economic growth and poverty alleviation, Tajikistan Tajikistan’s economy grew by 8.4 percent in 2024, supported by remains the poorest country in the Europe and Central Asia region, remittance-induced domestic demand and growth in industry (20 with a gross national income (GNI) per capita of US$1,440 (Atlas percent) and agriculture (10.6 percent), which exceeded the con- method) in 2023. Although the population has grown rapidly, Tajik- traction in services (-7.5 percent) primarily due to the transport sec- istan faces considerable barriers to sustained growth and job cre- tor. At 44 percent, Tajikistan has the lowest labor force utilization ation: weak public institutions, a difficult business environment, in the region compared to more than 50 percent in Uzbekistan and and poor human capital. 60 percent Kyrgyzstan. Tajikistan’s economy depends on remittances (about 49 percent of The current account surplus recorded 6.2 percent of GDP in GDP in 2024) largely from Russia, which drive private con- 2024 (compared to 4.8 percent in 2023). Strong remittance in- sumption and finance imports. According to the Listening-to- flows—growing 45 percent year-on-year—contributed to this sur- Tajikistan (L2T) survey, most households spend remittances plus. The trade deficit widened due to increased import demand on food (79 percent), healthcare (7 percent), and household and declining precious metal exports. Foreign direct investment improvements (3 percent). (FDI) inflows were low, at 1.3 percent of GDP (compared to 0.8 percent in 2023). The central bank accumulated international re- To accelerate growth and jobs creation, Tajikistan needs to imple- serves reaching US$4.6 billion by end-December 2024 and cover- ment structural reforms to increase competition, simplify invest- ing more than seven months of imports. Despite a 0.4 percent ment regulations, enhance SOE governance, improve financial sus- appreciation in the nominal exchange rate, there was a real de- tainability and transparency in the energy sector, strengthen trans- preciation of 0.3 percent due to lower inflation in trade partner port and digital connectivity, and improve education quality. countries, particularly China. FIGURE 1 / Current account balance, remittance inflows, and real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Growth of real GDP, percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 18 50 90 1200 15 80 40 1000 12 70 9 60 800 30 50 6 600 20 40 3 30 400 0 10 20 -3 200 10 -6 0 0 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Current account balance (lhs) Real GDP (lhs) International poverty rate Lower middle-income pov. rate Total remittances, net (rhs) Upper middle-income pov. rate Real GDP pc Sources: Statistical Agency, National Bank of Tajikistan, and World Bank staff estimates Source: World Bank. Notes: See footnotes in table on the next page. and projections. 78 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Prudent monetary policy and a stable exchange rate have en- sured a low inflation rate of 3.4 percent in 2024 (from 3.7 Outlook percent in 2023). The central bank reduced the policy rate in several steps from 10 percent in January 2024 to 8.75 percent In the context of rising global uncertainty, Tajikistan’s economic in February 2025. growth has been cautiously forecast at 6.5 percent in 2025, sup- ported by private consumption and the recovery of precious metal The fiscal deficit rose to 1.3 percent of GDP (from 1.0 percent in exports. Inflation is expected to rise slightly to 3.9 percent in 2025, 2023), spurred by lower revenue performance. Despite a reduction gradually moving toward the central bank’s medium-term target of in the VAT rate (from 15 to 14 percent), tax revenues flattened, 5 percent (+/-2). Poverty at the US$3.65/day line is expected to drop at 19 percent of GDP, aided by the gradual elimination of tax ex- to 8.2 percent in 2025. emptions. Revenues declined to 27.7 percent of GDP in 2024 (from 29.6 percent in 2023), due to lower externally financed public in- Under the baseline, Tajikistan’s external position is expected to re- vestment grants and nontax collections. Expenditures fell slightly main robust despite normalization of remittance flows as Russia’s to 29.1 percent of GDP (compared to 30.6 percent in 2023), with economic growth slows, including due to the lower oil price out- reduced energy and transport sector capital spending. The fiscal look, and migration policies tightening. Elevated precious metals deficit was largely financed with development partner concession- prices will likely support exports, while easing food and oil prices al loans. Tajikistan is at high risk of debt distress, with a public debt should reduce the import bill, thus narrowing the trade deficit. equivalent to 25.4 percent of GDP. Global uncertainty has worsened an already weak investment envi- ronment plagued by domestic challenges. Strong financial inflows boosted banking sector profits, with re- turn-on-equity at 20.7 percent, helping to reduce nonperforming The fiscal deficit is projected to remain below 2.5 percent of GDP loans volumes from 12.7 percent in 2023 to 7.1 percent in 2024. over the medium term. Spending on the Rogun Hydropower Plant Bank capitalization remained high at 21.8 percent, exceeding the and major infrastructure projects will likely be financed through in- 12 percent regulatory minimum. creased revenues from streamlined tax exemptions, development partner financing, and postponement of nonpriority expenditures. The poverty rate declined to 9.1 percent in 2024 from 11.1 percent in 2023 (at the Lower-MIC poverty line of US$3.65/day The outlook faces risks from global policy uncertainty, intensifying in 2021 PPP). L2T results indicate that 97 percent of migrants trade protectionism, regional armed conflicts, and lagging struc- work in Russia. The share of households receiving remittances in- tural reforms. To raise potential growth, the authorities will need creased by 4 percentage points in 2023/2024 to 21 percent. 33 to expedite reforms in stimulating private sector development percent of households were worried about food security in 2024, and public sector efficiency and accountability, while cultivating down from 38 percent in 2023. economic resilience to climate change. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.0 8.3 8.4 6.5 4.9 4.7 Private consumption 15.7 9.0 16.8 2.8 3.2 3.2 Government consumption -0.7 -9.1 12.1 5.8 4.4 4.3 Gross fixed capital investment 11.9 -9.9 4.5 10.5 5.9 5.7 Exports, goods and services -24.0 13.4 -5.5 6.8 3.2 3.2 Imports, goods and services 4.0 -4.3 3.5 3.3 3.2 3.1 Real GDP growth, at constant factor prices 9.0 7.4 8.3 6.5 4.9 4.8 Agriculture -4.5 12.2 10.6 5.5 5.2 5.1 Industry 9.1 9.8 20.0 5.5 5.3 5.2 Services 16.9 2.3 -7.5 8.8 4.0 3.9 Employment rate (% of working-age population, 15 years+) 43.8 44.4 44.2 44.2 44.1 44.1 Inflation (consumer price index) 6.6 3.7 3.4 3.9 4.5 5.0 Current account balance (% of GDP) 15.3 4.8 6.2 2.9 1.6 1.1 Net foreign direct investment inflow (% of GDP) 1.5 0.8 1.3 1.2 1.3 1.3 Fiscal balance (% of GDP) -1.4 -1.0 -1.3 -2.3 -2.3 -2.3 Revenues (% of GDP) 27.2 29.6 27.7 28.6 28.6 28.5 Debt (% of GDP) 31.8 30.0 25.4 26.3 27.3 28.2 Primary balance (% of GDP) -0.6 -0.3 -0.6 -1.7 -1.6 -1.7 1,2 International poverty rate ($2.15 in 2017 PPP) 2.3 2.1 1.7 1.5 1.3 1.0 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 12.5 11.1 9.1 8.2 7.5 7.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 47.5 44.0 40.8 38.1 36.5 34.6 GHG emissions growth (mtCO2e) 1.4 1.3 2.1 1.9 1.7 1.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2015-HSITAFIEN. Actual data: 2015. Nowcast: 2016-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2015) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 79 This outlook reflects information available as of April 10, 2025. 1 2 TÜRKIYE Population Poverty million millions living on less than $6.85/day 85.5 4.9 3 4 Life expectancy at birth School enrollment Macroeconomic normalization delivered significant improve- years primary (% gross) ments in 2024; disinflation started, current account improved, economic growth remained robust. However, inflation remains 78.5 102.5 5 6 persistent and expected to decline to upper 20s by end-2025. GDP GDP per capita Tightening fiscal policy and persevering tight monetary policy current US$, billion current US$ will be critical for advancing disinflation. Growth is projected at 3.1 percent in 2025 and 3.6 percent in 2026. High infla- 1322.3 15460.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. tion calls for social policies to protect the vulnerable. 4/ 2022. 5/ 2024. 6/ 2024. consumption continued to drive growth while net exports signifi- Key conditions and challenges cantly eroded in Q4. Growth momentum moderated in Q1-2025 as the Purchasing Managers' Index (PMI) remains below the 50-thresh- The macroeconomic stabilization policies have reduced uncertain- old (47.3 in March) and capacity utilization is at 75 percent. ty and disinflation is advancing. The Central Bank of the Republic of Türkiye (CBRT) started rate cuts with 250 bps in December, January The labor market continues to be strong despite slowing growth, and March, lowering the policy rate to 42.5 percent. with February unemployment at 8.2 percent. The broad unemploy- ment rate (including discouraged and underemployed) remains Price stability remains the primary policy objective, and monetary high at 28.4 percent. and fiscal policies should be oriented to advance disinflation while strengthening social policies to protect the vulnerable. Inflation is ex- The current account deficit was US$10b (0.8 percent of GDP) in pected to reach the upper 20s by end-2025. Hence, tighter fiscal poli- 2024, easing from US$39.9b in 2023 (3.6 percent of GDP), as the cy with tight monetary policy will be critical to re-anchor expectations trade deficit narrowed 23 percent yoy despite the real effective ex- and continue the disinflation. Removing structural barriers to faster change rate (consumer price index (CPI)-based) appreciating 21.6 productivity growth and economic performance is equally important. percent. Net foreign direct investment flows were stable at US$4.7b while net portfolio inflows doubled from 2023 to US$12b. Recent developments Inflation eased to 38 percent by March from a peak of 75 percent in May 2024. Food price inflation is lower and may soften the impact Alongside substantial monetary tightening, economic growth of growing prices on the most vulnerable. slowed from 5.1 percent in 2023 to 3.2 percent in 2024. Contracting in Q2 and Q3, economic activity picked up in Q4, as industrial pro- Tight monetary policy and macroprudential adjustments strength- duction increased by 3.5 percent qoq. The contribution of private ened bank profitability, capital adequacy, and financial stability. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 20 25 35000 15 30000 20 10 25000 5 15 20000 0 15000 10 -5 10000 5 -10 5000 2021 2022 2023 2024 2025 2026 2027 Private consumption Government spending 0 0 Investment Exports 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Imports Stocks International poverty rate Lower middle-income pov. rate Growth Upper middle-income pov. rate Real GDP pc Sources: Turkstat and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 80 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. While high policy rates continue to constrain loan growth (35 percent by tight monetary policy and fiscal tightening, reaching 29 percent nominal yoy in March), TL lending increased in recent months. High TL by end-2025, 18 percent by end-2026, and 13 percent end-2027. loan costs boosted foreign exchange (FX) loan demand. The FX-pro- The current account balance, which remained contained in 2025, tected deposit scheme shrank significantly, contributing to de-dollar- is expected to widen in line with the projected growth trajectory ization. Asset quality remains broadly stable; January’s non-perform- to around 2 percent over the forecast horizon as REER ap- ing loan (NPL) ratio was 1.9 percent. External borrowing conditions preciation continues despite declining commodity prices. In line improved, and the banking sector has adequate capital buffers, with gradual fiscal consolidation efforts, the general government high provisions, and managed interest rate and currency risks. deficit is expected to decrease to 4.2 percent of GDP in 2025, and to 3.6 percent of GDP in 2026, primarily due to the decline The fiscal deficit, which stood at 5.2 percent of GDP in 2023, is ex- in earthquake related spending. pected to remain around 5 percent in 2024 as expenditures rose and revenues remained weak alongside slowing growth. General The poverty rate declined from 7.6 percent to 5.7 percent between public debt-to-GDP remains at 25.6 percent as of Q3-2024. 2021 and 2022, continuing the downward trend from 2019, and is projected to further decline to 4.9 percent in 2025. Wage income, Financial markets experienced significant pressure following the boosted by minimum wage increases (30 percent in 2025) along- detention of Istanbul Mayor Ekrem Imamoglu in mid-March, who is side strong labor market performance, is expected to continue to the likely opposition presidential candidate. The credit default swap be the primary driving force of poverty reduction. However, giv- (CDS) premium was around 250 until mid-March but increased to en high broad unemployment rates and informality, individuals ex- above 300 since then. Net reserves had increased to US$65b ex- cluded from labor markets may not benefit from growth. Well-tar- cluding swaps in February (from –US$46b in February 2024) but de- geted and flexible social protection programs are needed to shield creased to US$38b as of end-March, as the CBRT intervened heav- this group from the impacts of high inflation. ily to stabilize the exchange rate. As of end-March, the lira depreci- ated by around 4 percent, and the stock market declined by 9 per- Risks remain tilted to the downside with significant uncertainty cent. The economic situation appears to have stabilized. to the forecasts. Domestically, private consumption remains robust, potentially delaying the adjustment process. Continued TL real ap- preciation, while essential for disinflation, could weigh on external Outlook demand. The delay of fiscal consolidation—particularly on the ex- penditure side—and slow progress on structural reforms could fur- Economic growth in 2025 is expected to remain broadly stable at ther stall disinflation. There may be constraints to political support 3.1 percent, underpinned by the tight monetary stance, anticipated for tight monetary and fiscal policies required to bring inflation to fiscal tightening, and subdued global growth due to heightened un- the mid-term target (5 percent). Externally, while lower commodity certainty, before strengthening to 3.6 percent in 2026 and 4.2 per- prices, notably oil prices, pose upside risks, enhanced global eco- cent in 2027. Disinflation is projected to continue gradually, driven nomic uncertainty poses negative risks to Türkiye’s growth outlook. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.5 5.1 3.2 3.1 3.6 4.2 Private consumption 18.9 13.6 3.7 3.6 4.0 4.3 Government consumption 4.2 2.4 1.2 1.3 1.4 1.5 Gross fixed capital investment 1.3 8.4 3.9 1.1 2.1 3.2 Exports, goods and services 9.9 -2.8 0.9 1.6 2.1 2.8 Imports, goods and services 8.6 11.8 -4.1 2.1 2.5 3.1 Real GDP growth, at constant factor prices 6.2 4.2 3.2 3.1 3.6 4.2 Agriculture 1.3 0.2 3.9 1.2 1.3 1.5 Industry -0.6 2.7 0.5 1.7 2.4 3.1 Services 10.1 5.8 3.2 3.9 4.3 4.8 Employment rate (% of working-age population, 15 years+) 47.5 48.2 48.4 48.5 48.6 48.7 Inflation (consumer price index) 72.3 53.9 58.5 35.7 22.1 14.8 Current account balance (% of GDP) -5.1 -3.6 -0.8 -1.7 -2.1 -2.4 Net foreign direct investment inflow (% of GDP) 1.0 0.4 0.4 0.6 0.7 0.8 Fiscal balance (% of GDP) -0.8 -5.2 -5.0 -4.2 -3.6 -3.4 Revenues (% of GDP) 27.8 30.3 31.4 31.5 31.9 32.0 Debt (% of GDP) 30.8 29.3 27.1 28.1 29.2 30.4 Primary balance (% of GDP) 0.5 -3.6 -2.2 -0.7 0.3 0.9 1,2 International poverty rate ($2.15 in 2017 PPP) 0.2 0.2 0.2 0.2 0.2 0.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.8 0.7 0.7 0.7 0.6 0.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 5.7 5.4 5.2 4.9 4.7 4.4 GHG emissions growth (mtCO2e) -6.2 -2.7 0.8 4.3 6.0 4.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2019-SILC-C, 2022-SILC-C, and 2023-SILC-C. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using point-to-point elasticity (2018-2021) with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 81 This outlook reflects information available as of April 10, 2025. UKRAINE Population Poverty million .. .. 1 2 Life expectancy at birth School enrollment Growth slowed to 2.9 percent in 2024 and is projected at 2 per- years primary (% gross) cent in 2025. This reflects the continued economic impact of hostilities through damage to energy capacity, binding labor 68.6 92.8 3 shortages and a closing output gap. High external financing GDP GDP per capita inflows and prudent monetary policy have sustained macro- current US$, billion current US$ economic stability. The indirect effects of global trade uncer- tainty could impact growth from 2026. Poverty and inequali- 190.8 .. Sources: WDI, MFMod, and official data. 1/ 2022. 2/ 2022. 3/ 2024. ty have risen, reflecting the social impact of hostilities. Going forward, accelerating growth will require a restoration of Key conditions and challenges the capital stock (the RDNA4 estimates reconstruction needs at US$524 billion for 10 years), policies to encourage productivity in- As Russia’s invasion enters the fourth year, the economy main- crease, reintegration of returnees and veterans into the workforce, tains its wartime equilibrium, characterized by high government and efforts to strengthen domestic revenues. Higher growth is spending on defense, and high external financing inflows that needed for Ukraine to cope with competition and market forces help manage the resulting fiscal and external imbalances. This after an eventual EU accession, achieve economic self-sufficiency, approach, while dependent on an average of about US$40 billion and ensure debt sustainability. of external financing flows a year, has proven effective in main- taining macroeconomic stability and generating modest growth. The IMF program, a key anchor for donor financing assurances Recent developments until 2027, remains on track. After growing by 5.5 percent in 2023—boosted by a strong harvest Headwinds to the current economic model are rising: On the and the reopening of the Black Sea corridor—Ukraine’s economy growth side, Ukraine’s energy capacity is heavily diminished. The expanded by 6.5 percent in Q1 and 3.7 percent in Q2 of 2024. How- labor market is tight due to labor shortages and labor market ever, large-scale infrastructure attacks from May 2024 caused en- mismatches, leading to wages rising at rates above inflation . On ergy shortages and disrupted activity. Quick repairs and policies the financing side, while Ukraine has secured commitments suf- prioritizing electricity for critical sectors prevented a contraction, ficient to meet its needs until 2027 (under the baseline scenario but growth slowed from Q3 leading to an overall annual GDP that active hostilities cease from late 2025), disruptions to financ- growth of 2.9 percent. ing flows and higher than expected military spending could open a financing gap. Indirect impacts of global trade policy shifts also The fiscal deficit stood at 23.1 percent of GDP in 2024, with defense expose export vulnerabilities. spending of 30.2 percent of GDP. Modest revenue efforts improved FIGURE 1 / Quarterly GDP growth, year-over-year FIGURE 2 / Wages and consumer price index (CPI) Percent Index value (2021=100) 30 220 20 19.2 200 9.6 10 6.3 6.5 6.2 4.7 4.0 2.9 2.2 180 0 -2.3 -0.1 160 -10 -10.3 140 -20 -14.6 -30 120 -30.6 -30.8 -40 -36.6 100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021 2022 2023 2024 CPI Aggregate wages 2021 2022 2023 2024 Wholesale wages IT wages Sources: State Statistics Service and World Bank staff calculations. Sources: State Statistics Service and World Bank staff calculations. 82 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. tax collection, raising tax revenue by 2 percentage points to 34.7 input shortages will increase in 2025, bringing output to near percent of GDP. However, fiscal space for non-military expendi- potential. As a result, growth is projected to slow to 2 per- tures remains constrained. cent in 2025. From 2026, growth is expected to accelerate to 5.2 percent, as tailwinds from an assumed end to hostilities result- Ukraine secured $41.7 billion in external financing in 2024, includ- ing in increased investment, productivity and labor force growth ing $12.5 billion in grants, to cover its fiscal deficit and external balance headwinds from global economic uncertainty that limit debt repayments. Official financing bolstered international re- an exports recovery. serves, which stood at $43.8 billion (five months of projected im- ports) at year-end, while also financing a widening current account The fiscal deficit is projected to remain at around 20 percent deficit of 7 percent of GDP (vs. 5.3 percent in 2023). of GDP in 2025 with revenue as a share of GDP compara- ble to 2024. From 2026, the deficit should narrow, assuming In 2024, inflation rose from 3 percent in April (year-on-year) to 12 per- military spending declines significantly. However, it is likely cent by December, driven by higher energy tariffs, currency depre- to remain above 5 percent of GDP in the medium term ciation, and a weaker harvest. In response, the NBU raised the key due to reconstruction-related expenditures and continued rate from 13 percent in November to 15.5 percent in March 2025. defense needs. The financial sector remains stable, liquid, and continues channel- ing savings into state bonds and increasingly to the private sector. Ukraine’s external financing needs for 2025 are projected at $42.8 billion, expected to be met from concessional sources. In- The poverty rate is estimated to have reached 35.5 percent in 2023, flationary pressures are expected to persist due to labor short- up from 20.6 percent in 2021, driven primarily by lower labor in- ages but will be eased by lower commodity prices. A high ex- come and employment losses. Continued public services, trans- ternal trade deficit, driven by wartime and later reconstruction fers, and rising wages mitigated some negative impacts of the inva- imports, and the impact of global uncertainty on Ukraine’s ex- sion on livelihoods. Inequality increased due to differentiated effects port recovery, will keep the current account in deficit. Given al- of hostilities, with destruction concentrated in Eastern Ukraine. ready continuous social assistance and rising pension payments, improved poverty dynamics will depend on a reactivation of the labor market. Outlook The risks to this outlook are high and reflect the uncertainty re- The outlook assumes the war extends through 2025, with ac- lated to the evolution of active hostilities coupled with increased tive hostilities winding down afterwards. Labor, energy, and global economic uncertainty. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -28.8 5.5 2.9 2.0 5.2 4.5 Private consumption -27.9 4.3 6.8 5.5 7.2 6.5 Government consumption 31.4 9.0 -4.3 -6.2 -14.2 -15.1 Gross fixed capital investment -33.9 65.9 3.5 13.5 25.0 17.0 Exports, goods and services -42.0 -5.9 10.3 4.0 5.8 5.0 Imports, goods and services -17.4 8.9 7.7 8.9 9.7 7.9 Real GDP growth, at constant factor prices -28.8 5.5 2.9 2.0 5.2 4.5 Agriculture -25.2 11.1 -7.3 6.0 3.0 4.0 Industry -42.7 32.8 3.9 1.5 8.0 10.0 Services -24.7 -2.5 4.7 1.5 4.7 2.7 Employment rate (% of working-age population, 15 years+) 49.1 44.7 45.3 46.3 47.3 47.7 Inflation (consumer price index) 26.6 5.1 12.0 8.5 5.0 5.0 Current account balance (% of GDP) 5.1 -5.3 -7.2 -14.8 -11.8 -7.5 Net foreign direct investment inflow (% of GDP) 0.1 -2.6 -2.0 -1.0 -3.8 -4.3 1 Fiscal balance (% of GDP) -15.6 -19.3 -17.2 -19.5 -9.6 -5.4 Revenues (% of GDP) 49.8 54.1 54.1 40.4 43.0 44.2 Debt (% of GDP) 77.8 78.3 87.4 110.5 108.4 103.4 1 Primary balance (% of GDP) -12.5 -15.5 -13.2 -13.9 -5.0 -0.8 GHG emissions growth (mtCO2e) -28.3 -0.3 -3.5 -6.2 -1.4 0.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal Balance and Primary Balance are excluding grants in 2022-2026. Macro Poverty Outlook / April 2025 83 This outlook reflects information available as of April 10, 2025. 1 2 UZBEKISTAN Population Poverty million millions living on less than $6.85/day 36.4 4.8 3 4 Life expectancy at birth School enrollment The economy grew by 6.5 percent in 2024. The fiscal deficit years primary (% gross) improved from 5.5 percent of GDP in 2023 to 3.3 percent in 2024, driven by the increase in the price of energy towards 71.7 93.5 5 6 cost-recovery levels. Poverty rates have continued to de- GDP GDP per capita cline from 13.4 in 2023 to 10.9 percent in 2024 (US$6.85/ current US$, billion current US$ day, 2017PPP). Medium-term growth prospects are posi- tive, assuming the continuation of reforms to boost private 115.3 3169.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. sector growth and job creation. 4/ 2023. 5/ 2024. 6/ 2024. the growth of the private sector. Uzbekistan also needs to re- Key conditions and challenges move trade barriers, both tariff and non-tariff barriers, become a member of the World Trade Organization, and boost workforce Uzbekistan has strived, since 2017, to fundamentally reform its skills, particularly for youth and women. economy by adopting a market-based system with a focus on shared prosperity. Since then, real GDP growth per capita has averaged 3.7 percent, which is above the average for lower Recent developments middle-income countries. Nevertheless, net job creation has grown only by 0.8 percent over the same period, with lim- Real GDP growth increased to 6.5 percent in 2024 (from 6.3 per- ited job security especially among poor households. As the cent in 2023). Real consumption growth accelerated to an ex- working age population is expected to grow by about one pected 8.1 percent (compared to 7.0 percent in 2023). The 13.5 percent per year, to achieve economic growth with higher percent growth in real investment was driven by centralized in- employment, Uzbekistan needs to persevere in its program vestment and foreign direct investment (FDI), with the latter ac- of economic reforms. counting for 30.5 percent of total investment. The current ac- count deficit is expected to narrow from 7.6 percent of GDP in Of particular importance is to liberalize key backbone economic 2023 to 5.5 percent in 2024, aided by a 30 percent remittance sectors (e.g., telecommunications, financial services, transporta- inflows increase. Exports increased by 8.5 percent, with nongold tion, chemicals, trade in raw materials, etc.) and to ensure com- exports increasing by 16.5 percent led by the service, food, and petitive neutrality in the use of State Aid, especially towards inef- chemical sectors, while exports of gold, textiles, and machinery, ficient state-owned enterprises (SOEs). SOEs hold monopoly pow- decreased moderately. Imports grew at an expected rate of 3.3 er in major sectors and dominate competitive sectors where the percent in 2024, driven by natural gas and a moderate reduction private sector could operate, and benefit from several advan- in the import of chemicals and transport equipment, the latter of tages like favorable loans and tax benefits, thereby undermining which was a result of rising domestic production. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 20 25 6 15 5 20 10 4 15 5 3 0 10 2 -5 5 1 -10 2023 2024 2025 2026 2027 0 0 Private consumption Government spending 2021 2022 2023 2024 2025 2026 2027 Investment Net exports Lower middle-income pov. rate Upper middle-income pov. rate Stocks GDP growth Real GDP pc Source: World Bank staff calculations based on official data. Source: World Bank. Notes: See footnotes in table on the next page. 84 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The Uzbek som depreciated by 3.7 percent against the US dollar in employment and growth in household agriculture and business in- 2024 (compared to the 8.4 percent depreciation in 2023). Interna- come mainly drove this reduction in 2024. tional reserves reached US$41.2 billion at the end of 2024, repre- senting 12 months of imports, and a 19 percent increase over the year due to the surge in the price of gold. Outlook In 2024 the budget deficit reached 3.3 percent, compared to 5.5 Uzbekistan is projected to grow by 5.9 percent in 2025, driven by percent in 2023. Revenues remained stable at 25.9 as a share of domestic demand from higher real wages, remittance inflows, and GDP, while expenditures decreased to 29.2 percent (from 31.4 per- investment. The improved trade balance, supported by growth in cent in 2023), driven by the reduction in energy subsidies by 26 per- gold, services, manufactured exports, along with fiscal consolida- cent in nominal terms. tion, is expected to narrow the current account deficit moderately over the medium term. Global trade policy shifts are not expected Headline inflation in 2024 peaked in June at 10.6 percent, to have major impacts but nevertheless increase the uncertainty largely due to essential energy tariff increases; however, histor- on the economic growth outlook. ically low food inflation rates offset the overall impacts and CPI inflation moderated to 9.8 percent in December, but crept up The government is expected to meet its fiscal deficit target of 3 per- to 10.1 percent again by February 2025. An interest rate cut by cent of GDP in 2025, as it continues its fiscal consolidation includ- 50 basis points to 13.5 percent in July 2024 was offset by an ing an additional round of energy subsidy reductions announced equivalent 50 basis points increase in March 2025 as inflation for mid-2025. remains elevated. Headline inflation is projected to decline to 9 percent in 2025 and In 2024, positive real interest rates boosted household sav- gradually approach the inflation target of 5 percent in 2027. ings growth by 43 percent in nominal terms. Nominal cred- it growth dropped to 13.8 percent in December 2024 from The government is expected to adhere to its borrowing limits of 22.9 percent in December 2023 due to tighter Central Bank US$5.5 billion, with public debt decreasing below 33 percent of regulations on high-risk lending. The banking sector overall GDP by 2027. remains well-capitalized, with non-performing loans (NPLs) rising slightly from 3.5 percent to 3.9 percent over the same The downside risks to this outlook include uncertainty arising from period, but the level varies significantly across banks, and global trade measures. Further downside risks include further de- not all the banks have achieved full compliance with IFRS terioration in Russia’s economic performance, increased volatility reporting standards. in commodity prices, rising food inflation compounding the 2025 energy tariff increases. Upside risks include higher global gold and The upper middle-income poverty rate declined from 13.4 percent copper prices, and faster productivity growth and FDI from ongoing in 2023 to 10.9 percent in 2024 (US$6.85/day, 2017PPP). Increased structural reforms. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.0 6.3 6.5 5.9 5.9 5.8 Private consumption 11.5 7.0 8.1 6.2 6.1 6.0 Government consumption 3.5 1.4 1.1 1.0 1.0 1.0 Gross fixed capital investment -0.3 23.4 13.5 7.4 8.0 8.9 Exports, goods and services 24.6 17.3 8.5 9.0 11.7 11.8 Imports, goods and services 13.5 15.3 3.3 15.0 16.6 16.8 Real GDP growth, at constant factor prices 6.0 6.3 6.5 5.9 5.9 5.8 Agriculture 3.6 4.1 3.1 3.4 3.7 4.0 Industry 5.6 6.2 7.3 6.5 6.6 6.6 Services 7.5 7.5 7.8 6.8 6.5 6.2 Employment rate (% of working-age population, 15 years+) 53.6 53.7 53.7 53.7 53.7 53.7 Inflation (consumer price index) 11.4 10.0 9.6 8.9 7.0 5.4 Current account balance (% of GDP) -3.5 -7.6 -5.5 -5.2 -4.9 -4.8 Net foreign direct investment inflow (% of GDP) 3.2 2.4 2.3 2.2 2.3 2.7 Fiscal balance (% of GDP) -4.0 -5.5 -3.3 -3.0 -3.0 -3.0 Revenues (% of GDP) 27.7 25.9 25.9 25.6 25.8 25.7 Debt (% of GDP) 25.4 36.5 33.4 33.3 33.2 32.6 Primary balance (% of GDP) -3.5 -5.3 -2.3 -2.4 -2.5 -2.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 5.0 4.5 4.3 4.2 4.1 4.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 17.3 13.4 10.9 9.1 7.6 6.3 GHG emissions growth (mtCO2e) 3.2 4.0 4.6 4.5 4.7 4.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on ECAPOV harmonization, using 2021-HBS and 2023-HBS. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using average elasticity (2021-2023) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 85 Argentina Guyana Bahamas, The Haiti Barbados Honduras Belize Jamaica Bolivia Mexico Brazil Nicaragua Chile Panama Colombia Paraguay Costa Rica Peru Dominica Saint Lucia Dominican Republic Saint Vincent and the Grenadines Ecuador Suriname El Salvador Trinidad and Tobago Grenada Uruguay Guatemala Latin America and the Caribbean Macro Poverty Outlook / April 2025 87 This outlook reflects information available as of April 10, 2025. 1 2 ARGENTINA Population Poverty million millions living on less than $6.85/day 45.7 4.0 3 4 Life expectancy at birth School enrollment Substantial progress has been achieved in addressing years primary (% gross) macroeconomic imbalances. Inflation is decelerating, the twin deficits have been eliminated, economic activity is 76.1 108.7 5 6 recovering, and the Central Bank’s balance sheet is gradually GDP GDP per capita strengthening. Real GDP is projected to grow by 5.5 percent current US$, billion current US$ in 2025. Poverty is estimated at 13.3 percent by end-2024. However, balancing inflation reduction with the removal of 641.4 14037.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. exchange rate and capital controls poses significant risks. 4/ 2022. 5/ 2024. 6/ 2024. than that of many regional peers (estimated at 13.3 percent in 2023 Key conditions and challenges under the international poverty line of $6.85 per day, 2017 PPP), it has been rising in recent years, unlike most of Latin America. Argentina boasts vast natural resources, a highly skilled workforce, and strong comparative advantages in agroindustry, as well as select- ed manufacturing and service sectors. Despite this potential, the Recent developments country has faced recurring macroeconomic crises over the past decades. Weak macroeconomic management, primarily driven by The stabilization program has delivered remarkable results. Real the monetary financing of fiscal deficits, has led to persistently high GDP contracted by 1.8 percent in 2024, but economic activity be- inflation, capital and exchange rate controls, and mounting debt. gan to rebound in the second half of 2024, driven by revived investment and private consumption. Month-on-month inflation In December 2023, authorities launched an ambitious macroeco- decelerated from 25 percent in December 2023 to 2.4 percent nomic stabilization program to eliminate the fiscal deficit and, con- in February 2025. Large spending cuts helped reverse an overall sequently, its monetary financing. The program also sought to cor- fiscal deficit of 4.6 percent of GDP in 2023 into an estimated sur- rect relative price misalignments, strengthen the Central Bank’s plus of 0.7 percent of GDP in 2024. Accordingly, sovereign risk balance sheet, and deregulate the economy. premium declined from 2,000 basis points (bps) in end-2023 to around 750 bps in February 2025. To strengthen the business environment, the government enacted a special regime for large investments, lowered tariffs, eliminated A 55 percent devaluation of the peso in December 2023, followed import licenses, and reduced export taxes. by a 2 percent monthly crawling peg in 2024 (reduced to 1 percent in February 2025), anchored inflation expectations and significantly Balancing structural reforms while protecting the most vulnerable narrowed the exchange rate premium. Initially driven by the de- remains a challenge. Although Argentina’s poverty rate is lower valuation and import payment management—and later by the tax FIGURE 1 / Central government primary balance and monthly CPI FIGURE 2 / Actual and projected poverty rates and real GDP per inflation capita Percent of GDP Percent Poverty rate (%) Real GDP per capita (constant LCU) 2.5 30 18 20000 2.0 18000 16 1.5 25 14 16000 1.0 20 14000 0.5 12 12000 0.0 10 15 10000 -0.5 8 8000 -1.0 6 10 6000 -1.5 4 4000 -2.0 5 2 2000 -2.5 -3.0 0 0 0 Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Apr-24 Jul-24 Oct-24 Jan-25 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Primary balance (lhs) Monthly inflation (rhs) Upper middle-income pov. rate Real GDP pc Sources: National Institute of Statistics and Censuses (INDEC), and Ministry Source: World Bank. Notes: See footnotes in table on the next page. of Economy. 88 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. amnesty—the Central Bank purchased over US$23bn. However, reforms. Disinflation is expected to continue, supported by con- net reserves only improved modestly, from -US$11bn in December tinued fiscal discipline and tighter monetary policies. 2023 to an estimated -US$6bn in February 2025, due to debt pay- ments to bondholders and multilateral institutions, as well as Cen- Fiscal balance is expected to remain the cornerstone of the eco- tral Bank interventions in the parallel exchange market. The cur- nomic program. The federal government's primary fiscal surplus rent account surplus is estimated at 1.0 percent of GDP in 2024. By is projected at 1.3 percent of GDP in 2025 and increase to 2.5 December 2024, however, the inflation and the exchange rate-peg percent by 2027, ensuring an overall fiscal balance. Public debt differential led the multilateral real exchange rate to return to lev- is expected to decline from 79 percent of GDP in 2025 to 69 els observed in November 2023. percent in 2027. Monetary policy initially relied on negative real interest rates to re- Important gains in reducing the exchange rate premium, coupled duce Central Bank’s remunerated liabilities but later shifted to keep with a credible fiscal and monetary program, are expected to en- the broad monetary base stable at 8 percent of GDP. able a gradual unification of exchange rates. The recovery of the external sector—supported by a growing trade surplus and finan- Poverty peaked at 18 percent of the population during H1 2024 cial inflows, including debt issuance and multilateral support—will (international poverty line of US$6.85 per day, 2017 PPP) up from help rebuild foreign reserves. 13.3 percent in H2 2023. However, declining inflation and ex- panded social transfer programs helped lower poverty to 13.3 The poverty rate is projected to decline to 12.7 percent by 2025, percent in H2 2024. While real wages are recovering, household as real wages grow and the social safety net system continues sup- incomes remain fragile. From November 2023 to November 2024, porting the most vulnerable populations. 186,000 formal job losses—mostly in the private sector—pushed many workers into informal employment. Unemployment rose The outlook remains subject to significant downside risks. External from 5.7 percent in 2023 to 7.7 percent in Q2 2024, stabilizing at threats include commodity price fluctuations, adverse climate con- 6.9 percent in Q3 2024. ditions, and tighter global monetary policies. Domestic vulnerabil- ities stem from a weaker-than-expected economic recovery and limited legislative support for reforms. Balancing inflation control Outlook with the gradual removal of exchange rate controls presents con- siderable challenges. Furthermore, a slower decline in the sover- Real GDP is projected to rebound to 5.5 percent in 2025 and eign risk premium could delay Argentina’s re-entry into global cap- reach 4.0 percent by 2027, driven by investments in energy (oil ital markets, a crucial step for managing foreign currency debt and gas), agriculture and mining exports, and market-oriented obligations starting in 2026. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.3 -1.6 -1.8 5.5 4.5 4.0 Private consumption 9.4 1.0 -3.3 3.5 2.6 2.5 Government consumption 3.0 1.5 -7.5 5.5 3.5 1.1 Gross fixed capital investment 11.2 -2.0 -18.2 17.5 8.8 6.8 Exports, goods and services 4.6 -7.5 19.8 3.8 5.2 4.6 Imports, goods and services 17.8 1.7 -11.8 10.2 4.4 2.6 Real GDP growth, at constant factor prices 5.1 -1.5 -1.8 5.5 4.5 4.0 Agriculture -2.8 -22.9 24.0 -2.1 3.5 2.2 Industry 5.6 -0.2 -5.8 4.8 4.0 4.1 Services 6.0 0.8 -2.6 6.9 4.9 4.2 Employment rate (% of working-age population, 15 years+) 56.4 56.6 56.6 56.7 56.8 56.9 Inflation (private consumption deflator) 69.9 131.1 228.6 36.0 14.5 9.4 Current account balance (% of GDP) -0.6 -3.2 1.0 -0.4 -0.4 0.0 Net foreign direct investment inflow (% of GDP) 2.1 3.2 1.4 0.8 1.3 1.1 1 Fiscal balance (% of GDP) -4.7 -4.6 0.7 0.5 0.9 1.4 Revenues (% of GDP) 34.2 34.0 33.1 34.0 34.8 34.8 1 Debt (% of GDP) 89.7 174.3 84.8 78.9 74.6 68.8 1 Primary balance (% of GDP) -2.7 -2.7 2.5 2.0 3.2 3.7 2,3 International poverty rate ($2.15 in 2017 PPP) 0.6 0.5 0.5 0.5 0.5 0.5 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.5 2.6 2.6 2.5 2.4 2.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 10.9 13.3 13.3 12.7 12.4 12.2 GHG emissions growth (mtCO2e) 2.9 -3.3 -2.2 2.8 2.5 2.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal data refer to the general government. 2/ Calculations based on SEDLAC harmonization, using 2023-EPHC-S2. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 3/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 89 This outlook reflects information available as of April 10, 2025. 1 THE BAHAMAS Population Poverty million 0.4 .. 2 3 Life expectancy at birth School enrollment The Bahamas’ economy has rebounded to pre-pandemic years primary (% gross) levels thanks to robust tourism. Despite limited diversification and external vulnerabilities, the country is making significant 74.4 77.9 4 5 progress toward economic stability. The primary surplus GDP GDP per capita achieved in 2024 helped reduce public debt. Although growth current US$, billion current US$ may moderate, fiscal consolidation and resilience efforts should persist. The Bahamas needs to navigate global uncer- 14.9 37022.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. tainties while maintaining stability and reducing poverty. Key conditions and challenges Recent developments The Bahamas is a small island state, highly dependent on Real GDP grew by an estimated 1.9 percent in 2024, compared tourism, particularly from the United States, Canada, and the to 2.6 percent in 2023. Tourism was the main driver of growth, United Kingdom. Although economic activity has rebounded to though it was tempered by limited accommodation capacity and pre-pandemic levels, growth remains limited by the economy’s a normalization in air arrivals. Cruise ship calls increased by ap- small size, a lack of diversification, high import dependence, proximately 20 percent in 2024, boosting total arrivals by 16 per- hotel infrastructure capacity limits, vulnerability to extreme cent and total room nights stays by 6 percent. Labor force par- weather and external shocks, skill shortages, and limited fiscal ticipation returned to pre-pandemic levels, reaching 73.4 percent space. The country also faces elevated public debt levels and (69.8 for women and 77.4 percent for men) in 2024Q2. However, significant gross financing needs. The Central Bank has main- methodological changes in the labor force survey prevent com- tained a strict 1:1 peg between the Bahamian dollar and the parisons with previous years. Unemployment stood at 8.7 per- U.S. dollar (USD) since 1973. cent in the first half of the year, with youth unemployment at 19.6 percent in 2024Q2. Notably, 78 percent of the unemployed As of 2013 (the most recent data), 12.8 percent of the population have at least completed secondary education and 15.6 percent lived below the national poverty line, and the Gini coefficient was hold a tertiary degree. The high percentage of unemployed edu- 41.1, surpassing the World Bank’s high inequality threshold of cated individuals and employed youth lacking field-specific train- 40. The cost of a healthy diet in 2022 was higher than the Latin ing may indicate a misalignment between education, training, American average and has been increasing since 2017, although and job opportunities. food insecurity was low. In 2022, The Bahamas ranked 57th in the Human Development Index with a value of 0.82, matching its Fiscal adjustment was supported by improved tax compliance, Caribbean peers and remaining stable since 2013. cyclical revenue rebound, and expenditure containment. The FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Fiscal balance and public debt GDP growth Percent, percentage points Percent of GDP Percent of GDP 20 100 6 4 15 80 2 10 60 0 5 40 -2 0 -4 20 -5 -6 2021 2022 2023 2024e 2025f 2026f 2027f 0 -8 Agriculture Industry 2021 2022 2023 2024e 2025f 2026f 2027f Services Net taxes on production Real GDP growth Debt (lhs) Fiscal balance Primary balance Source: World Bank. Source: World Bank. 90 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. government achieved a primary surplus of 2.9 percent of GDP and innovation in agriculture, could further reduce economic risks in FY2023/24, up from 0.3 percent in FY2022/23. The overall for the poor. deficit contracted to 1.3 percent of GDP from 3.8 percent in FY2022/23, due to a 7.7 percent increase in revenues and a 3.7 decrease in expenditures. Consequently, central gov- Outlook ernment public debt decreased to 84.0 percent of GDP and external debt to 34.6 percent. The current account deficit GDP growth is expected to decelerate to 1.1 percent in 2025, 1.2 widened to 9.2 percent of GDP mainly because of a deteri- percent in 2026, and 1.3 percent in 2027, aligning with its long-term oration in the trade balance. It has been financed primarily potential growth rate. The economy will continue to rely on strong through government external borrowing and foreign direct tourism activity in 2025, especially on cruise ship arrivals, and relat- investments. Gross international reserves stood at US$ 2.6bn ed investment projects. Inflation is expected to converge to 2 per- at the end of 2024, covering 4.4 months of imports. Credit cent in the medium-to-long term. Fiscal consolidation is set to con- to the private sector grew by 5.5 percent in 2024, exceed- tinue, with the fiscal balance turning to surplus in FY2025/26 and ing the expansion of deposits, while the share of loans that the primary surplus remaining above 4.0 percent of GDP due to were in arrears or non-performing improved to 2.6 and 5.5 implementation of tax reforms and further containment of expen- percent, respectively. ditures. The current account deficit is expected to improve slowly due to the stronger performance of the tourism sector, while the Inflation moderated significantly in 2024, after averaging 3.1 per- debt-to-GDP is expected to continue its downward trend. In the cent in 2023, and has been negative since July. Hotel and restau- baseline scenario, the Central Bank is set to maintain, to the extent rant prices fell by 2.6 percent annually, reflecting internation- allowed by the currency peg, an accommodative policy stance. al competitive pressures. With the currency peg limiting discre- tionary monetary policy, domestic interest rates are closely fol- Risks to the outlook include uncertainty in trade policy that could lowing the U.S. Federal Reserve’s policies. The year-on-year in- impact investment and growth and potential global economic and flation rate is estimated at -0.2 percent in 2024, with average financial shocks. Extreme weather events and geopolitical conflicts annual inflation at 0.4 percent. The decline in inflation was also could impact global commodity prices, raise inflation, and disrupt driven by lower food and beverage, gasoline, and diesel prices. food supply chains. Additionally, weaker-than-expected growth in The government's effort to strengthen resilience to climate haz- advanced economies could reduce tourist arrivals. All of which would ards in food supply chains, through enhanced local production place additional pressure on the welfare of the most vulnerable. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 10.8 2.6 1.9 1.1 1.2 1.3 Private consumption 2.4 8.0 0.6 1.6 0.9 1.2 Government consumption 12.8 4.5 3.7 1.7 1.5 1.5 Gross fixed capital investment -5.6 4.5 2.0 4.9 1.5 2.2 Exports, goods and services 43.1 4.5 0.1 0.3 1.2 1.4 Imports, goods and services -2.2 10.7 2.3 0.2 0.9 2.0 Real GDP growth, at constant factor prices 13.6 5.0 1.9 1.1 1.2 1.3 Agriculture -0.4 26.9 0.1 0.7 1.3 1.4 Industry -11.7 10.3 9.5 2.7 2.7 2.7 Services 16.9 4.3 1.1 0.9 1.0 1.1 Employment rate (% of working-age population, 15 years+) 64.6 65.2 65.2 65.2 65.2 65.2 Inflation (consumer price index) 5.6 3.1 0.4 1.0 1.6 1.9 Current account balance (% of GDP) -8.0 -6.4 -9.2 -9.2 -8.5 -7.6 Net foreign direct investment inflow (% of GDP) 2.4 2.6 3.2 3.2 3.2 3.0 1 Fiscal balance (% of GDP) -3.8 -1.3 -1.1 0.2 0.4 0.6 Revenues (% of GDP) 20.4 21.1 22.4 23.4 23.4 23.4 1 Debt (% of GDP) 89.8 84.3 84.0 78.7 76.2 75.2 1 Primary balance (% of GDP) 0.3 2.9 3.3 4.6 4.8 4.8 GHG emissions growth (mtCO2e) 6.6 3.6 1.4 1.2 1.5 1.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal balances are reported in fiscal years (July 1st -June 30th). Macro Poverty Outlook / April 2025 91 This outlook reflects information available as of April 10, 2025. 1 2 BARBADOS Population Poverty thousand thousands living on less than $6.85/ day 282.5 30.9 3 4 Barbados recorded three years of robust economic growth Life expectancy at birth School enrollment years primary (% gross) post-pandemic, as tourism rebounded. However, the econo- my remains small, dependent on tourism, and vulnerable to 77.7 93.4 natural disasters. Despite following a declining path, public 5 6 debt remains high, and debt service reduces fiscal space. The GDP GDP per capita current US$, billion current US$ government is committed to the Barbados Economic Recov- ery and Transformation (BERT) 2022 plan to reduce debt, 7.2 25365.8 promote green energy, and enhance competitiveness. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2016 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. challenges given increased spending on old-age pensions Key conditions and challenges and Barbados’ aging population. Barbados faces several challenges as a small island state with an economy reliant on tourism and imports, vulnerable to ex- Recent developments treme weather and external financial shocks. High public debt level, though decreasing, leads to high debt service and re- Real GDP is estimated to have expanded by 3.8 percent in duced fiscal space. The government is committed to imple- 2024, compared to 4.1 percent in 2023. Growth was robust menting the BERT 2022 plan which aims to reduce public debt across sectors, especially tourism, business services, construc- to about 60 percent of GDP by 2035/36, promote green energy, tion, and manufacturing, although agriculture contracted due diversify the economy, enhance competitiveness, invest in edu- to adverse weather conditions. Increased airline capacity and cation and health, provide affordable housing, and strengthen international events, contributed to a 10.7 percent rise in social safety nets. tourist long-stay arrivals and higher hotels’ earnings. Cruise passenger arrivals surged by 40.8 percent in 2024, with a 14.1 In 2016/17, 11.1 percent of Barbadians lived below the interna- percent increase in cruise calls. Credit to the non-financial pri- tional upper middle-income country poverty line of $6.85 2017 vate sector increased by 4.4 percent in 2024, led by real estate PPP per day. Poverty was higher among women, girls, and and professional services. people in female-headed or larger households. As of 2022, the National Assistance Program (NAP)—the Barbados Wel- The average consumer price index inflation rate decreased to 2.3 fare Department’s main social assistance program—reached percent in 2024 from 5.0 percent in 2023, supported by lower in- around 6,500 households, or around 6 percent of house- ternational commodity prices and receding domestic inflation. The holds, with cash assistance. The National Insurance Scheme fiscal deficit for FY23/24 stood at 1.6 percent of GDP, with a (NIS), which provides social insurance, faces longer-term primary surplus of 3.8 percent. Public debt fell to 100.3 percent FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Fiscal balance and public debt GDP growth Percent, percentage points Percent of GDP Percent of GDP 20 140 6 15 120 4 100 10 2 80 5 0 60 0 -2 40 20 -4 -5 2021 2022 2023 2024e 2025f 2026f 2027f 0 -6 Agriculture Industry 2021 2022 2023 2024e 2025f 2026f 2027f Services Net taxes on production Real GDP growth Debt (lhs) Fiscal balance Primary balance Source: World Bank. Source: World Bank. 92 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. of GDP, while external debt service increased 0.3 percentage points to 3.0 percent of GDP. In the first three quarters of Outlook FY24/25, the government achieved a primary surplus of 5.3 percent of GDP, due to increased corporate tax revenues, fol- GDP growth is expected to decelerate to 2.8 percent in 2025, 2.0 lowing the November 2023 tax reform, with an overall surplus percent in 2026, and 1.7 percent in 2027. The economy is expected of 1.5 percent of GDP. to benefit from significant tourism activity in 2025, with positive spillovers to other sectors. The government continues to invest in The trade deficit widened as imports rose by 1.9 percent year-on- renewable energy projects, sustainable tourism, and disaster pre- year and exports fell by 0.3 percent. The services surplus widened paredness, which are crucial for sustainable and inclusive growth. due to higher tourism receipts while higher interest payments on debt worsened the income account deficit. The current account Inflation is expected to stabilize around its historical average of 2.4 deficit narrowed to 5.9 percent of GDP, compared to 8.6 percent in percent due to the easing of global commodity prices and lower 2023. International gross reserves reached a record US$ 3.1 billion, domestic service prices. Fiscal consolidation is set to continue, with covering 31.2 weeks of imports. the government planning to increase revenues through tax re- forms and improve fiscal institutions. A fiscal surplus is expected in In June 2024, the unemployment rate was 7.7 percent, down 2026, and the primary surplus is expected to remain above 4.0 per- from 8.5 percent in June 2023, despite an increase in the labor cent of GDP. The current account deficit is projected to decrease to force participation rate from 62.6 percent to 63.5 percent over remain close to 6 percent of GDP while debt-to-GDP is expected to the same period. Employment growth was strongest in the man- fall below 90 percent by 2027. With slower growth, poverty reduc- ufacturing and education sectors, while wholesale and retail tion is also forecast to slow, with the share of Barbadians living on trade and accommodation and food services remained Barbados’ less than $6.85 2017 PPP per day decreasing from 9.2 percent in largest employers. 2025 to 8.5 percent in 2027. With robust growth and contained inflation, poverty has likely de- However, risks to the outlook persist, including uncertainty in trade creased in the last five years. The share of Barbadians living on less policy that could impact investment and growth, potential global than $6.85 2017 PPP per day is estimated to have dropped from economic and financial shocks, extreme weather events, and es- 15.5 percent in 2021 to 9.2 percent in 2025, reflecting the country’s calating conflicts in other parts of the world, which could impact post-pandemic recovery. tourist arrivals and raise inflation. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 17.8 4.1 3.8 2.8 2.0 1.7 Real GDP growth, at constant factor prices 16.3 4.2 3.8 2.8 2.0 1.7 Agriculture -18.0 9.4 -4.7 2.1 2.3 1.6 Industry 8.5 -1.3 4.0 2.6 2.1 1.8 Services 19.0 5.1 4.0 2.8 2.0 1.6 Employment rate (% of working-age population, 15 years+) 57.6 57.4 57.3 57.2 57.1 57.0 Inflation (consumer price index) 4.9 5.0 2.3 2.4 2.4 2.4 Current account balance (% of GDP) -9.4 -8.6 -5.9 -6.2 -5.8 -5.9 Fiscal balance (% of GDP) 0.2 -3.7 -1.6 -0.2 0.2 0.4 Revenues (% of GDP) 26.8 25.1 26.6 26.1 26.1 26.1 Debt (% of GDP) 113.8 110.7 100.3 95.7 91.1 86.7 Primary balance (% of GDP) 4.5 3.8 3.8 4.3 4.4 4.3 1,2 International poverty rate ($2.15 in 2017 PPP) 1.2 1.1 1.1 1.1 1.1 1.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.8 2.3 2.2 1.9 1.8 1.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 11.3 10.3 9.8 9.2 8.8 8.5 GHG emissions growth (mtCO2e) 4.6 0.7 0.5 0.4 0.5 0.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on CONLAC harmonization, using 2016-BSLC. Actual data: 2016. Nowcast: 2017-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 93 This outlook reflects information available as of April 10, 2025. 1 2 BELIZE Population Poverty thousand thousands living on less than $6.85/ day 412.3 75.6 3 4 After recovering from the COVID-19 pandemic with robust Life expectancy at birth School enrollment years primary (% gross) growth and debt reduction, Belize must tackle long-term structural challenges to reduce poverty and inequality and 71.0 97.0 sustain growth. The economy, reliant on tourism, agriculture, 5 6 and remittances, faces challenges such as limited credit and GDP GDP per capita current US$, billion current US$ inadequate infrastructure. GDP growth reached 5.4 percent in 2024, driven by tourism and construction. However, it is 3.5 8526.8 expected to slow, with risks from global uncertainty. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. population was multidimensionally poor according to Belize’s na- Key conditions and challenges tional definition. Multidimensional poverty rates are higher in rural areas (30.9 percent) compared to urban areas (9.7 percent), with Belize, an upper middle-income country, relies heavily on tourism, the Toledo district experiencing the highest rates (67.9 percent). agriculture, and remittances for foreign exchange. Its economic Poverty is particularly pronounced among children aged zero to 14 health is closely tied to the United States, which is its primary (30.5 percent), households with children (27.2 percent), Belizeans source of tourists and remittances, the main destination for its ex- of Maya descent (56 percent), large households (42.4 percent in ports, and a key investor. Belize's economy is sensitive to energy households with 7+ members), and households with an uneducat- price fluctuations because of its status as a net importer of oil and ed head (36 percent). Extreme weather events have significantly gas and its exchange rate being pegged to the US dollar. Addition- contributed to poverty over the past decades. The high prevalence ally, the country faces significant risks from natural disasters. Be- of informal employment, which disproportionately affects migrants lize has made significant progress in stabilizing the economy by en- and youth, has also been linked with higher poverty rates. hancing fiscal discipline and reducing public debt through debt re- structuring and blue bond issuance. Belize is also improving fiscal management by making its fiscal policy more countercyclical. How- Recent developments ever, the business environment still faces major challenges, includ- ing limited credit availability for the private sector, inadequate in- GDP growth is estimated at 8.2 percent in 2024, up from 1.1 frastructure, skill shortages, and high crime rates. percent in 2023, primarily driven by a surge in tourist arrivals, electricity and water production, and construction. Average infla- Poverty rates had been increasing in the two decades of limited tion was 3.3 percent in 2024, with notable increases in food and growth before the pandemic. Since the peak of the pandemic, beverages (5.6 percent) and restaurants and accommodation (7.4 monetary and multidimensional poverty rates have started to de- percent). The current account deficit widened to 1.5 percent of cline. As of September 2024, approximately 22.1 percent of the GDP in 2024, from 0.6 percent of GDP deficit in 2023, mainly FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 25 16000 20 14000 20 12000 15 15 10000 10 8000 5 10 6000 0 4000 5 -5 2000 2021 2022 2023 2024e 2025f 2026f 2027f 0 0 Agriculture Industry 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Services Net taxes on production International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 94 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. due to a surge in imports. Belize's monetary policy has focused on participating at a rate of 43.6 percent compared to 69.7 percent supporting economic stability and growth, with the exchange rate for men (down from 44.5 and 71.4 percent respectively in 2023). remaining pegged to the US dollar. The Central Bank of Belize has In 2024, 15.0 percent of the population is estimated to live on less maintained adequate international reserves to anchor the curren- than US$6.85/day (2017 PPP). cy peg, covering four months of imports at the end of 2024. Be- lize has achieved and maintained a primary surplus in recent years, supported by improved revenue efforts and expenditure control. Outlook The primary surplus is projected to remain just below 1 percent of GDP, while overall fiscal deficit is expected to remain stable at GDP growth is expected to decelerate to an average 2.5 percent about 1.5 percent of GDP. Revenues are estimated to decline from in the coming years, with inflation decreasing from 2.1 percent in 22.9 percent of GDP in FY2023/24 to 22.5 percent in FY2024/25, 2025 to 1.3 percent in 2027. The primary surplus is projected to while total expenditure is estimated to decline from 24.4 to 24.2 remain just below 1 percent of GDP, while overall fiscal deficit is percent of GDP. expected to remain stable at about 1,5 percent of GDP. Resum- ing principal payments on the Blue Bond after the grace period The financial sector showed some improvement in 2024. The Cen- will further pressure fiscal space. The current account deficit is tral Bank's vigilance and the authorities' efforts to strengthen the expected to increase to about 2.0 percent of GDP in the medium Anti-Money Laundering/Countering the Financing of Terrorism term. The debt-to-GDP ratio will gradually decrease but remain (AML/CFT) framework were positive developments. Domestic above 60 percent. banks maintained strong regulatory capital, and nonperforming loans decreased. However, challenges persist, including pressures In line with expected GDP growth, poverty is expected to decline in specific loan portfolios, increased corporate insolvencies, and over the coming years. By 2027, the poverty rate is expected to tight liquidity in some banks, which continue to constrain real pri- reach 14.1 percent. vate sector credit growth. Risks to the outlook are skewed to the downside. A sharper eco- Positive labor market trends are beneficial for poverty reduc- nomic deceleration in origin countries would translate into few- tion, with unemployment decreasing sharply from 3.9 percent er tourist arrivals and lower growth, while a slower path of fed in September 2023 to 2.1 percent in September 2024. Howev- rate cuts could hamper debt dynamics. Higher than anticipated er, labor force participation remains low at 56.3 percent, and import inflation would increase domestic inflation and widen the gender disparities in labor outcomes remain high, with women current account deficit. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 9.4 1.1 8.2 2.8 2.4 2.3 Private consumption 10.4 1.5 5.7 5.0 3.0 2.0 Government consumption 6.6 5.3 9.4 2.5 2.3 1.1 Gross fixed capital investment 14.6 5.4 4.0 3.4 2.1 2.0 Exports, goods and services 14.3 10.9 1.4 -1.0 1.4 2.3 Imports, goods and services 10.3 -2.4 7.8 1.9 2.1 1.5 Real GDP growth, at constant factor prices 8.2 0.7 8.3 2.8 2.4 2.3 Agriculture 0.1 -6.2 -2.0 6.1 2.4 2.1 Industry -1.2 -2.5 4.8 1.5 2.0 2.3 Services 12.2 2.6 10.5 2.8 2.5 2.3 Employment rate (% of working-age population, 15 years+) 55.3 54.5 54.5 54.4 54.3 54.3 Inflation (consumer price index) 6.3 4.4 3.3 2.1 1.5 1.3 Current account balance (% of GDP) -8.2 -0.6 -1.5 -2.0 -1.9 -1.9 Net foreign direct investment inflow (% of GDP) 4.6 0.4 -2.3 -2.3 -2.3 -2.2 1 Fiscal balance (% of GDP) -0.1 -1.4 -1.4 -1.5 -1.5 -1.5 Revenues (% of GDP) 23.1 22.9 22.5 22.5 22.5 22.5 1 Debt (% of GDP) 70.9 71.2 62.9 62.9 62.4 61.6 1 Primary balance (% of GDP) 1.7 0.7 0.8 0.8 0.9 0.9 2,3 International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.3 0.3 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.2 3.2 2.9 2.8 2.8 2.6 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 16.6 16.6 15.0 14.6 14.2 14.1 GHG emissions growth (mtCO2e) 0.3 0.3 0.2 0.1 0.1 0.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal balances are reported in fiscal years (April 1st -March 31st). 2/ Projection using neutral distribution (2018) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. 3/ Calculations based on SEDLAC harmonization, using 2018-HBS. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. Macro Poverty Outlook / April 2025 95 This outlook reflects information available as of April 10, 2025. 1 2 BOLIVIA Population Poverty million millions living on less than $6.85/day 12.4 1.7 3 4 Life expectancy at birth School enrollment Macroeconomic imbalances and sociopolitical tensions con- years primary (% gross) tinue to weigh on poverty reduction and growth, projected at 1.2 percent in 2025. Declining gas revenues and Bolivia’s 64.9 98.9 5 6 large subsidies have widened fiscal and external pressures. GDP GDP per capita Annual inflation increased to 14.6 percent by March. Bolivia current US$, billion current US$ would benefit from a medium-term strategy to enhance macroeconomic stability and promote private investment. 49.7 4001.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Bolivia suffers from structurally high fiscal deficits, low Subsidies and a fixed exchange rate kept inflation low in past years, growth, dwindling reserves, and a loss of access to inter- but decreasing natural gas output is leading to forex and fuel short- national capital markets. These macroeconomic imbalances ages, a widening parallel exchange rate gap, and declining re- stem from costly subsidies, declining gas production due serves. Inflation increased to 14.6 percent year-on-year in March to insufficient investment, a narrow export base, and a 2025, with food inflation at 25.3 percent (Figure 1). The Govern- weak business environment discouraging private-sector ac- ment continues to resort to ad-hoc measures, including price con- tivity. Progress in poverty reduction has slowed as a result, trols and export restrictions. The fiscal deficit increased from 7.1 and the country now has limited buffers to respond to ex- percent of GDP in 2022 to 10.9 percent in 2023 and an estimated ternal and climate shocks. 11.6 percent in 2024, driven by the declining gas revenues and con- tinuing high subsidies. Given difficulties in obtaining legislative ap- Low job quality is a structural issue in Bolivia, hindering proval for external loans and the limited access to international economic growth and poverty reduction. The ongoing demo- capital markets, the Government increasingly resorts to monetary graphic transition, increasing urbanization, and a more edu- financing, further fueling inflation. Public debt is estimated at 93.0 cated workforce are making it more urgent to generate more percent of GDP in 2024. and better jobs. Current social assistance programs do not effectively support the poor and vulnerable, with benefits Real GDP growth was 3.1 percent in 2023, and it is estimated to not indexed to inflation, and their design limits their ability have slowed to 1.4 percent in 2024, driven by a decrease in capital to respond swiftly to shocks. formation, lower growth in government and private consumption, FIGURE 1 / Inflation FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent (y/y) Poverty rate (%) Real GDP per capita (constant LCU) 30 40 4500 25 35 4000 20 30 3500 3000 15 25 2500 10 20 2000 5 15 1500 0 10 1000 -5 5 500 -10 0 0 2018 2019 2020 2021 2022 2023 2024 2025 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Headline Food Housing Education Upper middle-income pov. rate Real GDP pc Source: Instituto Nacional de Estadística of Bolivia (INE). Source: World Bank. Notes: See footnotes in table on the next page. 96 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. and import contraction. Real per capita household income in 2023 fiscal deficits, projected to continue above 12.0 percent of GDP. surpassed its 2021 levels, resulting in a decline in the poverty rate Given Bolivia’s limited access to external financing and its contin- from 15.2 percent in 2021 ($6.85/day per capita 2017 PPP) to 14.1 ued use of monetary financing, price pressures are high. Inflation percent in 2023. Labor force participation, employment rates, and is expected to increase to 13.0 percent in 2025 and may be further average real labor income stagnated in 2021-23. However, the in- exacerbated as dollar shortages generate import constraints. tegration of a growing working-age population into the labor mar- ket helped boost household income. Old-age pensions contributed Poverty is projected to present a slight upward trend in the medi- to the reduction in poverty, as the number of individuals eligible um term as growth slows, failing to keep pace with population for a non-contributory pension rose, while 40 percent of them re- growth. Given mounting inflationary pressures, the purchasing mained employed. Public transfers declined with the phase-out of power of poor and vulnerable households is at risk of eroding. COVID-19 relief programs. Income growth was more pronounced at the top of the distribution, increasing the Gini index from 40.9 The current account deficit is projected to remain close to -2.7 per- in 2021 to 42.1 in 2023. Per capita growth is projected to decline in cent due to lower natural gas production and export restrictions. 2024, increasing the poverty rate ($6.85/day per capita 2017 PPP) Despite recent contracts with foreign companies, the impact of mo- to 14.6 percent. bilizing foreign and public investment in lithium development and gas exploration is expected to be limited in the short and medium The country's external situation continues to weaken, putting term due to the long investment horizons. pressure on the parallel exchange rate. The current account bal- ance fell to -2.0 percent of GDP in the first three quarters of Depleted macroeconomic buffers and limited scope for reforms 2024, driven by the decrease in gas exports, while international in a fragmented political context expose the economy to both reserves stood at the low level of 1.98 billion dollars in December domestic and external risks, such as climate events and an in- 2024 (2.9 months of imports). creasingly adverse global economic context. Lower-than-previous- ly anticipated prices for oil and gas exports also pose downside risks to fiscal revenues and inflation. A credible medium-term Outlook plan to reduce the fiscal deficit, accumulate reserves, and regain access to international capital markets is critical for igniting new Growth is expected to slow further to 1.2 percent in 2025 as macro- growth and reducing poverty. Fiscal sustainability could be en- economic imbalances, fuel shortages, inflation, and uncertainty hanced by transitioning from universal fuel subsidies to more tar- limit private consumption and overall economic activity. Falling hy- geted support mechanisms, rationalizing public investment, and drocarbon revenues and high subsidy spending continue to widen making public procurement more efficient. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.6 3.1 1.4 1.2 1.1 1.1 Private consumption 3.4 3.2 2.0 1.7 1.6 1.6 Government consumption 3.7 2.4 1.4 0.7 0.5 0.5 Gross fixed capital investment 5.6 5.7 0.4 0.1 0.1 0.1 Exports, goods and services 15.1 -8.8 -5.0 -2.0 0.5 1.5 Imports, goods and services 8.8 -2.5 -6.0 -3.0 0.6 1.5 Real GDP growth, at constant factor prices 3.7 3.1 1.4 1.2 1.1 1.1 Agriculture 3.8 2.7 2.0 2.3 2.3 2.3 Industry 1.0 1.1 0.6 0.6 0.6 0.6 Services 5.7 4.6 1.7 1.3 1.2 1.0 Employment rate (% of working-age population, 15 years+) 75.5 76.0 76.0 76.0 76.0 76.0 Inflation (consumer price index) 1.7 2.6 5.1 13.0 13.5 13.5 Current account balance (% of GDP) 2.1 -2.6 -2.5 -2.6 -2.7 -2.6 Net foreign direct investment inflow (% of GDP) 0.2 0.1 -0.2 -0.1 -0.1 -0.1 Fiscal balance (% of GDP) -7.1 -10.9 -11.3 -12.1 -12.6 -12.8 Revenues (% of GDP) 26.6 26.6 26.0 25.6 25.5 25.5 Debt (% of GDP) 80.1 84.9 93.0 96.0 97.5 98.0 Primary balance (% of GDP) -5.5 -9.3 -9.7 -10.5 -11.0 -11.3 1,2 International poverty rate ($2.15 in 2017 PPP) 2.2 1.8 2.0 2.4 2.5 2.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 5.6 5.0 5.1 5.6 5.9 6.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.9 14.1 14.6 15.0 15.2 15.3 GHG emissions growth (mtCO2e) 1.2 0.4 -0.2 -0.2 -0.1 -0.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-EH. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 97 This outlook reflects information available as of April 10, 2025. 1 2 BRAZIL Population Poverty million millions living on less than $6.85/day 205.3 45.8 3 4 Life expectancy at birth School enrollment GDP grew 3.4 percent in 2024, driven by consumption and years primary (% gross) investment. Growth is expected to slow to 1.8 percent in 2025 amid global headwinds and tighter monetary policy. 73.4 104.0 5 6 Medium-term growth is projected at 2.0 percent, supported GDP GDP per capita by recent reforms. Job and wage growth reduced poverty by current US$, billion current US$ 0.8 percentage points in 2024, but further reforms are need- ed to sustain growth, boost competitiveness, create jobs, 2179.4 10616.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. and reduce inequality. 4/ 2022. 5/ 2024. 6/ 2024. minimum wage increases, is essential for compliance with fiscal Key conditions and challenges rules and targets, improving fiscal policy credibility. A proposed in- come tax reform aimed at broadening the tax base and enhancing Brazil's economic growth has shown resilience, averaging over 3 progressivity would further support fiscal sustainability. percent in the past three years. Strong private consumption, boost- ed by social transfers, was the main driver of demand, while, on the supply side, growth in services and agriculture played a key role. Recent developments The expanding labor market helped reduce poverty and inequality, although the Gini Index remained high at 51.7 percent in 2024. The In 2024, GDP grew 3.4 percent, driven by private consumption sup- recent indirect tax reform is expected to improve productivity, re- ported by a strong labor market, and investment recovery. On duce compliance costs, and remove myriad economic distortions. the supply side, services led growth while industry recovered, and To sustain growth amid demographic changes, further structural agriculture dropped from its record 2023 level. Strong services reforms are needed to enhance productivity, improve business en- demand, higher food prices, and domestic currency depreciation vironment, promote innovation and openness to trade, strengthen drove inflation to 4.8 percent in 2024, exceeding the upper limit learning outcomes, and boost resilience to climate change. of the Central Bank's target range (4.5 percent). This prompted a monetary tightening of 375 basis points since August 2024. The Fiscal sustainability remains a challenge. Budget rigidity and expen- current account deficit increased to 2.8 percent of GDP, driven by diture growth indexation undermine public spending efficiency, increased imports of goods and services, mostly financed by net eroding fiscal space for public investments. With a high and rising foreign direct investment (FDI) of 2.1 percent of GDP. Meanwhile, debt-to-GDP ratio, highly sensitive to negative economic shocks, a driven by shifts in the external environment and fiscal uncertainty, primary fiscal adjustment of 3 percent of GDP is necessary to re- the Real depreciated by 27.9 percent at year-end, despite a slight verse the debt trajectory and rebuild fiscal buffers. Controlling age- rebound in 2025. Reserves remained at 15 percent of GDP, cover- related spending, through reforms like de-indexing pensions from ing 14 months of goods imports. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 12 40 8000 9 35 7000 6 30 6000 3 25 5000 0 20 4000 -3 15 3000 -6 10 2000 -9 5 1000 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 98 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The general government’s primary fiscal deficit narrowed from 2.3 tightening anchors inflation expectations. Medium-term growth is percent in 2023 to 0.3 percent of GDP in 2024, driven by strong rev- expected to stabilize at 2.0 percent, reflecting the impact of ongo- enue growth and reduced expenditures (in 2023 expenditures in- ing structural reforms. The current account deficit is expected to creased due to one-off payments for judicial orders). Public debt narrow, driven by lower imports amid slowing activity, remaining increased from 73.8 percent to 76.5 percent of GDP in 2024 due to covered by net FDI flows. Efforts to curb expenditure growth and higher interest payments. increase tax revenues are projected to improve the primary deficit from 0.1 percent of GDP in 2025 to a surplus of 0.3 percent of GDP The poverty rate fell from 21.7 to 20.9 percent (at the US$6.85 by 2027. Public debt is projected to reach 80.2 percent of GDP by per day, 2017 PPP rate) in 2024, thanks to a strong labor mar- 2027, driven by high interest costs in the short term, underscoring ket. The economy added 2.8 million jobs, bringing unemploy- the need for additional fiscal efforts. Thereafter, debt is projected ment to a record low of 6.2 percent by year-end and lifting to decline slowly, supported by primary surpluses, continued GDP labor force participation. Average real wages rose by 4.8 per- growth and moderating domestic interest rates. cent, above the 3.0 percent real increase in the minimum wage. The minimum wage increase benefited not just low wage work- Poverty reduction is expected to slow due to lack of fiscal space for ers, but also pensioners and social protection recipients, whose increased social spending and reduced growth in services, where benefits are largely set by it. Poverty declined the most in rural 80 percent of the poor are employed. areas, among youth, and black Brazilians (1.3, 0.8, and 0.8 per- centage points, respectively). Macroeconomic risks are tilted to the downside. Resilient con- sumption and faster implementation of structural reforms could result in higher growth. However, lower commodity prices may Outlook compound the potential effects of the ongoing trade tensions. In- creasing interest rates in the US could trigger further depreciation Growth is expected to decrease to 1.8 percent in 2025 as higher and inflation pressures. Domestic risks stem from the challenge interest rates and uncertainty in trade policy weigh on investment to achieve fiscal adjustment and anchor inflation expectations. A and exports. Household consumption is expected to slow due robust financial system, ample foreign reserves, large cash bal- to lower transfers and fading labor market gains. Inflation is ex- ances, a flexible exchange rate, and low foreign-denominated pected to gradually converge to 4.2 percent by 2027, as monetary debt continue to mitigate risks. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 3.0 3.2 3.4 1.8 2.0 2.0 Private consumption 4.1 3.2 4.8 2.0 2.3 2.4 Government consumption 2.1 3.8 1.9 1.6 1.4 1.2 Gross fixed capital investment 1.1 -3.0 7.3 0.6 0.8 0.9 Exports, goods and services 5.7 8.9 2.9 1.5 1.1 0.9 Imports, goods and services 1.0 -1.2 14.7 1.3 1.0 1.0 Real GDP growth, at constant factor prices 3.1 3.4 3.1 1.8 2.0 2.0 Agriculture -1.1 16.3 -3.2 5.0 2.5 2.0 Industry 1.5 1.7 3.3 1.5 1.6 1.8 Services 4.1 2.5 3.8 1.5 2.1 2.1 Employment rate (% of working-age population, 15 years+) 56.6 56.9 58.0 56.7 56.0 55.7 Inflation (consumer price index) 9.3 4.6 4.4 5.4 4.7 4.2 Current account balance (% of GDP) -2.2 -1.2 -2.8 -2.3 -2.1 -2.0 Net foreign direct investment inflow (% of GDP) 2.1 1.7 2.1 2.5 2.5 2.5 Fiscal balance (% of GDP) -4.6 -8.8 -8.4 -7.6 -6.6 -5.7 Revenues (% of GDP) 39.4 37.5 38.8 38.7 38.4 38.3 Debt (% of GDP) 71.7 73.8 76.5 78.8 79.8 80.2 Primary balance (% of GDP) 1.2 -2.3 -0.3 -0.1 0.0 0.3 1,2 International poverty rate ($2.15 in 2017 PPP) 3.5 2.7 2.6 2.6 2.6 2.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 8.4 7.4 7.2 7.1 7.0 6.9 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 23.5 21.7 20.9 20.8 20.6 20.3 GHG emissions growth (mtCO2e) 0.8 -11.7 -13.0 2.1 -2.8 -0.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-PNADC-E1. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 99 This outlook reflects information available as of April 10, 2025. 1 2 CHILE Population Poverty million millions living on less than $6.85/day 20.1 0.9 3 4 Life expectancy at birth School enrollment years primary (% gross) Growth is projected to converge towards potential in 2025. Elevated inflation is expected to persist throughout most 79.5 100.2 5 6 the year but subside by year-end. Poverty and inequality GDP GDP per capita are unlikely to decrease due to the stagnation of real current US$, billion current US$ household incomes. A larger-than-expected deficit in 2024 increased public debt. 330.2 16441.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. 4/ 2022. 5/ 2024. 6/ 2024. non-mining sectors, low dynamism in labor-intensive industries Key conditions and challenges like construction, and rising wage costs. The poverty rate, defined as the share of people living below US$6.85/day per capita (2017 Chile has strong macroeconomic institutions and effectively PPPs), declined to 4.7 percent. Women, youth, and low-skilled managed recent global macroeconomic volatility. However, the workers remain overrepresented among the poor. Informality re- country faces mounting challenges due to low growth, subdued mained high at 26.4 percent in December 2024, down from 27.5 investment, and a decade-long productivity stagnation. Min- percent the previous year, with women disproportionately affected ing is expected to support medium-term growth. On the fiscal at 28.4 percent compared to 24.8 percent for men. front, the government is making additional efforts to achieve its medium-term fiscal balance target, as structural shifts have Inflation decreased to 4.3 percent in 2024 from 7.6 percent in led to revenue shortfalls. Poverty in Chile is the lowest in the 2023 but remained above the Central Bank’s 3.0 percent target. region and has been steadily declining. However, significant re- Inflation spiked into double digits in 2022 before declining. It rose gional disparities persist, and progress in non-monetary indica- again in March 2024 driven by currency depreciation, higher la- tors remains limited. bor costs, and three subsequent adjustments of previously frozen electricity rates. The Central Bank reduced the policy rate from 8.25 to 5.0 percent in 2024, as inflation eased and domestic de- Recent developments mand remained weak. GDP grew by 2.6 percent in 2024, driven by mining exports. In- The current account deficit decreased to 1.5 percent of GDP, driven vestment decreased by 1.4 percent, while consumption grew just by stronger export growth and lower imports amid a depreciated 1.0 percent. Unemployment declined slightly to 8.5 percent from peso. Consequently, national savings rose to 19.5 percent of GDP 8.6 percent in 2023 but remained above the 7.2 percent recorded in the second quarter, up from 18.7 percent last year, fueled by in 2019. Sluggish job creation is attributed to low investment in higher private savings. FIGURE 1 / Fiscal trends: Debt, revenue, and expenditures FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant million LCU) 45 30 12 40 25 10 35 30 20 8 25 15 6 20 15 10 4 10 5 2 5 0 0 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Gross debt Expenditures Revenues Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Chile and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 100 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Consumer and commercial loans experienced negative real annual stronger sales, though cautious investment decisions persist due growth of 2 and 3 percent, respectively, in 2024. Commercial loans, to uncertainty. Poverty and income inequality are estimated to re- which increased in 2020, have since declined by 10 percent (3 per- main around 4.6 percent and 43.0 Gini points in 2025, respectively, cent since 2019). While interest rates have reflected monetary pol- and gradually decrease thereafter. icy cuts, stricter collateral requirements have limited lending, and demand has remained subdued. Short-term cost pressures are expected to keep inflation around 5 percent in early 2025, but medium-term inflationary pressures The Central Government cyclically adjusted fiscal deficit reached should ease, with the monetary policy rate declining over the 3.2 percent of GDP in 2024, exceeding the 1.9 percent target policy horizon. and raising the debt-to-GDP ratio to 42 percent. Weak corporate tax collection, slow domestic demand recovery, and a drop in The current account is expected to deteriorate to 3.6 percent of lithium prices contributed to lower-than-expected revenue. To GDP as lower copper prices and rising import costs will also weigh mitigate the gap, the government implemented cuts totaling 0.6 on the balance. percent of GDP. The latest Public Finance Report (Q4 2024) predicts that the Central In January 2025, Congress approved a pension reform with a 7 Government’s cyclically adjusted deficit will reach 1.6 percent of percent employer contribution and raised the state-backed pen- GDP in 2025, exceeding the 1.1 percent target due to lower tax col- sion, increasing fiscal expenditures by 0.3 percent of GDP by lection and lithium revenues. Efforts to reduce the deficit are ex- 2027. The reform is expected to boost savings by 1.7 percent of pected but not yet reflected in the projections. The 2026 target is a GDP, supporting investment and growth, though it may discourage 0.5 percent deficit, but the government estimates, based on com- formal employment. mitted expenditures and projected cyclically adjusted revenue, it will reach 1.2 percent. The debt-to-GDP ratio is projected to remain around 42.7 percent by 2027, slightly below the 45 percent target. Outlook Current global trade tensions will likely mostly affect Chile indi- Real GDP growth is expected to be 2.1 percent in 2025, driven by rectly given its relatively low exposure to the US market. Chang- a recovery in investment and continued export growth, although ing trade policies and heightened uncertainty could have signif- uncertainty around global trade dynamics could weigh on invest- icant indirect effects on Chile through lower demand for its ex- ment decisions and dampen growth prospects. The investment ports and lower copper prices. Additional external risks include rebound is primarily attributed to reactivated large-scale mining tighter credit conditions, which could hinder investment recovery. projects, positively impacting medium-term investment. Outside Domestic risks arise from political uncertainty ahead of the No- mining, business confidence improved at the end of 2024 due to vember 2025 elections. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.2 0.5 2.6 2.1 2.2 2.1 Private consumption 1.6 -4.9 1.0 2.1 2.2 2.2 Government consumption 6.3 2.2 3.0 1.4 1.9 2.0 Gross fixed capital investment 4.6 -0.1 -1.4 3.7 2.8 2.4 Exports, goods and services 0.8 0.1 6.6 3.1 2.8 2.8 Imports, goods and services 1.3 -10.9 2.5 3.9 3.1 3.1 Real GDP growth, at constant factor prices 2.5 1.4 2.9 2.1 2.2 2.1 Agriculture -0.1 -0.8 5.4 2.3 2.2 2.2 Industry -1.4 2.9 3.3 1.6 1.8 1.8 Services 4.3 0.9 2.6 2.3 2.3 2.2 Employment rate (% of working-age population, 15 years+) 55.0 55.8 56.7 56.7 56.6 56.6 Inflation (consumer price index) 11.6 7.6 4.3 4.6 3.2 3.0 Current account balance (% of GDP) -7.9 -3.1 -1.5 -3.6 -3.9 -3.6 Net foreign direct investment inflow (% of GDP) 1.7 4.6 2.7 2.5 2.5 2.4 Fiscal balance (% of GDP) 1.4 -2.3 -2.5 -3.2 -2.8 -2.6 Revenues (% of GDP) 27.9 25.0 24.0 24.3 24.6 24.5 Debt (% of GDP) 37.7 39.2 41.6 42.4 42.7 42.7 Primary balance (% of GDP) 2.4 -1.2 -1.5 -2.1 -1.7 -1.5 1,2 International poverty rate ($2.15 in 2017 PPP) 0.4 0.5 0.4 0.4 0.4 0.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.9 0.9 0.8 0.8 0.8 0.8 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 4.7 4.9 4.7 4.6 4.5 4.5 GHG emissions growth (mtCO2e) -14.7 -3.6 5.5 4.4 4.7 4.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2022-CASEN. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 101 This outlook reflects information available as of April 10, 2025. 1 2 COLOMBIA Population Poverty million millions living on less than $6.85/day 52.9 16.9 3 4 Life expectancy at birth School enrollment Growth reached 1.7 percent in 2024, driven by private con- years primary (% gross) sumption and modest investment, as inflation eased and in- terest rates fell. While external deficits normalized, the fiscal 73.7 104.8 5 6 deficit widened, debt increased due to weak revenue and GDP GDP per capita rigid spending. Poverty is estimated to have declined slightly current US$, billion current US$ to 31.3 percent, with regional disparities persisting. Growth is projected at 2.4 percent in 2025. Risks include slow fiscal 418.0 7903.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. consolidation, inflation persistence, and global uncertainty. 4/ 2022. 5/ 2024. 6/ 2024. preventable infant mortality. Higher productivity growth requires Key conditions and challenges improved infrastructure, public services, a more equitable tax system, and more open business environment. Inclusive growth Colombia has maintained macroeconomic stability through further requires more efficient fiscal transfers, modernized social strong institutions, including inflation-targeting, exchange rate security, and improved labor markets. flexibility, and fiscal rules. However, growth has remained insuffi- cient, with productivity stagnating for over two decades, limiting convergence with high-income economies and progress in reduc- Recent developments ing social inequalities. Colombia's economy grew 1.7 percent in 2024 (0.7 percent per Despite a strategic location and multiple trade agree- capita), supported by declining inflation and looser monetary ments, limited global integration constrains export diver- policy. Private consumption remained resilient, with modest in- sification beyond commodities. A complex and unequal vestment gains in civil works. Activity in the health, education, tax system discourages private investment, limited market public administration, agriculture, and entertainment sectors led competition stifles innovation and productivity growth, growth. But momentum slowed in the second half of 2024 due while rigid public spending limits growth-enhancing invest- to fiscal consolidation. ments. Service delivery remains weak with subpar educa- tion outcomes, and infrastructure deficits reduce connectivity Inflation fell from 11.7 percent in 2023 to 6.6 percent in 2024 re- and competitiveness. maining above the central bank’s 2-4 percent target, with core in- flation persisting due to indexation. The central bank cautiously cut Structural constraints perpetuate deep regional inequalities, with the policy rate to 9.5 percent, constrained by fiscal risks and exter- Bogotá’s income nearly six times that of Chocó. Some munici- nal uncertainties. The peso depreciated 5.8 percent due to dollar palities experience up to 90 percent of “learning poverty” and strength and fiscal uncertainty. FIGURE 1 / GDP and components FIGURE 2 / Actual and projected poverty rates and real GDP per capita Index 2019=100 Poverty rate (%) Real GDP per capita (constant million LCU) 140 60 25 130 120 50 20 110 40 100 15 90 30 80 10 70 20 60 5 10 50 2018Q1 2019Q1 2020Q1 2021Q1 2022Q1 2023Q1 2024Q1 0 0 GDP Consumption 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Gross fixed capital formation Exports International poverty rate Lower middle-income pov. rate Imports Upper middle-income pov. rate Real GDP pc Sources: Departamento Administrativo Nacional de Estadísticas (DANE), and World Source: World Bank. Notes: See footnotes in table on the next page. Bank staff calculations. 102 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The fiscal deficit widened from 2.7 percent in 2023 to 4.8 percent of Inflation is expected to gradually converge to 3.0 percent in 2026, GDP in 2024 due to weak corporate tax receipts from extractives, allowing gradual interest rate reductions. underperforming VAT, and high public spending. Despite expendi- ture cuts of 1.7 percent of GDP, under-execution was necessary The fiscal deficit is expected to narrow to 4.5 percent of GDP in 2025, to approach fiscal targets. Debt-to-GDP rose from 59.9 percent with gradual reductions under the fiscal rule. Given inflexible expen- to 64.1 percent, driven by higher deficits, peso depreciation, in- ditures, the government announced 0.7 percent of GDP in expendi- creased interest payments, and arrears accumulation. The Emerg- ture deferrals for 2025, primarily affecting investment. Meeting fiscal ing Markets Bond Index Global spreads increased from 300 to 322 targets will require strict spending controls to offset potential rev- bps, above peers but below the November 2022 peak. The current enue shortfalls, a lower tax base, uncertain tax administration account deficit narrowed from 2.4 to 1.8 percent of GDP, support- gains and rising debt servicing costs. Tight cash management will ed by strong services exports and reduced primary income out- be essential to preserve liquidity. Debt would stabilize after 2027. flows. Total exports held at $49.6 billion, with volume gains in coal The current account deficit is projected to widen to 3.3 percent in and coffee offset by lower prices. Record-high remittances (2.8 per- 2025, driven by falling commodity exports receipts and rising im- cent of GDP) helped ease external pressures. Foreign direct invest- port costs. It is expected to stabilize at 2.7 percent by 2027. FDI (3.0 ment (FDI) remained strong in extractives, while international re- percent of GDP) should remain the main external financing source. serves reached $63 billion, covering nine months of imports. Poverty reduction should advance slightly with economic recovery, Labor markets improved slightly, with employment increasing by declining to 30.8 percent in 2025, though climate shocks may affect 756,000 people, benefiting mainly large cities and women. Howev- households, particularly in Caribe and Pacífico. Promoting better- er, 86 percent of new jobs were in lower-productivity self-employ- quality jobs and adjusting social protection—such as expanding ment, and informality slightly increased, particularly in Bogotá. The coverage and adaptiveness—would enhance resilience. impact of social assistance restructuring remains unclear due to changes in targeting, benefits, and budget cuts. The poverty rate is Downside risks are significant, with uncertainty around fiscal con- expected to have slightly declined to 31.3 percent in 2024 (Upper solidation. A larger-than-expected deficit or delays in structural fis- Middle-Income Country poverty line: $6.85/day, 2017 PPPs), but re- cal adjustments could raise borrowing costs and slow monetary gional disparities persist. easing. Persistent inflation and policy uncertainty may suppress private investment and job creation. External risks include volatile commodity prices and escalating trade uncertainty that could trig- Outlook ger adverse terms-of-trade shocks. These, combined with tighter global financial conditions, could constrain growth, amplify infla- Colombia’s economy is projected to grow 2.4 percent in 2025, tionary pressures, and exacerbate fiscal vulnerabilities, with poten- reaching its potential growth rate of 2.9 percent by 2027. Growth tial implications for poverty reduction. Climate change remains a is expected to be driven by private consumption and mildly rising threat to economic and fiscal stability, while regional armed vio- private investment, with commerce and manufacturing stabilizing. lence may worsen territorial disparities and hinder progress. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.3 0.7 1.7 2.4 2.7 2.9 Private consumption 10.7 0.4 1.6 2.1 2.3 2.8 Government consumption 0.8 1.6 -0.5 -0.2 0.0 0.0 Gross fixed capital investment 11.4 -12.7 3.0 0.4 5.3 4.3 Exports, goods and services 12.5 3.1 2.0 3.2 4.8 5.3 Imports, goods and services 24.0 -9.9 4.2 2.1 2.5 3.0 Real GDP growth, at constant factor prices 6.4 1.2 1.9 2.4 2.7 2.9 Agriculture -0.8 1.7 8.1 2.9 3.0 2.8 Industry 6.9 -1.3 -1.3 1.6 3.0 3.1 Services 6.9 2.1 2.4 2.6 2.5 2.8 Employment rate (% of working-age population, 15 years+) 56.5 57.3 57.3 57.6 57.8 58.0 Inflation (consumer price index) 10.2 11.7 6.6 4.5 3.1 3.0 Current account balance (% of GDP) -6.0 -2.4 -1.8 -3.3 -2.8 -2.7 Fiscal balance (% of GDP) -6.5 -2.7 -4.8 -4.5 -4.4 -4.0 Revenues (% of GDP) 27.6 32.4 28.9 28.2 27.8 27.9 Debt (% of GDP) 64.6 59.9 64.1 64.7 65.9 67.0 Primary balance (% of GDP) -2.1 1.3 -0.2 0.3 0.3 0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 6.0 4.8 4.8 4.5 4.5 4.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.0 12.2 12.0 11.5 11.4 11.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 34.8 32.4 31.3 30.8 30.5 30.1 GHG emissions growth (mtCO2e) -0.9 -3.0 -1.8 -0.4 -0.1 -0.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-GEIH. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 103 This outlook reflects information available as of April 10, 2025. 1 2 COSTA RICA Population Poverty million millions living on less than $6.85/day 5.1 0.5 3 4 Life expectancy at birth School enrollment Growth reached 4.3 percent in 2024, driven by strong years primary (% gross) domestic demand, with construction and manufacturing standing out. Policy rate cuts helped return inflation to the 77.3 107.6 5 6 positive territory. Despite a higher fiscal deficit, fiscal consoli- GDP GDP per capita dation remains on track and the public debt continues to current US$, billion current US$ decline. Strong labor market outcomes, including the lowest unemployment rate in a decade, supported reductions in 96.1 18736.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2024 (2017 PPPs). 3/ 2022. poverty and, to a lesser extent, in inequality. 4/ 2022. 5/ 2024. 6/ 2024. Fiscal challenges arose between 2008 and 2018 due to increased Key conditions and challenges spending without corresponding revenues. A 2018 reform aimed to stabilize the fiscal situation, but the pandemic and commodity Costa Rica's per capita income has doubled in the past price shocks delayed adjustments. Public debt rose from 56 per- two decades, thanks to an outward-oriented growth mod- cent of GDP in 2019 to 68 percent of GDP in 2021. Increased rev- el, investments in human capital, and good governance. enues, expenditure controls, and strong growth (averaging 5.9 per- The country diversified its exports, reducing its vulnerabil- cent between 2021 to 2023) enabled the country to post primary ity to external shocks, and strengthened its green trade- surpluses since 2022. The public-debt-ratio is declining but remains mark through sustainable natural resource management at around 60 percent of GDP. and reforestation. Addressing inclusion and fiscal management challenges is crucial. However, weak integration between the export-oriented and Growth must benefit all socioeconomic groups. Fiscal policies domestic-oriented segments of the economy has contributed should continue to support sustainability, while protecting vulner- to income and territorial disparities. Despite accessible health- able groups. Revenue mobilization and spending efficiency are es- care and education, monetary poverty reduction has been sential to address these challenges. limited (from 15.6 percent in 2010 to 14.1 percent in 2022, US$6.85/day, 2017 PPP) but has accelerated since 2022 (to 10 percent in 2024). Inequality remains high (Gini index of Recent developments 45.8 in 2024). All five regions have poverty rates twice that of the Central region, which includes San Jose. Poverty is Costa Rica's economy grew 4.3 in 2024, driven by strong domestic higher among Afrodescendants, indigenous populations, and demand, particularly private consumption and investment. Key migrants. Female labor force participation remains low at contributors included construction, manufacturing, and transport, 49.3 percent in 2023. while adverse weather impacted agriculture and tourism. FIGURE 1 / Revenues, expenditures, and deficit FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant million LCU) 25 1 25 10 0 9 20 -1 20 8 -2 7 15 -3 15 6 -4 5 10 -5 10 4 -6 3 5 -7 5 2 1 -8 0 0 0 -9 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Budget deficit Revenues Expenditures Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance of Costa Rica and World Bank estimates. Source: World Bank. Notes: See footnotes in table on the next page. 104 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. After experiencing deflation, fueled by exchange rate appreciation in key trade partners. Robust domestic demand and FDI, particu- and falling commodity prices, the BCCR cut rates by 425 basis larly in manufacturing and services, will help support growth dur- points between March-2023 and October-2024. This monetary eas- ing 2025-2026. Exports are expected to gradually recover starting ing raised inflation to 0.8 percent by the end of 2024. With low in- in late 2026 as the global economy gains momentum. flation and a resilient labor market, the poverty rate (US$6.85/day, 2017 PPP) fell by 2.7 p.p. in 2024. The CAD is expected to widen to 1.8 percent of GDP, amid lower ex- ports growth and increased capital goods imports. FDI is expected The current account deficit (CAD) stayed stable at 1.4 percent of to decelerate mildly due to uncertainty but stay strong. Reserves GDP in 2024, financed by strong foreign direct investment (FDI). remain at adequate levels. Merchandise exports grew steadily, supported by medical sup- plies and manufacturing, while services exports slowed. Goods Inflation is projected to return to the target range (3 percent ± imports decelerated, but service imports expanded due to higher 1p.p.) in 2025, supported by a neutral monetary stance. The pover- outbound travel. Net international reserves reached US$ 14.2 bil- ty rate is projected to decline below 10 percent for 2025-2027. Im- lion, covering 5.7 months of imports. The exchange rate appreci- proving targeting and efficiency in social programs could further ated 2.9 percent against the US dollar in 2024, adding to the 18 reduce poverty and vulnerability. percent appreciation since 2022. The government’s commitment to debt sustainability and the Fiscal consolidation continued with a smaller primary surplus (1.1 fiscal rule will guide fiscal consolidation, aided by contained percent of GDP). Expenditures grew faster than revenues, influenced non-priority spending and ongoing tax administration efforts. by temporary factors such as retroactive wage adjustments and de- Fiscal projections for 2025-2026 forecast a higher primary layed payments of accrued revenues. Investments in transport infra- surplus and a reduced fiscal deficit, focusing on wage bill structure and emergency programs raised capital expenditures. efforts, a declining interest bill, but sustained capital expen- Combined with higher interest payments, this led to a fiscal deficit of ditures. Debt is expected to continue decreasing as gross 3.8 percent of GDP. Costa Rica remained aligned with its medium- financing needs decline. term fiscal goals, reducing financing needs and the debt-to-GDP ratio. Fiscal consolidation has boosted confidence, leading to upgrades in Downside risks to the outlook include uncertainties about sovereign credit ratings by all three major rating agencies. global trade policy, geopolitical tensions that could disrupt supply chains and raise prices, and tighter global financing conditions. Domestically, reduced revenues or unexpected Outlook spending could slower fiscal consolidation, while extreme weather could affect agriculture and tourism. Conversely, the Economic growth is projected to average 3.7 percent for approval of tax reforms by the National Assembly could accel- 2025-2027, reflecting a slowdown in exports due to weaker growth erate fiscal consolidation. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.6 5.1 4.3 3.5 3.7 3.8 Private consumption 2.6 5.0 4.9 4.0 4.0 4.1 Government consumption 2.4 0.1 0.9 0.7 1.4 0.9 Gross fixed capital investment 1.5 8.6 4.3 3.9 4.2 3.9 Exports, goods and services 18.5 10.0 5.8 5.1 5.7 6.1 Imports, goods and services 8.1 5.2 6.1 5.7 5.8 6.1 Real GDP growth, at constant factor prices 4.6 5.1 4.3 3.5 3.7 3.8 Agriculture -2.3 3.5 2.0 1.8 1.8 1.9 Industry 2.1 8.3 4.1 3.9 3.8 4.1 Services 5.8 4.3 4.4 3.5 3.8 3.9 Employment rate (% of working-age population, 15 years+) 53.3 54.5 57.5 57.9 58.4 58.8 Inflation (consumer price index) 8.3 0.6 -0.4 2.5 3.0 3.0 Current account balance (% of GDP) -3.3 -1.4 -1.4 -1.8 -1.6 -1.7 Net foreign direct investment inflow (% of GDP) 4.4 4.3 4.5 4.2 4.3 4.3 Fiscal balance (% of GDP) -2.5 -3.3 -3.8 -3.2 -3.4 -3.1 Revenues (% of GDP) 16.4 15.3 15.0 15.1 15.2 15.2 Debt (% of GDP) 63.0 61.1 59.9 59.7 59.4 59.2 Primary balance (% of GDP) 2.1 1.6 1.1 1.3 1.2 1.3 1,2 International poverty rate ($2.15 in 2017 PPP) 0.9 0.9 0.8 0.8 0.7 0.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.3 3.0 2.4 2.3 2.2 2.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 14.1 12.7 10.0 9.6 9.3 9.0 GHG emissions growth (mtCO2e) 6.0 0.3 4.9 3.1 3.7 3.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2024-ENAHO. Actual data: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 105 This outlook reflects information available as of April 10, 2025. 1 DOMINICA Population Poverty million 0.1 .. 2 3 Life expectancy at birth School enrollment Infrastructure spending, bolstered by CBI revenues, and a years primary (% gross) recovery in tourism contributed to a 4.6 percent growth in 2024. The completion of infrastructure projects, coupled 73.0 89.9 4 5 with spending containment and revenue mobilization efforts, GDP GDP per capita has resulted in lower fiscal deficits and declining public debt. current US$, billion current US$ However, new fiscal and structural reforms are necessary to sustain process. Worsening external conditions and climatic 0.7 10537.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. events pose significant risks to growth and debt sustainability. of GDP by 2026 to reduce public debt below 60 percent of GDP by Key conditions and challenges 2035. Since then, fiscal imbalances have been gradually decreasing as recurrent expenditures return to pre-pandemic levels and rev- As a small island developing state, Dominica faces economic enue-boosting measures, such as increasing excise taxes on select challenges, including high dependency on tourism and agricul- goods and introducing a stamp duty, are implemented. Further ef- ture and large public debt, which are exacerbated by climate forts are needed to ensure compliance with the FRL. shocks. In the past two decades, the country faced Hurricane Er- ica in 2015, causing US$480 million in damages, and Hurricane Dominica’s vulnerability to hurricanes and other weather events Maria in 2017, resulting in US$1.3 billion in damages and losses. further increases the risk, necessitating a focus on resilience The post-disaster and post-pandemic economic recovery has through higher fiscal buffers, climate-resilient investments, ex- been supported by infrastructure investments and a rebound in panded public and private insurance coverage, and enhanced tourism. However, potential growth has declined due to reduced social assistance. total factor productivity and lower labor contributions, linked to skilled labor emigration. With a pegged exchange rate regime, Dominica lacks effective monetary policy tools, making structural Recent developments reforms essential for efficient financial intermediation and higher economic growth. Growth is estimated at 4.6 percent in 2024, driven by im- provements in tourism and robust public investment. Tourist ar- Pandemic-related support, increased infrastructure spending, and rivals have surpassed pre-pandemic levels, with cruise visitors fiscal measures to mitigate inflation’s impact on the poorest led in 2023-24 up 62 percent from 2019-20. Ongoing public capital to high fiscal deficits and pushed public debt over 100 percent of projects have boosted the construction sector. Agricultural ini- GDP from 2020 onwards. A Fiscal Responsibility Law (FRL), intro- tiatives, such as the Emergency Agricultural Livelihoods and Cli- duced in 2021, mandates a minimum primary surplus of 2 percent mate Resilience Project and the Caribbean Agriculture Productivity FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Public debt GDP growth Percent, percentage points Percent of GDP 12 140 8 120 4 100 0 80 -4 -8 60 -12 40 -16 20 -20 2017 2018 2019 2020 2021 2022 2023 2024e 2025f 2026f 2027f 0 2017 2018 2019 2020 2021 2022 2023 2024e 2025f 2026f 2027f Agriculture Industry Services Net Taxes Real GDP growth Public debt External public debt Sources: Eastern Caribbean Central Bank (ECCB), Government of Dominica, and World Source: Eastern Caribbean Central Bank (ECCB), Government of Dominica, and World Bank staff calculations. Bank staff calculations. 106 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Improvement Activity, are estimated to have boosted agriculture’s is adequately capitalized in aggregate, but its exposure to shocks, contribution to growth in 2024. weak asset quality, and heavy reliance on credit unions (CUs), whose non-performing loans were at 13.4 percent in 2023, pose The government undertook an ambitious public investment pro- risks to its stability. In September 2024, non-performing loans of gram, primarily financed by citizenship by investment (CBI) rev- commercial banks stood at 11 percent, exceeding the Eastern enues, including a new international airport, geothermal projects, Caribbean Central Bank's (ECCB) 5 percent prudential benchmark. and a large housing program. While CBI revenues are strong, their volatility poses financing risk. Outlook Inflation averaged 1.5 percent in 2024H1, supported by lower en- ergy costs. Despite this, food insecurity remains a concern. In 2024, GDP is expected to grow at 4.3 percent in 2025 and remain re- 21 percent of respondents to the Food Security and Livelihoods silient, supported by ongoing public investment projects. Inflation Survey reported going a whole day without eating in the previous is forecast to decline to 2.2 in 2025, as global commodity price pres- month, and 42 percent were hungry but did not eat, up from 11 sures ease, then remain at around 2.1 percent. percent and 18 percent in 2021. Food insecurity is higher in rural areas and among people under 25, reflecting households’ income Solid growth prospects and lower inflation should help reduce instability. Additionally, around 34 percent of respondents report- poverty in the medium term. However, updated data on poverty ed experiencing job loss or income reduction in the past year. and other key indicators, such as labor market statistics, are ur- gently needed to monitor households’ wellbeing and guide policy. The fiscal position improved to an estimated deficit of 4.8 percent in FY23/24 down from 7.5 percent in FY22/23 and to 3.1 percent in The fiscal deficit is projected to narrow to 2.1 percent of GDP in FY24/25. Expenditures declined to 60.4 percent of GDP in FY24/25, 2027, driven by increased excise taxes, solid yet declining CBI in- due to reduced capital spending and the unwinding of fuel subsi- flows, stable economic performance, and the completion of infra- dies and pandemic-related support. Public debt declined to 103.2 structure projects. The CAD, financed by CBI and FDI inflows, is ex- percent of GDP in FY23/24 and 102.6 percent in FY24/25. CBI rev- pected to contract over the forecast horizon, reaching 18 percent enues remained strong at 33 percent of GDP in 2023 and estimat- of GDP in 2027 due to lower imports and higher exports as tourism ed at 30 percent in 2024. benefits from the new international airport. The current account deficit (CAD) improved to an estimated The economic outlook faces considerable downside risks from 32.9 percent of GDP in 2024 driven by increased tourism rev- volatile food and fuel prices, trade disruptions, and volatile CBI enues and lower capital goods imports. This deficit was primarily revenues. Additional risks include natural disasters, tighter global financed by CBI inflows and, to a lesser extent, recovering foreign financial conditions, fiscal vulnerabilities, and public debt sustain- direct investment (FDI). In 2024, imputed reserves were adequate ability concerns. The financial sector is vulnerable to risks from covering approximately 4.3 months of imports. The financial sector the credit unions. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.6 4.7 4.6 4.3 3.4 2.8 Real GDP growth, at constant factor prices 6.7 4.4 4.6 4.3 3.4 2.8 Agriculture -0.7 -2.0 2.0 2.2 2.5 2.7 Industry 0.6 5.0 4.5 3.3 2.5 2.1 Services 9.4 5.3 5.0 4.8 3.7 3.0 Inflation (consumer price index) 7.8 4.2 2.3 2.2 2.1 2.1 Current account balance (% of GDP) -27.0 -34.2 -32.9 -30.6 -23.9 -18.0 1 Fiscal balance (% of GDP) -7.5 -4.8 -3.1 -2.6 -2.4 -2.1 Revenues (% of GDP) 65.2 61.1 57.3 50.9 42.2 40.7 1 Debt (% of GDP) 108.3 103.2 102.6 99.0 95.9 93.2 1 Primary balance (% of GDP) -4.5 -2.1 0.0 0.4 0.4 0.6 GHG emissions growth (mtCO2e) 4.3 4.0 4.1 3.9 3.1 2.6 Source: ECCB, Government of Dominica and World Bank staff calculations. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal balances are reported in fiscal years (July 1st -June 30th). Macro Poverty Outlook / April 2025 107 This outlook reflects information available as of April 10, 2025. DOMINICAN 1 2 Population Poverty million millions living on less than $6.85/day 10.9 2.0 REPUBLIC Life expectancy at birth years 3 School enrollment primary (% gross) 4 The Dominican economy grew by 5 percent in 2024, driven 74.2 94.7 5 6 by monetary easing and public investment. Increased remit- GDP GDP per capita current US$, billion current US$ tances and improved labor market conditions supported poverty reduction. Nevertheless, structural challenges 123.7 11305.9 persist, including low revenue mobilization and inequality. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. Growth is expected to moderate in the medium term due to 4/ 2023. 5/ 2024. 6/ 2024. uncertainty around reform implementation, reduced fiscal stimulus, and weaker external demand. (FRL) caps primary expenditure growth at 7 percent starting in 2025 Key conditions and challenges and aims to reduce debt to 40 percent by 2035. To create more fiscal space, the country would need to improve tax collection and The Dominican Republic (DR) stands out in the Latin America spending efficiency. Re-elected in May 2024, President Abinader, and Caribbean (LAC) region for its rapid growth and significant backed by a bicameral majority, could advance long-awaited re- social progress over the last two decades. Between 2005 and forms like the energy pact and pension overhaul. However, despite 2023, GDP grew an average of 5.2 percent, poverty incidence congressional backing, the recently proposed tax reform faced so- more than halved, from 48 to 18 percent (US$6.85 per day, 2017 cial resistance and was ultimately withdrawn, casting uncertainty PPPs), and income inequality declined. Nonetheless, important over future reforms. disparities in living conditions and access to services between urban and rural areas persist. Sound monetary and fiscal poli- Increasing productivity is also essential, including by: (i) improving cies maintained macroeconomic stability and supported labor education; (ii) boosting competitiveness; (iii) revamping the innova- market dynamism. tion strategy; and (iv) improving service delivery. These should go hand in hand with improvements in social protection systems. However, DR faces fiscal pressures. Recent shocks, including the pandemic, surging commodity prices, and floods, have strained the country’s finances. Debt remains above pre-pandemic levels, with Recent developments revenue mobilization at 16.3 percent of GDP and rising spending demands. In 2024, energy sector losses required transfers of 1.2 GDP expanded 5 percent in 2024. Service sectors, like hospitality percent of GDP, while interest payments consumed 3.4 percent of and financial services, maintained momentum, expanding 9.6 and GDP, limiting public investment. The new fiscal responsibility law 8.3 percent, respectively, offsetting the 5.2 percent contraction in FIGURE 1 / Energy losses in distribution (share of total purchased) FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 40 50 600000 35 45 500000 40 30 35 400000 25 30 25 300000 20 20 200000 15 15 10 100000 10 5 5 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 0 International poverty rate Lower middle-income pov. rate 2009 2011 2013 2015 2017 2019 2021 2023 Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations based on Ministry of Energy data. Source: World Bank. Notes: See footnotes in table on the next page. 108 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. mining. Manufacturing expanded by 4.3 percent, while construc- a 11.1 percent uptick in wages linked to health and defense reforms. tion grew 2.1 percent despite elevated input costs. The Consolidated Public Sector debt stood at 57.5 percent of GDP. The current account deficit narrowed to 3.4 percent of GDP in 2024, driven by a 5.9 percent rise in remittances (8.7 percent of GDP), and a Outlook 7 percent increase in exports, outpacing import growth. Foreign di- rect investments (FDI) remained stable at 3.6 percent of GDP, but Economic growth is anticipated to slow to 4 percent in 2025, re- net capital inflows fell by 2.5 p.p. as residents accumulated foreign flecting a weaker global economy and the fading impact of fiscal assets. Consequently, international reserves fell by US$2.1 billion stimulus of 2024. Over the medium term, growth will be driven to 10.8 of GDP (4.5 months of imports), and the peso depreciated by strong consumption and investment, supported by structural by 5 percent. reforms in energy, water, and labor, along with efforts to improve education and attract FDI. Growth is forecasted at 4.5 percent in Inflation declined to 3.3 percent y-o-y in 2024, within the central 2027. A robust labor market and stable inflation are expected to target range (4 percent +/- 1 percent). The Central Bank resumed support poverty reduction in 2025 and in 2026, reaching 15.4 and monetary easing in August 2024, lowering the policy rate from 7 15.0 percent, respectively. to 5.75 percent by December. Complementary measures includ- ed RD$140 billion in redeemed securities and RD$35.35 billion in Fiscal consolidation is expected to continue, anchored on the im- loans, contributing to a drop in lending rates, and a 10.6 percent plementation of the FRL, the phase-out of untargeted subsidies, growth in private credit. and measures to improve spending efficiency (e.g., procurement reforms, and the consolidation of institutions). Consequently, the In 2024, official poverty incidence fell 4 percentage points compared public debt-to-GDP ratio is expected to decrease progressively. to 2023, supported by rising real labor incomes. Urban poverty Comprehensive revenue and spending reforms can speed up fiscal dropped 4.4 p.p., while rural declined 1.8 p.p. Formal employment consolidation and address growing social demands. grew by 170,000, mainly in transport, communications, and services. Labor participation reached 65.3 percent in 2024, peaking at 70 The macroeconomic outlook faces downside risks, and it is ex- percent in the East and nearing 61 percent in the South. tremely uncertain. First, greater than expected shifts in global trade policies could hinder trade, remittances and growth. The fiscal deficit declined to 3.1 percent of GDP in 2024. Rev- Second, weather-related events, could disrupt agriculture and enues grew by 13.1 percent, bolstered by a large advance from tourism, disproportionately impacting the poor. Third, despite the AERODOM contract. Meanwhile, spending rose by 11.4 per- fiscal support to electricity distribution companies, persistent in- cent, fueled by a 17.2 increase in interest payments, a 12.4 rise in efficiencies have led to more frequent blackouts, which could goods and services—mainly education-related expenditures—and undermine economic growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.2 2.2 5.0 4.0 4.2 4.4 Private consumption 5.5 2.7 4.9 4.2 4.3 4.5 Government consumption 8.5 2.4 4.0 -0.1 0.7 1.8 Gross fixed capital investment 5.1 2.0 3.7 3.3 3.1 2.9 Exports, goods and services 13.1 -1.6 6.8 3.2 4.0 4.5 Imports, goods and services 14.0 0.1 2.3 1.7 2.1 2.3 Real GDP growth, at constant factor prices 4.7 2.1 5.0 4.0 4.2 4.4 Agriculture 3.4 3.6 4.9 4.4 4.2 4.2 Industry 1.6 -0.8 3.8 3.2 3.4 3.6 Services 6.2 3.2 5.5 4.3 4.4 4.7 Employment rate (% of working-age population, 15 years+) 60.6 61.7 62.3 61.5 62.6 63.4 Inflation (consumer price index) 8.8 4.8 3.3 3.3 3.5 4.0 Current account balance (% of GDP) -5.8 -3.6 -3.4 -3.6 -3.4 -3.2 Net foreign direct investment inflow (% of GDP) 3.6 3.6 3.6 3.4 3.5 3.6 1 Fiscal balance (% of GDP) -3.2 -3.3 -3.1 -3.1 -3.0 -2.7 Revenues (% of GDP) 15.3 15.8 16.3 15.4 15.3 15.3 2 Debt (% of GDP) 58.6 58.3 57.5 57.3 57.2 56.9 1 Primary balance (% of GDP) -0.4 -0.1 0.4 0.5 0.7 0.9 3,4 International poverty rate ($2.15 in 2017 PPP) 0.8 0.9 0.8 0.8 0.8 0.7 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.0 3.9 3.2 3.0 2.8 2.8 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 21.5 17.9 15.8 15.4 15.0 14.4 GHG emissions growth (mtCO2e) 0.3 -0.7 2.5 2.5 2.8 2.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal balances are shown for the non-financial public sector (i. e. excluding central bank quasi-fiscal balances). 2/ Consolidated public sector debt. 3/ Calculations based on SEDLAC harmonization, using 2023-ECNFT-Q03. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 4/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 109 This outlook reflects information available as of April 10, 2025. 1 2 ECUADOR Population Poverty million millions living on less than $6.85/day 18.1 5.3 3 4 Life expectancy at birth School enrollment Ecuador faces structural challenges centered around years primary (% gross) low-growth, low quality employment, and strained fiscal accounts. The government passed reforms that improved 77.9 97.3 5 6 the fiscal stance, but consolidation needs to be sustained. GDP GDP per capita Medium-term priorities include addressing the energy crisis current US$, billion current US$ and enhancing security. Slow growth expects to stall poverty reduction. Removing barriers to private sector development 118.2 6515.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. will boost investment and unlock sustainable growth. 4/ 2023. 5/ 2024. 6/ 2024. During the commodity boom, growth relied on unsustainable fiscal Key conditions and challenges spending, eroding fiscal buffers critical for a dollarized economy. The 2008 debt default to finance a large investment program has Ecuador's average growth was 1.5 percent between 2015 since limited access to private international markets. Despite and 2023, significantly lower than the 5.1 percent during the progress in reducing the fiscal deficit from 9.8 percent in 2016 to 2004–2014 commodity boom. Structural issues such as rigid near balance in 2022 and stabilizing public debt, fiscal revenues re- labor regulations, low-quality education, barriers to business- main volatile due to oil price dependence, and spending remains es, price distortions, preferential treatment for state-owned high due to the activity of state-owned enterprises and subsidized enterprises, and trade restrictions, along with climatic shocks fuel and energy prices. and rising crime, have hindered productivity growth and poverty reduction. Recent developments Job quality remains a challenge, with over half the workforce in the informal sector and 97 percent of formal businesses being micro Real GDP contracted by an estimated 2.5 percent in 2024. or small enterprises. Women are disproportionately in low-quali- Energy shortages, crime and political uncertainty led to de- ty jobs, making up 67.1 percent of part-time and below-minimum- clines in private consumption and investment. The worst wage jobs. Nearly one in four Ecuadorians lives in poverty, and one drought in 60 years caused nationwide blackouts and power in ten in extreme poverty, with inequality largely unchanged over rationing. Despite a decline in the homicide rate, it remained the past decade. To revitalize growth, Ecuador must boost private historically high. Output fell across all sectors, especially in investment in competitive sectors like mining and agriculture by re- manufacturing and services. Fiscal tightening further con- ducing barriers to private sector development, strengthening the tributed to the downturn. However, exports increased, driven insolvency framework, promoting competition and trade, and im- by agriculture and fishing products. Inflation averaged 1.6 per- proving labor regulations. cent for the year. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 50 7000 8 45 6000 40 6 5000 35 4 30 4000 25 2 3000 20 0 15 2000 -2 10 1000 5 -4 0 0 2022 2023 2024e 2025f 2026f 2027f 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Consumption Investment Inventories International poverty rate Lower middle-income pov. rate Exports Imports GDP growth Upper middle-income pov. rate Real GDP pc Sources: Banco Central de Ecuador and World Bank estimates. Source: World Bank. Notes: See footnotes in table on the next page. 110 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Labor market shocks led to a 3 percent decline in real labor in- expected to maintain an upward trend, supporting medium-term comes, raising poverty to 31.8 percent (US$6.85/day, 2017 PPP) growth of around 2 percent. Limited economic growth will con- and stagnating the Gini index at 45.2. Unemployment remained strain household income growth, leading to a mild decline in low at 2.5 percent, but informality rose to 58 percent. poverty to 31.3 percent in 2027 (US$6.85/day, 2017 PPP). Recur- ring rural climate shocks, urban security challenges, and energy The fiscal deficit narrowed from 3.5 percent in 2023 to 1.4 per- shortages could again harm the poorest. cent in 2024, driven by revenue growth from increased VAT, tem- porary taxes, and higher withholding requirements. Public debt The fiscal deficit is expected to surpass 2 percent this year due to rose to 56 percent of GDP due to lower GDP and a negative fis- lower oil revenues but narrow afterwards, driven by an anticipat- cal balance. The IMF approved a 48-month EFF program for US$4 ed oil price recovery and fiscal consolidation efforts. Public debt billion, including US$1.5 billion disbursements in 2024, facilitating is expected to peak at 57.8 percent of GDP in 2026 and stabilize additional financing. thereafter. The current account surplus is forecast to narrow due to lower export prices and higher imports, as domestic income The current account balance posted an estimated record-high recovers. International reserves are projected to increase but will surplus of 4.8 percent of GDP, with higher exports, lower im- not reach adequacy standards in the medium term. Inflation is ports, and increased remittances. International reserves grew expected to remain low. by US$2.4 billion to US$6.9 billion (5.7 percent of GDP and 2.2 months of imports) by the end of 2024, though still low by Several risks might impact this outlook. Domestic risks include international standards. natural hazards that might affect growth and further strain fis- cal accounts. Risks persist in the energy supply sector due to high dependence on hydroelectric generation and elec- Outlook tricity imports. An eventual resurgence of crime is also a source of uncertainty. Furthermore, after the April elections, The impact of commodity price declines may compound the there could be a redefinition of policy priorities. In the medi- potential effects of trade uncertainty and limit growth. Conse- um term, significantly relaxing fiscal consolidation plans and quently, GDP is projected to partially recover in 2025, increasing facing out structural reforms would impair growth. On the to 1.9 percent, supported by energy investments and reduced external front, Ecuador’s reliance on oil revenues makes it political uncertainty following the April elections. Assuming nor- vulnerable to volatile oil prices and weaker than expected mal weather conditions, agricultural and fisheries exports are growth in U.S. or China. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.9 2.0 -2.5 1.9 2.0 2.1 Private consumption 6.0 4.2 -2.3 1.8 1.9 2.0 Government consumption 1.4 1.7 -1.6 -1.7 1.4 1.0 Gross fixed capital investment 9.2 0.2 -8.5 3.7 2.6 2.7 Exports, goods and services 7.9 0.8 2.5 3.8 3.2 3.1 Imports, goods and services 9.5 0.6 0.0 3.0 2.8 2.8 Real GDP growth, at constant factor prices 5.7 2.0 -2.5 1.9 2.0 2.1 Agriculture 3.9 2.6 -1.0 2.5 2.0 2.0 Industry 5.5 -0.3 -2.1 1.5 1.5 1.5 Services 6.1 2.9 -2.8 1.9 2.3 2.4 Employment rate (% of working-age population, 15 years+) 63.4 63.1 63.1 63.1 63.1 63.1 Inflation (consumer price index) 3.5 2.2 1.6 2.1 1.8 1.8 Current account balance (% of GDP) 1.8 1.9 4.8 2.9 2.6 2.0 Net foreign direct investment inflow (% of GDP) 0.8 0.3 0.4 0.8 1.0 1.0 Fiscal balance (% of GDP) 0.0 -3.5 -1.4 -2.3 -1.5 -1.1 Revenues (% of GDP) 38.9 36.0 38.7 36.9 37.3 37.2 Debt (% of GDP) 57.2 54.3 56.0 57.4 57.8 57.6 Primary balance (% of GDP) 0.5 -2.6 -0.3 -1.3 -0.7 -0.4 1,2 International poverty rate ($2.15 in 2017 PPP) 3.2 3.8 5.8 5.5 5.5 5.5 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 9.5 10.3 12.7 12.5 12.3 12.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 29.9 29.6 31.8 31.7 31.5 31.3 GHG emissions growth (mtCO2e) 2.3 0.2 -2.2 0.1 0.1 0.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-ENEMDU. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 111 This outlook reflects information available as of April 10, 2025. 1 2 EL SALVADOR Population Poverty million millions living on less than $6.85/day 6.3 1.6 3 4 Life expectancy at birth School enrollment El Salvador has faced persistent fiscal, external, and structur- years primary (% gross) al imbalances, resulting in stable yet low growth and recently increasing poverty rates. To address challenges, El Salvador’s 71.5 91.1 5 6 reform agenda is focusing on enhancing fiscal sustainability, GDP GDP per capita financial stability, and resilience. Growth is projected at 2.6 current US$, billion current US$ percent in 2024, slowing to 2.2 percent in 2025 and gradual- ly accelerating to 2.9 percent by 2027 as fiscal consolidation 35.4 5579.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. efforts increase confidence. 4/ 2023. 5/ 2024. 6/ 2024. Extended Fund Facility Arrangement for El Salvador aimed at sup- Key conditions and challenges porting fiscal consolidation, enhancing financial stability, and im- proving governance and transparency. Support from other MDBs As a small, dollarized economy closely tied to the U.S. through is expected to follow and will be crucial in fostering growth-enhanc- trade and remittances, El Salvador grew at an average annual rate ing reforms that ensure public finance sustainability and strength- of 2.1 percent from 2000 to 2024, with official poverty dropping en resilience to both economic and climate-related shocks. by 14 percentage points to 30.3 percent in 2023. However, chal- lenges remain, including significant fiscal and external imbalances, low productivity, and rising poverty pressures. These pressures are Recent developments linked to low-quality jobs and insufficient human capital. El Salvador’s economy grew by 2.6 percent in 2024—down 0.9 per- Since 2022, stringent security measures have significantly reduced centage points from 2023—mainly due to severe flooding that dis- gang violence, boosting market confidence and generating eco- rupted construction and delayed public investment in the first se- nomic gains. The government has also made progress in address- mester. The economy rebounded in the second semester, driven by ing fiscal and external imbalances by approving an austere 2025 booming tourism and a recovery in public and private investment as budget, clearing domestic arrears, and reducing short-term financ- the adverse impacts of climate events subsided. Strong remittances, ing pressures through three recent debt buyback operations. despite a mild deceleration, and improved security continued to These efforts contributed to a decline in sovereign spreads by more boost private consumption, which grew by 3.2 percent. Inflation fell than 3,100 basis points (bps) from July 2022 to February 2025. sharply from 4.0 percent in 2023 to 0.9 percent in 2024, driven by lower food prices and reduced global inflationary pressures. Comprehensive reforms are needed to diversify the economy, attract foreign direct investment (FDI), and further reduce pover- In 2024, the fiscal deficit narrowed to 4.4 percent of GDP from 4.7 ty and inequality. In February 2025, the IMF board approved an percent in 2023, while the primary deficit fell by 0.7 percentage FIGURE 1 / El Salvador sovereign spread (EMBIG) FIGURE 2 / Actual and projected poverty rates and real GDP per capita Basis points Poverty rate (%) Real GDP per capita (constant LCU) 4000 60 6000 3500 50 5000 3000 40 4000 2500 30 3000 2000 20 2000 1500 1000 10 1000 500 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 0 International poverty rate Lower middle-income pov. rate Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Upper middle-income pov. rate Real GDP pc Source: JP Morgan. Source: World Bank. Notes: See footnotes in table on the next page. 112 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. points to 0.1 percent of GDP. This was driven by a 7.3 percent rise is expected to average 1.8 percent. The current account deficit in government revenues as improved security boosted business is projected to stabilize at around 1.1 percent of GDP by 2027, activity, consumption, and tax collection. However, expenditure on supported by increasing exports, rising tourism receipts, and ro- a one-off public employee voluntary retirement scheme and high bust remittance flows, though lower as share of GDP. interest payments prevented a narrower gap. Public debt peaked at 88.8 percent of GDP in 2024, despite three buyback operations Poverty, measured at the upper-middle-income line of US$6.85/ that alleviated short-term fiscal pressures. day (2017 PPP), is estimated to have increased to 25 percent in 2024 and to increase slightly in the following years, due to The current account deficit widened to 1.8 percent of GDP, driven the expected slowdown in the growth of remittances and GDP in by slowing remittance growth, weaker goods exports, and rising 2025 and 2026. imports, which more than offset increased tourism receipts. Deficit financing came mainly from market debt, development bank loans, El Salvador’s fiscal consolidation is projected to reduce the and FDI inflows. Although international reserves increased by $634 deficit from 4.4 percent of GDP in 2024 to 1.7 percent million, their coverage—only 2.5 months of imports—remains in- by 2027, driven primarily by expenditure-based measures. sufficient for a dollarized economy. These include hiring and wage freezes as well as a civil service reform, which are projected to decrease the public In 2023, official poverty rates indicated that about a third of the wage bill by 1.6 percentage points. Improvements in public population lived in poverty. Compared to 2022, official rates in- financial management will further enhance spending efficien- creased the most in urban areas and among adults, driven by cy and facilitate the phase-out of untargeted subsidies. Con- higher labor inactivity and unemployment among those in the sequently, the primary surplus is forecast to reach 3.4 per- bottom 40 percent. Nonetheless, inequality remains among the cent of GDP by 2027, with public debt declining from 88.8 lowest in the region. percent to 86.0 percent of GDP. El Salvador’s macroeconomic outlook is broadly positive, though Outlook subject to downside risks. Uncertainty in trade policy, elevated global interest rates, and climate shocks could dampen growth Weaker global economic activity and reduced public spending prospects and worsen external and fiscal balances. The govern- and investment are expected to dampen growth to 2.2 percent ment's commitment to fiscal consolidation, proactive debt man- in 2025. Growth is projected to gradually recover to 2.4 percent agement, structural reforms, and enhanced security measures are in 2026 and 2.9 percent in 2027, driven by higher private in- expected to help mitigate these risks, bolster stability, and rein- vestment and progress in structural reforms. By 2027, inflation force investor confidence. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.0 3.5 2.6 2.2 2.4 2.9 Private consumption -0.1 1.6 3.2 2.7 2.9 2.9 Government consumption 0.2 3.3 2.4 -4.6 -2.9 -0.4 Gross fixed capital investment 3.1 9.4 4.7 2.4 4.3 4.6 Exports, goods and services 12.0 5.3 12.1 5.6 3.7 3.5 Imports, goods and services 2.9 -1.4 8.0 3.3 3.3 3.3 Real GDP growth, at constant factor prices 3.0 3.5 2.6 2.2 2.4 2.9 Agriculture -0.7 -0.6 1.0 1.2 1.4 1.5 Industry 1.9 3.8 0.4 1.5 2.0 2.5 Services 3.7 3.7 3.6 2.5 2.6 3.1 Employment rate (% of working-age population, 15 years+) 58.2 58.5 58.5 58.5 58.5 58.5 Inflation (consumer price index) 7.2 4.0 0.9 1.8 1.8 1.8 Current account balance (% of GDP) -6.7 -1.1 -1.8 -1.5 -1.2 -1.1 Net foreign direct investment inflow (% of GDP) 0.5 2.1 1.8 1.9 2.1 2.3 1 Fiscal balance (% of GDP) -2.7 -4.7 -4.4 -3.4 -2.1 -1.7 Revenues (% of GDP) 24.7 24.9 25.5 25.8 25.9 26.3 2 Debt (% of GDP) 79.5 85.3 88.8 89.2 87.9 86.0 1 Primary balance (% of GDP) 2.0 -0.8 -0.1 1.6 2.6 3.4 3,4 International poverty rate ($2.15 in 2017 PPP) 3.4 3.1 3.1 3.0 2.9 2.9 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 8.6 7.7 7.7 7.6 7.6 7.6 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 27.5 24.8 25.1 25.2 25.3 25.8 GHG emissions growth (mtCO2e) 0.6 0.8 1.2 1.2 1.4 1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal and Primary Balance correspond to the non-financial public sector. 2/ Debt is total public debt. 3/ Calculations based on SEDLAC harmonization, using 2023-EHPM. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 4/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 113 This outlook reflects information available as of April 10, 2025. 1 2 GRENADA Population Poverty thousand thousands living on less than $6.85/ day 117.2 15.9 3 4 Grenada’s prudent preparation and swift action helped to Life expectancy at birth School enrollment years primary (% gross) limit the impact of Hurricane Beryl, ensuring that its econ- omy will continue growing. Despite the post-Beryl recon- 75.3 83.4 struction needs, the country is expected to reduce its debt 5 6 due to strong revenues and disaster risk management. GDP GDP per capita current US$, billion current US$ Complying with established fiscal rules will be critical for Grenada to sustain inclusive growth and make continued 1.4 11871.6 progress in poverty and inequality reduction. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. 4/ 2021. 5/ 2024. 6/ 2024. Hurricane Beryl, a Category 4 hurricane, made landfall in July Key conditions and challenges 2024, causing damages estimated at 16.5 percent of 2023 GDP. As a result, the government suspended the primary balance Grenada outperformed its Eastern Caribbean peers, achieving rule under the FRA to provide enough fiscal space for post-dis- an average annual GDP growth of 3.9 percent between 2015 aster recovery, focusing support on the hardest-hit households and 2019, while keeping relatively low public debt. Growth has and businesses. been supported by structural reforms initiated in 2015 with the Fiscal Responsibility Act, which was replaced by the 2023 Adherence to fiscal rules and enhancing public finances are Fiscal Resilience Act (FRA) to simplify rules, broaden the de- crucial for inclusive growth, poverty reduction, social protec- finition of public debt, and strengthen the medium-term fis- tion, and resilience against natural disasters. Despite escape cal strategy. The Eastern Caribbean Currency Union’s (ECCU) clauses in the fiscal rule framework, it is important to continue fixed exchange rate and sound policies anchor low inflation budget prudence, enhance revenue mobilization and improve and price stability. spending efficiency. Reforms are needed to improve Citizenship- by-Investment (CBI) revenue management and budget planning Grenada's economy relies heavily on tourism, making it processes through the timely preparation and publication of a vulnerable to global business cycles and natural disasters, Medium-Term Fiscal Framework. which increases the population’s vulnerability to poverty. In 2018, about 14 percent of the population lived on less than $6.85 a day (2017 Purchasing Power Parity). Inequality, mea- Recent developments sured by the Gini index, was 43.8 in 2018, which is high by international standards. Gender disparities in economic op- Despite the devastation of Hurricane Beryl, Grenada’s economy portunities persist, and youth unemployment is significantly continued growing at 3.7 percent in 2024, supported by tourism above the national average. and construction. Notwithstanding damages to around 10 percent FIGURE 1 / Key macroeconomic variables FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 12 90 20 30000 10 80 18 25000 8 70 16 6 60 14 20000 12 4 50 10 15000 2 40 8 0 30 10000 6 -2 20 4 5000 -4 10 2 -6 0 0 0 2022 2023 2024e 2025f 2026f 2027f 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Debt-GDP (rhs) Primary balance GDP growth rate Upper middle-income pov. rate Real GDP pc Source: World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. Notes: e= estimate; f = forecast. 114 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. of Grenada’s total tourism accommodations, the core tourism in- frastructure on the main island stayed operational. Stayover ar- Outlook rivals increased by 25 percent in January-September 2024 com- pared to the same period in 2023. Inflation moderated from 2.7 Growth is projected at 3.8 percent in 2025, with an average of 3.1 per- percent in 2023 to 1.1 percent in 2024, driven by lower import cent over 2026-2027, driven by tourism and re-construction efforts. prices that offset price pressures from sizable minimum wage in- The agriculture sector is expected to recover more gradually. Infla- creases in early 2024. Poverty ($6.85 a day in 2017 PPP) is estimat- tion is projected at 1.5 percent in 2025 and converge to 2.0 percent ed to have declined to 13.1 percent in 2024, falling below pre-pan- thereafter. The current account deficit is projected to widen to 14 per- demic levels in 2023. cent of GDP in 2025, driven by reconstruction efforts, higher food import demand, and reduced exports of fish and fishery products The current account deficit is estimated to have widened in to the US due to tariffs, despite the expansion of tourism receipts. 2024, as the increased import bill for construction projects Poverty is expected to continue its downward trend. exceeded the recovery in tourism-driven exports. Remittances slowed to 5.9 percent of GDP in 2024, from a peak of 6.6 per- Public expenditures are expected to rise to 39.1 percent of GDP in cent of GDP in 2020, but increased from 5.8 percent of GDP in 2025, amid post-hurricane reconstruction and higher wages, but are 2023. This is unlikely to have impacted poverty, as the wealthi- projected to decline after 2025 due to reduced capital spending. Ex- est households receive most remittances. CBI inflows increased ceptional non-tax revenues, including strong past CBI performance to an estimated 14.8 percent of GDP in 2024, supporting both and the CCRIF insurance payout, are expected to normalize over the public and private investment. Foreign Direct Investment (FDI) projection period. Consequently, total revenue is estimated to aver- and concessional loans fully financed the current account deficit age 30 percent of GDP over 2025-2027, and the primary deficit is in 2023 and 2024. Imputed reserves covered approximately 5.2 projected to average 1.6 percent of GDP. Public debt (71.4 percent months of imports in 2024. of GDP in 2025) is expected to continue its downward trajectory. The fiscal surplus reached 4.7 percent of GDP in 2024, as The risk outlook is skewed towards the downside, with potential revenues increased to 44.1 percent of GDP due to higher challenges including delays in the resumption of fiscal rules, an un- CBI revenue inflows and resilient economic activity. Public certain global trade outlook, economic slowdown in key tourist- sector debt decreased from 75.2 percent of GDP in 2023 origin countries, reduced FDI, fewer CBI applications, lower remit- to 73.3 in 2024. tances, natural disasters, and the impact of natural disasters. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.3 4.7 3.7 3.8 3.4 2.7 Real GDP growth, at constant factor prices 6.2 2.2 3.7 3.8 3.4 2.7 Agriculture -16.8 -18.1 -10.5 1.4 2.5 2.5 Industry 17.4 -2.9 2.9 7.1 5.6 4.2 Services 5.5 5.2 4.7 3.1 2.8 2.3 Inflation (consumer price index) 2.6 2.7 1.1 1.5 2.0 2.0 Current account balance (% of GDP) -11.0 -9.1 -13.3 -14.0 -10.6 -10.3 Fiscal balance (% of GDP) 0.9 8.0 4.7 -8.6 -3.7 -0.5 Revenues (% of GDP) 32.7 36.9 44.1 30.5 29.3 29.2 1 Debt (% of GDP) 78.8 75.2 73.3 71.4 66.5 65.2 Primary balance (% of GDP) 2.5 9.5 8.0 -5.0 -1.2 1.5 2,3 International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.1 0.1 0.1 0.1 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.3 1.3 1.1 1.1 1.1 1.0 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 14.1 13.7 13.1 12.6 11.9 11.9 GHG emissions growth (mtCO2e) 1.6 1.2 1.3 1.3 1.2 1.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The debt coverage over the period 2023-2026 was expanded to include the non-guaranteed debt of all SOEs, aligned with the new FRA. 2/ Calculations based on CONLAC harmonization, using 2018-SLCHB. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2018) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 115 This outlook reflects information available as of April 10, 2025. 1 2 GUATEMALA Population Poverty million millions living on less than $6.85/day 18.4 10.5 3 4 Life expectancy at birth School enrollment While Guatemala’s GDP has grown consistently, poverty years primary (% gross) and inequality remain high at levels observed a decade ago. In 2024, growth accelerated, inflation was below the 68.7 103.0 5 6 central bank target and the current account registered GDP GDP per capita another surplus. The government is expanding investment current US$, billion current US$ and social expenditure, while pursuing structural reforms, but faces bottlenecks in both areas. 108.9 5920.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. under five stunted in 2022). Female labor force participation re- Key conditions and challenges mains one of the lowest in the region (at 32.5 percent, a 32.3 p.p. gap compared to men). Guatemala is a well-managed economy. It grew on average 3.5 percent in the last decade supported by a growing labor force. Guatemala’s challenge is to leverage its strong macroeconomic An inflation targeting regime, with a managed exchange rate, has performance to transition to a higher and more inclusive growth. delivered on price stability: inflation averaged 4.2 percent in the The government is expanding public investment and social ex- last decade. It has had current account surpluses since 2016, with penditures, while pursuing structural reforms, such as the enact- comfortable international reserves. The government has man- ment of its first anti-trust law and improvements to infrastruc- aged finances prudently over the last decade, with an average ture frameworks. It increased the budget for investment and so- budget deficit of 1.7 percent of GDP and public debt below 30 cial expenditures in 2024 but did not spend all of it. Investment percent of GDP. in 2024 was nearly half of that in 2023, and social registry and programs reached 107,000 households in 2024, while the 2027 However, poverty and inequality have been stagnant since 2014. target is 500,000. While the government’s policy is consistent with Poverty incidence was 57.9 percent in 2023 (at the US$6.85/day higher growth and lower poverty, it needs to improve efficiency 2017 PPP line), the highest in the Latin America and Caribbean to achieve these goals. (LAC) region, and the Gini coefficient measuring income inequal- ity remained high (0.45). High informality and low productivity have prevented the labor market from driving poverty reduction. Recent developments With high disparities between urban and rural areas in access to basic services, poor households and ethnic minorities face un- Guatemala experienced positive developments in 2024. GDP grew equal opportunities, leading to social exclusion and poor out- 3.7 percent with higher growth by the financial, information and comes, including high malnutrition rates (44 percent of children communication technologies, and retail sectors. In 2024, inflation FIGURE 1 / GDP growth in Guatemala and remittances to FIGURE 2 / Actual and projected poverty rates and real GDP per Guatemala (2019-2027) capita Real GDP (percent, y/y) Remittances (percent of GDP) Poverty rate (%) Real GDP per capita (constant LCU) 25 25 70 40000 20 60 35000 20 30000 50 15 15 25000 40 10 20000 30 10 15000 5 20 10000 5 0 10 5000 0 0 -5 0 2014 2016 2018 2020 2022 2024 2026 2019 2020 2021 2022 2023 2024 2025f 2026f 2027f International poverty rate Lower middle-income pov. rate Guatemala Remittances to Guatemala (rhs) Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Guatemala and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 116 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. averaged 2.9 percent, with food inflation at 5.1 percent, while hous- GDP carry-over in 2025, credit growth and remittances, but weight- ing and transport experienced deflation at -0.2 percent and -0.9 ed down by lower exports. Inflation is expected to remain with- percent, respectively. The budget deficit was near 1 percent of GDP in the central bank target (4 percent +/- 1 p.p.), with room to ac- and debt stock around 28 percent of GDP. Bank credit grew 12 per- commodate shocks. Given the weak poverty growth elasticity (-0.3), cent year-on-year, with non-performing loans at 2.5 percent of to- poverty is expected to remain high around 57.2 and 56.6 percent tal credit stock in 2024. in 2025 and 2026. The current account accumulated a surplus of 3.2 percent of GDP Remittances growth is expected to peak in 2025 due to lower until September. Goods’ exports grew just 2 percent for the whole growth and changes in immigration policy in originator countries. year, while good’s imports grew 7.2 percent in the whole year, re- Exports growth will increase slightly, supported by service exports flecting a higher growth in volumes (11.4 percent) than in prices. growth. The current account is expected to record smaller surplus- Remittances grew 8.6 percent in 2024, reaching 19.8 percent of es starting in 2026 due to higher GDP and import growth, but con- GDP. International reserves reached US$24.4 billion around nine sistent with comfortable international reserves. months of imports, by end-2024. The government plans to increase public investment and social While employment rates are high, close to 98 percent, the quality expenditures, while keeping tax rates unchanged. Expenditures of jobs is poor, particularly for youth and women. The average real are expected to grow from 14.1 percent of GDP in 2024 to 15.4 labor household income declined 32 percent from 2014 to 2023, in 2027, while revenues will increase from 13.1 to 13.5 percent of due to stagnant labor productivity. Wages have fallen across all ed- GDP in the same period, driven by improvements in tax admin- ucation levels and returns to education have declined, particular- istration efficiency. The budget deficit will average 1.8 percent of ly for the better-off. The labor income fall has been partially com- GDP from 2025 to 2027, while debt is expected to remain below pensated by other sources of income, mainly remittances, which 30 percent of GDP. increased 67 percent between 2014 and 2023. The main risk to the outlook is changes to migration and trade policies. The immediate effect in Guatemala is a reduction in ex- Outlook ports, consequently affecting GDP growth. However, the country may benefit from trade diversion, particularly regarding clothing Guatemala’s outlook is positive, but clouded by heightened uncer- exports. Remittances, which influence consumption, may decrease tainty. GDP growth is expected to reach 3.5 percent in 2025 with and thus reduce GDP. The impacts on prices are uncertain, but re- slightly higher growth in following years, supported by a positive cessionary factors could dominate and lower expected inflation. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.2 3.5 3.7 3.5 3.8 3.8 Private consumption 4.3 4.4 5.2 3.7 3.9 4.0 Government consumption 7.2 3.3 2.4 7.3 1.7 1.9 Gross fixed capital investment 4.3 7.4 5.3 6.6 7.9 7.4 Exports, goods and services 7.5 -2.5 3.1 0.4 3.0 2.9 Imports, goods and services 4.8 5.9 7.2 4.8 4.8 4.8 Real GDP growth, at constant factor prices 4.4 3.1 3.7 3.4 3.7 3.8 Agriculture 2.8 2.2 1.1 3.5 3.0 3.0 Industry 4.6 2.5 2.0 3.3 3.3 3.3 Services 4.6 3.5 4.8 3.5 4.0 4.1 Employment rate (% of working-age population, 15 years+) 57.2 57.3 59.8 59.7 59.5 59.4 Inflation (consumer price index) 6.9 6.3 2.9 2.7 4.0 4.0 Current account balance (% of GDP) 1.3 3.1 3.0 2.0 1.4 0.9 Net foreign direct investment inflow (% of GDP) 0.8 0.8 1.0 1.2 1.4 1.6 Fiscal balance (% of GDP) -1.7 -1.3 -0.9 -1.6 -1.8 -2.0 Revenues (% of GDP) 12.9 12.8 13.1 13.4 13.5 13.6 Debt (% of GDP) 29.0 27.2 28.2 28.7 29.0 29.2 Primary balance (% of GDP) -0.1 0.4 1.2 0.5 0.2 0.1 1,2 International poverty rate ($2.15 in 2017 PPP) .. 10.9 11.7 12.1 12.5 12.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 27.0 27.3 27.4 27.4 27.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 57.9 57.3 57.2 56.6 55.8 GHG emissions growth (mtCO2e) 4.2 3.0 3.0 2.8 2.8 2.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-ENCOVI. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 117 This outlook reflects information available as of April 10, 2025. 1 2 GUYANA Population Poverty million 0.8 .. 3 4 Life expectancy at birth School enrollment Guyana remains one of the world's fastest-growing years primary (% gross) economies following the development of its oil and gas (O&G) sector. The government is implementing an ambitious 66.0 99.0 5 6 investment program to transform the non-oil economy and GDP GDP per capita address development needs. Lack of recent data on poverty current US$, billion current US$ and equity limits the effectiveness and monitoring of public policies to reduce poverty. Sound management of O&G 24.8 29883.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ No recent data available (after resources remains critical for inclusive growth. 2000). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Guyana also launched a Global Biodiversity Alliance, aiming to de- Key conditions and challenges velop a market for biodiversity credits beyond carbon. Guyana is a small state with abundant natural resources, in- Guyana’s oil revenues are held in the Natural Resource Fund cluding significant oil and gas reserves and extensive forest cov- (NRF), a sovereign wealth fund governed by the NRF Act 2021. er. With much of its territorial waters still unexplored, Guyana’s The NRF Act was amended in 2024 to increase the pace of gross oil resources are conservatively estimated at over 11 bil- withdrawals and enable additional public investments. However, lion barrels, one of the world’s largest on a per capita basis. The faster withdrawals also raise the risk of increasing spending inef- start of oil production in 2019 led to an unprecedented rate of ficiency, accelerating inflation, and dampening competitiveness of economic growth. non-oil sectors. A reliance on oil revenues may also contribute to economic imbalances and vulnerabilities to commodity price fluc- Guyana's resource wealth is helping address longstanding social tuations. Transparent and accountable governance, along with ro- and economic needs. It helped finance the pandemic response and bust public financial management, can help ensure equitable and is addressing infrastructure gaps and human development needs. sustainable growth. Poverty and social exclusion have been prevalent in the hinterland regions and among indigenous Amerindians. Agriculture, forestry, and fishing are important drivers of job creation and poverty re- Recent developments duction, as over 70 percent of the working-age population resides in rural areas. However, a lack of recent data inhibits assessing Real GDP growth accelerated to 43.4 percent in 2024, fueled by progress on poverty reduction and social inclusion. strong expansions in both the oil and non-oil sectors. Oil pro- duction reached 225 million barrels as the third oil field reached Guyana is a pioneer in the carbon credit market, becoming the first full capacity, supporting an oil GDP growth of 57.4 percent. The country to sell ART-TREES certified credits for forest conservation. non-oil economy also grew by 13.1 percent, driven mainly by FIGURE 1 / Real GDP (oil and non-oil) and oil production, FIGURE 2 / Natural Resource Fund (NRF) assets, inflows, and 2022-2027 outflows, 2022-2027 Real GDP (GYD millions, 2012 prices) Thousands of barrels per day US$ (billions) 10,000 1,200 5 9,000 1,000 4 8,000 7,000 800 3 6,000 5,000 600 2 4,000 400 1 3,000 2,000 200 1,000 0 2022 2023 2024e 2025f 2026f 2027f 0 0 Inflows (revenue deposits and nominal return) 2022 2023 2024e 2025f 2026f 2027f Outflows (withdrawals to budget) Oil GDP Non-Oil GDP Oil production (rhs) Assets (closing balance) Sources: Government of Guyana and World Bank staff estimates. Source: Government of Guyana. Notes: e= estimate, f= forecast. Notes: Projections from 2025 assume yearly withdrawal of maximum amounts allowed by the Fiscal Enactments (Amendment) Act 2024; e= estimate, f= forecast. 118 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. construction, manufacturing, and agriculture, supported by sub- from 2025 to 2027. Growth will be driven by positive spillovers stantial public investment. from the oil sector supported by the Local Content Act and an expanding public investment program. Inflation is expected to Inflation remained low in 2024, with the urban consumer price in- be moderate in 2025 but rise gradually over the medium term dex increasing by an average of 2.9 percent. However, food infla- as government investment and consumption increases. Poverty tion was relatively high, averaging 5.7 percent. Higher food prices reduction will depend on the government’s efforts to boost the disproportionately affect the poor and vulnerable, who allocate a purchasing power of poor and vulnerable households and job larger portion of their budget to food than the better off. creation in non-oil sectors. The fiscal deficit widened to 17.9 percent of non-oil GDP in 2024, The fiscal deficit is projected to average 15.1 percent of non-oil despite NRF transfers to the budget of nearly US$1.6 billion (15.7 GDP as the NRF transfers support increased capital spending. percent of non-oil GDP), up from US$1 billion in 2023 (13.7 percent Public debt is expected to rise in 2025, due to higher exter- of non-oil GDP). The NRF withdrawal limit was significantly in- nal debt and slower growth in nominal GDP linked to lower creased in 2024 following legislative amendments to support non- oil prices, but gradually fall thereafter as the economy grows. oil capital investment. The income tax threshold was raised, and a Increased exports of oil, gold, and bauxite will sustain the cur- fuel excise tax was reduced. The central government debt-to-GDP rent account surplus in the medium term, despite fluctuations ratio dropped slightly to 24.1 percent of GDP in 2024 as the econo- linked to the importation of oil production platforms and the my expanded. The current account surplus increased substantially evolution of commodity prices. Net foreign direct investment to 24.4 percent of GDP in 2024 (from 9.9 percent in 2023), large- flows are expected to remain negative due to the repatriation ly due to increased oil exports. The nominal and real effective ex- of oil sector investments. change rate remained stable in 2024, with a de facto stabilized ex- change rate regime. The near-term outlook is subject to high levels of uncertainty. Downside risks include a global economic slowdown, rising global uncertainty, and a stronger-than-expected decline in oil prices. The Outlook extractive sector is Guyana’s dominant source of growth and fis- cal revenues, which increases the country’s susceptibility to oil- Strong GDP growth is expected over the medium term, driven by related shocks and requires proactive management. Prudent NRF rising oil production, anticipated to reach over 1.3 million barrels management and strengthening the medium-term fiscal frame- per day beyond 2027. A fourth oil development project is expect- work are critical for preventing the economy from overheating. ed to start operations in late 2025, followed by two additional Oil production has environmental consequences that must be projects in 2027, further boosting GDP growth. Real non-oil GDP carefully considered, and the sector may face additional risks is projected to expand by an average of 9.4 percent annually amid global decarbonization efforts. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f 1 Real GDP growth, at market prices (total) 63.3 33.8 43.4 10.0 23.0 24.3 2 Real GDP growth, at market prices (non-oil) 11.5 12.3 13.1 11.6 8.9 7.8 Agriculture 11.7 6.9 11.0 11.4 7.2 6.1 Industry 12.7 16.7 22.1 18.3 13.9 11.7 Services 9.3 10.8 6.7 6.2 5.5 5.0 Inflation (consumer price index) 6.9 2.8 2.9 3.5 4.5 5.5 3 Current account balance (% of GDP) 25.9 9.9 24.4 8.0 25.0 17.6 Net foreign direct investment inflow (% of GDP) -20.7 -6.7 -22.1 -10.5 -21.0 -14.7 4 Fiscal balance (% of GDP) -11.7 -13.3 -17.9 -14.7 -16.3 -14.4 Debt (% of GDP) 24.8 26.7 24.1 32.0 27.7 24.2 4 Primary balance (% of GDP) -11.1 -12.5 -17.1 -13.6 -15.2 -13.3 GHG emissions growth (mtCO2e) 11.3 13.8 18.5 6.7 13.2 11.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Total GDP at 2012 prices. 2/ Non-oil GDP at 2012 prices. 3/ BOP definition in current US$. 4/ Share of non-oil GDP. Macro Poverty Outlook / April 2025 119 This outlook reflects information available as of April 10, 2025. 1 2 HAITI Population Poverty million millions living on less than $2.15/day 11.8 2.9 3 Life expectancy at birth School enrollment GDP contracted by 4.2 percent in 2024 amid gang violence years primary (% gross) and an ongoing political-institutional crisis. Agriculture has been the most severely impacted sector, disproportionately 63.7 .. 4 5 reducing the incomes of the poor and vulnerable: nearly 4 in GDP GDP per capita 10 Haitians now live on less than US$2.15/day 2017 PPP. current US$, billion current US$ Despite these challenging conditions, tight monetary policy and continued fiscal consolidation strengthened the macro- 25.2 2142.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2012 (2017 PPPs). 3/ 2022. economic framework, helping to reduce inflation. 4/ 2024. 5/ 2024. priorities include an improved governance and justice system and Key conditions and challenges infrastructure to connect rural communities to urban markets. Deep structural challenges including state capture and an un- conducive business environment continue to hamper economic Recent developments growth and poverty reduction. Underdeveloped financial mar- kets and weak competition have contributed to a large infor- Political instability deepened and gang violence increased follow- mal economy. Indefinite suspension of US commercial flights ing Prime Minister Gary Conille’s dismissal by the Transitional to the main airport and continued border shutdown with Presidential Council (CTP) in November 2024. Prime Minister Fils- the Dominican Republic isolate Haiti and constrain domestic Aimé replaced Conille with a mandate to restore security and or- resource mobilization. Economic mobility is hampered by a ganize elections. The underlying instability and gang violence de- weak labor market, dominated by low quality, poorly remu- pressed investor sentiment, and GDP contracted by 4.2 percent nerated jobs, especially for women. Indicators of human cap- in 2024. Agriculture registered the largest decline (-5.6 percent), ital are weak with limited access to quality healthcare and disproportionately affecting the poor and vulnerable, and deep- education: just 4 in 10 children are born in health facilities ening pre-existing inequalities. The industrial sector contracted by and learning-adjusted years of schooling (at 6.1) are below 4.7 percent due to the deteriorating business environment, with the regional average. layoffs in the textile sector. The services sector shrank by 3.9 per- cent, led by the small trade and real estate subsectors. The cur- Haiti faces a deepening fragility trap, as structural challenges, in- rent account deficit (CAD) narrowed from 3.3 percent of GDP in stitutional crisis, persistent gang violence and a growing human- 2023 to 0.5 percent in 2024, as a 21.2 percent drop in exports itarian crisis have undermined development prospects. Disaster was offset by lower imports and higher remittance inflows. Re- risk management and response systems are inadequate to man- mittances have provided a lifeline to recipient households, help- age vulnerability to natural hazards and climate change. Economic ing mitigate food insecurity. FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth (supply side) capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 2 100 70000 1 90 60000 80 0 70 50000 -1 60 40000 50 -2 40 30000 -3 30 20000 20 -4 10000 10 -5 0 0 2018 2019 2020 2021 2022 2023 2024e 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Agriculture Industry Services GDP Upper middle-income pov. rate Real GDP pc Sources: Haiti Statistical Office (IHSI) and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 120 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Tax revenues plummeted from 6.3 percent in 2023 to 5.2 per- exports, compounding existing security and business challenges, cent in 2024 as the economy contracted. However, a retrench- but the full impact of the recent measures is difficult to gauge as ment of capital spending and cuts in non-priority current expen- policy shifts may continue to unfold. Exports are forecast to ac- ditures helped contain the fiscal deficit, which narrowed from celerate in 2026 assuming greater clarity on a potential extension 2.1 percent of GDP in 2023 to 0.1 percent in 2024. The com- of a preferential trade agreement on textiles with the USA. A re- bined effect of tight fiscal policy and a better anchored mon- sumption of GDP growth would gradually reverse poverty trends, etary policy stance, with zero monetary financing of the fiscal with the share of Haitians living on less than US$2.15/day 2017 deficit by the central bank (BRH), helped ease price pressures. PPP projected to drop slightly from 37.6 percent in 2025 to 36.7 The gourde appreciated by 1.6 percent against the US dollar in percent by 2027. 2024 owing to tight fiscal and monetary policy, strong remit- tance inflows, and weak imports. A balanced current account in 2025 is forecast to move into deficit by 2026 as growth resumes and imports pick up. Increased govern- Consumer price inflation declined from an average of 44.2 percent ment spending ahead of planned elections and weak agricultural in 2023 to 25.8 percent in 2024. High food inflation (averaging 34.7 productivity are expected to contribute to inflationary pressure in percent in 2024) disproportionately affected the poor and vulner- 2025, moderating over the medium as security conditions improve. able, who spend a larger share of income on food. The share of Tax revenue collection is set to improve gradually as a new general Haitians living on less than US$2.15/day 2017 PPP is estimated to tax code goes into effect. However, the fiscal deficit will widen from have climbed to 36.2 percent in 2024, from 31.1 percent in 2021. 0.1 percent of GDP in 2024 to 1.2 percent in 2025 owing to larger security and elections-related spending. Outlook The path ahead remains fraught with downside risks and depends on an effective political transition and improvements in security. A GDP is forecast to contract by 2.2 percent in 2025. The lingering credible budgetary framework and an appropriate mix of fiscal and political crisis and gang violence are expected to depress private monetary policy will remain key to reducing inflation and strength- investment, while high inflation dampens private consumption. ening growth prospects. Inclusive growth will require strengthen- Modest GDP growth is expected by 2026 as investment increases ing the business environment, expanding social protection, and en- from a low baseline, assuming improvements on the political and hancing the institutional framework for disaster risk management, security fronts. Trade policy changes may further depress textile including better preparedness and response systems. Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f Real GDP growth, at constant market prices -1.7 -1.9 -4.2 -2.2 2.0 2.5 Private consumption -0.7 0.1 -5.2 -4.6 1.6 1.1 Government consumption 17.6 3.3 1.6 35.0 2.7 6.7 Gross fixed capital investment -9.9 -17.6 -36.3 -50.0 62.7 50.3 Exports, goods and services 2.4 -9.6 -31.9 -24.5 5.5 6.1 Imports, goods and services 4.9 -0.4 -16.2 -4.8 6.5 7.3 Real GDP growth, at constant factor prices -1.8 -3.6 -4.4 -2.2 2.0 2.5 Agriculture -4.5 -5.6 -5.6 -3.2 1.0 2.0 Industry -0.4 -3.8 -4.7 -1.7 2.5 3.4 Services -1.6 -2.9 -3.9 -2.2 2.0 2.3 Employment rate (% of working-age population, 15 years+) 55.8 55.8 55.8 55.8 55.8 54.9 Inflation (consumer price index) 27.6 44.2 25.8 29.7 20.3 14.1 Current account balance (% of GDP) -2.4 -2.6 -0.6 0.0 -1.1 -1.2 Net foreign direct investment inflow (% of GDP) 0.2 0.1 0.2 0.2 0.1 0.1 Fiscal balance (% of GDP) -3.2 -2.1 -0.1 -1.2 -0.1 0.1 Revenues (% of GDP) 6.6 7.4 6.0 6.4 7.0 7.4 Debt (% of GDP) 26.6 24.8 15.0 16.2 16.3 16.0 Primary balance (% of GDP) -2.9 -1.8 0.2 -0.9 0.1 0.4 1,2 International poverty rate ($2.15 in 2017 PPP) 32.3 34.1 36.2 37.6 37.2 36.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 61.4 62.6 65.4 66.7 66.4 65.9 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 88.0 88.4 89.5 90.0 89.9 89.7 GHG emissions growth (mtCO2e) 0.6 -0.4 -0.4 0.1 1.8 2.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2012-ECVMAS. Actual data: 2012. Nowcast: 2013-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 121 This outlook reflects information available as of April 10, 2025. 1 2 HONDURAS Population Poverty million millions living on less than $6.85/day 10.8 5.3 3 4 Life expectancy at birth School enrollment Real GDP grew 3.6 percent in 2024, driven by private years primary (% gross) consumption and investment, fueled by robust remit- tances, lower inflation, and access to credit. Growth is 70.7 86.6 5 6 expected to decelerate to 2.8 percent in 2025 and 3.4 GDP GDP per capita percent in 2026, dampened by slower exports, remittances, current US$, billion current US$ and credit growth. High informality and insufficient basic service delivery remain key challenges for poverty and 36.9 3409.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. inequality reduction in the medium term. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Honduras grew on average 3.7 percent in 2010-19, driven Real GDP growth remained stable at 3.6 percent in 2024. Robust by remittance-fueled households’ consumption. The econ- remittances, lower inflation, and access to credit sustained private omy benefited from prudent macroeconomic management consumption and investment, offsetting the drop in exports due to anchored in the Fiscal Responsibility Law (FRL), adequate lower demand and adverse climate impacts, including from storm foreign reserves and a robust financial sector. Productive Sara in mid-November. capacity is weak, with agriculture and light manufacturing representing key sources of employment and exports, Annual inflation decreased to 4.6 percent in 2024, within the cen- mainly to the US. tral bank target range of 4.0 percent ± 1.0 percentage points (pp), driven by lower international prices and liquidity absorption mea- Honduras remains one of the poorest and most unequal sures, including a 275 basis points hike in the policy rate between countries in the region. By 2024, almost half of Hondurans August and October (to 5.75 percent). lived on less than US$6.85 daily (2017 PPP). Slow poverty reduction is partly explained by informality, labor-market Labor market conditions and poverty slightly improved. Unemploy- gender inequality (74 percent of men vs. 41 percent of ment dropped 1.2 pp y-o-y in June 2024 (to 5.2 percent) with larger women participate), and unequal access to basic services. gains among women (2.3 pp decrease). The official poverty rate de- Food insecurity remains high. The share of rural house- creased from 64.1 percent of households in 2023 to 62.9 percent in holds with unmet basic needs doubles that of urban 2024. Poverty under international lines is estimated to have slightly households. Honduras is highly vulnerable to natural haz- decreased from 2023, except for the rate under the US$2.15/day ards, often overlapping geographically with poverty and line (2017 PPP) which increased to 12.4 percent and remains high. low coping capacity. Inequality (Gini index) remained stable at 47 points. FIGURE 1 / Sectoral value added (indexes, 2010=1) FIGURE 2 / Actual and projected poverty rates and real GDP per capita Index (2010=1) Poverty rate (%) Real GDP per capita (constant LCU) 3.5 60 30000 3.0 50 25000 2.5 40 20000 2.0 30 15000 1.5 20 10000 1.0 10 5000 0.5 0.0 0 0 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Agriculture Services Industry Upper middle-income pov. rate Real GDP pc Source: World Bank estimates based on data from the Central Bank of Honduras. Source: World Bank. Notes: See footnotes in table on the next page. 122 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The current account deficit (CAD) widened to an estimated 5.2 Inflation is expected to remain stable in 2025 and decline from percent of GDP in 2024, reflecting deficits in goods, services, and 2026. Upward pressures from the ongoing exchange rate recali- income, partially offset by strong remittances’ growth (6.2 per- bration and higher prices for some food products will be compen- cent y-o-y). Major exports like textiles, coffee, bananas, palm oil, sated by expected declines in oil prices and tighter monetary pol- and shrimp declined due to lower demand, prices, or supply- icy. The CAD is projected to widen in 2025 to -5.3 percent of GDP, side disruptions. The CAD was primarily financed by multilateral reflecting low maquila exports dynamism and slower remittances’ debt and foreign direct investment. Reserves declined through growth, despite improved agricultural-based exports and lower en- October 2024, partly due to net debt repayments, but recovered ergy imports due to milder La Niña impacts, lower oil prices, and to US$8,049.3 million (5 months of non-maquila imports) by higher prices of key export crops. The CAD is projected to narrow end-2024, strengthened by external disbursements. On Decem- from 2026 reflecting improving exports. Reserves are expected to ber 6, the IMF Board approved the first and second reviews of remain around 5 months of non-maquila imports. the ongoing program. Driven by these forces, poverty is forecasted to decline in 2025 The fiscal deficit narrowed to an estimated 1.1 percent of GDP (47.7 percent at the US$6.85/day upper middle-income country in 2024 (from 1.3 percent in 2023), driven by weaker public poverty line, 2017 PPP) and inequality is projected to remain stable. investments’ execution. The non-financial public sector debt re- Labor-market informality and gender gaps will continue limiting mained stable at 47.9 percent of GDP by end-2024. In Novem- households’ potential to generate income. ber 2024, Honduras issued its first thematic sovereign bond for US$700 million. The fiscal deficit is projected to widen to 1.4 percent of GDP in 2025 driven by increased public investments’ execution and social spending, before narrowing to 1 percent of GDP over the medium Outlook term in line with the FRL target, underpinned by expenditure ad- justments and enhanced revenue collection efficiency. Growth is projected to slow to 2.8 percent in 2025 and 3.4 per- cent in 2026, with weaker credit expansion, lower growth in main Downside risks include a significant deceleration of remittances, trading partners, and trade policy shifts hampering exports and persistent exports’ weakness, and higher import prices, which investment. Improved agricultural production and rising public in- could dampen consumption and delay CAD narrowing. More re- vestments’ execution will counterbalance. Remittances are pro- turned migrants may pose labor-market re-entry challenges. Con- jected to remain elevated, at around one fourth of Honduras’ tinued trade policy uncertainty may hamper investment. Natural GDP, despite the continuing mild deceleration of their growth. hazards could raise financing needs. Capacity constraints and leg- GDP growth is expected to strengthen from 2027, supported by islative gridlock as elections near might slow social and structural improving global conditions. reforms, hampering growth and poverty reduction. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.1 3.6 3.6 2.8 3.4 3.7 Private consumption 5.7 4.6 4.3 3.1 3.4 3.6 Government consumption -4.1 9.2 5.3 4.8 4.7 4.8 Gross fixed capital investment 2.6 11.2 6.2 2.7 3.4 3.8 Exports, goods and services 6.6 -7.0 -4.8 2.0 3.8 4.3 Imports, goods and services 8.5 -8.6 2.3 3.0 4.0 4.1 Real GDP growth, at constant factor prices 4.1 3.6 3.6 2.8 3.4 3.7 Agriculture 0.3 4.0 -0.7 3.4 3.6 3.7 Industry 7.0 -2.4 0.8 0.9 3.6 4.1 Services 3.8 6.3 5.7 3.5 3.3 3.6 Inflation (consumer price index) 9.1 6.7 4.6 4.6 4.5 4.4 Current account balance (% of GDP) -6.7 -4.1 -5.2 -5.3 -4.8 -4.5 Net foreign direct investment inflow (% of GDP) 2.4 2.5 2.7 2.4 2.5 2.7 1 Fiscal balance (% of GDP) -0.2 -1.3 -1.1 -1.4 -1.0 -1.0 Revenues (% of GDP) 29.9 29.4 29.1 29.5 29.5 29.3 1 Debt (% of GDP) 51.9 47.9 47.9 46.8 46.5 46.3 1 Primary balance (% of GDP) 1.2 0.2 0.4 0.4 0.7 0.7 2,3 International poverty rate ($2.15 in 2017 PPP) .. 12.1 12.4 11.7 11.5 11.3 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 25.2 25.0 24.0 23.6 23.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 49.5 49.3 47.7 47.2 46.7 GHG emissions growth (mtCO2e) -0.9 -0.2 0.9 0.7 1.3 1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal data refers to non-financial public sector. 2/ Calculations based on SEDLAC harmonization, using 2023-EPHPM. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 3/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 123 This outlook reflects information available as of April 10, 2025. 1 2 JAMAICA Population Poverty million millions living on less than $6.85/day 2.8 0.4 3 4 Life expectancy at birth School enrollment A series of weather-related shocks and the completion of years primary (% gross) the post-pandemic rebound resulted in an estimated GDP contraction of 0.7 percent for 2024. Sound macroeconomic 70.6 84.5 5 6 management has enabled Jamaica to respond to shocks GDP GDP per capita without significantly impairing fiscal sustainability and current US$, billion current US$ poverty reduction. In the medium term, real GDP growth is expected to converge to its low potential, while poverty 19.9 7019.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. reduction is set to continue at a slower pace. 4/ 2023. 5/ 2024. 6/ 2024. income instability also remain concerns, with nearly half of non- Key conditions and challenges agricultural jobs being informal. Jamaica has been burdened by high debt levels for decades. Since Jamaica is highly vulnerable to external shocks. Agriculture and 2013, the Government has successfully implemented fiscal consol- tourism, which account for over half of employment, are partic- idation measures, reducing the public debt-to-GDP ratio by more ularly vulnerable to weather-related events. The financial sec- than 60 percentage points to 73.4 percent of GDP in FY2023/ tor is stable, well-capitalized, and profitable but also suscep- 24—the lowest level in 25 years. The Government sustained efforts tible to shocks. To strengthen fiscal, financial, and social re- in fiscal consolidation while providing temporary assistance to vul- silience to climatic shocks, Jamaica has been gradually inte- nerable households and businesses. grating climate change adaptation into its policy framework. Further improving the Anti-Money Laundering and Combat- However, Jamaica has been among the slowest growing ting the Financing of Terrorism frameworks and enhancing economies in the region with persistently low productivity financial supervision can strengthen financial stability and at- growth due to a weak business environment, limited innovation, tract private investment. and human capital constraints. The economy has limited diversi- fication, being concentrated in low-productivity services, geared towards tourism. High connectivity costs, inadequate digital in- Recent developments frastructure, and pervasive crime hamper private investment, while fiscal consolidation and relatively high debt service costs After growing at 2.3 percent in 2023, the economy contracted by constrain public investment. The share of Jamaicans living on an average of 2 percent in the first three quarters of 2024. In less than US$6.85 (2017 PPP) per day was 13.7 percent in 2021 2024Q2, the economy underperformed compared to initial expec- and inequality stood high at 39.9 Gini points. Job quality and tations, driven by contractions in construction, manufacturing, and FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 16 350000 4 14 340000 2 12 330000 0 320000 10 -2 310000 8 -4 300000 6 -6 290000 4 280000 -8 2 270000 -10 -12 0 260000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Agriculture Industry Services Real GDP Upper middle-income pov. rate Real GDP pc Sources: Statistical Institute of Jamaica and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 124 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. services. After Hurricane Beryl hit in July 2024, almost all sec- tors reported negative growth in 2024Q3, particularly agri- Outlook culture and mining, which contracted by 12 and 17 percent, respectively. The economy is estimated to have contracted Growth is expected to recover to 1.7 percent in 2025 and converge by 0.7 percent in 2024. to its potential averaging 1.6 percent over the medium term. Agri- culture, mining, and construction are expected to drive the recov- After year-on-year inflation spiked to 6.4 percent in August 2024, ery. Inflation is projected to stay within the BOJ’s target range (5 driven by Hurricane Beryl’s temporary impact on food and utility ±1 percent). As per capita real income improves, the share of Ja- prices, it stabilized around 5 percent at end-year. With anchored maicans living on less than US$6.85 per day is projected to drop to inflation expectations, the Bank of Jamaica (BOJ) reduced the key 11.0 percent by 2027, still above pre-pandemic levels. policy rate four consecutive times in 2024, by 25 basis points each, reaching 6.0 percent in December 2024. The fiscal balance in the forecast horizon is consistent with the legislated debt-to-GDP target of 60 percent by FY2027/28. Rev- The fiscal stance was bolstered by tax revenues in FY2024/25, enues will be supported by tax mobilization efforts, and spend- mostly income taxes, and non-tax revenues, due to the securitiza- ing is projected to decline marginally, in part due to lower inter- tion of revenue from an international airport. Government expen- est payments. Public debt is expected to reach 60.7 percent of ditures also increased due to hurricane response and the public GDP by 2027. sector compensation restructure, but to a lesser extent than rev- enues. The fiscal surplus is estimated at 0.3 percent in FY2024/25. The current account is expected to remain stable, averaging 0.2 percent of GDP between 2025 and 2027. Foreign direct investment The current account surplus is estimated at 0.4 percent in 2024 is anticipated to recover and fully cover the deficit but stay below amid higher imports and lower tourist arrivals, partly due to Hur- pre-pandemic levels. Gross reserves are projected to remain at ricane Beryl. As of December 2024, reserves remain adequate, healthy levels. covering about 6.6 months of imports and contributing to ex- change rate stability. The near-term outlook is subject to significant uncertainty. Downside risks include a global economic slowdown, rising glob- The share of Jamaicans living on less than US$6.85 per day dropped al uncertainty and worsening climatic events. Recent trade mea- from 13.7 percent in 2021 to 12.2 percent in 2024. Overall unem- sures can have direct and indirect impacts through changes ployment was 3.5 percent in 2024Q4 but was 11 percent for youth in international prices and economic slowdown of major mar- and 13.7 percent for female youth. Around 61.9 percent of work- kets, but the full impact is difficult to gauge as policy shifts ing-age women participated in the labor market compared with may continue to unfold. High uncertainty could curtail invest- 74.5 percent of men. Food insecurity proved an issue in 2024: 32 ments and slow growth, derailing climate change adaptation and percent of all households and 60 percent of those in the poorest debt objectives. Worsening crime could also undermine econom- wealth quintile had moderate to severe food insecurity, according ic growth and hinder poverty reduction efforts, disproportion- to the Multiple Indicator Cluster Survey’ scale. ately affecting vulnerable communities. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.2 2.6 -0.7 1.7 1.7 1.6 Real GDP growth, at constant factor prices 5.2 2.6 -0.7 1.7 1.7 1.6 Agriculture 9.0 -5.7 -2.0 3.5 0.9 0.9 Industry -0.4 5.0 -1.5 2.1 1.5 1.4 Services 6.5 2.9 -0.4 1.4 1.9 1.7 Employment rate (% of working-age population, 15 years+) 64.9 64.9 64.7 64.7 64.9 65.3 Inflation (consumer price index) 10.3 6.5 5.5 4.8 5.0 5.0 Current account balance (% of GDP) -0.8 3.0 0.4 0.5 0.1 0.0 Net foreign direct investment inflow (% of GDP) 1.5 2.0 2.2 2.4 2.7 3.1 Fiscal balance (% of GDP) 0.3 0.0 0.3 0.0 -0.9 -0.8 Revenues (% of GDP) 31.6 30.9 34.4 32.6 30.9 30.5 Debt (% of GDP) 80.9 74.2 70.2 66.0 63.4 60.7 Primary balance (% of GDP) 6.1 5.8 6.1 5.2 3.8 3.4 1 International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.3 0.3 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.0 1.7 1.8 1.6 1.6 1.5 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 12.5 12.1 12.2 11.9 11.5 11.0 GHG emissions growth (mtCO2e) 6.9 4.3 -0.9 1.6 1.6 1.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on CONLAC harmonization, using 2021-JSLC. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 125 This outlook reflects information available as of April 10, 2025. 1 2 MEXICO Population Poverty million millions living on less than $6.85/day 130.9 28.0 3 4 Life expectancy at birth School enrollment Real GDP growth is projected to come to a halt in 2025 as years primary (% gross) uncertainty in trade policy and the revision of the United States-Mexico-Canada Agreement (USMCA) dampen invest- 74.8 102.0 5 6 ment and exports. With gradual growth improvements GDP GDP per capita expected by 2027, the poverty rate is projected to decline. current US$, billion current US$ Spending needs in infrastructure and other key areas might require revenue-boosting measures to safeguard 1853.0 14159.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. debt sustainability in a lower growth environment. 4/ 2022. 5/ 2024. 6/ 2024. Key conditions and challenges To unlock its full potential, the key is to strengthen the drivers of growth. Spending pressures will require revenue-boosting re- Mexico has a strong track record of macroeconomic stability, forms to safeguard debt sustainability and greater participation backed by an independent central bank, a robust financial sector, of private sector to meet investment needs, particularly given in- and a flexible exchange rate. Prudent fiscal management has frastructure needs. In the near term, navigating a turbulent trade kept public debt relatively low and sustainable. However, in- and investment setting and planning for greater trade resilience creased spending on social programs, large public infrastructure will be essential. projects, and continued fiscal support to Petróleos Mexicanos (PEMEX) have contributed to growing fiscal deficits and strained public finances. Recent developments Mexico’s economic growth has lagged its regional and international Real GDP grew 1.5 percent in 2024, driven by consumption and in- peers. Yet, the official multidimensional poverty rate in Mexico, vestment. Domestic demand weakened in the second half of the which assesses income poverty alongside six indicators of social year, with private consumption slowing down to 0.4 percent y-o-y deprivation, fell from 43.2 percent in 2016 to 36.3 percent in and investment contracting by 2.6 percent y-o-y in Q42024. Con- 2022, lifting 5.4 million people out of poverty, driven mainly by la- struction, retail, transport, and professional, scientific and techni- bor market outcomes, including increases in the minimum wage. cal services contributed the most from the supply side. Recent changes to US tariff policy and the upcoming revision of the USMCA are now affecting Mexico's growth prospects and its The current account deficit was 0.3 percent of GDP in 2024, fully fi- role as a destination for foreign direct investment (FDI), given nanced by net FDI. Remittances reached US$64.7bn (+2.3 percent its proximity to major consumer markets, large domestic market, y-o-y), while reserves stood at US$228.8bn by end-2024. Peso ap- and diversified economy. preciated 2.8 percent year-to-date in 2025. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita. Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 45 200000 10 40 195000 35 190000 5 30 185000 0 25 180000 20 175000 -5 15 170000 -10 10 165000 -15 5 160000 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 155000 Gov. cons. Exports GFCF 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Upper middle-income pov. rate Statistical disc. GDP Real GDP pc Sources: National Institute of Statistics and Geography (INEGI), and World Bank Source: World Bank. Notes: See footnotes in table on the next page. staff calculations. 126 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. After a spike in mid-2024, headline inflation continued to decline, uncertainty surrounding trade policy shifts, the upcoming USMCA reaching 3.8 percent y-o-y in February 2025. Core inflation has revision, and the expected slowdown in the U.S. economy. These been on a downward trend since early 2022, dropping to 3.6 per- developments also contribute to a 1 percentage point increase cent. Banxico reduced the policy rate by 50 bps in February to 9.5 in the current account deficit to 1.3 percent of GDP by 2027 as percent. The banking sector maintains high levels of capitalization exports contract. The monetary poverty rate at the upper mid- and liquidity above regulatory requirements, with stress tests sug- dle-income threshold ($6.85/day, 2017 PPP) is expected to slight- gesting that it can absorb significant shocks. ly increase from 20.6 to 20.9 between 2024 and 2025 and then decline to 20.8 in 2026 and 20.4 percent in 2027, driven by im- Mexico’s labor participation rate dropped by 0.6pp to 59.9 percent proving GDP growth. in Q42024 y-o-y, whereas the unemployment rate leveled off at 2.6 percent. Informal employment also declined from 54.8 to 54.5 The fiscal outlook is expected to gradually improve with the over- percent. Labor poverty –the share of the population whose family all deficit declining to 4.0 percent by 2027, driven by a slowdown earnings per capita from labor alone are below the official food in social program spending, and the completion of major infra- poverty line—stood at 35.4 percent. structure projects. The normalization of interest rates as inflation reaches Banxico’s target range in the first half of 2025, further The overall fiscal deficit stood at 5.1 percent of GDP in 2024 supports this outlook. (up from 4.3 percent in 2023). Public sector revenues rose 1.7 percent in real terms y-o-y, driven by higher fuel taxes and oil Mexico's growth forecast faces several risks. Uncertainty over revenues. But expenditures increased at the faster pace of 7.7 trade policy shifts and the upcoming revision of the USMCA percent in real terms, primarily due to higher investment spend- could have more negative impacts on exports, growth, and in- ing, financial costs, and pension outlays. Mexico’s credit rating vestment than those assumed in the baseline. Trade restric- remains above investment grade. Sovereign spreads have stayed tions could lead to slower than expected growth in the U.S. around 310bps in 2025. and the global economy. Stricter border controls and depor- tations could reduce migration to the U.S. and lower remit- tances. Heightened market volatility could dampen investment Outlook and consumption, add fiscal pressures, and reduce exports and FDI. Domestically, uncertainty surrounding the implementation Mexico’s GDP growth is projected to come to a halt in 2025, with of the judicial reform and the restructure of regulatory bodies a gradual recovery to 1.8 percent by 2027—a level below the av- could undermine market confidence, affecting investment and erage growth rate of the past three years. This is primarily due to financial flows. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.7 3.3 1.5 0.0 1.1 1.8 Private consumption 4.8 4.2 2.8 1.7 1.9 2.2 Government consumption 2.0 1.8 1.6 1.2 0.8 1.2 Gross fixed capital investment 7.5 16.6 3.3 -0.6 0.0 1.5 Exports, goods and services 9.5 -7.2 3.3 -3.6 1.1 2.5 Imports, goods and services 8.6 3.7 2.7 0.3 1.6 2.7 Real GDP growth, at constant factor prices 3.6 3.2 1.5 0.0 1.1 1.8 Agriculture 1.6 -1.4 -2.3 0.8 1.5 1.6 Industry 4.8 3.4 0.2 -0.1 1.2 1.8 Services 3.1 3.4 2.3 0.0 1.0 1.8 Employment rate (% of working-age population, 15 years+) 59.0 59.8 59.4 59.1 59.1 59.1 Inflation (consumer price index) 7.9 5.5 4.7 3.7 3.6 3.6 Current account balance (% of GDP) -1.2 -0.3 -0.3 -1.4 -1.5 -1.3 Net foreign direct investment inflow (% of GDP) -1.5 -1.7 -1.5 -1.3 -1.4 -1.6 Fiscal balance (% of GDP) -4.3 -4.3 -5.1 -4.5 -4.3 -4.0 Revenues (% of GDP) 22.4 22.1 21.9 21.8 21.9 22.0 Debt (% of GDP) 48.2 47.4 52.7 54.4 55.8 56.5 Primary balance (% of GDP) -1.6 -1.0 -1.4 -0.7 -0.6 -0.4 1,2 International poverty rate ($2.15 in 2017 PPP) 1.2 1.1 1.1 1.1 1.1 1.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 21.8 20.8 20.6 20.9 20.8 20.4 GHG emissions growth (mtCO2e) 2.7 0.3 -0.5 -1.7 -0.8 -0.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2022-ENIGHNS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 127 This outlook reflects information available as of April 10, 2025. 1 2 NICARAGUA Population Poverty million millions living on less than $6.85/day 6.9 2.6 3 4 Life expectancy at birth School enrollment Nicaragua’s economy is estimated to have grown by years primary (% gross) 3.6 percent in 2024, driven by private consumption and services. Prudent fiscal and macroeconomic policies have 74.6 105.9 5 6 likely reduced public debt to 47.1 percent of GDP and GDP GDP per capita lowered inflation to 2.8 percent. Poverty fell to 12 percent current US$, billion current US$ in 2023, but challenges remain. Downside risks include a global slowdown, disruptions in trade and remittances, 18.8 2719.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2014 (2017 PPPs). 3/ 2022. and vulnerability to natural disasters. 4/ 2023. 5/ 2024. 6/ 2024. and education from 2017 to 2022, but not on a proxy of Key conditions and challenges household economic dependency (ratio of age 14+ house- hold members on employed members). Rural areas are be- Over the past three years, Nicaragua has sustained stable econom- hind urban ones on some dimensions, such as water, sani- ic growth at an average rate of 4 percent, driven by an unprece- tation and education. dented surge in remittances that has boosted private consump- tion, strong public and foreign direct investment, robust export Investing in human capital and infrastructure would enhance performance, as well as prudent macroeconomic and fiscal man- productivity in manufacturing and services and generate produc- agement. The sustained performance across these sectors has re- tive jobs. The economic impact of recent domestic legislative sulted in fiscal and current account surpluses, contributing signifi- changes, along with uncertainties in the global economic policy cantly to a reduction in public debt. environment, could impact trade, as well as domestic and foreign investment. However, Nicaragua’s solid international reserves, Nicaragua has made progress in reducing poverty incidence standing at an estimated US$6.2 billion in 2024, equivalent to 6.9 (US$3.65 per day 2017 PPP) reaching 12 percent in 2018. months of imports, bolster the country's capacity to respond to However, the triple shock of socio-political unrest in 2018, economic shocks. the pandemic, and hurricanes contributed to a renewed in- crease in the poverty rate to around 15 percent and a Gini index of around 48 in 2020. As the economy rebounded in Recent developments 2021, supported by public investment, export demand, and external aid pushing GDP above pre-crisis levels, it is likely Growth was mainly driven by construction, mining and robust that poverty rate restarted to fall (estimated at 13.1 percent services. Remittances are estimated to have increased from 26 in 2022). Data on basic needs (the only survey data avail- percent of GDP in 2023 to 27 percent in 2024, supporting private able post 2014) shows improvements in housing conditions consumption and partially compensating for the slowdown in net FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 60 35000 20 50 30000 15 25000 10 40 5 20000 30 0 15000 -5 20 10000 -10 10 5000 -15 2000 2004 2008 2012 2016 2020 2024 0 0 Gov. cons. Exports GFCF 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: World Bank staff elaboration based on data from World Bank, Ministry of Source: World Bank. Notes: See footnotes in table on the next page. Finance and Public Credit (MHCP), and Central Bank of Nicaragua. 128 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. external demand. The current account surplus narrowed from 7.7 percent of GDP in 2023 to 6.4 in 2024 percent due to a deterio- Outlook rating trade balance. Nicaragua is projected to grow at 3.4 percent in 2025 and 3.3 in 2026 Poverty is estimated to have declined to 11.5 percent in 2024 and 2027, as global economic deceleration and uncertainty limit ex- (US$3.65/day 2017 PPP), reflecting moderate economic growth and port opportunities and foreign investment. Remittances are expect- growth in remittances. The employment rate declined slightly in ed to moderate but continue supporting private consumption. 2024 (to 65.3 percent in December 2024 from 66.9 in December 2023), while the unemployment rate remained low, at 2 percent in Inflation is projected to settle at a higher rate of 4 percent in the December 2024 (Instituto Nacional de Información de Desarrollo). medium term, assuming higher global inflation. Poverty (US$3.65/ The employment rate for women (55.2 percent in December 2024) day 2017 PPP) is projected to be 11.4 percent in 2025 and decline has increased in recent years but remains well below that for men to 10.3 percent by 2027 as labor income grows. (77.1 percent). The current account surplus is expected to narrow to 1.8 percent Inflation halved from 5.6 percent in 2023 to 2.8 percent in 2024, by 2027 due to weaker external demand and trade policy shifts helped by moderately tight policy rates, a crawling peg exchange negatively impacting garment, commodity, and manufacturing ex- rate system, declining global prices, and subsidies. Banks re- ports. Conversely, lower crude oil prices will improve the balance mained well-capitalized, and credit and deposits continued to as the country is a net oil importer. Foreign direct investment flows grow. As of end-2024, capital adequacy and liquidity ratios for are forecast at around 5.4 percent of the GDP in the medium term. banks remained well above the regulatory minima. Bank deposits International reserves are projected to remain strong, ensuring ex- and credit to the private sector grew by 10.3 and 19.3 percent (y- change rate stability. o-y), respectively. Non-performing loans declined to 1.4 percent in December 2024, from 1.7 percent in December 2023 (Central Fiscal policy is expected to be prudent, with stable primary and Bank of Nicaragua). overall surpluses in the medium term, while public debt is project- ed to decline to 42.8 percent by 2027. Government expenditure rose due to increased capital spend- ing, narrowing the fiscal surplus from 2.6 percent of GDP in Downside risks to the macroeconomic outlook include global eco- 2023 to an estimated 2.1 percent in 2024. Sustained prudent nomic uncertainty, with potential impact on trade, remittances, fiscal policy and the current account surplus led to an estimat- and investment; weaker economic growth in key trading partners; ed decrease in public debt from 49.6 percent of GDP in 2023 the effects of legislative changes on investors’ sentiment; and vul- to 47.1 percent in 2024. nerability to natural disasters. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.8 4.6 3.6 3.4 3.3 3.3 Private consumption 6.0 7.3 3.9 3.0 2.8 2.8 Government consumption -6.5 -3.2 2.8 2.3 2.3 2.6 Gross fixed capital investment -3.0 20.3 5.1 3.9 5.1 6.3 Exports, goods and services 8.6 1.3 2.2 0.5 2.0 3.6 Imports, goods and services 5.0 8.9 3.3 1.0 4.1 3.9 Real GDP growth, at constant factor prices 3.8 4.6 3.6 3.4 3.3 3.3 Agriculture 1.7 -2.6 2.0 1.8 1.7 1.7 Industry 2.8 4.1 4.0 3.9 3.7 3.8 Services 4.7 6.7 3.8 3.6 3.6 3.4 Employment rate (% of working-age population, 15 years+) 62.1 62.5 62.5 62.5 62.5 62.5 Inflation (consumer price index) 10.5 5.6 2.8 3.5 4.0 4.0 Current account balance (% of GDP) -2.5 7.7 6.4 5.9 3.6 1.8 Net foreign direct investment inflow (% of GDP) 8.1 6.7 6.0 5.8 5.6 5.4 1 Fiscal balance (% of GDP) 0.6 2.6 2.1 1.4 1.4 1.4 Revenues (% of GDP) 31.7 31.7 32.0 31.3 31.3 31.6 2 Debt (% of GDP) 53.0 49.6 47.1 45.4 43.8 42.8 1 Primary balance (% of GDP) 2.0 4.2 3.7 3.1 3.0 3.0 3,4 International poverty rate ($2.15 in 2017 PPP) 5.8 5.2 5.0 4.9 4.6 4.4 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 13.1 12.0 11.5 11.4 10.9 10.3 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 36.1 32.9 31.8 31.4 31.0 30.2 GHG emissions growth (mtCO2e) 0.8 0.9 0.9 0.8 0.9 0.9 Source: World Bank, Ministry of Finance and Public Credit (MHCP) and Central Bank of Nicaragua. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal and Primary Balance correspond to the non-financial public sector. 2/ Debt is total public debt. It is adjusted for the pending relief for Non-Paris Club debt under the Heavily Indebted Poor Countries framework. 3/ Calculations based on SEDLAC harmonization, using 2014-EMNV. Actual data: 2014. Nowcast: 2015-2024. Forecasts are from 2025 to 2027. 4/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 129 This outlook reflects information available as of April 10, 2025. 1 2 PANAMA Population Poverty million millions living on less than $6.85/day 4.5 0.6 3 4 Life expectancy at birth School enrollment Growth is estimated at 2.9 percent in 2024, affected by the years primary (% gross) mining closure but supported by domestic demand. The fiscal deficit rose to 7.3 percent of GDP, driven by spending 76.8 94.6 5 6 pressures, arrear settlements, and the dissipation of one-off GDP GDP per capita revenues. With mixed results in the labor market and lower current US$, billion current US$ non-labor incomes, poverty and inequality increased. Growth is expected to accelerate, driven by a recovery in 86.2 19092.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. construction and robust services. 4/ 2023. 5/ 2024. 6/ 2024. These efforts resulted in Panama's removal from the Inter- Key conditions and challenges national Financial Action Task Force’s list of jurisdictions in October 2023. Additionally, comprehensive reforms in Pub- Panama is a key logistical and financial hub in Central America lic-Private Partnerships and procurement have also helped thanks to its strategic location, the Panama Canal's role in global increase financing for critical infrastructure. trade, and a dollarized economy. Over the past 30 years, Pana- ma has experienced robust growth driven by capital and labor Despite high growth, poverty reduction, and reform progress, new accumulation, resulting in significant job creation and a sharp re- challenges have emerged. A legal dispute over the contract of duction in poverty (from 48.1 percent in 1991 to 12.9 percent in Panama’s largest mine, Cobre Panama, led to the suspension of all 2023 at $6.85/day per capita, 2017 PPP). Despite this progress, extraction activities. Additionally, recurrent droughts temporarily Panama remains one of the most unequal countries globally (Gi- reduced the number of vessels crossing the Panama Canal. These ni index of 48.9 in 2023), with high poverty rates persisting in events have impacted the economy and increased fiscal strain, giv- rural areas and among indigenous communities due to limited en Panama’s low tax revenues and new spending pressures. access to human capital and basic services and uneven labor market opportunities. Recent developments Panama continues to enhance its attractiveness as an off- shore center and has made significant progress in recent Growth is estimated to have decelerated to 2.9 percent in 2024, years to address challenges with anti-money laundering and impacted by the suspension of Cobre Panama activities. Govern- counter-terrorism financing (AML/CFT). Authorities have im- ment and private consumption, along with public investment (such plemented key reforms to improve governance and trans- as the metro line) and private ventures, helped mitigate a stronger parency, including updates to AML/CFT prevention regula- deceleration. The Economic Activity Index indicated a 3.5 percent tions and enhancements in beneficial ownership information. year-on-year growth in December-2024, showing signs of recovery FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 40 25 25000 30 20 20 20000 10 15 15000 0 -10 10 10000 -20 -30 5 5000 -40 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Source: World Bank estimates based on data from the National Institute of Statistics Source: World Bank. Notes: See footnotes in table on the next page. and Census of Panama. 130 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. from the significant slowdown in the construction and mining ear- non-mining exports. Inflation is expected to stabilize at approx- lier in the year. Inflation decreased to -0.2 percent year-on-year in imately 1.5 percent in the medium term. However, limited agri- December-2024, supported by stable energy and food prices. cultural growth and the challenge of creating high-quality jobs, particularly in rural areas where 67.3 percent of the poor reside, Growth was accompanied by higher labor force participation but are likely to keep poverty levels around those of 2024 during limited gains in labor income among low-income households. Addi- the forecast period. tionally, the discontinuation of pandemic emergency transfers af- fected non-labor incomes. Consequently, the poverty rate ($6.85/ The current account deficit (CAD) is expected to widen in 2025, im- day per capita, 2017 PPP) rose by 0.7 percentage points to 13.6 per- pacted by slower growth in key trade partners but is projected to cent in 2024, and the Gini coefficient increased to 49.6 in 2024. gradually narrow thereafter. The CAD is anticipated to be largely fi- nanced by Panama’s robust FDI flows. The current account deficit (CAD) remained narrowed in 2024, im- ports slowed down faster than exports. Lower copper exports were Panama’s fiscal deficit is projected to decrease to 3.7 percent of partly offset by other merchandise and services exports, while im- GDP by 2027 due to fiscal consolidation efforts including cuts in ports declined from a high base in 2023. Foreign direct investment non-priority spending, better targeting of benefits, and improved (FDI surged by 69.7 percent by September 2024, mainly due to revenue collection. Additional fiscal reforms, particularly in rev- reinvested profits in the services sector. Panama's international re- enue mobilization, could further accelerate consolidation beyond serves are assessed as adequate. baseline projections. Public debt is expected to remain above his- torical levels, financed through a mix of global bonds, domestic The fiscal position worsened significantly in 2024, with the fiscal bonds, private creditors and international financial institutions. balance deficit reaching 7.3 percent of GDP. Revenues declined Despite recent rating pressures, Panama is expected to maintain as royalties from the copper mine and land sales to the Canal good access to financing, as its dollarization and stable political Authority waned. Spending increased due to election cycle pres- environment make it an attractive financial center. The country’s sures in the first half of the year and efforts to settle existing ar- domestic financial sector is also highly liquid. rears after the new administration came into office in July 2024. Consequently, public debt reached 61.5 percent of GDP by the Panama faces downsides risks from global trade uncertainties, end of 2024. tighter global financing conditions, and geopolitical tensions af- fecting prices. Domestically, fiscal pressures, uncertainty over the Cobre mine closure, and challenges in advancing the fiscal re- Outlook form agenda could slow down consolidation efforts and increase reliance on external debt. These risks may exacerbate poverty, Growth is projected to gradually accelerate to around 4.3 per- as 1 in 10 Panamanians are vulnerable to falling back poverty cent in 2027, driven by a dynamic services sector and increased due to a shock. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 10.8 7.4 2.9 3.5 3.8 4.3 Private consumption 6.7 3.0 3.0 3.7 3.9 4.3 Government consumption 2.9 3.4 3.2 3.5 4.3 4.2 Gross fixed capital investment 20.6 18.8 3.6 3.9 4.4 5.4 Exports, goods and services 22.3 5.1 3.5 3.5 4.1 4.7 Imports, goods and services 24.0 7.1 3.3 3.5 4.1 4.9 Real GDP growth, at constant factor prices 10.8 7.4 2.9 3.5 3.8 4.3 Agriculture 3.0 0.5 0.5 0.5 0.6 0.8 Industry 12.6 12.8 2.5 2.6 2.7 2.9 Services 10.4 5.7 3.2 3.9 4.4 4.9 Employment rate (% of working-age population, 15 years+) 56.4 58.2 58.1 58.2 58.3 58.4 Inflation (consumer price index) 2.9 1.5 1.5 1.5 1.5 1.5 Current account balance (% of GDP) 0.0 -3.2 1.9 -3.3 -2.6 -1.9 Net foreign direct investment inflow (% of GDP) 3.0 1.7 2.9 3.0 3.0 3.0 Fiscal balance (% of GDP) -4.0 -3.5 -7.3 -5.0 -3.9 -3.7 Revenues (% of GDP) 17.4 17.9 15.8 17.2 17.5 17.7 Debt (% of GDP) 58.0 56.4 61.5 61.8 61.6 61.5 Primary balance (% of GDP) -2.3 -1.4 -5.1 -2.7 -1.7 -1.5 1,2 International poverty rate ($2.15 in 2017 PPP) .. 1.3 0.9 0.9 1.0 1.0 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 4.4 4.1 4.4 4.8 4.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 12.9 13.6 14.0 14.3 14.2 GHG emissions growth (mtCO2e) 9.8 8.1 5.3 4.5 3.7 2.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-EH. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 131 This outlook reflects information available as of April 10, 2025. 1 2 PARAGUAY Population Poverty million millions living on less than $6.85/day 6.4 1.2 3 4 Life expectancy at birth School enrollment Despite uneven rainfall which halved hydropower exports, years primary (% gross) Paraguay grew at an estimated 4.2 percent in 2024. Low inflation and healthy agriculture harvests helped to reduce 70.5 92.4 5 6 poverty to an estimated 16.2 percent. While growth is ex- GDP GDP per capita pected to average 3.6 percent over 2025-2027, Paraguay current US$, billion current US$ needs to create more and better jobs and strengthen its capacity to confront extreme weather shocks. 44.5 6978.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. structural transformation, generating more formal employment Key conditions and challenges opportunities. While the recent investment grade rating should help to attract more private investment, efforts to strengthen the Thanks to a stable macroeconomic framework and an open trade rule of law and tackle corruption are still critical. and investment regime, Paraguay’s per capita income grew 2.8 per- cent annually on average over 2003-2023, faster than other region- al and upper middle-income peers. Recent developments Nonetheless, 18 percent of the population lived under the poverty Real GDP growth decelerated to 4.2 percent year-on-year in 2024 line of US$6.85 per day (2017 PPP) in 2023. External shocks, includ- from a high base in 2023. Uneven rainfall along the main water- ing droughts and floods, have slowed growth and poverty reduc- ways cut hydropower output by 20 percent and reduced overall tion since 2013. Income inequality remains high at 44.4 Gini points GDP growth by 0.5 percentage points over the same period. in 2023. Informal employment—affecting two-thirds of work- ers—constrains social mobility and economic security. The social The unemployment rate declined to 4.6 percent in Q4 2024, down protection system presents opportunities to strengthen coverage 0.7pp from a year earlier, mainly driven by gains among urban for these workers. male workers. However, underemployment rose by 0.3pp to 3.5 percent. Women’s workforce participation rose 1.3pp to 60.9 per- Creating better quality jobs is a priority, especially given Paraguay’s cent. Poverty is estimated to have fallen to 16.2 percent between young workforce. The government has advanced reforms to 2023 and 2024 (-1.8pp), supported by healthy agricultural harvests, streamline property registration, encourage the formalization of social transfers, and moderate increases in labor income. workers and of micro, small and medium-sized enterprises. Imple- menting these reforms and tackling gaps in infrastructure and hu- The current account deficit widened to 3.7 percent of GDP in man capital will help Paraguay boost productivity and accelerate 2024 as hydropower exports halved and global soy prices fell by FIGURE 1 / Annual hydropower exports FIGURE 2 / Actual and projected poverty rates and real GDP per capita Gigawatt hours Poverty rate (%) Real GDP per capita (constant million LCU) 45000 40 45 40000 35 40 35000 30 35 30000 30 25 25000 25 20 20000 20 15 15 15000 10 10 10000 5 5 5000 0 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Average 2020 2021 2022 2023 2024 International poverty rate Lower middle-income pov. rate 2014-2020 Upper middle-income pov. rate Real GDP pc Source: Central Bank of Paraguay. Source: World Bank. Notes: See footnotes in table on the next page. 132 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 23 percent. The Guaraní depreciated against the US dollar by 6.5 consumer spending. Private investment growth is expected to percent in 2024. Net international reserves stood at 7.1 months pick up gradually as financing conditions ease over the medium of imports at end-March 2025. term, enabling moderate progress on a large pipeline of projects totaling around 10 percent of GDP. Headline inflation continued the downward trend seen since 2022, averaging 3.8 percent in 2024, but picked up to 4.4 percent at end- Inflation is expected to moderate to the midpoint of the target March 2025. Core inflation ticked up to 5.2 percent, towards the range in 2026 and 2027. Poverty is expected to decline from 16.2 upper end of the new target range (1.5-5.5 percent). The Central percent in 2024 to 15.6 percent in 2025 and to 14.8 percent in 2026, Bank maintained the policy rate at 6 percent. supported by rising incomes in services and agriculture. The 2024 fiscal deficit met the approved budget target of 2.6 per- The central government fiscal deficit is expected to continue nar- cent of GDP. Tax revenues exceeded expectations, reaching a rowing towards the legal limit of 1.5 percent of GDP in 2026. The record 11.4 percent of GDP. This performance reflected a rebound consolidation will be supported by lower public investment as a in corporate profits from the 2022 drought, as well as efficiency share of GDP and slightly higher revenues compared to pre-2024, improvements from the merger of tax and customs agencies. Real reflecting some permanent tax efficiency improvements. With a spending grew by only 0.9 percent as cuts in public investment off- smaller primary deficit and robust growth, public debt is expected set a 22.5 percent real increase in interest payments. to stabilize at around 40 percent of GDP. Public debt rose 2.3 pp to reach 40.7 percent of GDP as at The current account deficit is projected to narrow as agriculture end-2024. In February 2025, Paraguay issued a 10-year Guaraní- and hydropower exports recover and global oil prices fall. indexed bond for USD 600 million with an 8.5 percent coupon, in Nonetheless, the current account is expected to remain in a addition to a 30-year USD-denominated bond for an equivalent deficit as import growth, particularly of machinery and cap- amount at 6.65 percent. Paraguay’s sovereign spreads are among ital goods, picks up along with the gradual implementation the lowest in the region. of private investments. The outlook is subject to downside risks. Uncertainties in the global Outlook trade outlook and slower growth in China could dent Paraguay’s export performance, while tighter global financing conditions may Growth is forecast to decelerate further to 3.5 percent in 2025, augment external vulnerabilities (87 percent of Paraguay’s external reflecting the combined effects of a mild drought that is expected debt is denominated in foreign currency). Severe weather events to reduce the main soybean yield by 15 percent, and lower global could disrupt agricultural and hydropower production, and slow soybean prices. Over 2026-2027, growth is expected to remain poverty reduction. But, upside risks are also present, including near potential at 3.6 percent, driven by agriculture exports and faster progress on large private investment projects. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 0.2 5.0 4.2 3.5 3.6 3.6 Private consumption 2.3 3.2 5.2 3.5 3.5 3.5 Government consumption -2.2 5.1 7.1 0.0 0.2 1.2 Gross fixed capital investment -1.8 -2.8 8.3 2.7 4.3 4.8 Exports, goods and services -1.1 35.0 -2.0 3.7 4.2 4.2 Imports, goods and services 9.4 9.4 4.2 2.0 3.3 3.8 Real GDP growth, at constant factor prices 0.1 4.9 3.8 3.5 3.6 3.6 Agriculture -8.6 15.9 3.9 2.3 3.5 3.5 Industry 0.7 4.0 2.2 3.3 3.0 3.0 Services 1.5 3.5 4.8 4.0 4.0 4.0 Employment rate (% of working-age population, 15 years+) 61.3 62.3 62.2 63.4 64.8 64.0 Inflation (consumer price index) 9.8 4.6 3.8 3.8 3.5 3.5 Current account balance (% of GDP) -7.2 -0.6 -3.7 -1.8 -1.4 -1.1 Net foreign direct investment inflow (% of GDP) 1.9 0.8 0.8 1.2 1.5 1.5 Fiscal balance (% of GDP) -2.9 -4.1 -2.6 -1.9 -1.5 -1.5 Revenues (% of GDP) 14.0 14.0 15.1 15.0 14.7 14.6 Debt (% of GDP) 37.7 38.3 40.7 40.1 39.8 39.7 Primary balance (% of GDP) -2.0 -2.8 -0.9 -0.4 0.0 0.0 1,2 International poverty rate ($2.15 in 2017 PPP) 1.7 1.2 0.9 0.8 0.8 0.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 6.2 4.9 4.1 3.8 3.5 3.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 20.6 18.0 16.2 15.6 14.8 14.0 GHG emissions growth (mtCO2e) -0.7 1.0 1.4 1.2 1.1 0.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-EPHC. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 133 This outlook reflects information available as of April 10, 2025. 1 2 PERU Population Poverty million millions living on less than $6.85/day 34.2 11.1 3 4 Life expectancy at birth School enrollment Economic growth is projected at 2.9 percent in 2025, sup- years primary (% gross) ported by high commodity prices and key infrastructure and mining projects. Poverty rates would fall to 30.5 percent in 73.4 107.5 5 6 2025 due to continued growth and stable prices. Risks in- GDP GDP per capita clude political uncertainty which could result in delays in fis- current US$, billion current US$ cal consolidation. Overcoming structural challenges related to low-productivity jobs and low-quality public services will 289.4 8458.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. be critical for medium-term growth and poverty reduction. 4/ 2023. 5/ 2024. 6/ 2024. unrest. The recovery was driven by a strong expansion of public Key conditions and challenges investment and improved conditions in most sectors in the sec- ond half of the year. Private investment grew by 2.3 percent in Peru’s macroeconomic environment is characterized by low pub- 2024, as business confidence rebounded. Inflation returned to lic debt, ample international reserves, a credible Central Bank, the Central Bank's target and Congress's political decision to al- and a well-capitalized financial system. However, low growth and low withdrawals from private pension funds boosted consump- structural constraints limit formal job creation and the pace of tion by 2.8 percent in 2024. The labor market dynamics reflect- poverty reduction, while 70.9 percent of workers are informal. ed the economic recovery, with total employment growing by By 2024, almost one in three Peruvians subsisted on less than 1.8 percent in the Q4 2024, while private formal employment US$6.85 daily (2017 PPP). Over half of the population faced food expanded by 6.4 percent y-o-y. The unemployment rate fell to insecurity. Moreover, the economy is susceptible to commodi- 4.7 percent in the same quarter. Real wages increased by 3.4 ty price fluctuations and to climate shocks. To achieve higher percent in 2024, though they remain below pre-pandemic levels. growth, it is crucial to improve the quality of public services and Poverty declined by an estimated 1.4 percentage points, reach- infrastructure, governance, and the business environment, while ing 31.3 percent in 2024, still above pre-pandemic levels (28.8 ensuring political stability. Enhancing job quality, formal labor, percent in 2019). gender equality in the labor market, and social protection are key to inclusive growth. The fiscal deficit closed at 3.6 percent of GDP in 2024, exceeding the fiscal rule ceiling of 2.8 percent. The fiscal target was also missed in the recessionary context of 2023. Fiscal rule ceilings Recent developments have been increased or suspended six times in the last eight years. The deficit widened by 0.8 percentage points compared The Peruvian economy grew by 3.3 percent in 2024, recovering to 2023, driven mainly by a deterioration in fiscal revenues and from the 2023 recession driven by weather shocks and political higher public investment. Despite this temporary deterioration FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 50 20000 20 45 18000 15 40 16000 10 35 14000 5 30 12000 0 25 10000 -5 20 8000 -10 15 6000 10 4000 -15 5 2000 -20 2019 2020 2021 2022 2023 2024e 2025f 2026f 2027f 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Private cons. Gov. cons. Gross investment International poverty rate Lower middle-income pov. rate Exports Imports GDP Upper middle-income pov. rate Real GDP pc Sources: Central Reserve Bank of Peru (BCRP), and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 134 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. in the fiscal position, markets and rating agencies continue to will support growth throughout the forecast horizon. Poverty express confidence in the country's medium-term fiscal outlook. (US$6.85/day, 2017 PPP) is projected to decline to 29.9 percent by Public debt (32.7 percent of GDP as of 2024) and sovereign 2026 driven by economic growth and lower inflation. spreads (157 bp as of end-December 2024) are among the lowest in the region. A significant fiscal consolidation is expected in 2025, with the fiscal deficit projected to narrow from 3.6 percent in 2024 to Inflation reached 2.0 percent in December 2024, within the target 2.5 percent of GDP. Income tax regularization, boosted by high- range of 1-3 percent. Consequently, the Central Bank lowered its er commodity prices and mining profits, will significantly con- policy rate by 1.75 percentage points during 2024 reaching 5.0 tribute to revenue. The regularization in 2022, preceded by an percent in December. increase in copper and gold prices that is twice as large as that observed in 2024, raised tax revenues by 1.5 percentage The current account recorded a surplus of 2.2 percent of GDP in points of GDP. The 2025 budget reflects a restrained nominal 2024. Favorable international conditions, which led to a 10.4 per- increase of 4.5 percent, compared to a 12 percent rise in cent increase in the terms of trade, were the main drivers of the 2024. Fiscal consolidation would continue through 2026-27 improvement in the trade balance and current account compared at a slower pace. Public debt would remain at an average to 2023. The exchange rate remained stable, while net internation- of 32.5 percent of GDP in the medium term. Inflation is pro- al reserves reached 27.6 percent of GDP in December 2024 (13 jected to remain within the Central Bank's target range, and months of import cover). the current account balance would remain positive due to high commodity prices. Outlook In the second half of 2025, and especially before the 2026 pres- idential elections, political uncertainty may increase economic Growth is projected at 2.9 percent in 2025. High commodity prices volatility. Domestic risks include spending pressures in a pre-elec- by historical standards and continued positive business confi- toral year, affecting the fiscal rule's credibility. Climate change dence, which reached its highest level in six years in February, threats could impact medium-term growth. External risks include are expected to maintain the growth momentum throughout 2025. a global economic slowdown, a reversal of favorable commodity The opening and full operation of the port of Chancay, along with prices, and increasing trade policy uncertainty which could impact key mining projects (Zafranal, Reposicion Antamina or San Gabriel) investment and growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.8 -0.4 3.3 2.9 2.5 2.5 Private consumption 3.6 0.1 2.8 2.9 2.4 2.5 Government consumption -0.2 4.6 2.3 2.0 2.6 2.4 Gross fixed capital investment 0.7 -5.4 4.9 4.0 2.5 2.7 Exports, goods and services 5.2 4.9 5.1 4.0 3.3 3.2 Imports, goods and services 4.4 -1.3 6.9 5.1 3.8 3.9 Real GDP growth, at constant factor prices 2.9 -0.2 3.3 2.9 2.5 2.5 Agriculture 3.1 -3.9 4.1 2.8 2.4 2.5 Industry 1.5 -1.3 2.6 2.3 1.9 2.0 Services 3.7 0.9 3.7 3.3 2.8 2.8 Employment rate (% of working-age population, 15 years+) 71.6 69.1 69.3 69.4 69.7 70.2 Inflation (consumer price index) 8.5 3.2 2.0 2.2 2.0 2.0 Current account balance (% of GDP) -4.0 0.8 2.2 1.0 0.7 0.7 Net foreign direct investment inflow (% of GDP) 4.8 0.9 1.9 1.6 1.6 1.5 Fiscal balance (% of GDP) -1.7 -2.8 -3.6 -2.5 -1.9 -1.7 Revenues (% of GDP) 27.4 23.9 23.3 24.0 23.8 23.8 Debt (% of GDP) 33.9 32.9 32.7 32.6 32.4 32.4 Primary balance (% of GDP) -0.1 -1.1 -1.9 -0.7 -0.3 -0.1 1,2 International poverty rate ($2.15 in 2017 PPP) 2.7 3.2 3.2 2.8 2.7 2.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 9.5 10.3 9.8 9.2 8.9 8.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 32.2 32.7 31.3 30.5 29.9 29.5 GHG emissions growth (mtCO2e) 1.3 -1.2 0.1 0.2 0.1 0.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SEDLAC harmonization, using 2023-ENAHO. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 135 This outlook reflects information available as of April 10, 2025. 1 2 SAINT LUCIA Population Poverty thousand thousands living on less than $6.85/ day 179.7 14.7 3 4 Saint Lucia's economy has stabilized post-pandemic but Life expectancy at birth School enrollment years primary (% gross) remains at risk from natural disasters and escalating geopolitical tensions. Economic growth is estimated to have 71.3 100.7 accelerated to 3.7 percent in 2024, contributing to poverty 5 6 reduction. Nonetheless, high public debt inherited from the GDP GDP per capita current US$, billion current US$ pandemic limits development funding. Structural reforms are necessary to build fiscal buffers, address informality, strength- 2.6 14202.5 en the financial system, and enhance poverty reduction. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2015 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Despite a stable financial sector, bank lending remains slow Key conditions and challenges due to high sovereign risk and stagnant efforts in reducing non-performing loans. The Co-operative Societies Act strength- Saint Lucia is a small open economy that is heavily reliant ened the regulatory framework for the growing credit union on tourism, with high levels of debt, and volatile economic sector. However, the lack of foreclosure legislation makes the growth, averaging 1.3 percent between 2010 and 2019. Fre- bank mortgage lending riskier and effectively uncollateralized. quent natural disasters, climate change, and vulnerability The pegged exchange rate under the Eastern Caribbean Cur- to global geopolitical tensions cause significant economic rency Union and its sound monetary policies help to ensure and social losses. To mitigate these impacts, it is critical to price stability. strengthen resilience through fiscal buffers and adequate do- mestic resource mobilization. Recent developments In 2015, fewer than 1 in 10 Saint Lucians were considered poor (US$6.85/day, 2017 PPP). Inequality was high, with a Gini in- Real GDP growth reached 2.2 percent in 2023 and accelerated dex above 40. Monetary poverty is estimated to have declined to 3.7 percent in 2024 driven by a fully recovered tourism sector slowly in the subsequent years but surged during the pandem- and robust construction activity. From January to August, stay- ic and was aggravated by high food and fuel prices. Recent over arrivals increased by 18 percent in 2024 compared to the census data indicates improvements in non-monetary pover- same period in 2023, and by 3.4 percent over 2019 levels, driven ty: the share of households without toilet facilities decreased by an increase in arrivals from the United States and hosting of from 6.2 percent in 2010 to 1.9 percent in 2022 and house- the Cricket World Cup. The construction sector was fueled by in- holds with internet access increased from 26.5 percent to vestments in public and private infrastructure projects. The eco- 89.1 percent. nomic recovery helped reduce the official unemployment rate FIGURE 1 / Key macroeconomic variables FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent Percent Poverty rate (%) Real GDP per capita (constant LCU) 25 100 12 40000 20 90 35000 15 80 10 30000 10 70 8 5 60 25000 0 50 6 20000 -5 40 15000 -10 30 4 10000 -15 20 2 -20 10 5000 -25 0 0 0 2022 2023 2024e 2025f 2026f 2027f 2015 2017 2019 2021 2023 2025 2027 PPG debt-to-GDP (rhs) Primary balance (% of GDP) International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 136 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. from 16.3 percent in Q1 2023 to 11.3 percent in Q2 2024, despite the recent introduction of a minimum wage, and is expected to Outlook reduce poverty. Real output growth is projected to gradually moderate over the The external balance improved due to the recovery in tourism, low- medium term, as tourism demand stabilizes at pre-pandemic levels er fuel prices, and stable remittances. Foreign direct investment is and air-travel capacity constraints emerge. Investments in major estimated around 7.4 percent of GDP in 2024, helping to fund the construction projects, including several major hotels and roads, are current account deficit, which decreased to 1.3 percent in 2024. Im- expected to peak in 2025 and 2026. Agriculture is likely to slow puted international reserves covered approximately 3.4 months of down due to unfavorable weather conditions. Poverty is projected imports at the end of 2024. to continue declining in the medium term. Inflation is expected to stabilize at its equilibrium point of 2.0 percent in 2027. Favorable global supply developments, tighter monetary policy, and lower energy and food prices reduced inflation from 6.4 per- Primary surpluses are expected over the medium term. The rev- cent in 2022 to 1.3 percent in 2024. The pressure on food security, enue-to-GDP ratio is anticipated to remain stable at 2023 levels, previously worsened by the pandemic and food price shocks, is while total spending is projected to increase, driven by capital ex- now easing. The financial sector remains liquid and profitable. penditures peaking in FY25/26 and FY26/27. Public debt is projected to remain stable at around 74 percent of GDP, above the regional tar- Since 2022, the primary fiscal balance has been positive, con- get of 60 percent of GDP by 2035. The current account deficit is ex- sistent with the country’s pre-pandemic track record. Recent pected to improve gradually as the recovery in tourism offsets the tax policy reforms, including a health and citizen security levy trade deficit from imports of construction materials, fuel, and food. and an increase in cigarette excise tax, along with the robust performance of the tourism sector, boosted annual revenues. The risks to the outlook are skewed to the downside, including po- On the expenditure side, a slowdown in post-pandemic spend- tential delays in fiscal consolidation, escalating global geopolitical ing on goods and services and capital spending, especially in tensions, economic slowdowns in key tourist-origin countries, re- 2024, reduced total spending. Public debt has improved sig- duced foreign direct investment, fewer revenues for the Citizen- nificantly since 2020 thanks to high nominal GDP growth and ship-by-Investment Program, lower remittances, natural disasters, fiscal improvements. and the impacts of climate change. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 20.4 2.2 3.7 2.8 2.3 1.9 Real GDP growth, at constant factor prices 19.7 2.1 3.7 2.8 2.3 1.9 Agriculture 4.4 -16.9 9.2 4.0 3.1 3.1 Industry 1.8 12.4 12.5 4.5 1.5 2.6 Services 23.5 0.9 2.1 2.4 2.4 1.8 Inflation (consumer price index) 6.4 4.1 1.3 1.6 1.8 2.0 Current account balance (% of GDP) -3.6 -1.6 -1.3 -1.0 -0.8 -0.6 1 Fiscal balance (% of GDP) -1.9 -2.0 -0.5 -2.3 -2.7 -2.2 1 Revenues (% of GDP) 20.9 21.8 22.3 22.0 21.9 22.1 1,2 Debt (% of GDP) 74.1 75.5 73.9 73.7 73.6 73.4 1 Primary balance (% of GDP) 1.0 1.4 2.7 1.3 0.9 1.4 3,4 International poverty rate ($2.15 in 2017 PPP) 0.0 0.0 0.0 0.0 0.0 0.0 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.4 0.4 0.4 0.3 0.3 0.3 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 7.8 7.4 7.2 6.8 6.2 6.2 GHG emissions growth (mtCO2e) 3.9 2.0 2.4 2.2 1.9 1.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal balances are reported in fiscal years (April 1st -March 31st). 2/ Public debt includes payables and overdrafts/Eastern Caribbean Central Bank advances. 3/ Calculations based on CONLAC harmonization, using 2015-SLCHBS. Poverty estimates and projections not comparable to pre-2024 MPOs due to methodological changes. For details, see March/April 2024 Update to the Poverty and Inequality Platform (PIP) at https://pip. worldbank. org/publication. Actual data: 2015. Estimates: 2016-2024. Forecasts: 2025-2027. 4/ Projection using neutral distribution (2015) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 137 This outlook reflects information available as of April 10, 2025. ST. VINCENT AND 1 Population Poverty thousand 100.6 .. THE GRENADINES Life expectancy at birth years 2 School enrollment 3 primary (% gross) Despite Hurricane Beryl's damages that slowed growth to 69.0 109.7 4 5 an estimated 4.5 percent of GDP in 2024, economic activity GDP GDP per capita current US$, billion current US$ remained relatively strong, driven by tourism, agricultural recovery, and infrastructure projects. The fiscal deficit is 1.2 11546.7 expected to rise only temporarily as spending is controlled, Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. reducing the debt burden. New tourism infrastructure is ex- pected to boost growth and jobs, but potential risks from ex- ternal uncertainties and natural disasters cloud the outlook. from 2008, 30.2 percent of the population lived below the nation- Key conditions and challenges al poverty line, but economic growth in subsequent years should have contributed to a decline in poverty. Saint Vincent and the Grenadines is a small island developing state highly integrated into the global economy and vulnerable to exter- nal economic shocks and natural disasters. The economy is primar- Recent developments ily driven by tourism, agriculture, and construction. Ongoing invest- ments in infrastructure—such as a new port, an international airport, Real GDP growth is estimated to have slowed to 4.5 percent in roads, hotels, a hospital, water supply, and digitalization—support 2024, due to the impact of Hurricane Beryl, which caused losses growth and foster economic diversification. The country aims to di- and damages estimated at US$230.6 million (22 percent of 2023 versify its economy through high-end tourism, international finan- GDP). Agriculture has been recovering slowly but remains hindered cial services, agricultural processing, light manufacturing, renew- by persistent droughts and the lasting impacts of the hurricane, able energy, and information and communication technologies. disproportionally affecting the poor and increasing food insecurity. Inflation eased to 3.5 percent in 2024 due to lower global commod- The fiscal balance deteriorated due to the pandemic and the vol- ity prices, helping mitigate food security concerns. canic eruption in April 2021, compounded by Hurricane Beryl in July 2024, which caused significant damage to infrastructure and The fiscal deficit is expected to have widened to 12.9 percent livelihoods, leading to an increase in public debt. The main chal- of GDP in 2024 amid faster project execution and hurricane-re- lenge is to reduce fiscal deficits while directing limited resources to- lated spending. Revenues increased primarily due to a pension ward recovery and high-priority public investment projects. There reform and adjustments in user and license fees. The primary is no up-to-date poverty data available. According to the latest data deficit widened to 9.7 percent of GDP as fiscal rule targets were FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Public debt GDP growth Percent, percentage points Percent of GDP 8 100 90 6 80 4 70 2 60 0 50 -2 40 30 -4 20 -6 10 2017 2018 2019 2020 2021 2022 2023 2024e 2025f 2026f 2027f 0 Agriculture Industry 2017 2018 2019 2020 2021 2022 2023 2024e 2025f 2026f 2027f Services Net taxes GDP at market prices Public debt Public external debt Sources: Ministry of Finance and World Bank staff calculations. Sources: Ministry of Finance and World Bank staff calculations. 138 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. suspended to ensure appropriate crisis response, contributing to converge to around 2.8 percent thereafter. Tourism is expected to a 3 percentage points increase in the debt-to-GDP ratio to 91.1 continue expanding, supported by the new airport and Sandals Re- percent of GDP. Government gross financing needs reached 12.9 sort. Inflation is projected to slow to 2.6 percent in 2025 amid more percent of GDP in 2024, covered mainly by official external fi- favorable global commodity prices but remain above the 2.0 per- nancing and supplemented by domestic bond issuances. cent target. Poverty is expected to continue declining. The current account deficit (CAD) is estimated to have widened The fiscal deficit is expected to decrease over the forecast period, to 20.1 percent of GDP in 2024 due to higher imports related to turning into a surplus of 0.4 percent of GDP in 2027. Public in- major capital investment. The worsening trade deficit was partial- vestment is projected to decline from 11.1 percent of GDP in ly offset by higher exports of services resulting from greater stay- 2025 to 6 percent of GDP in 2027 as investment projects and over arrivals associated with the opening of the Sandals Resort. Hurricane Beryl reconstruction activities conclude. During this The CAD was mainly financed by foreign direct investment and ex- time, capital expenditure on health, education and other essen- ternal borrowing on concessional terms. International reserves are tial services will be prioritized, and current spending will be re- adequate, estimated at around 5 months of imports in 2024. The strained. Consequently, the public debt is projected to decline to financial system remains sound with adequate capital and liquidity 87.6 percent of GDP by 2027. Realigning with fiscal rule is crucial buffers. Uptake for loan moratorium offered to those affected by for debt sustainability. Hurricane Beryl was minimal, and non-performing loans continued to decline in the 2024Q3. Lower imports following the completion of large capital projects and higher service exports driven by improved tourism infrastruc- ture will help reduce the CAD to 9.5 percent of GDP by 2027. Outlook This outlook is subject to downside risks, including uncertain Growth is expected to accelerate to 4.9 percent in 2025, driven by global economic conditions, a changing trade outlook, and reconstruction activities and large infrastructure investments, and natural disasters. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.0 5.8 4.5 4.9 2.9 2.7 Real GDP growth, at constant factor prices 5.4 5.0 4.5 4.9 2.9 2.7 Agriculture -6.2 -2.9 -0.3 2.0 2.0 2.0 Industry 7.9 3.9 3.5 2.2 2.1 2.1 Services 5.7 5.8 5.0 5.7 3.1 2.8 Inflation (consumer price index) 5.7 4.6 3.5 2.6 2.1 2.1 Current account balance (% of GDP) -20.6 -16.8 -20.1 -13.9 -10.8 -9.5 1 Fiscal balance (% of GDP) -9.4 -11.9 -12.9 -7.9 -0.5 0.4 Revenues (% of GDP) 27.3 27.0 28.3 28.7 28.7 28.7 1 Debt (% of GDP) 86.2 88.0 91.1 93.7 90.4 87.6 1 Primary balance (% of GDP) -7.0 -9.3 -9.7 -4.6 2.4 3.0 2 GHG emissions growth (mtCO2e) 5.6 2.8 1.5 0.5 0.5 0.9 Source: Ministry of Finance and World Bank staff calculations. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Budget balances and public debt are for the central government. 2/ Emissions data sourced from CAIT and OECD. Macro Poverty Outlook / April 2025 139 This outlook reflects information available as of April 10, 2025. 1 2 SURINAME Population Poverty million millions living on less than $6.85/day 0.6 0.1 3 4 Life expectancy at birth School enrollment Suriname’s economy has stabilized under a program to years primary (% gross) restructure debt, modernize monetary and exchange rate policies, and address financial sector vulnerabilities. Rapid 70.3 66.0 5 6 growth is expected over the medium term as a result of a GDP GDP per capita major offshore oil investment. Managing this economic current US$, billion current US$ transition will require prudent fiscal policy to reduce debt, and continued investment in human development to 4.8 7512.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. support poverty reduction and shared prosperity. 4/ 2023. 5/ 2024. 6/ 2024. Recent discoveries of several offshore oil deposits have improved Key conditions and challenges Suriname’s medium-term economic prospects. A final investment decision was announced in October 2024, with production expect- Fiscal, monetary, and financial sector indicators have improved, ed to start in 2028. Significant equipment imports are expected, supported by an IMF program which concluded in March 2025 financed by foreign direct investment. Ensuring that economic ahead of May 2025 elections. Debt restructuring, subsidy reform, growth is inclusive requires strengthening the governance and in- and improved tax policies have supported fiscal consolidation stitutional framework to enhance fiscal management, deliver pub- and improved debt sustainability. Tighter monetary policy has lic services, and implement climate change adaptation measures. helped contain inflation, while exchange rate flexibility support- ed foreign exchange reserve accumulation. Reducing financial sector vulnerabilities relies on the completion of a program of Recent developments ongoing reforms. Growth accelerated to an estimated 2.8 percent in 2024, up from Approximately 17.5 percent of the population lived below the up- 2.5 percent in 2023. Services led the expansion, followed by in- per middle-income poverty line of US$6.85 (2017 PPP) per day dustry, as inflation moderated. Agriculture lagged as a result of an in 2022 (the latest measurement) with 46.5 percent in multidi- ongoing drought. Inflation slowed to 10.1 percent by December mensional poverty. Monetary and multidimensional poverty are 2024, from 32.6 percent (y-o-y) one year earlier. Estimated mon- markedly higher in the country’s interior. Reforms to strengthen etary poverty continued to decline as a result. However, the pro- social protection, education, and female labor force participation longed drought in the interior of the country has limited access to will be key to accelerate poverty reduction. Suriname is exposed to clean water and worsened food insecurity. natural disaster hazards due to irregular precipitation (floods and droughts) and water management is a high priority, especially in Higher imports, led by capital goods to support investment, nar- the more vulnerable interior. rowed the current account surplus to 0.2 percent of GDP in 2024, FIGURE 1 / Budget balance FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 5 20 27500 18 27000 0 16 26500 14 26000 12 25500 -5 10 25000 8 24500 -10 6 24000 4 23500 -15 2 23000 0 22500 2022 2023 2024 2025 2026 2027 -20 International poverty rate Lower middle-income pov. rate 2012 2015 2018 2021 2024 2027 Upper middle-income pov. rate Real GDP pc Source: Ministry of Finance and Planning in Suriname. Source: World Bank. Notes: See footnotes in table on the next page. 140 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. down from 4.0 percent of GDP in 2023. The overall balance of The fiscal deficit is projected to narrow, supported by a broader payments surplus is estimated at 6.1 percent of GDP in 2024, in- VAT tax base, fuel taxes, and non-tax revenues supported by lease cluding errors and omissions. Gross international reserves accu- rates and fees. Subsidy expenditure is expected to decline due to mulated to an estimated 7.6 months of imports in 2024, up from electricity and gas price adjustments. Fiscal consolidation will cre- 7.3 months in 2023. ate space to scale up social spending and growth-enhancing in- frastructure investments. The debt-to-GDP ratio will remain on a Fiscal policy focused on debt sustainability, improving the quality of declining path as GDP growth accelerates and the exchange rate public spending, and social assistance programs to protect the vul- strengthens. Over the medium term, public investment in oil in- nerable. However, the primary surplus fell to an estimated 0.3 per- frastructure is expected to modestly increase the fiscal deficit. The cent of GDP in 2024, missing a 2.5 percent of GDP target under an current account will move into a significant deficit as oil-related IMF program. Weak non-tax revenues, persistent electricity subsi- capital imports rise, financed by foreign direct investment. dies, and a rising wage bill contributed to this fiscal outturn, as well as the cost of a temporary cash transfer program to mitigate the The government aims to expand coverage of permanent social as- impact of higher energy prices on the vulnerable. Debt restructur- sistance programs, introduce digital payments, and regularly up- ing negotiations with most official and private creditors are near- date payment amounts in line with inflation. These reforms have ing completion, and Moody’s upgraded its sovereign debt rating to the potential to ensure more effective and efficient social support Caa1 in October 2024. to those most in need. Decisions on whether and in what form to maintain a large-scale temporary cash transfer program to offset rising costs of living still need to be made. Outlook The outlook is subject to upside and downside risks. New invest- Real GDP growth is projected to accelerate to 3.1 percent ments in bauxite production could increase exports and govern- in 2025, supported by private investment in preparation for ment revenues over the medium term. However, oil price volatil- oil production. Investment-led growth is expected to contin- ity may affect the pace of ongoing investments in offshore pro- ue over the medium term, with rapid expansion expected duction, and emerging trade policies in key partner countries may after oil production begins in 2028. Inflation is anticipated to limit the growth of non-oil exports. A robust institutional and fis- decelerate through 2027, supported by restrictive monetary cal framework, accompanied by investments in human capital, and fiscal policy. Driven by economic growth and lower in- will be essential to manage future extractive revenues in an ef- flation, poverty is projected to decline by up to a percentage ficient and equitable manner, enhance non-oil competitiveness, point (y-o-y) in 2025. and mitigate environmental impacts. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.4 2.5 2.8 3.1 3.3 3.5 Real GDP growth, at constant factor prices 2.4 2.5 2.9 3.1 3.3 3.5 Agriculture -3.9 -1.8 2.4 2.6 2.5 2.4 Industry 2.5 2.1 2.9 3.0 3.5 3.5 Services 3.1 3.2 2.9 3.2 3.3 3.6 Inflation (consumer price index) 52.4 51.6 16.2 11.2 8.5 7.4 Current account balance (% of GDP) 2.0 4.3 0.2 -23.5 -29.1 -37.8 Net foreign direct investment inflow (% of GDP) 0.1 -1.8 -0.6 21.1 27.1 36.1 1 Fiscal balance (% of GDP) -0.9 -1.9 -2.5 -3.1 -1.6 -1.3 Revenues (% of GDP) 26.0 27.6 25.2 27.0 27.8 28.0 1 Debt (% of GDP) 76.7 97.6 69.7 63.0 56.7 51.5 1 Primary balance (% of GDP) 0.8 1.4 0.3 -0.4 0.6 0.8 2,3 International poverty rate ($2.15 in 2017 PPP) 1.1 1.1 1.1 1.1 0.8 0.7 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.2 4.2 4.0 3.8 3.5 3.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 17.5 17.5 17.3 16.5 16.0 15.2 GHG emissions growth (mtCO2e) 1.2 1.2 1.6 1.5 1.7 1.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Budget balances and public debt are for the central government, with debt based on SDMO data. 2/ Calculations based on CONLAC harmonization, using 2022-SSLC. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 141 This outlook reflects information available as of April 10, 2025. TRINIDAD AND 1 Population Poverty million 1.4 .. TOBAGO Life expectancy at birth years 2 School enrollment primary (% gross) 3 Trinidad and Tobago's economy is characterized by relatively 74.7 92.8 4 5 strong human development and financial buffers, yet remains GDP GDP per capita current US$, billion current US$ reliant on the energy sector, which employs a small workforce. Recently, fiscal accounts worsened due to declining energy 26.3 19176.3 revenues. Increased oil and gas production is expected to Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. improve GDP growth in 2025, but risks include global eco- nomic slowdowns and trade policy uncertainties. Labor market challenges persist, with notable gender disparities. Key conditions and challenges The economy is supported by significant reserves and the Heritage and Stabilization Fund, which buffer against economic shocks. Trinidad and Tobago exhibits several economic These reserves, along with political stability, have helped stabilize strengths, including solid human development and ro- the economy during periods of fluctuating oil and gas prices, cru- bust financial buffers. The country's human capital indi- cial for the nation's fiscal health. Prudent management of natural cators compare favorably to those of the rest of Latin resource revenues and a focus on diversifying the economic base America and the Caribbean (LAC) supported by substan- are essential for advancing economic development. tial government investments that foster a knowledge- based economy, essential for adapting to globalization Recent data on poverty and inequality are not available. Trinidad and technological advancements. and Tobago’s Human Development Index (HDI), aligns with its status as a high-income country, driven by favorable life ex- However, Trinidad and Tobago’s economy remains heavily pectancy at birth (74.7 years) and mean years of schooling (11.7 dependent on the energy sector, which accounts for only years), both exceeding regional averages. The performance of 2.0 percent of employment, but over one-third of GDP and schoolchildren in standardized tests also exceeds regional aver- over two-thirds of exports. This reliance makes the coun- ages, but lags OECD countries. Notable gaps between women try vulnerable to global energy price fluctuations and pro- and men remain; despite comparatively strong academic perfor- duction disruptions. To balance its maturing energy sec- mance, women’s labor force participation (46.9 percent) lags that tor with the shift toward a low-carbon economy, efforts of men by 16.4 percentage points. Additionally, the adolescent are underway to reduce greenhouse gas emissions and in- fertility rate, although below the LAC average, is high compared crease renewable energy use. to other high-income countries. FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Fiscal balance and public debt GDP growth Percent, percentage points Percent of GDP Percent of GDP 4 70 6 3 60 4 2 2 50 1 0 40 0 -2 30 -1 -4 20 -2 -6 -3 10 -8 2021 2022 2023 2024e 2025f 2026f 2027f 0 -10 Agriculture Industry 2021 2022 2023 2024e 2025f 2026f 2027f Services Net taxes on production Real GDP growth Debt (lhs) Fiscal balance Primary balance Source: World Bank. Source: World Bank. 142 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The government is committed to attracting investment, pro- The financial system remains robust and stable. Banks maintain moting private sector engagement, and increasing trade inte- capital levels well above the regulatory minimum, and non-per- gration to foster diversification. Advancing structural reforms forming loans (NPLs) remained steady at around 3 percent in to enhance the business environment, improve trade logistics, 2024. The insurance sector continues to be well-capitalized, liq- and tackle insecurity is crucial for fostering private sector uid, and profitable. growth and economic diversification. Improving governance, in- frastructure, and public service delivery are essential for creat- Labor market outcomes deteriorated in 2024. Unemployment ing a conducive environment. increased by 0.9 percentage points year-on-year, to 4.1 percent in the third quarter of 2024. The labor force participation rate declined by 0.5 percentage point to 55.1 percent. The deteri- Recent developments oration was most pronounced among men. Their labor force participation rate declined by 0.7 percentage points to 63.3 In 2024, Trinidad and Tobago’s GDP growth was estimated at 1.7 percent and their unemployment rate increased by 1.6 per- percent up from to 1.4 percent in 2023, driven by the non-ener- centage points to 4.2 percent. gy sector. The energy sector is estimated to have contracted by 2.1 percent, due to low global energy prices and weaker produc- tion. The economy’s slow recovery from the pandemic continues Outlook to rely on the non-energy sector, particularly services. Average annual inflation declined to 0.5 percent in 2024, down from 4.6 GDP growth is expected to rise to 2.8 percent in 2025 and average percent in 2023. 2.5 percent in the medium term, driven by oil production increases. Two developing natural gas projects are scheduled to become op- Fiscal accounts worsened in FY2024, with the primary balance shift- erational by 2027, further boosting the energy sector. Inflation is ing from a 1.5 percent of GDP surplus in FY2023 to a 1.4 percent expected to gradually increase, converging toward 2 percent. The deficit. The overall deficit reached 5.0 percent of GDP, up from 1.8 overall fiscal deficit is expected to remain below 3.0 percent of GDP percent in 2023. The deterioration can be attributed to a loss in in 2025 and 2026 due to subdued energy sector revenues, before revenue of 8.2 percent of GDP from the energy sector, only part- improving in 2027 due to the completion of investment projects. ly offset by a 3.6 percent increase for the non-energy sector. Total The current account surplus will moderately increase, and public expenditures slightly decreased to 31.8 percent of GDP from 32.7 debt as a percentage of GDP will remain above 50 percent during percent in 2023. the projection period. The current account surplus narrowed to 5.8 percent of GDP as a Risks to the outlook remain tilted to the downside. A more severe result of a drop in the goods and services balance and in the in- slowdown in global economic activity could push oil prices down, come account. Supported by the Heritage and Stabilization Fund, and unexpected disruptions could lower oil production. Increasing net international reserves remained adequate at US$ 5.8bn (or 7.5 trade policy uncertainty poses threats to Trinidad and Tobago’s months of imports) at the end of 2024. main export products. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.1 1.4 1.7 2.8 1.3 3.2 Real GDP growth, at constant factor prices 3.2 0.1 1.7 2.8 1.3 3.2 Agriculture -13.2 -5.8 1.8 0.3 4.1 2.3 Industry 2.4 -4.7 -0.4 2.9 -0.1 3.3 Services 4.1 3.9 3.1 2.9 2.3 3.2 Inflation (consumer price index) 5.8 4.6 0.5 1.4 1.8 1.9 Current account balance (% of GDP) 18.4 13.3 5.8 6.7 6.3 6.3 Net foreign direct investment inflow (% of GDP) -7.3 -8.1 -2.9 -2.9 -2.8 -2.7 1 Fiscal balance (% of GDP) 0.7 -1.8 -5.0 -2.9 -3.6 -2.1 Revenues (% of GDP) 29.4 30.9 26.7 30.0 27.8 27.4 1 Debt (% of GDP) 53.0 59.3 56.7 55.9 54.8 52.4 1 Primary balance (% of GDP) 3.4 1.5 -1.4 0.8 0.0 1.6 GHG emissions growth (mtCO2e) -1.2 -1.2 0.1 0.6 -0.2 -0.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Budget balances and public debt are for the central government. Macro Poverty Outlook / April 2025 143 This outlook reflects information available as of April 10, 2025. 1 2 URUGUAY Population Poverty million millions living on less than $6.85/day 3.5 0.2 3 4 Life expectancy at birth School enrollment In 2024, Uruguay’s economy rebounded from 2023's years primary (% gross) drought-induced recession, bolstered by higher soy and cellulose production. Buoyed by strong growth and faster 78.0 108.8 5 6 disinflation, real average household incomes increased by 3 GDP GDP per capita percent, prompting poverty to fall to an estimated 6 percent. current US$, billion current US$ Growth is expected to moderate towards its potential over the medium term, averaging 2.2 percent over 2025-2027. 81.0 23087.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. Risks to the outlook remain tilted to the downside. 4/ 2022. 5/ 2024. 6/ 2024. to enhance human capital and trade integration, dynamize labor Key conditions and challenges markets and boost competition and productivity. Continuing to strengthen fiscal buffers is also important so that Uruguay can ef- Annual average growth slowed from 3.7 percent between 2002 fectively address external shocks, including climate-related ones. and 2015 to just 1.0 percent between 2016 and 2023. The slow- down reflected external factors such as lower commodity prices, the COVID-19 pandemic, slower growth of trading partners, along Recent developments with extreme weather events, but shortcomings in human capital and productivity also hinder faster growth. The economy grew by 3.1 percent in 2024, rebounding from the severe drought in 2023. Exports drove the recovery, reflecting the Uruguay has Latin America’s largest middle class and highest per normalization of soybean production and a 22 percent increase in capita income, and poverty is low relative to the region at 6.7 cellulose exports from new milling capacity. On the supply side, percent in 2023 (using the international poverty line of US$6.85 growth was mainly driven by the agriculture and industrial sectors, per day, 2017 PPP). Nonetheless, poverty rates are twice as high reflecting a normalization of hydropower generation and the re- among children and the Afro-descendant population, and income sumption of operations at the ANCAP (Administración Nacional de inequality remains high at about 40.9 points. There are persistent Combustibles, Alcohol y Portland) oil refinery. regional disparities in poverty and access to good quality jobs. Informality is higher among Afro-Uruguayans (30 percent) and in The current account deficit narrowed from 3.4 percent of GDP in the northeastern departments (39-49 percent) than the national 2023 to 1.0 percent in 2024. This reflected the large improvement average (22.7 percent). in the trade balance, driven by agriculture and cellulose exports. Reigniting growth and creating more and better jobs are crucial Average inflation fell to 4.8 percent in 2024 from 5.9 percent in to consolidate Uruguay’s social gains. To do so, Uruguay needs 2023, remaining within the central bank’s target range of 3 to FIGURE 1 / Annual inflation and inflation expectations FIGURE 2 / Actual and projected poverty rates and real GDP per capita Annual inflation (percent) Poverty rate (%) Real GDP per capita (constant LCU) 12 16 700000 11 14 600000 10 12 9 500000 8 10 400000 7 8 300000 6 6 5 Target Range 200000 4 4 2 100000 3 0 0 2 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 International poverty rate Lower middle-income pov. rate Annual Inflation Two-year ahead inflation expectation Upper middle-income pov. rate Real GDP pc Source: Bank of Uruguay. Source: World Bank. Notes: See footnotes in table on the next page. 144 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 6 percent. After a cumulative monetary easing of 300 basis points The non-monetary public sector fiscal deficit is expected to remain since April 2023, the central bank began tightening monetary policy unchanged at 3.3 percent of GDP over 2025-2027, assuming no in December 2024, citing higher core inflation and one-year ahead new revenue-raising measures. However, there are downside risks inflation expectations (6.1 and 6.0 percent respectively in February from pressures for increased social spending, an electoral promise 2025). In March 2025, inflation rose to 5.7 percent y-o-y (5.1 per- by the new administration. cent in February), partly driven by surging food prices. The current account deficit is forecast to average 1.2 percent of The 2024 non-monetary public sector fiscal deficit was unchanged GDP over 2025-2027. Import growth is anticipated to remain mod- at 3.3 percent of GDP. Nominal spending growth accelerated from erate, consistent with the pace of private investment, and reflecting 6 to 9.7 percent, on par with revenue growth, but revenues fell lower global oil prices. Export growth will, however, be affected by short of expectations as inflation was lower than initial official fore- lower global commodity prices. casts. Public debt decreased from 63.7 percent of GDP in 2023 to 62.6 percent of GDP in 2024. Uruguay has among the lowest sover- Average inflation is expected to rise slightly in 2025 as core inflation eign spreads in the region. and inflation expectations remain elevated. However, it is antici- pated to remain within the target range for 2025 and converge to- Labor force participation and employment increased by nearly one wards the 4.5 percent target over the medium term, supported by percentage point each in 2024, reaching 64.3 and 59 percent, re- a tight monetary policy stance. spectively. The unemployment rate remained stable at 8.2 percent. However, informality increased by 1pp over the past two years, Poverty is expected to decline by less than one percentage point reaching 22.7 percent nationally in 2024. over the next three years, limited by fiscal constraints and persis- tent social and economic exclusion faced by those still in pover- ty. Currently, 18.9 percent of the population is deprived in at least Outlook four of 15 multidimensional poverty indicators, spanning educa- tion, housing, basic services, social protection, and employment. Barring any extreme weather events, the economy is projected to grow by 2.3 percent in 2025 and subsequently converge towards Growth may be further constrained by weaker external demand potential in 2026-2027. Growth is expected to be driven by exports, in Uruguay’s main trading partners as well as uncertainty in global particularly of cellulose and tourism, with the latter benefiting from trade policy. Additionally, Uruguay's high dollarization levels pose a stronger Argentinian peso. Private investment is expected to re- a risk amid currency volatility and prolonged tight global financial cover following two consecutive years of contractions but remain conditions. A strong U.S. dollar could complicate servicing dollar- moderate as the monetary stance remains restrictive. A slight ac- denominated debt, potentially increasing inflation and constrain- celeration in private consumption is expected as inflation eases. ing growth. Climate hazards further weigh on the outlook. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.5 0.7 3.1 2.3 2.2 2.2 Private consumption 5.4 3.7 1.7 2.2 2.3 2.3 Government consumption 2.6 -0.7 2.0 1.1 1.0 1.1 Gross fixed capital investment 12.3 -5.7 -1.3 4.0 3.5 3.5 Exports, goods and services 11.3 0.8 8.3 2.2 3.0 3.0 Imports, goods and services 14.3 5.7 -1.5 2.5 3.5 3.5 Real GDP growth, at constant factor prices 4.4 0.8 3.1 2.3 2.2 2.2 Agriculture -10.4 8.6 11.3 2.5 2.0 2.0 Industry 5.8 -3.4 4.4 3.7 1.5 1.5 Services 5.6 1.3 1.9 1.9 2.4 2.4 1 Employment rate (% of working-age population, 15 years+) 58.2 59.2 60.1 60.5 60.8 60.9 Inflation (consumer price index) 9.1 5.9 4.8 5.2 4.7 4.5 Current account balance (% of GDP) -3.8 -3.4 -1.0 -1.3 -1.1 -1.1 Net foreign direct investment inflow (% of GDP) 4.1 3.6 -2.9 2.3 2.5 2.6 2 Fiscal balance (% of GDP) -2.7 -3.3 -3.3 -3.3 -3.3 -3.3 Revenues (% of GDP) 27.4 27.4 27.9 27.5 27.0 27.0 Debt (% of GDP) 61.6 63.7 62.6 63.2 63.8 64.0 2 Primary balance (% of GDP) -0.6 -1.0 -0.9 -1.0 -1.0 -1.0 3,4 International poverty rate ($2.15 in 2017 PPP) 0.2 0.1 0.1 0.1 0.1 0.1 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.8 0.9 0.8 0.8 0.8 0.8 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 6.4 6.7 6.0 5.9 5.7 5.6 GHG emissions growth (mtCO2e) 1.9 1.3 1.7 1.5 1.5 1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Employment rates may differ from official national estimates due to variations in the age group used for calculation. 2/ Non-Financial Public Sector. Excluding revenues associated with the "cincuentones". 3/ Calculations based on SEDLAC harmonization, using 2023-ECH. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 4/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 145 Algeria Morocco Bahrain Oman Djibouti Palestinian territories Egypt, Arab Republic Qatar Iran, Islamic Republic Saudi Arabia Iraq Syrian Arab Republic Jordan Tunisia Kuwait United Arab Emirates Lebanon Yemen, Republic Libya Middle East and North Africa Macro Poverty Outlook / April 2025 147 This outlook reflects information available as of April 10, 2025. 1 ALGERIA Population Poverty million 46.8 .. 2 3 Life expectancy at birth School enrollment Driven by investment, Algeria’s non-hydrocarbon growth re- years primary (% gross) mained dynamic in 2024, while inflation eased. Pressure mounts on fiscal and external balances amid shrinking hy- 77.1 108.8 4 5 drocarbon exports, robust imports and surging public GDP GDP per capita spending, heightening exposure to volatile oil markets. current US$, billion current US$ Continued private-sector-led diversification and public sec- tor modernization, along with gradual fiscal rebalancing, 263.6 5631.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. are essential to sustainable, job-creating growth. Growth has been robust since the pandemic, despite moderating Key conditions and challenges hydrocarbon production, but inflation rose markedly, driven by food prices. Growth was fueled by public spending rising by over Despite diversification efforts, Algeria’s economy remains de- 60 percent between 2021 and 2023, amid increasing public sector pendent on the oil and gas sector, which accounted for wages and pensions, the introduction of unemployment benefits, 14 percent of GDP, 83 percent of exports, and 47 percent expanding food subsidies, and surging public investment. The con- of budget revenues between 2019 and 2023. Significant im- current soar in hydrocarbon prices narrowed the fiscal deficit and provements in living standards, education, and health took resulted in current account surpluses in 2022 and 2023. However, place prior to the pandemic, but youth and female un- falling prices and OPEC quota cuts, coupled with dynamic invest- employment remains elevated. While no recent information ment-driven imports and strong spending growth have put the fis- is available on monetary poverty and inequality indicators, cal and external balances under renewed pressure. World Bank projections suggest that poverty headcounts are lower than the regional average. Recent developments Algeria’s public sector has been at the core of its development model, but productivity growth and diversification have been GDP growth slowed slightly to 3.3 percent y-o-y during the first limited, prompting the introduction of reforms to boost invest- nine months of 2024, down from 4.1 percent in 2023, as broad- ment and private sector development. The 2022 Investment based non-extractive growth (+3.9 percent y-o-y) compensated for Law, the 2023 Banking and Monetary Law, the 2023 Economic contracting extractives (-3.3 percent y-o-y) due to lower oil and Land Law, and efforts to dynamize the stock exchange evidence gas production. Surging public spending supported consumption the government’s commitment to a diversified, private-sector-led and investment, boosting services and industrial activity, but also model of growth and job creation, while maintaining the social imports. Agricultural growth was robust, with satellite data sug- role of the state. gesting that production improved in the East but weakened in the FIGURE 1 / Real GDP and components, indices (2019=100) FIGURE 2 / Hydrocarbon prices and fiscal and external balances Index, 2019=100 Percent of GDP US$ 140 10 120 130 5 100 120 0 80 110 100 -5 60 90 -10 40 80 -15 20 70 2019 2020 2021 2022 2023 2024e 2025p 2026p 2027p 2019 2020 2021 2022 2023 2024e 2025p 2026p 2027p Consumption Investment Exports Current account balance (lhs) Fiscal balance (lhs) Imports GDP Brent crude price (rhs) Sources: Algerian authorities and World Bank staff estimates. Sources: Algerian authorities and World Bank staff estimates. 148 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. West. Night-time lights data suggest a cross-regional non-extrac- tive growth acceleration in the fourth quarter of 2024. Outlook The current account narrowed to an estimated 1.4 percent of GDP GDP growth is expected to slow to 3.2 percent in 2025 as hydro- deficit in 2024, down from a 2.4 percent surplus in 2023, as the carbon production and exports recover, tracking OPEC quotas but goods trade surplus narrowed from US$10.4 billion to US$3.9 bil- public investment is consolidated in response to lower hydrocar- lion. Goods exports fell by US$3.3 billion, due to contracting vol- bon prices and revenues. Nonhydrocarbon growth would moder- umes of hydrocarbon, fertilizer, iron and steel products exports, ate, as public spending growth decelerates, and GDP growth would and lower commodity prices. Product imports rose by US$3.2 bil- slow slightly in 2026 and 2027. lion, amid a surge in food and equipment and vehicles imports, de- spite lower import prices. Official reserves decreased, from 16.0 to The current account deficit would widen due to declining an estimated 14.4 months of imports by end-2024. hydrocarbon exports and private investment-driven imports. The fiscal deficit would remain elevated because revenue The budget deficit widened from 5.5 to an estimated 13.5 percent growth would be constrained by declining hydrocarbon rev- of GDP in 2023-2024. Hydrocarbon export revenues contracted, enues, only partially offset by the fiscal consolidation effort while tax revenues grew modestly. Public spending kept expanding foreseen in the government’s medium-term framework, a re- rapidly, amid rising public investment, wage bill and transfers. Pub- duction in public investment, and modest tax revenue in- lic debt increased slightly, from 47.7 to an estimated 49.1 percent creases tracking investment and consumption growth. With of GDP, as the deficit was mostly financed by exhausting hydrocar- hydrocarbon savings exhausted, the deficit would translate bon savings. Public debt remains almost completely domestically into rapidly expanding public debt, reaching 74 percent of held at long-term maturities and low interest rates. GDP by 2027. Money supply growth accelerated, and growth of credit was robust Fluctuating hydrocarbon prices represent a key downside risk to (+5.8 percent). Monetary policy remains accommodative with inter- Algeria’s growth, fiscal and external balances outlook, exacerbat- est rates unchanged at 3 percent since May 2020. Inflation deceler- ed by trade uncertainty and other geopolitical factors. Climate ated from 9.3 percent in 2023 to 4.0 percent in 2024, tracking food shocks could also affect Algeria’s agricultural output, imports and prices, as agricultural production accelerated, subsidies expanded, prices, while the global low-carbon transition could lower hydro- import prices moderated, meat imports were authorized, and the carbon demand, with supply increasingly constrained by growing dinar remained stable. Together with rising transfer payments, it domestic consumption. The introduction of the European Carbon supported living standards among vulnerable Algerians. Border Adjustment Mechanism could lower the competitiveness of Algeria’s nonhydrocarbon exports, concentrated in fertilizers GDP per capita growth was positive in 2024, and household welfare and iron and steel products. may have benefited from declining prices, including food, the rise in civil servants’ wages and pensions, and the introduction of new Algeria’s successful economic transformation will hinge on its abili- unemployment benefits. A recent ONS publication indicates ty to foster rapid, private-sector-led growth and job creation, to en- 450,000 new jobs were created in 2024 and national unemploy- sure sustainable and inclusive development. Diversification away ment stood at 9.7 percent at end-2024. The previous available rate from carbon-intensive growth, exports, and fiscal revenues, togeth- dates to May 2019 (11.4 percent). er with a gradual fiscal rebalancing, will be crucial. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.6 4.1 3.3 3.2 3.1 2.8 Private consumption 3.6 4.1 3.7 3.3 2.9 2.6 Government consumption 2.8 3.4 2.8 2.5 2.2 1.8 Gross fixed capital investment 2.6 9.9 10.4 3.4 5.0 5.1 Exports, goods and services -0.1 3.4 -3.6 4.4 2.2 1.2 Imports, goods and services -0.2 17.9 11.9 4.4 5.0 4.6 Real GDP growth, at constant factor prices 3.8 3.8 3.1 3.2 3.1 2.8 Agriculture 5.2 2.9 4.9 2.6 2.6 2.4 Industry 2.9 3.7 1.7 3.9 3.5 3.2 Services 4.1 4.0 3.6 2.8 2.8 2.6 Employment rate (% of working-age population, 15 years+) 36.6 37.1 36.7 36.6 36.5 36.6 Inflation (consumer price index) 9.3 9.3 4.0 4.3 4.1 3.9 Current account balance (% of GDP) 8.6 2.4 -1.4 -7.1 -6.3 -6.6 Fiscal balance (% of GDP) -3.0 -5.5 -13.5 -14.3 -13.4 -12.5 Revenues (% of GDP) 29.7 31.9 26.9 27.0 26.6 26.1 Debt (% of GDP) 48.1 47.7 49.1 60.9 67.8 74.2 Primary balance (% of GDP) -1.8 -4.3 -12.4 -13.0 -12.0 -10.9 GHG emissions growth (mtCO2e) 2.3 2.7 2.6 2.4 2.4 2.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 149 This outlook reflects information available as of April 10, 2025. 1 BAHRAIN Population Poverty million 1.6 .. 2 3 Life expectancy at birth School enrollment Notwithstanding lower oil production and elevated interest years primary (% gross) rates, Bahrain’s economic growth remains bolstered by the nonhydrocarbon sector. Sustained fiscal reforms have helped 79.2 93.7 4 5 improving fiscal and current account balances in 2024, particu- GDP GDP per capita larly important amid elevated uncertainty. Yet further fiscal current US$, billion current US$ consolidation measures are needed to bring down the elevat- ed debt levels. Key risks include uncertainty on global growth, 47.7 29547.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. oil market volatility, and delays in additional fiscal adjustment. given that exports to some large markets account for a relative- Key conditions and challenges ly modest. Public debt levels remain high and the foreign reserves low, raising fiscal and external vulnerabilities over the medium Bahrain has actively pursued diversification efforts as part of its term. A gradual phasing out of energy subsidies and investments Economic Vision 2030 strategy, with the non-oil sector now ac- in renewable energy, would facilitate Bahrain’s climate transition counting for over half of GDP, led by infrastructure, gas, logistics, without creating additional fiscal needs or weighing on growth. financial technology and tourism sectors. Implementation of the Vision is underpinned by the Economic Recovery Plan (2022–26), which aim to raise standards of living, improve infrastructure, and Recent developments accelerate digital transformation, among others. On the fiscal front, a 5 percent VAT was introduced in 2019, with the rate dou- Growth is estimated to have reached 3 percent in 2024, thanks bling to 10 percent in 2022. Since January 1, 2025, Bahrain has ap- to a robust performance of the nonhydrocarbon sector. Prelimi- plied a domestic minimum top up tax (DMTT) to levy a minimum nary official data reveals that the economy grew by 1.9 percent 15 percent rate of tax on the profits of multinational enterprises in the first nine months of 2024 (9M-2024 y/y), driven primar- with global revenue exceeding €750 (US$828) million. Efforts are al- ily by a 3 percent expansion in the non-oil sectors, reflecting so underway to stimulate job creation in the private sector and in- ongoing diversification efforts. Government services, mainly fi- crease female labor force participation, supported by the National nancial and insurance activities, followed by manufacturing and Labor Market Plan 2023–2026. construction were the largest contributors to overall growth in non-oil activities, which outpaced the contraction in the oil sec- Despite progress on diversification efforts, Bahrain’s budget re- tor (falling by 3.8 percent) due to the maintenance activities at mains heavily reliant on volatile hydrocarbon revenues (64 per- the Abu Sa’afa field. Inflation remains contained at 0.9 percent cent), making it vulnerable to ongoing volatility in oil prices. The di- in 2024, up from 0.1 percent in 2023, driven by rising hotel and rect impact of recent shifts in trade policy is expected to be small, restaurant prices. FIGURE 1 / Real annual GDP growth FIGURE 2 / General government operations Percent change Percent of GDP 8 40 6 30 4 20 2 10 0 0 -2 -10 -4 -20 2021 2022 2023 2024e 2025f 2026f 2027f 2021 2022 2023 2024e 2025f 2026f 2027f Hydrocarbon GDP Non-hydrocarbon GDP Real GDP Revenues Expenditures Budget balance Sources: Bahrain authorities and World Bank staff estimates. Sources: Bahrain authorities and World Bank projections. 150 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Official fiscal data for 2024 are yet to be released. The lack of timely face tighter financial conditions from trade uncertainty related in- and regular reporting on the fiscal stance is a challenge consider- flationary pressure and disrupted global supply chains. ing its importance for macroeconomic monitoring and transparen- cy. The fiscal deficit for 2024 is estimated to have slightly narrowed Higher non-hydrocarbon revenues along with the implementation reflecting fiscal consolidation efforts. Government public debt is es- of the new announced corporate tax and the expanding capacity timated to remain elevated above 124 percent of GDP amid rising of Sitra oil refinery are expected to partially offset the current de- financing needs. cline in oil prices, to slightly narrow the fiscal deficit to 7.7 per- cent of GDP in 2025, from 8.4 percent of GDP in the previous year. The current account balance (CAB) recorded a surplus of 4.8 per- However, absent further fiscal consolidation measures, a poten- cent of GDP (US$2.3 billion) in 2024. The trade balance showed a tially sustained downturn in global energy prices and high interest surplus of 7.6 percent of GDP (US$3.6 billion), albeit lower than a burden will continue to pressure fiscal balances in 2026–27, keep- surplus of 9.7 percent of GDP in 2023, as the value of oil exports ing the deficit above 8 percent of GDP. Government debt will con- declined by 4.6 percent y/y. Remittances decelerated to 5.6 percent tinue to rise during 2025–2027 on high interest payments and ele- of GDP in 2024, down from 5.8 percent in 2023 y/y. The overall per- vated gross financing needs. formance of the CAB was mainly driven by 9.6 percent increase in the services exports (35.7 percent of GDP). These positive trends The current account balance will remain in surplus during helped official reserves to remain relatively stable at US$3.8 billion 2025–2027, albeit lower than its current level, in line with oil price in 2024—a slight decline of US$0.2 billion compared to 2023. outlook and the slump in the global demand, following the recent trade policy related uncertainty, which would weigh more heavily According to the ILO-modeled estimates, there were insignificant on Bahrain's aluminum export earnings (aluminum already subject changes in employment and unemployment rates in Bahrain be- to a 25 percent tariff). Foreign reserves are expected to decline re- tween 2023 and 2024 years. Employment rates were about 70 per- flecting lower hydrocarbon prices. cent, while unemployment rates were about 1 percent. Women had a higher unemployment rate than men in 2024 (0.4 versus 3.65 per- Key downside risks to the outlook arise from sharp fall in oil prices, cent), which was exceptionally high among female youth aged 15–24 elevated spending and delays to undertaking additional fiscal ad- (12.4 percent). No significant changes in employment and unemploy- justments which would pose fiscal and external vulnerabilities. The ment rates are expected in 2025, but some uncertainty remains. immediate direct impact of the trade uncertainty is expected to be limited, given that oil is exempted. Meanwhile, despite the impor- tance of aluminum as an export commodity, Bahrain’s high-quali- Outlook ty products and competitive prices of aluminum could mitigate any significant possible tariff impact and retain market share. Indirect Bahrain’s economic outlook hangs on oil market prospects and ac- risks arise from the slowdown in energy demand, and steep de- celerated implementation of structural reforms. Growth is expect- cline in oil prices which could exacerbate fiscal and external vulner- ed to accelerate to 3.5 percent in 2025, with the completion of BAP- abilities, and weigh on growth and debt dynamics. On the upside, CO refinery upgrades while oil production recovers. Over the medi- leveraging additional fiscal reforms and sustained higher oil prices um-term, real GDP is projected to grow to about 3 percent driven would reduce fiscal and external vulnerabilities and put debt on by robust non-hydrocarbon growth supported by the expansion of a firm downward path, while increase employment opportunities Sitra oil refinery. Given its currency peg to the USD, Bahrain could among youth, would ensure a private sector-led inclusive recovery. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.2 3.9 3.0 3.5 3.0 2.8 Private consumption 6.9 4.7 4.8 4.9 4.2 3.3 Government consumption 2.1 7.3 5.3 5.0 3.5 3.1 Gross fixed capital investment 18.7 2.1 2.4 4.0 4.2 4.1 Exports, goods and services 9.2 -9.1 2.0 2.6 3.5 3.6 Imports, goods and services 11.9 2.6 3.5 3.7 4.7 4.6 Real GDP growth, at constant factor prices 4.3 3.8 3.0 3.5 3.0 2.8 Agriculture 4.4 4.7 2.1 3.0 3.2 2.8 Industry 1.7 0.1 4.1 6.5 5.8 4.0 Services 6.2 6.5 2.3 1.4 1.0 1.8 Employment rate (% of working-age population, 15 years+) 70.9 70.9 70.9 70.9 70.9 70.9 Inflation (consumer price index) 3.6 0.1 0.9 1.8 2.2 2.4 Current account balance (% of GDP) 14.7 5.8 4.8 4.4 3.9 3.5 Net foreign direct investment inflow (% of GDP) 0.0 12.4 5.1 4.2 4.1 4.2 Fiscal balance (% of GDP) -5.1 -8.4 -7.9 -7.7 -7.9 -8.5 Revenues (% of GDP) 22.4 19.4 21.0 19.3 18.2 17.5 Debt (% of GDP) 111.1 123.0 124.5 127.1 131.0 134.3 Primary balance (% of GDP) -1.7 -4.4 -3.7 -4.3 -4.2 -4.2 GHG emissions growth (mtCO2e) 4.3 2.7 5.2 4.1 3.4 3.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 151 This outlook reflects information available as of April 10, 2025. 1 2 DJIBOUTI Population Poverty million millions living on less than $3.65/day 1.2 0.5 3 4 Life expectancy at birth School enrollment Economic activity continued its upward momentum in years primary (% gross) 2024H2, prompting a second revision of real GDP growth to 6.0 percent—a 0.1 percentage point increase from the 62.9 64.4 5 6 previous fall forecast. This expansion, alongside rising real GDP GDP per capita GDP per capita, is expected to alleviate poverty. The medi- current US$, billion current US$ um-term outlook remains positive with growth projected to moderate to 5.1 percent in 2025-27, partly driven by lower 4.3 3658.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. international oil prices amid increased OPEC+ production. 4/ 2021. 5/ 2024. 6/ 2024. the U.S. dollar has provided stability, a recent decline of foreign Key conditions and challenges reserves below the one hundred percent coverage of the money supply necessitates heightened vigilance to mitigate risks to the Djibouti has witnessed rapid economic expansion over the past currency board arrangement (CBA). decade. Growth averaged 6.2 percent annually from 2011 to 2019, fueled by debt-financed investments in transport and port infrastructure. However, this growth has come at a cost, exacer- Recent developments bating debt vulnerabilities and limiting fiscal space for essential social spending. Poverty remains widespread—by 2017, 19.1 per- Djibouti’s economy maintained strong momentum in 2024H2, cent of the population lived on less than US$2.15 per day, while propelled by a sharp increase in port activity, particularly in con- 43.8 percent fell below the US$3.65 threshold (2017 PPP). Human tainer traffic. Port operations surged by 31.4 percent year-on- capital remains underdeveloped, and the country ranks among year in 2024H2, averaging an impressive 49.1 percent annual the most unequal in the region, with a Gini index of 41. 6. The growth, largely driven by a staggering 239.5 percent spike in labor market remains constrained by low participation, especial- transshipment volumes. This surge continues to reflect strategic ly for women, and high unemployment, further exacerbated by diversion in regional shipping routes, as shipping from Asia to sluggish formal private sector growth. Europe increasingly bypass Red Sea conflict zones. While this has put Djibouti port in a favorable position, once the Red Sea Despite rising tensions in the Red Sea, Djibouti has demonstrat- shipping is normalized, the windfall is likely to quickly evaporate, ed resilience, bolstered by expanding transshipment activities. causing a reverse shock to the port and the broader economy. Positioned as a key transport and logistics hub in the region, Despite high energy costs, production and consumption rose by the country faces structural weaknesses, including a heavy re- 3.8 percent and 7.0 percent y-o-y in 2024Q2 respectively. Mean- liance on imports, making it vulnerable to global price swings while, the construction sector contracted by 21 percent due to and supply chain disruptions. While the fixed currency’s peg to persistent supply chain disruptions. Real GDP growth for 2024 FIGURE 1 / Real GDP growth, fiscal, and current account balances FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent change Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 40 90 700000 80 30 600000 6 70 500000 20 60 4 50 400000 10 40 300000 2 30 0 200000 20 100000 0 -10 10 2021 2022 2023 2024 2025 2026 2027 0 0 Real GDP growth, at constant market prices (lhs) 2012 2014 2016 2018 2020 2022 2024 2026 Current account balance (rhs) International poverty rate Lower middle-income pov. rate Fiscal balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: Government of Djibouti and World Bank staff projections. Source: World Bank. Notes: See footnotes in table on the next page. 152 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. has been revised upward to 6.0 percent—a 0.1 percentage point increase from the fall forecast. Outlook Despite rising freight costs fueled by the Red Sea crisis, inflation Djibouti’s medium-term outlook remains positive but vulnerable has remained contained, anchored by the currency’s peg to the to headwinds. Sharp declines in oil and metal prices are expected U.S. dollar. In 2024, Harmonized Index of Consumer Prices (HICP) to partially cushion the direct impact of ongoing trade policy un- inflation stood at 2.2 percent y-o-y, primarily driven by food prices certainty, supporting a modest improvement in real GDP growth (2.6 percent) and energy costs (3.0 percent). Economic growth has in 2025 compared to the previous fall forecast. Over the medium contributed to a decline in the international poverty rate (below term, growth is projected to average 5.0 percent in 2026–27, partly US$2.15 per person/day, 2017 PPP), from 19.1 percent in 2017 to fueled by logistics revenues, re-exports to Ethiopia, and major in- an estimated 14.9 percent in 2023. Similarly, poverty at the low- vestments in Damerjog Port and the DDID Free Trade Zone. Infla- er-middle-income threshold fell from 43.8 percent to 36.3 percent tion is expected to remain moderate at 2.1 percent over the fore- over the same period, though it remains high. Poverty levels in cast window as global prices stabilize. The ongoing debt moratori- 2024 are estimated at 14.5 percent (international poverty line) and um and expected restructuring will ease fiscal pressure, enabling 35.5 percent (lower middle-income threshold). the government to focus on consolidation and maintain a fiscal sur- plus over the period. With limited access to external financing and The overall fiscal balance improved from a deficit of 3.3 percent of fiscal surpluses, public debt is projected to decline. GDP in 2023 to a modest surplus of 0.2 percent in 2024, driven by tighter government spending and increased total revenue, includ- The external current account surplus is expected to rise from an ing grants, partly boosted by rising transshipment earnings. As of estimated 11.5 percent of GDP in 2024 to 14.1 percent in 2025, be- September 2024, public debt remains above 60 percent of GDP, fore settling at 11.4 percent in 2026–27, driven by revenue from the with over 70 percent linked to state-owned enterprises (SOEs). Ex- renewed military base agreement in Djibouti, notably with China, ternal arrears are estimated at 2.8 percent of GDP, with 18 percent France, and the United States. Poverty in 2025 is projected at 14.4 of these delays attributed to technical reasons. percent (international poverty line) and 35.9 percent (lower mid- dle-income poverty line), subject to substantial risks given the high The external sector in 2024 presented a mixed picture. The trade public debt and major risks to economic growth. balance recorded a surplus of 10.1 percent, fueled by rising exports and transshipment activities. However, net foreign exchange re- Downside risks remain significant and include: (i) escalating ten- serves declined, partly due to external debt service obligations. sions in the Red Sea and uncertainty over the stabilization of the Full reserve coverage of the money supply remained below the Red Sea shipping corridor, (ii) setbacks in macro-fiscal reforms, 100 percent threshold throughout the year, standing at an estimat- (iii) potential shifts in regional trade patterns, and (iv) the knock- ed 72.9 percent as of September 2024—a situation that calls for on effects of global trade policy uncertainty, which could dampen heightened vigilance to ensure the continued stability of the CBA. Ethiopia’s import demand and significantly reduce port traffic. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.7 6.7 6.0 5.2 5.1 5.0 Private consumption -0.6 4.4 5.4 6.0 6.1 6.2 Government consumption -14.3 8.1 12.6 -5.7 0.9 6.1 Gross fixed capital investment 2.7 12.4 9.4 0.5 5.8 7.9 Exports, goods and services -12.5 8.4 9.4 13.9 12.2 12.5 Imports, goods and services -6.2 10.4 12.5 13.0 13.7 15.0 Real GDP growth, at constant factor prices 4.0 6.7 6.0 5.2 5.1 5.0 Agriculture -0.5 5.9 5.9 5.9 5.9 5.9 Industry 7.2 10.0 9.7 8.3 8.0 7.8 Services 3.4 6.0 5.2 4.5 4.4 4.2 Employment rate (% of working-age population, 15 years+) 23.5 23.7 23.7 23.7 23.7 23.7 Inflation (consumer price index) 5.1 1.4 2.2 2.1 2.0 2.0 Current account balance (% of GDP) 17.9 15.6 11.5 14.1 12.9 9.8 Fiscal balance (% of GDP) -1.4 -3.3 0.2 3.3 3.4 3.7 Revenues (% of GDP) 18.9 17.3 23.6 23.8 23.6 25.1 Debt (% of GDP) 66.5 69.4 65.5 61.2 58.2 56.0 Primary balance (% of GDP) -0.7 -3.1 0.4 3.3 3.2 3.5 1,2 International poverty rate ($2.15 in 2017 PPP) 16.5 15.5 14.9 14.4 14.0 13.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 39.2 36.9 36.3 35.9 35.6 35.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 74.2 72.5 72.1 71.9 71.7 71.4 GHG emissions growth (mtCO2e) 0.4 0.5 0.5 0.8 1.0 1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2013-EDAM and 2017-EDAM. Actual data: 2017. Nowcast: 2018-2024. Forecasts are from 2025 to 2027. 2/ Projection from 2025 using point-to-point elasticity (2013-2017) with pass-through = 0.7 and 0.87 for 2024 based on GDP per capita in constant LCU. Projections till 2023 use neutral distribution (2017). Macro Poverty Outlook / April 2025 153 This outlook reflects information available as of April 10, 2025. ARAB REPUBLIC 1 2 Population Poverty million millions living on less than $3.65/day 106.6 14.7 OF EGYPT Life expectancy at birth years 3 School enrollment primary (% gross) 4 Growth is gradually recovering to a forecast 3.8 percent in 70.2 90.3 5 6 FY25, from 2.4 percent in FY24. Inflation declined but re- GDP GDP per capita current US$, billion current US$ mains high, thereby challenging poverty reduction. External accounts are under pressure, due to structural constraints, 389.1 3651.2 global trade uncertainties, and the Middle East conflict. Im- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. proved socioeconomic outcomes require accelerating re- 4/ 2023. 5/ 2024. 6/ 2024. forms to enhance the business environment and human capi- tal, whilst strengthening institutions and fiscal sustainability. Key conditions and challenges Recent developments Egypt is pursuing economic reforms, supported by the IMF, the Real GDP growth increased to 3.9 percent in H1-FY25 (July-December World Bank, and other development partners. External accounts 2024), up from 2.5 percent in H1-FY24. The uptick was driven by remain under pressure despite the adjustments since March 2024 tourism, transportation, non-oil manufacturing and ICT. Other key and the injected financing (including the Ras El Hekma deal). This sectors continue to be a drag on growth, notably the Suez Canal due is due to the scarring effect of the long-standing challenges related to the ongoing Middle East conflict, as well as extractives and oil refin- to the elevated public debt, sluggish exports, as well as the reper- ing, in light of the outstanding arrears owed by the government to in- cussions of the Middle East conflict on the Suez Canal. Further, the ternational oil companies (IOCs). Overall, the share of tradables (ex- shifting global trade policy contributed to uncertainties and capital port-oriented sectors) remained largely stable at 48 percent of real outflows from emerging markets, including Egypt. gross value added in H1-FY25, although lower than historical levels. World Bank estimates based on official data indicate that the na- The recent decline in unemployment to 6.4 percent in Q2-FY25 from tional poverty rate is at 33.5 percent in 2021/22, with higher rates 6.9 percent in Q2-FY24 has been associated with an uptick in the in Rural Upper Egypt. employment and labor force participation rates, but both remain low at 42.6 percent and 45.5 percent of the working-age population, Accelerating structural reforms to foster a conducive environment respectively, in Q2-FY25; limiting sustainable poverty reduction. for the private sector, strengthen institutions and macro-fiscal sta- bility, and advance human development is crucial for boosting pro- While remaining in double-digits, inflation declined sharply to 12.8 ductivity and improving socioeconomic outcomes. percent in February 2025, after surpassing 38 percent towards FIGURE 1 / Real GDP growth, employment and labor force FIGURE 2 / Net Foreign Assets (NFA) of the banking system participation rates Percent Percent of working-age population US$ Billion 12 50 30 10 20 40 8 10 6 30 0 4 20 2 -10 10 0 -20 -2 0 -30 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 -40 GDP growth (lhs) Employment rate (rhs) Labor force participation rate (rhs) CBE NFA Banks NFA Total NFA Sources: World Bank estimates based on Central Agency for Public Mobilization Source: Central Bank of Egypt (CBE). and Statistics (CAPMAS), and Ministry of Planning, Economic Development and International Cooperation (MoPEDIC). 154 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. end-2023, due to the dissipating impact of the steep parallel ex- The budget deficit is projected to surge to 7.2 percent of GDP in change rate depreciation a year earlier. Policy rates were held FY25 from 3.6 percent in FY24, due to higher interest payments steady at 27.25 percent and 28.25 percent for overnight deposits and a decline in non-tax revenues, compared to the previous year and lending transactions respectively through March 2025 (1,900 which had benefited from one-time revenues generated by the Ras bps above the levels prevailing prior to March 2022), given the El Hekma deal. However, fiscal consolidation is expected to resume prevailing negative real interest rates for key domestic monetary thereafter, supported by declining energy subsidies as well as im- instruments, including Treasury Bill rates (net of taxes). With the proving revenues. The government debt-to-GDP ratio is forecast to February drop in inflation, real interest rates are finally on a decline from 90.1 percent at end-FY24 to a projected 86.7 percent positive trajectory. at end-FY25, benefitting from the primary surplus and negative real interest rates prevailing during most of FY25. Nevertheless, contin- The poverty rate, measured by the lower middle-income country gent liabilities remain a concern as they have increased from 28.7 international poverty line, is estimated to have increased by about percent at end-January 2023 to 34.0 percent at end-June 2024, like- 4 percentage points between 2022 and 2024, despite government ly driven by off-budget borrowing to address the rising energy sec- compensatory measures. tor needs to avoid recurring power cuts. International financing alleviated the severe foreign currency External financing requirements remain substantial, with US$11.1 shortages, but the external accounts continue to face pressures. billion in external debt obligations maturing during Q4-FY25, in addi- International reserves increased to US$47.4 billion at end-February tion to the commitment to repay the arrears to IOCs. The current 2025 (6.7 months of FY25 merchandise imports), up from US$35.3 account deficit is projected to widen further in FY25 due to higher billion a year earlier. However, concerns persist with regards to for- gas imports, and a sluggish recovery of Suez Canal receipts. The re- eign exchange liquidity, as shown by commercial banks' Net For- cent drop in international oil and gas prices should help ease exter- eign Assets that have remained in negative territory for seven con- nal account pressures, but this may be counterbalanced by the po- secutive months through end-February 2025. tential subsequent decline in remittances (mostly from Egypt’s dias- pora in oil-exporting Gulf economies).The IMF financing, the recent sovereign Eurobond issuance, and other sources of international fi- Outlook nancing would help the country meet its near-term commitments. Growth is forecast to increase from 2.4 percent in FY24 to 3.8 per- Meanwhile, modest per capita growth and still elevated inflation cent, 4.2 percent and 4.6 percent in FY25, FY26 and FY27, respec- constrain poverty-reduction; with poverty rates expected to re- tively, driven by increased private consumption due to easing in- main stagnant in 2025, notwithstanding the most recent package flation and higher private investment. Risks however are tilted to announced in February 2025. Risks to the outlook emanate from the downside, if the ongoing shifts in global trade policy contribute the ongoing Middle East conflict, uncertainties around interna- to international supply chain disruptions and uncertainty that may tional trade and global growth, as well as potential fiscal and hurt investor sentiment. structural reform slippage. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 6.6 3.8 2.4 3.8 4.2 4.6 Private consumption 2.8 3.6 8.0 8.2 5.3 4.7 Government consumption 4.9 -2.8 0.2 3.2 2.0 2.4 Gross fixed capital investment 18.5 -16.6 -6.6 -9.8 16.8 13.2 Exports, goods and services 57.4 31.4 -10.6 13.5 15.0 12.0 Imports, goods and services 24.3 1.1 4.7 19.5 21.0 13.0 Real GDP growth, at constant factor prices 6.2 3.6 2.3 3.8 4.2 4.6 Agriculture 4.0 4.1 3.8 2.8 2.9 3.0 Industry 6.9 -0.6 -1.9 1.7 3.3 4.2 Services 6.2 6.2 4.6 5.2 4.9 5.2 Employment rate (% of working-age population, 15 years+) 40.9 40.4 40.4 41.0 41.6 42.2 Inflation (consumer price index) 8.5 24.1 33.6 20.9 15.5 12.2 Current account balance (% of GDP) -3.5 -1.2 -5.3 -6.3 -4.7 -2.7 Net foreign direct investment inflow (% of GDP) 1.8 2.5 11.7 2.5 2.1 1.9 Fiscal balance (% of GDP) -6.2 -6.0 -3.6 -7.2 -6.5 -5.5 Revenues (% of GDP) 17.2 15.4 18.3 16.3 17.1 18.1 Debt (% of GDP) 88.3 95.2 90.1 86.7 82.7 79.4 External government debt (% of GDP) 19.5 25.1 27.3 25.7 24.4 23.6 Primary balance (% of GDP) 1.3 1.6 6.2 3.9 4.1 4.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 13.2 15.5 17.1 17.0 .. .. GHG emissions growth (mtCO2e) 1.9 1.0 0.4 1.1 1.5 1.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2010-HIECS, 2015-HIECS, and 2021-HIECS. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2010-2015) with pass-through = 0.01 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 155 This outlook reflects information available as of April 10, 2025. IRAN, ISLAMIC 1 2 Population Poverty million millions living on less than $6.85/day 91.4 18.0 REPUBLIC Life expectancy at birth years 3 School enrollment primary (% gross) 4 Growth is moderating due to declining oil exports and the 74.6 104.5 5 6 impact of energy shortages on non-oil activity. While unem- GDP GDP per capita current US$, billion current US$ ployment has fallen, labor force participation remains low. Tighter monetary policy helped curb inflation, but recent 436.9 4781.7 geopolitical tensions have triggered currency depreciation, Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. with potential negative impact on inflation and poverty. The 4/ 2020. 5/ 2024. 6/ 2024. outlook is fraught with risks, including the impact of intensi- fied sanctions, regional conflict, and rising trade uncertainty. 6 percent. Labor force participation remains low at 41 percent Key conditions and challenges and disproportionately so for women, at just 14.1 percent. An aging population and high emigration further constrain human Oil production has been declining in 2024/25 (the Iranian calendar capital accumulation and pose additional fiscal pressures for year ending March 20) due to stricter enforcement of US sanctions the longer-term. and moderating oil demand in China. Non-oil growth remains con- strained by sanctions, energy shortages, and heightened uncer- The government faces a persistent fiscal deficit. Expenditures tainty from the conflict in the region. dominated by under-targeted cash transfers and a growing wage bill and pension spending drive fiscal pressures that are exacer- The heavily subsidized energy sector, burdened by underinvest- bated by volatile oil revenues. As the real value of transfers de- ment and inefficiencies, is experiencing frequent gas and electricity clines with rising living costs, shielding recipients from high infla- outages. Infrastructure investment could help address supply chal- tion without exacerbating the deficit would require transfer cuts lenges, but the country faces financial constraints, and technology for higher-income groups. transfer is impeded by sanctions. Tariff reforms could ease de- mand-side pressures but must be carefully designed given their short-term inflationary impact. Recent developments Despite the recent employment growth, job creation remains GDP growth slowed to 3.7 percent year-over-year (Y-o-Y) in the inadequate for a growing population. Inadequate job creation first nine months of 2024/25 (9M-24/25), driven by the services has reduced the active labor force by 1.3 percent since before sector. Oil GDP growth decelerated to 6 percent (Y-o-Y), down the pandemic, despite the working-age population growing by from 20.3 percent in the same period last year. The non-oil sector FIGURE 1 / Real GDP growth and supply-side contributions to real FIGURE 2 / Exchange rates (ER) and inflation GDP growth Percent, percentage points Thousand Rials per 1 US$ Percent 6 1000 12 Introduction of 4 800 commercial forex system 10 8 2 600 6 0 400 4 -2 200 2 -4 0 0 -6 2018/19 2020/21 2022/23 2024/25e 2026/27f Oil Agriculture Non-oil industries Inflation, M-o-M (rhs) Parallel market ER (lhs) Services Net taxes GDP growth CBI trade ER (lhs) Weighted average ER (lhs) Sources: Central Bank of Iran and World Bank staff calculations. Sources: Central Bank of Iran, Statistical Center of Iran, and World Bank staff calculations. 156 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. grew by 2.9 percent (Y-o-Y), led by services. In line with economic activity, employment increased by 1.2 percent in 2024/25. Outlook Declining oil exports and rising expenditures added pressures on GDP growth is projected to decelerate in the medium term, with a government finances. While most tax revenues were realized in contraction in the oil sector due to stricter sanctions and subdued 2024/25, oil export revenues are reported to have fallen sharply global demand, including a slowdown in China. Non-oil growth in the second half of 2024/25. Government expenditures on goods is forecast to remain constrained by ongoing sanctions, energy and services also grew at an accelerated pace of 3.1 percent (in shortages, and heightened economic uncertainty. Climate-related real terms) in 9M-24/25. As a result, the fiscal deficit is estimated weather events, including water scarcity, will continue to weigh on to have widened to 3.1 percent of GDP in 2024/25. In 11M-24/25, the agriculture sector and impact the livelihood of the rural popu- the deficit of the Targeted Cash Subsidy Program reached 1.6 per- lation. The current account balance is projected to deteriorate, due cent of GDP. These fiscal pressures prompted additional borrowing to declining oil exports and lower projected oil prices. The fiscal from the National Development Fund and the banking system. deficit is forecast to widen in line with restricted oil revenues and the expected increase in transfers in response to accelerating infla- Tighter monetary policy and lower global commodity prices have tion. The pass-through from currency pressures and the rising fis- helped consumer price inflation to decelerate but price pressures cal deficit is expected to return inflationary pressures, dispropor- have reemerged. Inflation in 2024/25 is estimated to have tionately impacting low-income households. With a projected con- reached 35.4 percent. The prospects of intensified sanctions fol- traction in per-capita GDP, poverty is projected to increase to 20 lowing the US elections have elevated inflationary expectations percent in 2025/26 - as spatial and gender inequalities persist. and renewed exchange rate pressures. A more flexible exchange rate regime, introduced in 2024, briefly narrowed the gap be- Risks to Iran’s economic outlook have significantly tilted downward, tween the CBI trade exchange rate and the parallel market rate. primarily due to escalating geopolitical risks and rising trade un- Non-oil exports rose by 15.5 percent in 2024/25, outpacing im- certainty. Rising geopolitical tensions and the possible reimposition port growth of 8.2 percent, which helped narrow the non-oil and tightening of implementation of international sanctions could trade deficit by 14.2 percent to US$14.5 billion. have ripple effects throughout the real economy and disrupt finan- cial flows. Such risks could materialize in a sizable shock to oil Spurred by economic growth, poverty has continued to decline exports, a collapse in investment, disruption in trade with imme- from its peak during the pandemic, but a fifth of Iranians still live in diate neighbors, and a widening fiscal deficit. Monetary financing poverty. Poverty is estimated at 19.9 percent for 2023/24 based on of the fiscal deficit could reignite an inflationary spiral and neg- the Upper Middle Income International poverty line of US$6.85 in atively impact household welfare. A sharper economic slowdown 2017 PPP. This represents a continuing decline from a high of 29.3 in China and uncertainty in global trade policy could further impact percent in 2020/21 at the height of the Covid-19 pandemic. investment and growth. Recent history and projections 2022/23 2023/24 2024/25e 2025/26f 2026/27f 2027/28f Real GDP growth, at constant market prices 3.8 5.0 3.0 -1.6 0.6 1.5 Private consumption 8.7 4.1 2.6 1.0 1.3 1.3 Government consumption -3.6 -1.7 2.5 0.7 1.7 2.7 Gross fixed capital investment 6.7 7.2 1.9 -8.4 -5.7 -0.6 Exports, goods and services 8.2 17.1 6.1 -10.8 2.6 3.1 Imports, goods and services 7.5 3.0 -1.1 -14.8 -3.5 0.0 Real GDP growth, at constant factor prices 4.0 4.5 3.0 -1.6 0.6 1.5 Agriculture 1.1 0.2 3.4 1.8 1.0 0.8 Industry 7.4 7.1 2.8 -6.1 0.4 1.1 Services 2.7 3.8 3.1 0.6 0.7 1.8 Employment rate (% of working-age population, 15 years+) 37.2 37.9 37.9 37.7 37.5 37.4 Inflation (consumer price index) 46.5 52.3 35.4 42.0 43.2 44.5 Current account balance (% of GDP) 3.6 2.2 1.7 -1.6 -0.8 -0.1 Net foreign direct investment inflow (% of GDP) -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 Fiscal balance (% of GDP) -2.8 -2.9 -3.1 -4.6 -4.7 -4.9 Revenues (% of GDP) 11.0 11.1 9.9 8.6 8.5 8.3 Gross public debt (% of GDP) 30.1 29.5 32.6 36.5 38.2 39.5 Primary balance (% of GDP) -2.4 -2.4 -2.7 -4.1 -4.2 -4.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.8 3.3 3.1 3.3 3.3 3.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 21.9 19.9 19.0 20.0 20.1 19.7 GHG emissions growth (mtCO2e) 1.3 1.9 2.0 -2.9 0.5 2.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2014-HEIS, 2018-HEIS, and 2023-HEIS. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using average elasticity (2014-2018) with pass-through = 1 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 157 This outlook reflects information available as of April 10, 2025. 1 2 IRAQ Population Poverty million millions living on less than $6.85/day 46.5 9.2 3 4 Life expectancy at birth School enrollment Iraq’s economy is growing supported by the fiscal spending years primary (% gross) boost to the non-oil sector and a gradual tapering of OPEC+ oil production cuts. The large expansion in government ex- 71.3 103.7 5 6 penditures and higher imports are weighing on fiscal and GDP GDP per capita external balances. Growth is projected to be dominated by current US$, billion current US$ the oil sector developments in the medium term. Risks to the outlook include oil market volatility amplified by trade 254.7 5479.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. uncertainty and heightened geopolitical tensions. 4/ 2007. 5/ 2024. 6/ 2024. prices, the public debt-to-GDP ratio has increased, highlighting Key conditions and challenges rising fiscal risks. Overall growth remains dominated by developments in the oil sec- Further policy reforms can enhance the nascent economic diversi- tor, despite sustained non-oil GDP growth. Considering the sig- fication drive towards private sector-led growth amid heightened nificant share of oil in the economy (58 percent of real GDP in trade uncertainty. Progress on digitalization and automation of 2023) overall growth has been volatile and followed the OPEC+ oil public finances helped improve non-oil revenue mobilization. Mea- production agreements. The non-oil sector meanwhile has grown sures to reduce fiscal rigidities and improved oil wealth manage- consistently aided by improved security conditions and benefitting ment can help mitigate fiscal risks. Reforms aimed at improving from the spillovers of the 2021-2022 oil windfall. Recently unveiled human capital accumulation, boosting female economic empow- infrastructure projects in the energy and transport sectors also erment, tackling the skills-jobs mismatch, pension system harmo- provide potential for growth and jobs and lay the foundations for nization, and improving the business environment can further in- economic diversification. centivize private sector participation. The recent large fiscal expansion and continued reliance on volatile oil revenues increase fiscal vulnerabilities. The 2023-25 Recent developments budget law encompasses a sharp rise in the wage bill and so- cial welfare that add to fiscal rigidities and restrict room for GDP growth is recovering from a two-year oil-based contraction. discretionary fiscal policy on pro-growth spending, especially in Real GDP is estimated to have contracted by 1.5 percent in 2024, human capital. The large investment expenditure targets have following a 2.9 percent contraction in 2023. Growth in 2024 was not materialized due to implementation challenges and absorp- weighed down by extended OPEC+ production cuts, including Iraq’s tive capacity constraints. Despite the partial execution of the voluntary cuts, which led oil GDP to decline by an estimated 6.2 budget envelopes in 2023 and 2024 and relatively stable oil percent. The non-oil sector is estimated to have grown by 5 percent FIGURE 1 / Real GDP growth and supply-side contributions to real FIGURE 2 / Actual and projected poverty rates and real private GDP growth consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant million LCU) 10 30 2.2 8 25 2.1 6 4 20 2.0 2 15 1.9 0 10 1.8 -2 -4 5 1.7 -6 0 1.6 2021 2022 2023 2024e 2025f 2026f 2027f 2012 2014 2016 2018 2020 2022 2024 2026 Oil Agriculture Non-oil industry International poverty rate Lower middle-income pov. rate Services GDP growth Upper middle-income pov. rate Real priv. cons. pc Sources: Iraq’s Authority of Statistics and Geographic Information Systems (ASGIS), and Source: World Bank. Notes: See footnotes in table on the next page. World Bank staff calculations. 158 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. buoyed by the fiscal expansion, improved agricultural sector out- put, and non-oil industry activity. Outlook Inflationary pressures eased in part due to easing global prices, GDP growth is projected to rebound in the medium term, albeit tem- normalization of trade finance, and tighter monetary policy. Head- pered by a lower oil price outlook. The tapering of OPEC+ oil produc- line and core inflation both eased to 2.5 percent y/y in 2024. tion cuts is expected to drive a bounce back in growth. Non-oil GDP is forecast to grow, albeit at a decelerating pace as the effect of previ- Higher oil revenues and under execution of the planned budget ous years’ fiscal stimulus dissipates. The fiscal deficit is projected to helped drive a fiscal surplus in 11M-24, albeit a declining one. widen due to of lower oil prices following global trade uncertainty Government revenues increased by 13.4 percent (y/y, nominal) and despite a significant projected downward adjustment to invest- in 11M-24 aided by improved tax and fee collection efforts ment expenditures, leading the debt-to-GDP ratio to rise to over 65 but from a narrow base. Expenditures grew by 25.3 percent in percent by 2027. Lower oil export revenues will also translate to a 11M-24 (y/y) driven by wage bill and oil investments but reached growing current account deficit, despite some import compression. 65 percent of the annual budget ceiling. As a result, the fiscal account recorded a surplus of 3.2 percent of GDP (on cash ba- Iraq’s cash transfer programs and universal public distribution sys- sis), almost half of the ratio in 11M-23. The sharp increase in tem are expected to continue shielding vulnerable households from imports drove down the current account surplus to 1.4 percent volatility in global markets. However, continued reliance on public of GDP in 2024 and foreign reserves coverage ratio declined to sector employment and welfare programs will not offer poor house- 11.4 months of imports. holds a sustainable path out of poverty. Trade-induced volatility in prices would likely affect households in the middle of the welfare dis- The national poverty rate in Iraq decreased to 17.5 percent in tribution, affecting poverty rates at the upper-middle income lines. 2023/24 from 18.9 percent in 2012 based on the Iraq Household Socio-Economic Survey. While comprehensive national data are The economic outlook is subject to risks, largely stemming from rising not available for the interim years, it is expected that living stan- trade uncertainty and geopolitical risks. With upcoming Iraqi presi- dards had deteriorated and poverty had increased due to the dential elections in November2025, a prolonged government forma- budgetary crisis and conflict with ISIS. Inequality remained stable tion could undermine the economic progress made to date and in- with a Gini coefficient of 30. The recent decrease in the pover- crease security risks. Disruptions to Iraq’s oil export routes or to ener- ty rate is accompanied by improvements in living conditions, as gy imports in the short term could affect the projected recovery path. measured by durable housing, ownership of assets, and access The impact of commodity price declines may be further com- to public services. However, labor force participation remains low pounded by the potential effects of global trade uncertainty. Im- at 38.1 percent, driven largely by limited economic participation proved regional security could open new transit routes and desti- from women. nation for Iraq’s exports, including through the Mediterranean. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.0 -2.9 -1.5 1.3 5.3 3.1 Private consumption 2.7 3.5 4.5 1.5 3.4 2.5 Government consumption 1.4 7.6 19.7 -1.8 1.4 1.5 Gross fixed capital investment 3.3 12.7 14.5 -20.4 8.1 3.1 Exports, goods and services 7.2 -3.6 -0.1 1.7 6.9 4.1 Imports, goods and services 27.9 13.3 21.0 -5.6 4.0 2.8 Real GDP growth, at constant factor prices 7.6 -2.9 -1.5 1.3 5.3 3.1 Agriculture -33.3 28.9 5.0 3.0 2.0 2.0 Industry 12.7 -6.3 -5.1 0.3 7.0 3.5 Services 2.7 1.9 5.0 3.0 2.5 2.6 Employment rate (% of working-age population, 15 years+) 34.6 34.8 34.9 35.0 35.0 35.1 Inflation (consumer price index) 5.0 4.4 2.5 4.0 3.7 3.2 1 Current account balance (% of GDP) 19.1 10.4 1.4 -6.0 -3.5 -3.1 1 Net foreign direct investment inflow (% of GDP) -0.8 -2.3 -2.8 -3.0 -2.8 -2.8 1 Fiscal balance (% of GDP) 12.7 0.9 -4.2 -10.2 -7.6 -7.2 Revenues (% of GDP) 38.9 41.1 45.3 37.0 38.8 39.1 1 Debt (% of GDP) 40.2 44.8 48.9 61.9 64.0 67.5 1 Primary balance (% of GDP) 13.1 1.6 -3.3 -8.7 -6.0 -5.5 2,3 International poverty rate ($2.15 in 2017 PPP) .. 0.1 0.1 0.1 0.1 0.1 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 1.9 1.7 1.8 1.6 1.6 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 20.4 19.3 19.5 18.9 18.7 GHG emissions growth (mtCO2e) 5.8 1.1 4.0 5.0 5.6 4.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Share of factor cost GDP. 2/ Calculations based on 2023-IHSES. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2023) with pass-through = 0.7 (Low (0.7)) based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 159 This outlook reflects information available as of April 10, 2025. 1 JORDAN Population Poverty million 11.6 .. 2 3 Life expectancy at birth School enrollment Jordan demonstrated resilience amid external shocks, but years primary (% gross) growth remains too slow to substantially reduce unemploy- ment. In the first three quarters of 2024, growth averaged 74.2 98.3 4 5 2.4 percent. The fiscal deficit widened due to higher interest GDP GDP per capita payments. Despite global trade headwinds, medium-term current US$, billion current US$ growth is projected to average 2.5 percent. To reduce pover- ty and promote shared prosperity, Jordan must boost pro- 53.3 4613.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. ductivity and strengthen the investment climate. impacts. More frequent natural hazards underscore the need for Key conditions and challenges stronger resilience policies. Jordan’s prudent fiscal and monetary policies have upheld macroeconomic stability. After average annual growth rates of Recent developments 5.1 percent (1992–2003) and 7.5 percent (2004–2009), Jordan’s economy expanded at a lower average rate of 2.2 percent Despite regional challenges, real GDP grew by 2.4 percent in the (2012 and 2022). A series of adverse events—including the Iraq first three quarters of 2024. Manufacturing expanded by a record war, the Arab Spring, the Syrian conflict and the refugee influx, 4.3 percent in Q3—the highest since Q2-2011. Although regional the COVID-19 pandemic, and recent regional conflict—have conflicts led to a decline in tourist arrivals, services sector remained strained the economy. a key driver, contributing 1.1 percentage points to GDP growth, down from 1.5 percentage points a year earlier. Prolonged low growth has hindered job creation amid rapid pop- ulation growth. Unemployment has stayed above 20 percent since Labor force participation rose slightly to 34.3 percent - the highest 2020, while labor force participation remains low. since Q3-2021 – reflecting gains among both males and females. However, unemployment remained high at 21.5 percent, as a rise As a small, open economy with limited natural resources, Jordan in female unemployment -- driven by greater labor force participa- cannot rely on domestic consumption or resource exports for sus- tion, likely due to new graduates entering labor market -- offset the tainable growth. Fiscal constrains also limit the government’s ca- decline in male unemployment. pacity to support medium- and long-term development. Inflation decelerated to 1.6 percent in 2024, down from 2.1 percent Climate events are expected to further exacerbate water scarcity, in 2023, driven by tight monetary policy and favorable import reducing per capita availability and generating wider economic prices. Following a cumulative 525 basis-points policy rate increase FIGURE 1 / Tourist arrivals declined by 4 percent in 2024, yet FIGURE 2 / The overall fiscal deficit widened in 2024, affected by above the levels of 2019 and 2022 the economic slowdown and the conflict. In million tourists Percent of GDP 7 0 -1 6 -2 5 -3 4 -4 -5 3 -6 2 -7 1 -8 2020 2021 2022 2023 2024 0 Primary fiscal balance (excluding grants) 2019 2020 2021 2022 2023 2024 Overall fiscal balance (including grants) Sources: Ministry of Tourism and Antiquities, and World Bank staff calculations. Sources: Ministry of Finance and World Bank staff calculations. 160 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. between March 2022 and December 2023, real interest rates re- could generate positive spillover to Jordan. Given the vast needs in mained positive despite a 100-basis-point cut in 2024. The real ef- terms of reconstruction, Jordan is well-placed to provide the neces- fective exchange rate remained stable as lower domestic inflation sary inputs, skills and capital. Improved economic linkages in terms offset a stronger US dollar. of trade, investment and labor flows could leverage the human and social capital built over the past decade. The central government's (CG) overall fiscal deficit widened to 5.6 percent of GDP in 2024, driven by slower tax revenue and high- Inflation is projected to remain contained, supported by favor- er interest payments. Revenue weakened due to the slowdown able international prices for key imports. Annual headline infla- in economic activity and falling export prices. The government tion is expected to reach 2.2 percent in 2025 and to stabilize at raised taxes on e-cigarettes and electric vehicles in September 2.4 percent thereafter. 2024 to mitigate emerging tax gaps. On the expenditure side, capital spending was curtailed to approximately 70.0 percent of The overall fiscal deficit is projected to narrow with ongoing rev- the budgeted amount. enue efforts and controlled expenditures. However, fiscal pres- sures from utility companies are likely to keep debt levels elevated. The current account deficit widened to 5.6 percent of estimated Measures in the utility sector, alongside fiscal consolidation efforts, full year GDP in 9M-2024, relative to 5.4 percent in the same peri- could accelerate debt reduction. od in 2023, as lower travel receipts were partially offset by lower imports and higher current transfers. Exports remained stable at The current account deficit is projected to gradually narrow, sup- 18.7 percent of GDP. Portfolio investments declined to 2.4 per- ported by contained imports and a recovery in tourism. However, cent of GDP compared to 3.1 percent a year earlier, while FDIs recent trade policy uncertainty could affect investment and growth, witnessed a marginal decrease. At the end of 2024, CBJ’s gross with sectors highly exposed to markets undergoing significant pol- reserves stood at USD21.9 billion (close to 8.2 months of next icy changes likely to be disproportionately impacted. The full effect year's imports of GNFS), relative to USD18.1 (7.4 months of im- of these shocks remains difficult to assess, as relevant policies are ports of GNFS) at end-2023. still evolving. Nevertheless, adverse impacts from trade develop- ments may be partially offset by other factors, including shifts in global commodity prices, particularly oil, and the potential easing Outlook of interest rate. The external sector and the broader Jordanian economy remain vulnerable to regional instability and changes in Growth is projected to average 2.5 percent in 2025 and 2026 with a the global trade environment. gradual recovery expected from 2025, assuming an improvement in the regional security situation. The recent regime change in Syria To reduce poverty and promote shared prosperity, Jordan must has improved sentiment, but broader economic impact has yet to focus on inclusive, private sector-driven job creation. Investing in materialize due to ongoing uncertainties. As of March 14, 2025, UN- green infrastructure is crucial for securing water and energy re- HCR reports 48,000 refugees have returned from Jordan to Syria sources while creating jobs for high- and low-skilled workers. Sus- while 620,000 registered refugees - 565,000 of them Syrian - re- taining macroeconomic stability and improving debt management main. UNHCR’s February Flash Regional Surveys indicate that many are critical for sustainable growth. Further, strengthening social Syrian refugees express a desire to return but are adopting a cau- safety net, most recently through the doubling of National Aid tious ‘wait and see’ approach as the security situation continues Fund and the launch of new social protections strategy, is key to to evolve. A faster recovery in Syria and greater regional stability building resilience. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.6 2.7 2.4 2.4 2.5 2.8 Real GDP growth, at constant factor prices 3.0 2.9 2.5 2.5 2.6 2.9 Agriculture 3.9 5.9 3.8 2.4 2.4 2.4 Industry 4.4 3.5 3.0 2.5 2.4 2.2 Services 2.3 2.4 2.2 2.5 2.7 3.3 Inflation (consumer price index) 4.2 2.1 1.6 2.2 2.4 2.4 Current account balance (% of GDP) -8.1 -4.9 -5.5 -5.1 -4.9 -4.2 Net foreign direct investment inflow (% of GDP) 1.7 3.6 3.1 3.3 3.5 3.6 1 Fiscal balance (% of GDP) -5.8 -5.1 -5.6 -5.4 -5.2 -4.3 Revenues (% of GDP) 25.7 25.3 25.1 25.3 25.4 25.4 1 Expenditures (% of GDP) 31.5 30.4 30.6 30.7 30.6 29.8 2 Consolidated Debt (% of GDP) 88.6 89.2 90.5 89.8 88.7 86.6 2 Unconsolidated Debt (% of GDP) 111.2 113.8 116.9 117.8 118.1 117.3 1 Primary balance (% of GDP) -1.5 -0.4 -0.1 0.1 0.4 0.5 GHG emissions growth (mtCO2e) 3.1 0.8 0.9 1.7 1.9 2.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Including the Adjustment on receivables and payables (use of cash) as per IMF Country Report No. 23/49. 2/ Consolidated debt coverage excludes the SSC's investment arm holdings. Projections indicate that SSC's financial surplus will gradually decline, turning into a deficit, causing the consolidated debt to converge to the unconsolidated debt over time. Macro Poverty Outlook / April 2025 161 This outlook reflects information available as of April 10, 2025. 1 KUWAIT Population Poverty million 5.0 .. 2 3 Life expectancy at birth School enrollment The economy remained in recession in 2024 due to oil sec- years primary (% gross) tor contraction, but recovery is expected in 2025 with the gradual unwinding of OPEC+ production cuts. Recent disrup- 80.3 101.9 4 5 tions will have small direct effect on Kuwait given the oil ex- GDP GDP per capita emption from trade policy measures. Downside risks are current US$, billion current US$ stemming from trade headwinds, uncertainty on global growth, oil price volatility. Substantial financial buffers from 144.9 29244.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2015. 4/ 2024. 5/ 2024. past oil revenues provide a cushion against adverse shocks. spillovers through lower global demand, reduced trade volumes, Key conditions and challenges and weakened investor sentiment may be more pronounced. Diversification and fiscal sustainability remain essential for the Despite strong fiscal buffers, Kuwait remains exposed to external country’s development path and for its economic resilience in the risks, including tighter global financial conditions, oil price volatility, long-term. While substantial sovereign assets and oil revenues pro- global economic shifts, and regional geopolitical uncertainties. Pro- vide financial buffers, structural reforms are imperative to reduce longed reliance on hydrocarbons increases macroeconomic vul- hydrocarbon dependence and enhance private-sector growth that nerabilities, making timely fiscal and structural reforms critical to is necessary to create productive jobs and meet the youth aspira- maintaining stability and investor confidence. Delayed reforms tions. Achieving fiscal consolidation requires prudent expenditure could exacerbate fiscal pressures, constrain policy flexibility, and management, improved budget planning, and the mobilization of slow economic diversification. Additionally, the volatility of oil non-oil revenues. Strengthening the business environment and la- prices and geopolitical risks present further challenges. bor market is key to attracting investment and enhancing produc- tivity. However, political gridlock and delays in reform implementa- tion continue to hold back progress. Recent developments Recent developments have heightened global trade policy uncer- Kuwait’s real GDP contracted by 3.1 percent in the 9M-2024 pe- tainty. Direct effects on Kuwait’s exports are expected to be con- riod compared to the same period of the previous year and is tained, as these exports predominantly consisting of crude oil estimated to have shrunk by 2.9 percent for the full year, pri- which remains exempt from the recently introduced measures. marily due to OPEC+ production cuts. Oil output fell by 7 percent Concurrently, OPEC+ accelerated the pace of supply increases, rais- in the 9M-2024 period, reflecting the impact of these reductions. ing Kuwait’s production target to 2,443 kbd in May, potentially Despite the overall economic contraction, the non-oil sector is exerting additional downward pressure on oil prices. Indirect recovering, expanding by 1 percent during the same period. This FIGURE 1 / Annual real GDP growth FIGURE 2 / Fiscal balance Percent change Percent of GDP 15 60 12 50 9 40 6 30 3 20 0 10 -3 0 -6 -10 2022 2023 2024 2025 2026 2022 2023 2024 2025 2026 Oil GDP Non-Oil GDP GDP Fiscal Balance Revenue Expenditure Sources: Kuwait CSB, IMF WEO, and World Bank staff estimates. Sources: World Bank and IMF WEO. Notes: Exclude investment income and FGF transfers. 162 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. resilience is supported by a rebound in real credit growth which are gradually unwound starting in May 2025. The non-oil sector has recovered in 2024 after a slow down in 2023. Credit to the pri- is forecasted to expand by 1.6 percent in 2025, supported by a vate sector expanding by 4.7 percent in 2024, compared to 2.4 per- rebound in real credit growth and large-scale infrastructure pro- cent in 2023. Major infrastructure projects, including the Mubarak jects, including the Northern Special Economic Zone. Long-term Al-Kabeer Port and the Silk City initiative, are helping to stimulate growth prospects remain contingent on the effective implemen- non-oil activity, generate employment, attract foreign investment, tation of structural reforms and diversifying the economy. and reduce dependence on oil revenues. Inflation eased to 3.0 per- cent in 2024, down from 3.6 percent in 2023, reflecting diminishing The fiscal deficit is projected to widen to 7.2 percent of GDP demand-side pressures and lower imported food prices. in 2025, reflecting a decline in oil revenues despite ongoing expenditure containment measures. Public debt is expect- The fiscal deficit is estimated to have widened to 5.0 percent of ed to rise gradually from 2025 onward, assuming the im- GDP in 2024, up from 4.8 percent in 2023, driven by lower oil plementation of the Financing and Liquidity Law. Over the revenues, due to declining oil prices and OPEC+ production cuts, medium term, fiscal pressures are expected to persist as despite efforts to contain expenditure growth. The Kuwaiti dinar revenue losses from oil continue to outstrip consolidation remains pegged to a currency basket, ensuring a stable nominal efforts, particularly if reforms face delays or remain limited anchor for monetary policy. The current account surplus contin- in scope. Monetary stabilization is expected to remain closely ues to decline in 2024, while remaining elevated, and is estimat- aligned with global central bank policies, supported by a mod- ed to have reached 23.8 percent of GDP in 2024, down from erating inflation trajectory, which is projected to decline to 2.5 26.2 in 2023, reflecting the impact of lower oil prices and produc- percent in 2025. The external position is anticipated to remain tion on the trade balance. In 9M-2024, the trade surplus contract- strong, though the current account surplus is projected to mod- ed to 25 percent of GDP, down from 28 percent in the same peri- erate to 15 percent of GDP in 2025 due to lower oil export rev- od of 2023. This was partially mitigated an improvement in non-oil enues. Weaker oil prices and production are expected to con- exports, reaching 4.3 percent of GDP in 9M-2024 compared to 3.6 tinue to narrow the surplus, impacting the trade balance. The percent in the previous year. Net FDI continue to decline reaching pace of adjustment could accelerate if external buffers are not 5.0 percent of GDP in M 9 2024 comparing to 7.3 percent in the reinforced, or external conditions deteriorate. Nonetheless, sub- same period in 2023. FDI inflows remained weak due to structur- stantial sovereign assets will help cushion external vulnerabilities al barriers, despite recent regulatory reforms aimed at improving over the medium term. investment attractiveness such as amendment to the Commercial Law permitting full foreign ownership of local branches. Official Despite the overall economic contraction, ILO employment pro- reserve assets declined to US$44.5 billion in 2024 from US$47.5 jections for 2025 point to a growth of about 2.0 percent y-o-y, billion in 2023. Despite this decrease, reserves remain sufficient stronger among women (2.4 percent y-o-y), thanks to the recov- to support balance of payments needs. ery of the non-oil sector. This is in a context of roughly stable labor force participation and unemployment rates. The lat- ter is projected to hover around 2.1 percent in 2025, with Outlook virtually no change with respect to 2024. Yet, the unemploy- ment rate is estimated to remain significantly higher at 14.9 A recovery in real GDP from the oil sector is projected in 2025, percent among youth (15-24), with a peak of 28.3 percent with growth expected at 2.2 percent as OPEC+ production cuts among young women. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.3 -3.6 -2.9 2.2 2.7 2.7 Private consumption 1.8 1.1 2.8 2.6 2.5 2.5 Government consumption 3.9 1.2 1.4 2.1 2.4 2.8 Gross fixed capital investment 2.2 0.6 3.8 2.4 2.6 2.6 Exports, goods and services 12.0 -3.6 -5.4 2.4 2.9 2.7 Imports, goods and services 6.3 5.7 4.8 2.9 2.6 2.6 Real GDP growth, at constant factor prices 6.3 -3.6 -2.8 2.2 2.7 2.7 Agriculture 1.1 0.1 0.3 1.2 1.2 1.2 Industry 7.9 0.1 -2.1 2.5 2.4 2.3 Services 4.2 -8.8 -3.8 1.8 3.1 3.4 Employment rate (% of working-age population, 15 years+) 70.0 70.0 70.0 70.0 70.0 70.0 Inflation (consumer price index) 4.0 3.6 3.0 2.5 2.3 2.1 Current account balance (% of GDP) 32.4 26.2 23.8 15.0 17.6 20.2 1 Fiscal balance (% of GDP) 12.5 -4.8 -5.0 -7.2 -5.4 -5.0 Revenues (% of GDP) 55.0 43.5 44.0 44.0 46.6 46.1 1 Debt (% of GDP) 2.3 3.2 7.3 12.3 13.5 16.1 1 Primary balance (% of GDP) 12.7 -4.8 -4.9 -7.1 -5.3 -4.9 GHG emissions growth (mtCO2e) 4.6 2.3 1.8 5.0 5.9 6.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Based on fiscal year cycle (April to March 31). Fiscal balances exclude investment income and FGF transfers. Macro Poverty Outlook / April 2025 163 This outlook reflects information available as of April 10, 2025. 1 LEBANON Population Poverty million 5.8 .. 2 3 Life expectancy at birth School enrollment Real GDP is estimated to have contracted by 7.1 percent in years primary (% gross) 2024, bringing Lebanon’s cumulative decline since 2019 to nearly 40 percent. In 2025, following the end of the conflict 74.4 79.8 4 5 and resolution of political paralysis, real GDP is projected GDP GDP per capita to grow by 4.7 percent, the first positive growth since current US$, billion current US$ 2017, driven by anticipated reforms, recovering tourism, improved consumption, limited reconstruction inflows, and 26.0 4473.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. a base effect from the sharp prior contraction. to address Lebanon’s prolonged crisis through a comprehensive Key conditions and challenges recovery plan. Reforms are urgent as the country grapples with a five-year financial crisis, fallout from the recent conflict, and im- Thirteen months after the October 7 events and the conflict esca- mense reconstruction challenges ahead. lation between Israel and Lebanon in September 2024, a ceasefire between the two countries took effect on November 27, 2024. The The conflict and its aftermath are expected to deepen poverty conflict has claimed over 3,500 Lebanese lives, injured more than and vulnerability in Lebanon. Agriculture, commerce, and tourism, 14,500, and displaced nearly 1.2 million people—over a quarter of comprising 77 percent of losses, heavily impact low-wage and in- Lebanon’s population. formal workers. Agricultural losses particularly hurt southern com- munities, while disruptions in health, education, and housing By the end of 2024, Lebanon’s cumulative GDP decline since heighten long-term poverty risks. At its peak, the conflict displaced 2019 approached 40 percent, deepening Lebanon’s pre-exist- over 1.2 million people, with around 99,000 remaining internally ing multi-pronged crisis. The World Bank Rapid Damage and displaced. The mounting economic losses are exacerbating Needs Assessment (RDNA) estimates that physical asset dam- Lebanon's enduring socioeconomic challenges. age reached US$6.8 billion, economic losses totaled US$7.2 billion, and recovery and reconstruction costs amount to US$11 billion. Recent developments After more than two years, Lebanon’s political paralysis has end- Updated World Bank estimates indicate that the conflict with Israel ed with the election of former army chief Joseph Aoun as Pres- cut Lebanon’s real GDP growth for 2024 by 8 pp, up from an earlier ident in January 2025 and the formation of a new government projection of 6.6 pp before the conflict ended. As a result, real GDP under Prime Minister Nawaf Salam on February 8. The formation is now expected to contract by 7.1 percent in 2024, compared to a of a reform-committed government offers a crucial opportunity no-conflict growth estimate of 0.9 percent. FIGURE 1 / Recent exchange rate stabilization has driven a FIGURE 2 / Rising education costs were a key driver of overall deceleration in inflation inflation in 2024 Index (Aug 2019=100) Percent Contributions to overall inflation in 2024, percent 7,000 300 50 40 6,000 250 30 5,000 20 200 4,000 10 150 3,000 0 100 -10 2,000 -20 1,000 50 -30 0 0 Headline Inflation growth Education Owner occupied Food & non-alcoholic beverages Water,electricity,gas,&other fuels Health Transportation Actual rent World Bank average exchange rate (lhs) Clothing and footwear Communication Currency in circulation (lhs) Alcoholic beverages, tobacco Furnishings, household equipment Inflation rate (% yoy), (rhs) Other Sources: Lebanese authorities and World Bank staff calculations. Sources: Lebanese authorities and World Bank staff calculations. 164 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. A fiscal surplus (on a cash basis) of 0.5 percent is estimated for and December 2023 (excluding October, when the education CPI 2024 driven by stronger-than-expected revenue collection and component surged six-fold), and 1.4 percent in 2024. spending restraints despite the conflict. Total revenues in 2024, 77 percent of which come from taxes, reached 15.3 percent of Despite the ongoing economic crisis, sovereign default, and the GDP, surpassing the ratified budget estimates, in part due to bet- most recent conflict, Lebanon continued to record a significant cur- ter-than-expected tax collection rates in 9M-2024. Expenditures re- rent account (CA) deficit in 2024, reaching 22.2 percent of GDP, mained lower at 14.7 percent of GDP. Fiscal restraint was rein- primarily driven by a trade-in-goods deficit. Historically, trade-in- forced by spending restrictions on public institutions’ accounts goods deficits have been partially offset by a trade-in-services by Banque du Liban (BdL), contributing to a 45 percent increase surplus. However, the decline in tourism receipts due to the con- in public sector deposits between January 2024 and December flict led to a trade-in-services deficit of -3.3 percent of GDP in 2024. Before the conflict escalated in September 2024, the out- 2024. Historically weak BOP data, and the prevalence of a perva- going government approved a draft 2025 budget targeting a zero sive dollarized cash economy are likely to skew official estimates fiscal deficit, with revenues and expenditures at 15.9 percent of the current account deficit. of GDP. Although submitted to parliament, it was not discussed, prompting the new government to approve the budget by decree, as constitutionally permitted. Outlook The Lebanese pound has been stable at 89,500 LBP/US$ since July In 2025, following the end of the conflict and resolution of political 2023, following years of rapid depreciation. This stability has been paralysis with the election of a president and a reform-oriented largely sustained through improved revenue collection, rather than government, real GDP is projected to grow by 4.7 percent, support- a robust monetary framework. These surpluses act as fiscal steril- ed by anticipated reforms, recovering tourism and consumption, ization, as their accumulation at BdL reduces excess LBP liquidity, limited reconstruction inflows, and a base effect after a 40 percent preventing downward pressure on the exchange rate. However, cumulative GDP decline. However, several risks could weigh on this the reliance on fiscal sterilization as a mechanism for exchange outlook. A deterioration in the security situation may affect senti- rate stability largely hinges on continued fiscal restraint. Central ment, tourism, financial flows, and consumption. Additionally, the bank gross reserves (liquid reserves) have increased by US$447 impact of rising global trade uncertainty on Lebanon remains un- million in 2024, reaching US$10,089 million. clear. Although direct effects may be limited, given that exports to some large markets account for a modest 4 percent of Lebanon’s The annual average inflation rate in 2024 declined to 45.24 percent, total goods exports, the indirect effects will depend on how recent a level not seen since 2020, driven by exchange rate stabilization policy shifts affect the global economy. Assuming exchange rate since August 2023. This stabilization led to a steady decline in stability and no additional global inflationary pressures, Lebanon's month-to-month inflation, averaging 1.2 percent between August annual inflation is projected to average 15.2 percent in 2025. Recent history and projections 2022 2023 2024e 2025f Real GDP growth, at constant market prices -0.6 -0.8 -7.1 4.7 Private consumption 2.3 0.2 -4.6 2.2 Government consumption 34.9 -18.4 16.6 18.4 Gross fixed capital investment -88.6 4.5 -31.6 157.1 Exports, goods and services 0.3 -1.1 -9.7 1.9 Imports, goods and services 3.5 -0.3 -0.1 -0.5 Real GDP growth, at constant factor prices -0.6 -0.8 -7.1 4.7 Agriculture -0.8 -0.2 -7.1 4.7 Industry -0.6 0.1 -7.1 4.9 Services -0.6 -1.0 -7.1 4.7 1 Employment rate (% of working-age population, 15 years+) 40.5 40.5 39.0 37.6 Inflation (consumer price index) 171.2 221.3 45.2 15.2 Current account balance (% of GDP) -34.6 -28.1 -22.2 -15.3 Net foreign direct investment inflow (% of GDP) 2.2 2.9 1.1 1.9 Fiscal balance (% of GDP) -2.9 0.5 0.5 0.0 Revenues (% of GDP) 6.1 13.7 15.3 15.9 Debt (% of GDP) 179.7 179.7 176.5 151.7 Primary balance (% of GDP) -2.5 1.4 0.9 0.1 GHG emissions growth (mtCO2e) -6.1 2.7 -9.0 2.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ ILO data is through 2023, with 2024-2025 projections imputed using the World Bank model. These projections are highly uncertain due to the 2023-24 conflict's impact, causing a steep contraction in 2024 and a potential rebound in 2025, with the overall employment effect unclear. Macro Poverty Outlook / April 2025 165 This outlook reflects information available as of April 10, 2025. 1 LIBYA Population Poverty million 7.0 .. 2 3 Life expectancy at birth School enrollment The resolution of the Central Bank of Libya's crisis in years primary (% gross) September 2024 laid the ground for the resumption of oil production which exceeded its 10-year historical average. 72.2 106.9 4 5 Global economic prospects are clouded with uncertainty GDP GDP per capita which directly affects international energy markets and un- current US$, billion current US$ derscores the need for a transparent and effective unified budget in Libya. In the medium term, efforts should be 45.4 6515.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2006. 4/ 2024. 5/ 2024. channeled to peacefully rebuild and diversify the economy. Furthermore, the recent devaluation of the Libyan Dinar (LYD) Key conditions and challenges announced by the CBL should help support foreign exchange re- serves and control the high public spending. However, structural Libya is actively engaged in efforts to overcome its political chal- reforms are essential to diversify away from hydrocarbon rev- lenges. The UN and international community have launched initia- enues and shield the economy from fluctuations in international tives to address electoral laws and foster national dialogue, aiming energy prices. to unite the country and pave the way for elections. Despite com- plexities, these developments reflect a commitment to progress Efforts are underway to improve the accessibility and comprehen- and reconciliation, offering opportunities for Libya to move for- siveness of data for monitoring labor market and household out- ward and end long-standing conflict and division. comes in Libya. Labor force participation is 49.1 percent (National Labor Force Survey, 2022) and is much higher among men than The Government of National Unity (GNU), the Government of Na- women and youth. The public sector continues to play a significant tional Stability (GNS) and other stakeholders have not reached an role in providing employment, particularly in administration ser- accord for a unified budget for 2025. Consequently, budget spend- vices with limited job opportunities in the private sector. Libya has ing will continue to be covered on a monthly allocation basis. An not yet adopted a national poverty line, which makes targeting of agreement has been reached to terminate the oil-for-fuel barter programs and monitoring challenging. system, which has been in place since November 2021. This system will be replaced by a more transparent fuel procurement mech- anism and ensuring timely transfers of oil receipts to the Central Recent developments Bank of Libya (CBL) starting March 2025. The Libyan economy contracted by an estimated 2.9 percent in The global economic consequences from changes in trade policy 2024. The resolution of the CBL crisis in October 2024 paved are uncertain and will have direct implications on energy markets. the way for the resumption of oil production which surged by FIGURE 1 / Crude oil production and international price FIGURE 2 / LYD/USD exchange rate in the official and parallel markets bpd, million US$/bbl LYD/USD 1.4 140 8 1.2 120 7 1.0 100 6 0.8 80 5 0.6 60 4 0.4 40 3 0.2 20 2 0.0 0 1 0 Oil production (monthly) Oil production average (yearly) Crude oil price (rhs) Official Parallel Sources: OPEC and World Bank Commodity Markets Outlook, February 2025. Sources: Central Bank of Libya and World Bank staff calculations. 166 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 35 percent (q-o-q) in the last quarter of 2024. However, average Libya experienced high exchange rate volatility in 2024. The production for the entire year fell short of 2023 levels resulting gap between official and parallel exchange rate averaged 36 in oil GDP contracting by 6 percent. Meanwhile, robust private percent in Jan-Feb and rose sharply to 47 percent during consumption driven by a 10 percent increase in public wages Mar-Oct 2024 following the implementation of the foreign kept non-oil GDP growth robust at around 2 percent. In January currency tax and the uncertainty associated with the CBL cri- 2025, the NOC successfully ramped up production to 1.4 mbpd sis. With the resolution of the CBL crisis and the reduction with the aim to realize 1.6 mbpd by 2025. of the tax rate from 20 to 15 percent, the gap narrowed to 25 percent by November 2024 but widened again in subse- Inflation which is only officially measured in the Tripoli area hov- quent months to reach 32 percent by January 2025. More ered around its average of 2.1 percent in 2024 compared to 2.3 recently, the CBL announced the devaluation of the Libyan percent in 2023 with food and beverages prices contributing to Dinar by 13.3 percent in April 2025 to narrow the exchange 1.3 percent to overall inflation. However, due to the presence of rate gap and curb domestic demand originating from high a large shadow economy in Libya, official inflation figures do not public spending. capture price increases and volatility faced by households. The budget surplus stood at 0.3 percent of GDP in 2024. Total Outlook revenues reached 56.7 percent of GDP with a significant increase in non-oil revenues driven by tax collections from foreign cur- Assuming no disruptions, oil production is expected to average 1.3 rency exchange (10 percent of GDP) and CBL’s dividends (3 per- to 1.5 mbpd during 2025- 2027, respectively. Consequently, oil GDP cent of GDP). The non-oil revenues had softened the sharp fall is projected to grow by 17 percent in 2025 and 7 percent annually in oil receipts as a result of lower production levels and prices in during 2026-2027. Driven by robust private investments, especially 2024. On the other hand, public spending, which stood at 56.4 per- in the oil sector, non-oil GDP is anticipated to grow on average by 4 cent of GDP, increased by 2 percent compared to 2023 to reflect percent annually during 2025-2027. As a result, overall GDP is fore- higher current spending (2 percent) driven by higher wages and a casted to grow by 12.3 percent this year and average 6 percent in sharp fall in capital expenditure, which fell by 77.8 percent. In Dec the medium term. 2024, the GNU transferred LYD 21 billion from the unspent de- velopment budget (Chapter 3) to Ministry of Finance’s accounts to Inflation in Tripoli is likely to rise to 3.6 percent in 2025 to reflect finance future projects in 2025. the devaluation of Libyan Dinar, however, moderating global im- port prices would soften this hike. The implementation of the foreign currency tax, introduced in March 2024, resulted in tighter access to foreign currency and sup- Lower oil receipts will deteriorate both fiscal and external bal- ported the decline of merchandise imports by 6 percent during the ances in 2025, with the fiscal balance expected to register a 10 months of 2024. Moreover, the fall in oil exports by close to 9 deficit of 4.5 percent of GDP while the current account surplus percent, following the shutdown of export facilities amidst the CBL narrows to 3.2 percent of GDP. The twin balances are expected to crisis and declining oil prices, resulted in a narrowing merchandise improve in the medium term with the expansion of oil production trade surplus by 12 percent, reaching 23 percent of GDP. and the recovery of oil prices. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -8.3 10.2 -2.9 12.3 6.4 5.6 Private consumption -1.3 5.3 2.0 2.0 2.1 2.0 Government consumption -1.1 5.5 5.5 2.2 3.1 1.6 Gross fixed capital investment -1.3 -10.7 -26.6 3.0 5.3 3.6 Exports, goods and services -19.9 7.1 -6.9 19.7 8.5 7.8 Imports, goods and services -13.9 -16.5 -3.0 1.0 2.5 2.1 Real GDP growth, at constant factor prices -11.8 11.7 -2.9 12.3 6.4 5.5 Agriculture 10.0 6.8 -1.2 1.3 2.0 3.0 Industry -17.0 17.8 -5.9 15.8 7.2 6.6 Services -1.9 1.2 3.3 6.4 4.9 3.4 Inflation (consumer price index) 4.6 2.3 2.1 3.6 2.5 2.6 Current account balance (% of GDP) 21.2 3.0 4.5 3.2 15.6 20.7 Fiscal balance (% of GDP) 2.7 -0.1 0.3 -4.5 -1.8 0.1 Revenues (% of GDP) 64.1 57.9 56.7 48.5 46.3 44.9 Debt (% of GDP) 95.0 91.5 90.9 90.3 85.8 82.2 Primary balance (% of GDP) 2.7 -0.1 0.3 -4.5 -1.8 0.1 GHG emissions growth (mtCO2e) -4.9 -4.0 -3.4 4.6 2.0 1.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 167 This outlook reflects information available as of April 10, 2025. 1 2 MOROCCO Population Poverty million millions living on less than $3.65/day 38.1 3.3 3 4 Life expectancy at birth School enrollment The economy shows positive trends driven by strong exports, a years primary (% gross) declining budget deficit, and lower inflation. However, socio- economic challenges persist following recent shocks, espe- 75.0 114.5 5 6 cially for the rural populations most affected by drought. Ad- GDP GDP per capita verse labor market trends have aggravated since the pan- current US$, billion current US$ demic, prompting the government to launch a roadmap on job creation focused on active labor market policies, rural 153.3 4024.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2013 (2017 PPPs). 3/ 2022. economies, women employment and private investment. 4/ 2023. 5/ 2024. 6/ 2024. coverage. The government has announced a job creation roadmap Key conditions and challenges that proposes more inclusive active labor market policies, mea- sures to preserve rural jobs, programs to lift barriers to women A drought has dragged overall growth, but non-agricultural GDP economic employment and incentives for private investment. To has accelerated. Among the factors that have driven this expansion boost employment opportunities and enhance overall living con- are the robust performance of export-oriented sectors and the re- ditions, further structural reforms would be needed to formalize covery of domestic demand. Hosting the 2025 Africa Cup of Na- firms and workers, stimulate the emergence of high-growth firms, tions and the 2030 World Cup could bolster the economy, which modernize labor regulations, and support women's employment. has been attracting growing interest from international investors. However, heightened trade uncertainty could prompt a reevalua- tion or delay of nearshoring investment plans. Recent developments Morocco is still grappling with significant socioeconomic challenges Real GDP growth decelerated to 3.2 percent in 2024 from 3.4 per- following the post-pandemic shocks. Inflation has eroded house- cent in 2023 due to a 4.6 percent contraction in the agricultural holds’ purchasing power, leading to depressed confidence indica- sector amid the sixth consecutive year of drought. Non-agricultural tors. The latest household survey reveals a partial reversal of pre- growth accelerated to 3.9 percent, driven by a revitalized industrial COVID poverty reduction trends and a rise in inequality since 2014. sector, particularly in phosphates and construction, which helped Long-term trends in the labor market show an increase in inactiv- offset the slowdown in services. Domestic demand is recovering ity and unemployment rates. The government is addressing these from the inflationary shock, with investment rising by 9.1 per- challenges. Minimum and civil servant wages have been adjust- cent—supported by public infrastructure and FDI—while private ed to mitigate the cost-of-living increase. Social protection systems consumption grew by 3.2 percent. The decline in inflation observed have been revamped with the introduction of mandatory health throughout 2024 has allowed Bank al-Maghrib to cut the policy rate insurance schemes and an enhanced cash transfer with broader by 50 basis points, to 2.5 percent. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 16 45 40000 40 35000 12 35 30000 8 30 25000 25 4 20000 20 15000 0 15 10 10000 -4 5000 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 0 2021 2022 2023 2024 2013 2015 2017 2019 2021 2023 2025 2027 Primary sector Secondary sector International poverty rate Lower middle-income pov. rate Tertiary sector Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: Haut Commissariat au Plan (HCP) and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 168 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Morocco’s external position remains strong. Despite fast-growing non-agricultural GDP is expected to decelerate to 3.2 percent imports resulting from the recovery of domestic demand, manu- in 2025 due to a base effect and to the impact of lower phos- facturing exports, tourism inflows, and remittances kept the cur- phate prices and heightened trade uncertainty on industrial rent account deficit at close to 1.2 percent of GDP in 2024, largely output and investment. financed with FDI. International reserves cover five months of im- ports, and Morocco retains good access to international financial As domestic demand continues to recover amidst moderate markets and multilateral credit. Revenue performance was strong price pressures, the current account deficit is expected to driven by tax reforms, anti-fraud measures, a tax amnesty, and widen to 2 percent of GDP in 2025, still below historical aver- State asset sales-and-lease back operations. This helped offset ages. The budget deficit is anticipated to decline to 3.9 percent the increased government expenditures resulting from a cost-of- of GDP as authorities moderate spending growth through mod- living salary adjustment and ongoing reforms and investments. est salary increases and ongoing LPG subsidy reform. Greater re- Consequently, the budget deficit is gradually returning to pre- liance on public-private partnerships (PPPs) for public investment pandemic levels, closing 2024 at 4.1 percent of GDP (down from in the face of high needs would help keep the debt ratio on a 4.5 percent in 2023). The debt-to-GDP ratio has stabilized at around downward trajectory. 70 percent of GDP. This forecast is subject to significant uncertainty and risks. Moroc- In 2024, Morocco's labor market exposed a contrast between the co's geographic position and comparatively advantageous market 2.5 percent growth in urban employment and a 1.9 percent decline access could help it cope with ongoing protectionist tensions. But in rural jobs. This trend penalizes women, whose activity rate uncertainty in trade policy could also lead to a higher-than-antici- has declined since the early 2000s. It also exacerbates the chal- pated investment slowdown. Challenging climatic conditions could lenges faced by the poor and vulnerable, which are predominant- continue impacting agriculture and rural households. Additional- ly rural and depend on irregular agricultural income. While pover- ly, spending pressures associated with ongoing reforms and infra- ty has accelerated its decline following recent shocks—reaching structure plans could strain the budget. 0.76 percent at the international line and dropping below 6 per- cent at the lower-middle income line—spatial disparities persist, GDP growth acceleration is expected to lead to a 20 percent de- with poverty remaining entrenched in low density areas distant cline in poverty by 2027, bringing it to 0.6 percent at the inter- from urban center. national poverty line and close to 5 percent at the lower-middle- income threshold. However, rising inequality could reduce the effectiveness of growth in lowering poverty. To sustain pover- Outlook ty reduction, targeted structural reforms promoting inclusive job creation, supporting SMEs, and completing social protection re- Real GDP growth is projected to slightly accelerate to 3.4 per- form should be pursued, along with stronger policies to reduce cent in 2025, driven by a partial recovery of agriculture. But territorial disparities. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.5 3.4 3.2 3.4 3.3 3.5 Private consumption 0.0 3.9 3.2 3.1 3.2 3.4 Government consumption 3.0 4.1 3.9 4.1 3.6 3.5 Gross fixed capital investment -3.9 1.9 9.1 6.0 4.0 4.3 Exports, goods and services 20.5 8.8 8.3 6.8 7.3 6.1 Imports, goods and services 9.5 7.4 11.1 7.4 6.7 5.8 Real GDP growth, at constant factor prices 1.6 3.2 3.2 3.4 3.3 3.5 Agriculture -11.8 1.6 -4.6 4.5 2.6 2.8 Industry -2.7 1.3 5.1 3.0 3.2 3.6 Services 6.8 4.4 3.5 3.4 3.5 3.6 Employment rate (% of working-age population, 15 years+) 39.9 39.7 39.7 39.9 40.0 40.1 Inflation (consumer price index) 6.6 6.1 0.9 2.0 1.8 1.5 Current account balance (% of GDP) -3.7 -0.6 -1.2 -2.0 -2.3 -2.5 Net foreign direct investment inflow (% of GDP) 1.2 0.2 0.7 0.7 0.9 1.2 Fiscal balance (% of GDP) -5.4 -4.5 -4.1 -3.9 -3.4 -3.3 Revenues (% of GDP) 28.7 28.1 30.3 30.7 29.6 28.3 Debt (% of GDP) 71.5 69.5 70.0 68.9 67.7 66.8 Primary balance (% of GDP) -4.1 -3.4 -2.8 -2.1 -1.9 -1.9 1,2 International poverty rate ($2.15 in 2017 PPP) 0.9 0.9 0.8 0.7 0.7 0.6 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 7.4 7.1 6.6 6.1 5.7 5.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 36.5 35.0 33.8 32.6 31.2 29.7 GHG emissions growth (mtCO2e) -0.2 0.9 1.9 2.1 2.9 3.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2013-ENCDM. Actual data: 2013. Nowcast: 2014-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2013) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 169 This outlook reflects information available as of April 10, 2025. 1 OMAN Population Poverty million 5.3 .. 2 3 Life expectancy at birth School enrollment Oman’s economic activity is expected to continue performing years primary (% gross) well with the phase out of OPEC+ oil production cuts, despite global economic uncertainty. Prudent fiscal management and 73.9 95.6 4 5 sustained efforts to accelerate diversification have shifted fis- GDP GDP per capita cal and external balances into surpluses since 2022. Using current US$, billion current US$ windfall savings to pay debt has put government finances on a more sustainable path. Downside risks to the outlook include 106.9 20238.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. oil market volatility, global slowdown, and climate events. slowing global growth and its impact on oil demand and on key sec- Key conditions and challenges tors such as the logistics, downward pressure on oil prices, which could impact the country’s fiscal and external sustainability. Oman has achieved significant economic progress in recent years. The expansion of nonhydrocarbon activities has helped support economic activity despite OPEC+ oil production cuts, notably in Recent developments construction, manufacturing, and services. Prudent fiscal discipline under Vision 2040, and higher non-hydrocarbon exports (minerals, Real GDP growth accelerated to 1.7 percent y/y in 2024, up from 1.2 metals, plastic, rubber and foodstuffs) have turned fiscal and exter- percent in the previous year, reflecting robust growth in non-oil activ- nal balances into surpluses since 2022. Using hydrocarbon wind- ities and gas production. The non-oil sector grew by 3.9 percent led by falls to pay debt has markedly reduced government debt, by al- a robust expansion in manufacturing, construction and resilient ser- most a half of its peak of nearly 68 percent of GDP in 2020. vices sectors. Within the hydrocarbon sector, oil activity contracted by 4.4 percent due to OPEC+ output cuts, resulting in a 3 percent Labor market reforms are ongoing, aiming to increase job oppor- contraction in the sector. Average headline inflation slowed down tunities for Omani nationals across all sectors, and improve female to 0.6 percent in 2024, from 1 percent in 2023, reflecting continued labor force participation. As such, Oman achieved 54 percent of contraction in transport prices and moderation in food inflation. its 2024 employment plan in the first six months, with more than 14,000 Omanis employed in the public and private sectors. Fiscal revenues edged by 4 percent y/y in the first ten months of 2024 (10M-24), mainly due to a surge in in revenues related to cap- Despite progress, the economy remains dependent on the hydro- ital and taxes on goods and services, up by 75 percent and 18 per- carbons sector, which contributes heavily to government revenue cent, respectively. On the other hand, public spending rose by 8 and export proceeds. Shifts in trade policy may have a limited di- percent during the same period, reflecting a 29 percent and 43 per- rect impact on the economy, while greater risks may arise from the cent y/y increase in investment expenditures (including oil and gas, FIGURE 1 / Real annual GDP growth FIGURE 2 / General government operations Percent change Percent of GDP 10 45 40 8 35 6 30 25 4 20 2 15 0 10 5 -2 0 -4 -5 2021 2022 2023 2024 2025e 2026f 2027f 2021 2022 2023 2024e 2025f 2026f Hydrocarbon GDP Non-Hydrocarbon GDP Real GDP Revenues Expenditures Budget balance Sources: Oman authorities, World Bank staff projections, and IMF projections. Sources: Oman authorities and World Bank staff projections. 170 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. manufacturing, tourism, and logistics). Accordingly, Oman’s over- Hydrocarbon growth is expected to reach 2.1 percent, while nonhy- all fiscal surplus narrowed to 1.3 percent of GDP in 10M-24, down drocarbon growth will remain strong at an estimated 3.4 percent, from 2 percent of GDP during the same period of 2023. Adding the driven by robust growth in construction, manufacturing and ser- transfers of funds to the total revenues and continued fiscal disci- vices activities. In the medium term (2026-2027), the full resump- pline, fiscal balance is expected to remain in surplus of 5.4 percent tion of oil production and steady growth in non-hydrocarbon activ- of GDP in 2024. Public debt stood at 35 percent of GDP in 2024, ities amid continued diversification efforts will drive the real GDP down from 37.5 percent of GDP by end 2023, underscoring the au- growth to 4 percent. Oman could face inflationary pressures in thorities’ commitment to containing public debt. the medium term on strong nonhydrocarbon growth and due to disrupted supply chains from rising trade uncertainty, however, The trade balance recorded a surplus of 18 percent of GDP (US$19.1 government subsidies and price caps will prevent a sharper rise billion) by end-December 2024, as refined oil products’ exports in inflation during the forecast period. surged by 185.5 percent. The current account surplus is estimated to remain broadly stable at 2.4 percent of GDP in 2024 on the back Lower oil prices following global trade uncertainty will pressure of solid growth in the non-hydrocarbon exports and higher refined government revenues, causing a lower fiscal surplus of an estimat- fuel exports from the new Duqm refinery, offsetting the impact of ed 2 percent of GDP in 2025. However, it is projected to gradually lower oil exports revenues. Gross foreign assets remain sizable at improve during 2026-27 as rising oil and gas production and con- US$18.4 billion by end-December 2024 (up by US$0.9 billion y/y). tinued fiscal adjustment would partially offset the impact of lower oil prices. Accordingly, public debt is expected to continue its down- Labor market indicators were generally stable in 2024, with an es- ward trajectory over the medium term. timated employment rate of 65.6 percent and an unemployment rate of 3.2 percent. According to the National Center for Statistical Similarly, the potential impact of trade uncertainty on oil export Information, the number of foreign workers declined by approxi- revenues, together with rising imports costs will reduce the current mately 1 percent in 2024 compared to 2023, while the number of account surplus to less than 1 percent of GDP in 2025. It is expect- Omani workers increased by about 0.5 percent. Women, particu- ed to rebound during 2026-27 driven by the anticipated increase in larly youth aged 15-24, continue to be the most vulnerable group oil production and solid increase in service exports on the back of in the labor market, facing the highest unemployment rate of 30.9 increased tourism and higher refined fuel exports. percent in 2024. The National Strategy for the Advancement of Omani Women aims to support women in the workforce. Employ- Key risks to the outlook arise from downward pressure on oil ment and unemployment rates are not expected to change signifi- prices, which could pose significant challenges to the fiscal and cantly in 2025, but some uncertainty remains. external accounts and disrupt the government’s reform program. Other risks are related to rising trade uncertainty. The immediate impact of trade uncertainty on Oman is expected to be limited, Outlook given that oil and refined products are exempted. Indirect risks arise from the slowdown in global oil demand, economic deceler- Notwithstanding rising trade uncertainty, Oman’s economic out- ation in China – a major trading partner–and steeper decline in oil look remains positive, with real GDP growth is expected to acceler- prices which could weigh on growth and debt dynamics. On the ate to 3.0 prompted by a rebound in oil production along with solid upside, additional fiscal and diversification measures could help growth in the nonhydrocarbon activity, and devoted reform efforts. Oman navigate such risks and uncertainty. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.0 1.2 1.7 3.0 3.7 4.0 Private consumption 7.1 5.4 3.3 2.8 2.7 2.8 Government consumption 0.9 4.0 2.0 2.3 2.5 2.4 Gross fixed capital investment 1.8 2.2 2.6 3.0 3.7 3.9 Exports, goods and services 9.1 1.9 1.5 3.0 4.3 4.7 Imports, goods and services 7.6 1.6 1.8 2.4 3.0 3.0 Real GDP growth, at constant factor prices 7.9 1.4 1.7 3.0 3.7 4.0 Agriculture 6.8 5.9 2.8 3.2 3.4 3.8 Industry 8.0 -0.2 2.6 3.0 3.6 3.8 Services 7.8 3.0 0.6 3.0 3.8 4.3 Employment rate (% of working-age population, 15 years+) 66.7 67.3 67.3 67.3 67.3 67.3 Inflation (consumer price index) 2.5 0.9 1.0 1.6 2.0 2.3 Current account balance (% of GDP) 4.0 2.5 2.4 0.9 1.2 1.4 Net foreign direct investment inflow (% of GDP) 4.5 2.2 4.6 4.8 4.9 5.0 Fiscal balance (% of GDP) 10.5 6.9 5.4 2.0 2.4 2.8 Revenues (% of GDP) 41.4 34.3 34.0 30.4 29.3 28.7 Debt (% of GDP) 41.7 37.5 35.2 35.0 34.2 33.1 Primary balance (% of GDP) 13.0 9.4 7.6 4.2 4.4 4.8 GHG emissions growth (mtCO2e) 6.3 4.6 3.2 4.5 0.5 0.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 171 This outlook reflects information available as of April 10, 2025. PALESTINIAN 1 2 Population Poverty million millions living on less than $6.85/day 5.3 1.1 TERRITORIES Life expectancy at birth years 3 School enrollment primary (% gross) 4 After 17 months of conflict, Gaza fell into its deepest eco- 73.4 92.1 5 6 nomic recession in 2024. In the West Bank, the knock-on GDP GDP per capita current US$, billion current US$ effects triggered significant job losses and a worsening fis- cal crisis for the Palestinian Authority (PA), amid an Israeli 13.7 2592.7 military operation in the Northern governorates. The out- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2023 (2017 PPPs). 3/ 2022. look hinges on whether the ceasefire is reinstated, recon- 4/ 2023. 5/ 2024. 6/ 2024. struction prospects, aid levels, PA reforms and the level of Israeli restrictions in the West Bank. Key conditions and challenges Recent developments The economic potential of the Palestinian territories has been The overall Palestinian economy is estimated to have contracted heavily curtailed by movement and access restrictions relating to by 27 percent in 2024, marking its most severe downturn in over the Israeli occupation of the West Bank (the Government of Israel three decades. By early October 2024, damage to Gaza’s capi- states that these measures are in place to safeguard its security tal stock was estimated at US$29.9 billion. Economic activity in and that of its citizens), a near-blockade and, more recently, on- Gaza collapsed, with GDP contracting by 83 percent, except for going hostilities in Gaza. In addition, intermittent reform efforts minimal public services. In the West Bank, economic shocks were by the Palestinian Authority, limited government momentum, and triggered by tighter movement restrictions, loss of access to the the divide between the West Bank and Gaza further stifled the Israeli labor market, and a recent Israeli military operation in the economy. Real GDP growth averaged a mere 0.6 percent between Northern West Bank. This, compounded by increased Israeli de- 2017 and 2022. ductions from clearance revenues, payable to the PA, deepened the fiscal crisis and contributed to a 17 percent GDP contraction Current hostilities have exacerbated disparities in living standards in the West Bank. between the West Bank and Gaza. By the end of 2024, Gaza’s real income per capita fell below US$200, just 5 percent of the West In 2024, Gaza saw consumer price inflation (CPI) increase by 238 Bank’s. World Bank data show an 11 percent drop in the Palestin- percent year-on-year, driven largely by food and transport costs. ian Gross National Income (GNI) per capita in 2023, downgrading After the start of the ceasefire in last January, CPI declined for the territories from upper-middle income, prior to the conflict, to two months, dropping 33 percent in February 2025 compared lower-middle income status. to the previous month. The resumption of conflict in March, FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 40 45 4000 40 3500 20 35 3000 0 30 2500 25 2000 -20 20 1500 15 -40 1000 10 5 500 -60 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Palestinian Central Bureau of Statistics and World Bank estimates. Source: World Bank. Notes: See footnotes in table on the next page. 172 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. however, triggered a new major supply shock, causing renewed constrain economic activity in Gaza at least for the medium term, escalation in commodity prices. In the West Bank, inflation re- while growth in the West Bank will hinge largely on labor mobili- mained stable at 2.5 percent in 2024 reflecting continued trade ty both within the territories and into the Israeli labor market. If activity and subdued demand. reconstruction efforts start in 2026, economic recovery could gain traction. However, even with those assumptions, GDP is not antici- The PA’s fiscal crisis worsened in 2024 due to increased Israeli pated to return to pre-conflict levels in the immediate future, given deductions from clearance revenues, the natural decline in do- the estimated US$53.2 billion in recovery and reconstruction needs mestic revenues given the economic contraction and less than across Gaza. Consequently, the poverty rate is expected to remain needed aid. This forced the PA to significantly cut public salaries to high and climb to over 38 percent by end-2025—by far the highest an average of 60-70 percent, since October 2023. The fiscal deficit level in over two decades. The Palestinian economy is not expected surged to 9.5 percent of GDP in 2024, up from 3.8 percent in 2023, to be directly affected by the recent increase in global trade uncer- and was offset by domestic bank borrowing and arrears to public tainty. While some exposure may arise through indirect exports via employees, the private sector and the pension fund. Israel, for goods ultimately destined for the U.S. market, such ef- fects are currently assessed to be minimal. An already fragile labor market was severely impacted by the con- flict in Gaza and the economic contraction in the West Bank. By On the fiscal front, despite high uncertainty, the baseline assumes October 2024, unemployment in Gaza is estimated to have soared a return of clearance revenue transfers to pre-conflict levels by late to 79 percent. In the West Bank, the rate reached 29 percent by 2026, as well as a gradual uptick in domestic tax collection, re- end-2024, driven by the loss of commuters’ jobs in Israel and the flecting rebounding economic activity. These factors should drive settlements as well as job losses in the local economy. revenues up and - along with continued efforts by the PA on fis- cal consolidation- this should improve the deficit trajectory over In this context poverty has risen sharply. The national poverty rate the medium term. at the international line of US$6.85 a day in 2017 PPP stood at 22.1 percent in 2023 and is expected to have increased to 37.7 percent The outlook remains contingent on whether the ceasefire can be by the end of 2024. In Gaza, practically the whole population was reinstated, entrance of aid supplies to Gaza at scale and the res- estimated as living in poverty at the end of 2024 due to the conflict. olution of the clearance revenues dispute. Downside risks remain elevated, especially amid evolving regional and global geopolitical dynamics. The post-conflict governance framework for Gaza will Outlook be a critical determinant. The West Bank has in recent months experienced heightened and escalating tension and violence, with In 2025, the Palestinian economy is projected to grow by a mere any potential territorial changes, or threats thereof, posing risks to 1.6 percent under the baseline scenario. Fixed asset losses will economic stability, security, peace, and poverty dynamics. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.1 -4.6 -26.6 -1.6 4.0 16.0 Private consumption 17.7 -4.6 -32.5 3.6 4.0 16.6 Government consumption -9.3 -5.5 -25.0 -3.9 1.1 2.0 Gross fixed capital investment 12.2 -3.4 -30.7 1.9 3.0 13.0 Exports, goods and services 5.9 -6.0 -11.1 2.8 2.2 7.0 Imports, goods and services 19.7 -3.7 -31.1 6.0 2.0 8.0 Real GDP growth, at constant factor prices 1.4 -7.2 -26.6 -1.6 4.0 16.0 Agriculture -5.6 -11.0 -21.0 -11.1 2.5 8.0 Industry 3.5 -14.6 -32.2 -5.8 2.4 10.0 Services 1.6 -4.8 -25.7 0.3 4.5 18.0 Employment rate (% of working-age population, 15 years+) 34.0 30.4 19.6 29.3 32.4 34.0 Inflation (consumer price index) 3.7 5.9 53.7 5.0 3.0 3.0 Current account balance (% of GDP) -10.6 -16.2 -21.6 -18.5 -16.2 -14.2 Net foreign direct investment inflow (% of GDP) 2.0 0.6 -1.3 -0.3 0.3 1.0 Fiscal balance (% of GDP) -1.8 -3.8 -9.5 -9.5 -6.2 -6.2 Revenues (% of GDP) 27.2 26.2 28.7 29.2 31.7 31.7 Debt (% of GDP) 53.1 59.0 86.3 94.6 96.1 96.7 Primary balance (% of GDP) -1.1 -3.2 -8.5 -8.4 -5.1 -5.1 1,2 International poverty rate ($2.15 in 2017 PPP) .. 0.4 2.2 2.2 2.1 1.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 4.9 9.9 10.0 9.8 7.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 22.1 37.7 38.1 37.0 30.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2023-PECS. Actual data: 2023. Nowcast: 2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2023) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 173 This outlook reflects information available as of April 10, 2025. 1 QATAR Population Poverty million 3.1 .. 2 3 Life expectancy at birth School enrollment Qatar’s economic growth remained subdued due to stagnant years primary (% gross) hydrocarbon output, while the non-hydrocarbon sector expanded under the Third National Development Strategy 81.6 95.0 4 5 (NDS3), driven by education, tourism, and manufacturing. Fis- GDP GDP per capita cal and external balances are set to remain in surplus, with fis- current US$, billion current US$ cal gains strengthening and external surpluses narrowing. Key risks include volatile energy prices, further escalation of geopo- 218.5 70854.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2022. 4/ 2024. 5/ 2024. litical tensions and a potential slowdown in China’s economy. heightened trade tensions may dampen investment flows and Key conditions and challenges weigh on diversification efforts in many countries, they could also redirect some investment activity toward Qatar, given its Qatar has made notable progress in diversifying its economy, relatively stable trade environment. Domestically, risks include with strong growth in education, infrastructure, and tourism, delays in implementation of NDS3 and an oversupply in the which has exceeded the country’s annual targets. The govern- real estate market. ment’s strategic investments in Artificial Intelligence (AI) and re- newable energy reflect its commitment to a knowledge-based economy. The newly launched education strategy (2024–2030) Recent developments aims at increasing tertiary enrollment, bridge skill gaps and en- hance workforce readiness will further strengthen the country Qatar’s economy grew modestly, with real GDP rising 2.6 per- in that area. cent year-on-year in 2024. Non-hydrocarbon activities expand- ed more rapidly (by 3.7 percent), driven by education (+14.4 Competition from the U.S. and Australia, along with ongoing percent), accommodation and food services (+8.7 percent), arts geopolitical risks, could affect LNG pricing and export revenues. and entertainment (+7.5 percent), and transportation (+5.4 per- In response, Qatar is securing long-term LNG contracts with cent). Qatar’s tourism sector exceeded its annual visitor ar- key partners, including China, Bangladesh, India, Taiwan, and rivals target of 4.79 million, achieving 5.08 million visitors—a Kuwait. The immediate impact of trade uncertainty on Qatar is strong step toward the official goal of 6 million visitors an- expected to be limited, given that oil and refined products are nually by 2030. Infrastructure upgrades, including smart city exempted—significant indirect risks remain. Amid rising glob- initiatives in Lusail, are creating opportunities for business ex- al trade uncertainty, potential global economic slowdown and pansion. Business sentiment improved, as the Purchasing Man- slower growth in China—a major trading partner—could damp- agers' Index (PMI) increased in February 2025 for the first time en LNG demand and further weigh on energy prices. While in 3 months and reach 51.9 in March. The hydrocarbon sector FIGURE 1 / Annual real GDP growth FIGURE 2 / Fiscal balance Percent, percentage points Percent of GDP 12 40 10 35 8 30 25 6 20 4 15 2 10 0 5 -2 0 2021 2022 2023 2024 2025 2026 2027 2021 2022 2023 2024 2025 2026 2027 Oil GDP growth Non-oil growth Real GDP growth Fiscal balance Revenue Expenditure Source: World Bank. Source: World Bank. 174 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. grew modestly by 0.6 percent in 2024, as production remained stable in anticipation of the North Field expansion. Despite sub- Outlook dued output, QatarEnergy secured new long-term contracts with China and Kuwait in January 2025, reinforcing its export market Despite rising trade uncertainties, real GDP growth is expected to stability. Inflation has decelerated to 1.1 percent in 2024, largely hold steady at 2.4 percent in 2025, before accelerating to 5.4 per- due to subsidies, price controls, weakening of rent and recre- cent in 2026 with the anticipated expansion of LNG capacity. Non- ation services prices and the strong riyal peg to the U.S. dollar. hydrocarbon growth is projected to stay strong at 3.3 percent, sup- ported by manufacturing, construction, and tourism, driven by ma- Fiscal pressures emerged as hydrocarbon revenue declined by jor events such as the Formula 1 Grand Prix and an expanding 18 percent in 2024, narrowing the fiscal surplus to 0.7 percent cruise industry. AI and smart infrastructure investments are ex- of GDP, down from 5.5 percent in 2023. On the external bal- pected to further enhance productivity and business efficiency. The ances, the current account surplus edged up to 17.4 percent of hydrocarbon sector is projected to grow by 0.9 percent in 2025, but GDP in 2024, supported by resilient tourism and transportation a significant boost is anticipated in 2026 as LNG output is set to services, even as the trade surplus moderated due to weaker surge by 40 percent to 110 mtpa. Inflation is expected to remain hydrocarbon exports. Remittance outflows decreased by 0.2 per- stable at 1.5 percent, anchored by fuel and food subsidies, though cent of GDP y/y 2024, supporting the secondary income balance. VAT implementation and uncertainty in trade policy pose upside Net FDIs decreased by 0.5 percent of GDP in the same period, risks. The rising trade uncertainties could elevate global production which worsened the financial account, contributing to the 0.4 costs and disrupt commodity markets, increasing the prices of im- percent of GDP decline in the overall balance of payments. Inter- ported goods, raw materials, and food products, which may con- national reserves held at the Qatar Central Bank’s rose gradually tribute to higher inflation in Qatar, but the currency peg to the USD to USD 70.2 billion in February 2025, up from USD 67.6 billion may play a stabilizing effect. in February 2024. This is complemented by the sizeable foreign assets held by Qatar Investment Authority (QIA), exceeding USD Fiscal and external balances are projected to remain in surplus, 526 billion at the end of 2024. despite continued moderation in hydrocarbon revenues amid de- clining oil prices. The fiscal surplus is projected to grow to 1.5 In 2023, the employment rate was 91 percent for non-Qatari percent of GDP in 2025, driven by LNG earnings and prudent fis- and 54.2 percent for Qatari populations. Men had significantly cal management. Additionally, the long-delayed implementation higher employment rates than women regardless of citizenship of value-added tax (VAT), anticipated later in 2025, can help miti- status. Labor market indicators remained stable in 2024, with an gate some reductions in hydrocarbon revenues from softer prices unemployment rate of 0.13 percent and an employment-to-pop- and potentially lower export volumes. The current account sur- ulation ratio of 87.4 percent (ILO). No significant changes in em- plus is expected to narrow but remain robust at 13.1 percent in ployment or unemployment rates are anticipated for 2025; how- 2025, reflecting lower energy export revenues together with ris- ever, there is considerable uncertainty due to increased global ing imports costs driven by the trade uncertainties, partially off- trade unpredictability. set by strong tourism exports. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.2 1.4 2.6 2.4 5.4 7.6 Private consumption 5.2 2.0 2.7 2.5 3.1 3.9 Government consumption 4.1 1.2 1.6 0.7 2.0 2.4 Gross fixed capital investment 3.1 1.4 1.9 2.1 2.4 3.2 Exports, goods and services 3.0 0.5 1.8 0.8 4.2 6.8 Imports, goods and services 6.0 3.2 3.7 3.2 3.2 3.4 Real GDP growth, at constant factor prices 4.2 1.4 2.6 2.4 5.4 7.6 Agriculture 7.7 5.4 2.5 2.4 2.9 2.9 Industry 1.7 0.3 1.5 1.8 6.0 9.0 Services 7.5 2.8 4.0 3.0 4.7 5.9 Employment rate (% of working-age population, 15 years+) 87.3 87.6 87.4 87.2 87.6 88.0 Inflation (consumer price index) 5.0 3.1 1.1 1.5 1.9 2.1 Current account balance (% of GDP) 26.8 16.9 17.4 13.1 15.5 16.2 Fiscal balance (% of GDP) 10.4 5.5 0.7 1.5 4.2 6.1 Revenues (% of GDP) 34.7 32.4 26.8 29.6 32.1 33.7 Debt (% of GDP) 42.6 44.2 40.2 38.8 38.8 34.8 Primary balance (% of GDP) 10.4 5.5 0.7 1.5 4.2 6.1 GHG emissions growth (mtCO2e) 3.4 0.8 1.7 2.4 4.8 6.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 175 This outlook reflects information available as of April 10, 2025. 1 SAUDI ARABIA Population Poverty million 33.9 .. 2 3 Life expectancy at birth School enrollment Growth is expected to recover with the phase out of OPEC+ oil years primary (% gross) production cuts, despite global economic uncertainty and downward pressure on oil prices. The performance of the non- 77.9 102.7 4 5 oil sector remains robust, driven by Saudi Arabia’s diversifica- GDP GDP per capita tion agenda. Fiscal pressures increased due to higher spend- current US$, billion current US$ ing. Inflation remains low and stable except for housing prices. Challenges include oil price and production uncertainty, 1085.4 32052.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2022. 4/ 2024. 5/ 2024. slowdown in global growth, and lack of productivity growth. Key conditions and challenges Recent developments Saudi Arabia faces risks from uncertain global market dynamics re- Economic growth partially recovered to 1.3 percent in 2024, up lated to oil production, demand and price. OPEC+ production deci- from -0.8 percent the previous year. This was driven by robust sions will have a large impact on economic recovery, external bal- non-oil sector growth (4.3 percent) and a slowing decline in the ances, and on the financing of the diversification plans. oil sector GDP (-4.5). During that period, non-oil growth was mainly driven by services (+4.1), namely the wholesale, restau- The country also faces risks from an uncertain global economic rant, and hotel sectors (+6.4) followed by finance, insurance, real context marked by rising protectionism, uncertainty and a resulting estate, and business services (+4.1). global economic slowdown. This could affect growth in major trad- ing partners and reduce demand for oil, particularly from Saudi Fiscal pressures increased throughout 2024, as the fiscal deficit in- Arabia’s largest trading partners, notably China. creased from 2 to 2.8 percent of GDP. This was due to the growth of expenditures (+1.5 percent of GDP) that outweighed that of rev- Finally, Saudi Arabia’s lack of productivity growth poses a challenge enues (+0.7). Other expenditures were the main driver of expen- to its diversification agenda. Despite efforts to develop non-oil sec- diture growth (+0.5), followed by the wage bill (+0.4) and subsidies tors, key indicators capturing the progress on economic diversi- (+0.3) that increased moderately. On the revenue side, oil revenues fication show limited progress. For instance, the share of non-oil slightly decreased by 0.3 percent of GDP, while non-oil revenues (private sector) activities in GDP increased from 47.5 percent to grew by 0.9 percent of GDP, mainly through higher collection of 51.4 percent of GDP between 2014 and 2024, while non-oil ex- VAT taxes (+0.5). ports remain weak (26.8 percent of total exports). Public finances have however benefitted from the introduction of non-oil revenue Inflation remained low throughout 2024, supported by tight mon- streams including VAT. etary policy and controlled prices of key consumption items. The FIGURE 1 / Annual real GDP growth FIGURE 2 / Central government operations Percent change Percent of GDP 20 35 30 15 25 10 20 5 15 0 10 -5 5 0 -10 2021 2022 2023 2024 2025f 2026f 2027f -5 Oil GDP Non-oil private GDP 2021 2022 2023e 2024f 2025f 2026f 2027f Government activities Real GDP Budget Balance Revenues Expenditures Sources: GASTAT Saudi Arabia and World Bank staff estimates. Sources: GASTAT Saudi Arabia and World Bank staff estimates. 176 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. average annual inflation rate of consumer prices was 1.7 per- September 2026, on an accelerated schedule from May 2025. cent in 2024. The housing sector remained the main contributor Resultantly, growth is forecasted to increase in the medium term, to inflation (8.8 percent), followed by modest contributions from driven by increased oil production from 8.9 million bpd in March restaurants and hotels (2.0). 2025, to 9.98 million bpd towards the end of 2026. With the full resumption of oil production (anticipated to further pick up in Pressures on the external accounts increased, with a declining 2027 to an average of 10.4 million bpd), oil GDP growth is ex- trade balance (-3.8 percent of GDP y/y in 2024). This was due to pected to accelerate starting 2026, forecasted to grow at 6.7 and lower oil exports (-2.6 percent of GDP), despite some improvement 6.1 percent respectively for 2026 and 2027. Meanwhile, the non- of the non-oil exports (+0.7), which was mostly driven by machin- oil sector is estimated to maintain steady yearly growth (3.6 per- ery, electrical appliances and equipment (+0.5) and transportation cent on average) between 2025 and 2027. However, rising global equipment (+0.3). Net FDI decreased by 0.5 percent of GDP y/y. Re- economic uncertainty remains an impediment to stronger non-oil mittance outflows increased by 0.5 percent of GDP y/y January-Sep- sector growth. tember 2024, adding pressures to the secondary income balance. The anticipated increase in oil production and improving ser- The labor market continues to show improving outcomes. The vices balance are also expected to strengthen the external sec- employment-to-population ratio improved in the third quarter of tor in 2025-2027. Additionally, service exports as a percentage 2024, up 0.6 percentage points from the previous year. Labor of GDP is projected to increase due to increased tourism and force participation among Saudis reached 51.5 percent, driven investments in the digital economy. Net foreign direct invest- mostly by increasing participation among Saudi women which re- ments are predicted to remain stable, at 1.1 percent of GDP mains, however, 30 percentage points below men. The Saudi un- throughout 2025-2027. employment rate stands at 7.8 percent as of the third quarter of 2024 down from 8.8 in 2023, inching closer to the Vision 2030 Fiscal pressures are anticipated to increase in the medium term objective of 7 percent. due to increased (capital) expenditures, in line with the budget projections. However, the planned increase in oil production in 2025-2027 is likely to keep the fiscal deficit within reasonable Outlook bounds, despite a projected increase from 2.3 percent of GDP in 2025 to 3.1 percent in 2027. On the monetary side, inflation As per the latest OPEC+ announcements, the voluntary oil is projected to remain stable in the coming years in line with production cuts will be phased out between April 2025 and recent trends. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.5 -0.8 1.3 2.8 4.5 4.6 Private consumption 4.9 5.3 3.3 2.9 3.0 3.1 Government consumption 9.3 5.7 0.7 4.9 3.5 3.5 Gross fixed capital investment 21.3 5.3 2.6 3.7 3.9 4.4 Exports, goods and services 20.5 -6.5 -5.5 4.0 8.0 7.6 Imports, goods and services 12.4 9.9 4.3 4.9 5.3 5.1 Real GDP growth, at constant factor prices 8.2 -1.4 1.1 3.0 4.5 4.6 Agriculture 4.0 4.1 2.0 2.0 2.0 2.0 Industry 12.4 -6.0 -3.4 1.3 4.5 4.0 Services 4.5 2.9 5.1 4.3 4.7 5.2 Employment rate (% of working-age population, 15 years+) 58.2 58.5 58.5 58.5 58.5 58.5 Inflation (consumer price index) 2.5 2.3 2.1 2.3 2.2 2.0 Current account balance (% of GDP) 13.7 3.2 2.5 3.9 5.7 7.8 Net foreign direct investment inflow (% of GDP) 2.4 2.1 1.1 1.1 1.1 1.1 Fiscal balance (% of GDP) 2.5 -2.0 -2.8 -2.3 -2.9 -3.1 Revenues (% of GDP) 30.5 30.3 30.9 30.4 30.6 30.8 Debt (% of GDP) 23.8 26.2 27.8 29.4 31.6 30.1 Primary balance (% of GDP) 3.2 -1.1 -1.9 -1.4 -2.0 -2.1 GHG emissions growth (mtCO2e) 3.7 4.1 -0.4 0.2 1.2 2.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 177 This outlook reflects information available as of April 10, 2025. SYRIAN ARAB 1 2 Population Poverty million millions living on less than $2.15/day 24.7 5.6 REPUBLIC Life expectancy at birth years 3 School enrollment primary (% gross) 4 In December 2024, Syrian rebels ousted President Bashar al- 72.3 79.6 5 6 Assad, sparking hopes of ending a 14-year conflict that dis- GDP GDP per capita current US$, billion current US$ placed over half the population and caused economic col- lapse and widespread poverty. Resolving the conflict could 21.4 869.0 drive recovery in Syria and the region through improved se- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. curity conditions, international engagement, eased sanc- 4/ 2023. 5/ 2024. 6/ 2024. tions, and reconstruction. Benefits are, however, contingent on political stability and effective policies. production and trafficking emerged as the economy’s most valu- Key conditions and challenges able sector. Once the eastern Mediterranean’s leading oil exporter, Syria has been forced to rely on imports due to severe drops in Syria’s civil war has been the deadliest conflict of this century. Be- domestic production and operational fields controlled by non-state tween 2011 and 2023, Uppsala Conflict Data Program recorded actors. Dependence on food imports has also intensified, with im- more than 409,000 battle-related deaths in Syria—more than any ports accounting for approximately one-third of cereal consump- other conflict of the past three decades. The conflict has had dev- tion between 2011 and 2024. astating economic consequences, with Gross Domestic Product (GDP) shrinking by 53 percent between 2010 and 2022, prompting the World Bank to classify Syria as a low-income country in 2018. Recent developments Nighttime light data suggests an even larger impact, with an 83 per- cent contraction in economic activity from 2010 to 2024. A coalition of rebel groups, led by Hayat Tahrir al-Sham, seized regime-held territories in a sweeping military operation in Decem- The conflict triggered one of the largest waves of displacement ber 2024, bringing 78 percent of Syria’s population and 60 percent since World War II. As of December 2024, approximately 5.5 million of economic activity under the control of the transitional govern- Syrian refugees reside in Turkey, Lebanon, Jordan, Iraq, and Egypt, ment. However, they control only 9 percent of oil production, with with an additional 1.2 million in Europe. the vast majority still under Syrian Democratic Forces (SDF) control. The combined impact of conflict and sanctions has profoundly re- After the regime's fall, conflict dynamics shifted. Clashes between shaped Syria’s economic structure. The tourism, energy, and man- transitional government forces and armed groups loyal to the for- ufacturing sectors have been hit particularly hard, while Captagon mer Assad regime fueled sectarian violence in Latakia and Tartous. FIGURE 1 / Inflation and exchange rate movements FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, y/y growth Poverty rate (%) Real GDP per capita (constant LCU) 350 80 32000 300 70 31000 250 60 30000 200 29000 50 28000 150 40 27000 100 30 26000 50 20 25000 0 10 24000 -50 0 23000 2010 2012 2014 2016 2018 2020 2022 2024 2022 2023 2024 2025 CPI inflation WFP min food basket prices International poverty rate Lower middle-income pov. rate CPI inflation: food SYP to US$ mkt exchange rate Real GDP pc Sources: Central Bureau of Statistics of Syria, World Food Program Market Price Watch Source: World Bank. Notes: See footnotes in table on the next page. Bulletin, and World Bank estimates. 178 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. In the north, Syrian National Army (SNA)-SDF clashes near the decline in 2024, due to persistent security instability, potential Tishreen Dam and Aleppo escalated amid Turkish airstrikes. In the prolonged disruptions in oil supply, and tight liquidity conditions. south, Israeli forces deployed beyond the occupied Golan Heights, With the economic contraction, extreme poverty is projected to sig- seizing territory in and beyond UN-supervised demilitarized areas. nificantly increase between 2024 and 2025. Israel also launched airstrikes on alleged military targets and smug- gling routes across Syria, raising conflict events involving Israel by Syria’s economic outlook is highly uncertain. Security chal- 40 percent compared to 2024. lenges remain acute, with armed groups retaining significant influence and the proliferation of weapons undermining cen- After a brief depreciation amid the chaos of the power shift, the tralized authority. Securing oil supply will be a major chal- Syrian pound appreciated by about 30 percent between the pre-es- lenge for the new government, as disrupted imports from calation level in late November 2024 and February 2025. The ap- Iran could drive up fuel prices and inflation. While some preciation has been partly driven by increased demand from re- sanctions on Syria’s energy, transportation, and financial sec- turning Syrians and expatriates. Syria's liquidity crisis persists as tors have been eased, frozen assets and restricted access tight restrictions—including weekly withdrawal limits, suspended to international banking continue to impede trade and in- e-payments, and delayed government salaries—continue to strain vestment. Further sanction relief could enhance energy sup- cash availability and worsen the pound’s scarcity. ply, foreign assistance, and humanitarian delivery. Addition- ally, reopened trade routes could facilitate the movement of After an initial spike, food prices have stabilized due to the removal goods and services and boost cross-border trade with Turkey and of military checkpoints and the influx of cheaper Turkish imported neighboring countries. goods. However, the price of subsidized bread has risen significant- ly as the new caretaker government has opted to reduce subsidies Return movements have increased since the fall of the Assad to curb the budget deficit. regime. Around 300,000—4.9 percent of the 6.3 million Syr- ian refugees abroad—have returned since the December 8 Access to humanitarian assistance in Syria remains critically low. regime change, according to the United Nations High Com- According to the UN Financial Tracking Service, US$1.5 billion in missioner for Refugees (UNHCR). In addition, out of the 7.4 funding has been allocated for humanitarian assistance for million Internally Displaced Persons (IDPs) in Syria, around 2024—less than half compared to the previous year. 885,000 have returned to their areas of origin since Novem- ber 27. While returnees pose a short-term challenge as they require assistance—key needs include food, water, and fu- Outlook el—their return could boost growth in the medium term by resuming their abandoned business activities and bringing Subject to extraordinarily high uncertainty, real GDP is project- much-needed skills and capital, increasing aggregate demand ed to contract by 1.0 percent in 2025, extending a 1.5 percent and labor supply. Recent history and projections 2022 2023 2024e 2025f Real GDP growth, at constant market prices 0.7 -1.2 -1.5 -1.0 Inflation (consumer price index) 63.7 127.8 58.1 19.7 Fiscal balance (% of GDP) -4.6 -2.5 -3.1 -2.2 1,2 International poverty rate ($2.15 in 2017 PPP) 24.8 27.7 30.4 32.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 67.0 70.1 72.8 74.8 Source: World Bank, Poverty and Economic Policy Global Departments. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2022-HNAP. Actual data: 2022. Nowcast: 2023-2024. Forecasts are for 2025. 2/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 179 This outlook reflects information available as of April 10, 2025. 1 2 TUNISIA Population Poverty million millions living on less than $3.65/day 12.3 0.2 3 4 Life expectancy at birth School enrollment Tunisia’s economic outlook remains challenging, with eco- years primary (% gross) nomic growth at 1.4 percent and job creation stagnating in 2024, amid a drought and limited demand. With tighter ex- 74.3 103.5 5 6 ternal financing. the government has relied more on borrow- GDP GDP per capita ing from the Central Bank. Re-igniting growth and raising current US$, billion current US$ capital inflows are important near-term challenges. This will involve adopting a more ambitious fiscal policy, and 53.5 4354.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. strengthening state-owned enterprises and competition. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Tunisia faces challenging economic conditions and limited reform Tunisia’s growth has been modest and volatile since the sharp progress. As growth and private job creation stagnated after the COVID related contraction in 2020 (-9 percent). After a moderate 2011 revolution, the State stepped in as an employer of last resort rebound in 2021 (4.3 percent) and in 2022 (2.7 percent), the econo- and price stabilizer through subsidies. This caused a deterioration my stalled in 2023 (0 percent growth) and did not gain momentum of the fiscal and the current account deficits (CAD), and an increase in 2024 (+1.4 percent growth). As a result, real GDP in 2024 was 1 in public debt, which were accelerated by the COVID-19 pandemic. percent below its pre-Covid-19 level, four years after the pandemic. While both deficits have since reduced, also thanks to some fiscal The modest recovery is due to a drought, uncertain external financ- consolidation, the tighter external financing environment has ing conditions, the limited domestic and external demand, and reg- made their financing challenging. The authorities have relied more ulatory constraints that would need economic reforms. on domestic borrowing to finance the Budget in recent years, in- cluding Central Bank financing in 2020, 2024 and 2025. Tunisia’s external situation continued to improve in 2024. The growth of tourism revenues (+ 8.3 percent growth in 2023-24) and Tunisia’s growth prospects hinge on economic modernization ef- remittances (+ 11.2 percent) offset the 7.5 percent increase in mer- forts to address economic distortions and fiscal pressures. The pri- chandise trade deficit. As a result, the CAD declined from 2.3 per- ority actions could include making the tax system fairer and cent to 1.7 percent of GDP between 2023 and 2024. more efficient, improving the public administration and state- owned enterprises (SOEs) and reducing the barriers to the en- The pressure on public finances remains elevated. While the fiscal try of new firms. Progress in these reforms is critical to accel- deficit moderated in 2024, it continues to be higher than in the pre- erate the recovery and lay the foundation for a more sustain- Covid period (6.3 percent of GDP in 2024, up from 2.9 percent of able economic growth. GDP in 2019). This contributes to the challenges in financing the FIGURE 1 / Real GDP: Actual, forecast and pre-COVID-19 trend FIGURE 2 / Actual and projected poverty rates and real GDP per capita Millions of real TND (2015 prices) Poverty rate (%) Real GDP per capita (constant LCU) 110,000 35 8400 30 8200 105,000 Pre-COVID-19 8000 25 trend 100,000 7800 20 7600 95,000 15 7400 SM25 10 90,000 7200 5 7000 85,000 0 6800 2010 2012 2014 2016 2018 2020 2022 2024 2026 80,000 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 2024 Upper middle-income pov. rate Real GDP pc Sources: World Bank estimates and National Institute of Statistics. Source: World Bank. Notes: See footnotes in table on the next page. 180 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. public debt, which between 2019 and 2024 increased from 67.8 rainfall and some impact of trade uncertainty particularly on man- to 81.2 percent of GDP (excluding government guarantees and ufacturing. Growth is eventually expected to stabilize at around SOE debts). Gross financing needs also increased from 7.9 per- 1.6-1.7 percent in 2026-27. cent of GDP in 2019 to 16.0 percent in 2024, with 70 percent due to debt amortization. The budget deficit is expected to decline slightly to 5.8 per cent of GDP in 2025 (compared to 6.3 percent in 2024) as the growth of Tunisia’s access to international financing remains limited and for- subsidies and the wage bill remains subdued and tax revenues in- eign direct investment (FDI)—while increasing by 4.4 percent in crease moderately. Gross financing needs are expected to decline 2024—cover about a fifth of the CAD and public external debt reim- slightly to 15.6 percent of GDP in 2025 (from 16.0 percent in 2024) bursement combined. As a result, the authorities have increasingly mainly due to the reduction in the fiscal deficit. relied on domestic sources to cover the external financing needs. These include a TND 7 billion (US$2.3 billion) loan from the Central The CAD is projected to increase slightly to 1.8 percent of Bank in both 2024 and 2025. GDP in 2025 with a widening of the trade deficit also due to the trade uncertainty, partly compensated by the moder- Inflation continued to moderate since the peaks of February 2023, ate growth in tourism and the decline in oil prices. With FDI declining from 10.4 percent to 5.7 percent in February 2025. The projected to increase but from a low base and minimal portfo- decline appears to be driven by lower global prices, reduced do- lio investments, borrowing would remain an important source of mestic demand and a relatively high policy rate. However, inflation external financing. remains slightly above both the pre-Covid average (5.3 percent), and food inflation is higher (7.1 percent), which presents a particu- The 2025-27 growth forecast is subject to significant downside lar challenge for lower income households. risks. In the near term, rising trade uncertainty, limited external fi- nancing conditions and a deterioration of drought conditions could With modest economic growth, the unemployment rate increased raise growth and macroeconomic stability challenges for Tunisia. slightly to 16 percent in Q3 2024 from 15.8 percent a year before. Medium-term prospects would improve markedly if Tunisia took The labor force participation rate continues to hover around 1.2 steps toward strengthening fiscal policies, modernizing SOEs and percentage point below the pre-Covid rate, which suggests a higher fostering greater competition. number of discouraged workers. Poverty at the Lower Middle Income Poverty Line (US$3.65/person/ day line in 2017 PPP term) is expected to remain stable at close Outlook to 2 percent until 2027. The share of individuals who are poor and vulnerable at the Upper-Middle Income Poverty Line (US$6.85/per- After the limited growth in 2023-2024, the economy is expected to son/day in 2017 PPP) is projected to steadily decrease from 15.6 in grow by 1.9 percent in 2025, assuming continued improvement in 2023 to 14.3 percent by 2027. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 2.7 0.0 1.4 1.9 1.6 1.7 Private consumption 2.0 -1.9 4.1 4.4 4.1 4.2 Government consumption 1.2 -2.4 -1.1 4.7 4.4 3.1 Gross fixed capital investment 2.1 -7.5 0.8 1.3 0.9 1.3 Exports, goods and services 17.3 10.5 -0.7 1.5 1.5 1.6 Imports, goods and services 11.6 5.6 4.3 5.9 5.7 5.6 Real GDP growth, at constant factor prices 2.6 -0.1 1.2 1.9 1.6 1.7 Agriculture 1.9 -16.1 8.3 8.3 0.9 0.6 Industry 0.7 -1.0 -2.5 -1.7 -0.8 -0.6 Services 3.4 2.7 1.6 2.3 2.6 2.6 Employment rate (% of working-age population, 15 years+) 38.8 38.5 38.8 39.0 39.0 39.0 Inflation (consumer price index) 8.3 9.3 7.0 5.5 5.0 5.0 Current account balance (% of GDP) -8.8 -2.3 -1.7 -1.8 -2.0 -2.4 Net foreign direct investment inflow (% of GDP) -1.3 -1.5 -1.4 -1.5 -1.5 -1.6 Fiscal balance (% of GDP) -6.9 -7.3 -6.2 -5.8 -5.6 -5.5 Revenues (% of GDP) 29.6 29.1 28.4 28.0 28.0 27.8 Debt (% of GDP) 82.3 84.6 81.2 82.2 83.1 85.5 Primary balance (% of GDP) -3.6 -3.4 -2.4 -1.8 -1.5 -1.1 1,2 International poverty rate ($2.15 in 2017 PPP) 0.2 0.2 0.2 0.2 0.2 0.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.9 1.9 1.9 1.8 1.8 1.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.4 15.6 15.3 14.9 14.6 14.3 GHG emissions growth (mtCO2e) 0.3 -0.2 0.4 1.9 1.9 1.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-NSHBCSL. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2021) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 181 This outlook reflects information available as of April 10, 2025. UNITED ARAB 1 Population Poverty million 10.9 .. EMIRATES Life expectancy at birth years 2 School enrollment primary (% gross) 3 The UAE’s economy is reaping the benefits of its diversifica- 79.2 106.3 4 5 tion, prudent macroeconomic policies and economic trans- GDP GDP per capita current US$, billion current US$ formation. While hydrocarbons remain critical, the expand- ing non-oil sector drives sustainable growth. Despite OPEC+ 543.1 50033.1 adjustments, global trade headwinds and associated uncer- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2023. 4/ 2024. 5/ 2024. tainty, economic growth remains steady, with modest im- provements expected in 2025. Fiscal buffers, forward-look- ing governance, and investments ensure long-term stability. space; and (3) higher interest rates given the UAE currency peg to Key conditions and challenges the USD. Further risks may stem from geopolitical instability partic- ularly in the Red Sea, and trade disruptions and its implications on The United Arab Emirates (UAE) economic growth remains robust, key sectors including transport and logistics. driven by strong domestic activity and structural transformation. While hydrocarbons remain critical, economic diversification is ac- celerating to enhance resilience and reduce fiscal risks. The non-oil Recent developments sector is expanding, supported by strategic investments. As part of OPEC+, the UAE extended its voluntary oil production cuts through The UAE maintained robust economic growth in 2024, driven by March 2025, with a gradual phase-out until September 2026, to strong domestic demand, structural reforms, and targeted invest- support market stability and fiscal sustainability. A recent increase ments. In 9M 2024 the real GDP expanded 3.7 percent year-on- in global trade policy uncertainty has introduced new headwinds to year, supported by a 4.5 percent expansion in the non-oil sector. the external environment. Simultaneously, OPEC+’s decision to ac- Growth was broad-based, led by a rise in financial services, trans- celerate the resumption of oil production—with the UAE’s output portation, and construction and real estate. Growing FDI inflows rising to 3,015 kbd in May—could potentially trigger additional and improvements in governance indicators further strengthened downward pressure on oil prices. The direct impact through trade economic competitiveness. The oil sector grew 1.5 percent during channels is expected to remain limited, reflecting the relatively low the same period, remaining a key stabilizing force despite a 2.5 per- exposure of UAE exports to the most affected markets. Howev- cent voluntary reduction in crude oil output under OPEC+ agree- er, indirect spillovers can be significant, notably through (1) glob- ments. Inflation moderated to 2.3 percent, with stable tradable al trade volumes, investment sentiment, and slower global growth; goods prices offsetting housing and utilities cost increases. The (2) lower oil prices following OPEC+ decisions and tighter fiscal Central Bank maintained a balanced monetary stance, ensuring FIGURE 1 / Annual real GDP growth FIGURE 2 / Public finances Percent change Percent of GDP 15 30 25 10 20 5 15 10 0 5 -5 0 2021 2022 2023 2024 2025 2026 2021 2022 2023 2024 2025 2026 Oil GDP Non-oil GDP GDP Fiscal Balance Revenue Expenditure Sources: UAE authorities, IMF WEO, and World Bank staff estimates. Sources: UAE authorities, IMF WEO, and World Bank staff estimates. 182 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. liquidity conditions remained supportive of growth while contain- support economic diversification and competitiveness. However, ing inflationary pressures. While hydrocarbons remain the main key sectors such as logistics may be impacted by ongoing trade source of government revenue, the UAE continues to accelerate uncertainties and disruptions. The UAE is expected to continue economic diversification to mitigate fiscal vulnerabilities. Robust advancing its energy transition strategy, targeting a threefold in- fiscal buffers and countercyclical policies contribute to macroeco- crease in renewable capacity to 14 GW by 2030. Strategic invest- nomic stability. The fiscal surplus is estimated at 4.6 percent of ments in clean energy and efficiency technologies will reinforce GDP in 2024, supported by robust fiscal stance and countercyclical economic resilience and long-term sustainability, in line with the fiscal policies. Targeted public investments in AI, digital infrastruc- UAE’s Energy Strategy 2050 and net-zero targets. ture, and advanced are accelerating innovation-driven growth and expanding the knowledge economy. The UAE’s external position The fiscal surplus is projected to narrow to 4.2 percent of GDP in remains strong. The current account surplus is estimated at 7.9 2025 while remaining in surplus. However, declining oil prices, dri- percent of GDP in 2024, reflecting strong goods and services ex- ven by both supply expansion and global slowdown, are expected ports. Non-oil exports expanded by 33 percent during 9M 2024 to tighten fiscal space, though sovereign buffers offer near-term re- compared to the same period in previous year, driven by increase silience. Medium term fiscal stability is anticipated to be reinforced in gold, jewelry and tobacco products. The UAE's ongoing expan- by ongoing tax policy reforms. The Domestic Minimum Top-up Tax, sion of Comprehensive Economic Partnership Agreements (CEPAs) effective January 2025, is expected to enhance fiscal sustainability with countries across Eastern Europe, Asia, Oceania, and beyond and strengthen international tax alignment, though its implemen- has played a pivotal role in enhancing trade volumes. In 2024, the tation may require corporate adjustments and compliance adap- UAE’s tourism sector recorded steady growth, contributing to the tations. The current account surplus is projected at 6.2 percent in country’s external sector by supporting service exports, increasing 2025 and expand to 6.4 in 2026 as oil prices stabilize and imports foreign exchange inflows, and strengthening the current account increase, supported by substantial reserves and sovereign wealth balance. As of November 2024, net international reserves at the buffers. The economic outlook remains subject to external risks, central bank of UAE reached USD223 billion. including oil price volatility, geopolitical tensions, and global trade disruptions. Elevated uncertainty, weaker trade, and tighter global financial conditions may weigh on the near-term outlook. However, Outlook strong fiscal buffers, targeted investments, and structural reforms are expected to support medium term stability. The UAE’s GDP is projected to grow by 4.6 percent in 2025, and to remain broadly stable around that range in medium-term. From Employment’s growth remains robust in 2025 at 3.3 percent y-o-y, 2025 onward, oil GDP is expected to expand, reflecting the phasing a slight decline relative to 2023 (ILO estimates). The employment- out of OPEC+ decisions. Gradual resumption of oil production be- to-population ratio is projected to reach 76.2 percent on average in tween May 2025 and September 2026, is expected to support oil- 2025, with a stronger growth estimated among women. The unem- GDP growth despite downward pressure on global oil prices. The ployment rate is projected to remain stable at about 2.1 percent in non-oil sector is expected to remain a key contributor to growth, 2025, though the rate is estimated to remain twice as high among with projected expansion of 4.9 percent in 2025, supported by women. At 6.2 percent, unemployment rates remain substantially growth in tourism, construction, transportation, and financial ser- higher among young adults ages 15–24. The gap is especially wide vices. Ongoing business climate reforms, infrastructure invest- among women, with projected rates of 11.9 percent among youth ments, and governance enhancements are expected to further relative to 4.5 percent among women ages 15+ for 2024. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 7.6 2.9 3.9 4.6 4.9 4.9 Private consumption 9.0 5.1 4.6 3.5 3.1 3.0 Government consumption 3.5 3.0 3.5 3.8 3.8 3.7 Gross fixed capital investment 6.0 5.9 4.2 2.9 3.1 3.3 Exports, goods and services 8.1 3.3 5.0 5.9 6.1 5.9 Imports, goods and services 7.4 5.3 5.6 5.0 4.8 4.8 Real GDP growth, at constant factor prices 7.6 2.9 3.9 4.6 4.9 4.9 Agriculture 3.4 3.5 2.9 2.7 2.5 2.5 Industry 8.8 1.2 2.5 1.3 2.0 1.7 Services 6.5 4.5 5.2 7.6 7.3 7.5 Employment rate (% of working-age population, 15 years+) 79.9 80.2 80.4 80.3 80.2 80.2 Inflation (consumer price index) 4.8 1.6 2.3 2.2 2.1 2.1 Current account balance (% of GDP) 11.9 9.7 8.2 6.2 6.4 6.8 1 Fiscal balance (% of GDP) 3.6 3.6 4.6 4.2 4.5 4.6 Revenues (% of GDP) 27.0 27.0 27.4 26.4 25.7 25.0 Debt (% of GDP) 31.5 29.8 29.8 30.7 30.2 29.7 Primary balance (% of GDP) 3.8 3.9 4.9 4.4 4.8 4.9 GHG emissions growth (mtCO2e) 2.9 -1.3 -1.0 -1.2 -0.1 0.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Consolidated fiscal balance. Macro Poverty Outlook / April 2025 183 This outlook reflects information available as of April 10, 2025. REPUBLIC OF 1 Population Poverty million 40.6 .. YEMEN Life expectancy at birth years 2 School enrollment primary (% gross) 3 Yemen faces mounting external risks amid persistent do- 63.7 83.9 4 5 mestic tensions, including the Houthis ongoing blockade of GDP GDP per capita current US$, billion current US$ IRG oil exports. The U.S. designation of the Houthis as a For- eign Terrorist Organization threatens banking and financial 17.6 433.2 flows, while aid cuts could worsen Yemen’s already dire eco- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2016. 4/ 2024. 5/ 2024. nomic and social conditions. Two-thirds of the population have inadequate food consumption, and poverty is wide- spread. Against this backdrop, the outlook remains bleak. Conflict, climate hazards, and food insecurity compound humani- Key conditions and challenges tarian needs. Nearly half of Yemenis face extreme heat, drought, or flooding, while 64 percent had inadequate food consumption by Yemen’s prolonged conflict has driven a severe humanitarian and 2024 (WFP). Moreover, a quarter suffer from the compounding ef- economic crisis. Since 2015, real GDP per capita has shrunk by fects of food insecurity and exposure to climate hazards, mostly 58 percent, and Yemen now ranks 186th out of 193 countries on in conflict-affected districts. Rising food insecurity is also linked to the Human Development Index (2024). The country remains high- worsening health conditions and increasing mental health disor- ly fragmented, with two distinct economic zones governed by sep- ders, reinforcing a cycle of poverty and human capital loss. With- arate institutions. Houthi-controlled areas are home to 70 percent out conflict resolution, meaningful reconstruction, and reforms, of the population, while IRG-controlled regions hold the country’s Yemen’s crisis will only deepen. oil and gas resources. Structural challenges further constrain economic recovery. Reviv- Recent developments ing the oil sector necessitates sustained peace, significant invest- ment, and technical support, especially considering the deteriora- In 2024, Yemen’s economy has been severely impacted by the tion of Yemen’s aging oil fields. Meanwhile, the non-oil sector con- ongoing Houthi blockade on IRG oil exports and a deteriorating tinues to struggle under conflict conditions, grappling with supply economic environment. Real GDP is estimated to have contract- disruptions, double taxation, corruption, market distortions, and ed by 1.5 percent, following a 2.0 decline in 2023. Oil-sector ac- weak institutions. Even remittances and aid, which are crucial for tivity stagnated after a sharp 60 percent drop in 2023, while the mitigating social hardship, remain vulnerable to disruptions caused non-oil sector continues to struggle with economic fragmenta- by the ongoing conflict. tion, exchange rate depreciation in IRG-controlled areas, liquidity FIGURE 1 / Real GDP per capita FIGURE 2 / Exchange rate trend: Sana’a and Aden Base 100 in 2014 YER per US$1 100 2100 1900 90 1700 80 1500 1300 70 1100 900 60 700 50 500 40 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Aden Sana'a Source: World Bank staff calculations. Sources: Telegram Exchange Market Group and World Bank staff calculations. 184 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. shortages in Houthi-controlled areas, and heavy reliance on im- GDP. Consequently, the YER depreciated from 1,540 per US dol- ports. In principle, currency depreciation should boost exports and lar at the end of 2023 to 2,065 by the end 2024 driving con- curb imports by making locally produced goods more competitive. sumer prices up by over 30 percent and further straining house- However, in Yemen’s FCV context, self-correcting market mecha- hold purchasing power. nisms are absent, as domestic firms remain severely constrained by the conflict, limiting their capacity to expand production. As a result, rather than enhancing competitiveness, the depreciation of Outlook the Aden exchange rate further exacerbates economic challenges. The economic outlook for 2025 remains bleak, with persistent do- Regional instability has further worsened the economic conditions. mestic challenges compounded by escalating external threats. In Houthi involvement in the Red Sea led to approximately 477 violent IRG-controlled areas, the ongoing Houthi oil exports blockade, cou- incidents, including 201 attacks on commercial ships (ACLED Dash- pled with the absence of a clear path to peace and security, will board 2025). Consequently, traffic through the Suez Canal and Bab keep public finances and external accounts under significant strain. El-Mandeb Strait—critical trade routes carrying 30 percent of glob- Inflation is expected to persist, driven by currency depreciation in al container shipping—plummeted by three-fourths, while the al- the Aden market, which will erode purchasing power and damp- ternative Cape of Good Hope route saw a 50 percent increase in en consumption. At the same time, worsening fuel shortages have traffic, driving up freight and insurance costs. exacerbated electricity blackouts, disrupting essential services and constraining production capacity. In Houthi-controlled areas, acute Additionally, tensions between the Houthis and the IRG over con- liquidity shortages persist, with restrictions on cash withdrawals trol of the banking sector in the first half of 2024 further height- and limited access to funds stifling local consumption and business ened economic uncertainty. In April, CBY-Aden issued a mandate activity. The divide between the two economic zones is widening, requiring banks in Sana’a to relocate to Aden or face disconnection with diverging monetary policies further exacerbating the gap be- from SWIFT, exacerbating hostilities between the two parties. The tween the Aden and Sana’a exchange rates (Yemen Economic Mon- situation remained tense until July 23, when both sides agreed to itor, Fall 2024). Simultaneously, Yemen faces increasing external de-escalate by reversing recent measures against banks and ex- threats. The U.S. decision to designate the Houthis as a FTO could panding Yemenia Airways’ international flights. This agreement fol- have far-reaching impacts for the banking sector, imports and fi- lowed a warning from the World Food Program about an imminent nancial flows, including remittances and ODA. Additionally, cuts in liquidity crisis and rising hunger in Houthi-controlled areas. U.S. foreign aid could worsen Yemen’s already dire social condi- tions. In 2023, U.S. official aid to Yemen totaled US$820 million, The IRG’s fiscal revenues, excluding grants, declined sharply in nearly one-fifth of the country’s total ODA. Yemen remains highly 2024, though donor support and spending cuts helped mitigate dependent on aid, which constitutes around 25 percent of its an- the fiscal deficit. According to the Ministry of Finance in Aden and nual GDP. As a result of these compounded challenges, real GDP is World Bank calculations, non-grant revenues fell to 2.5 percent of projected to contract by 1.5 percent in 2025. GDP, from 4.6 percent of GDP in 2023. However, Saudi budget sup- port—totaling US$750 million in 2024 —helped stabilize public fi- Downside risks remain significant, potentially further destabilizing nances. Additionally, reductions in spending on current transfers, Yemen’s economy. The risk of renewed Houthi attacks persists, po- along with lower goods and services expenditures, helped narrow tentially driving up import costs through supply disruptions, high- the fiscal deficit from 7.2 percent of GDP in 2023 to approximately er shipping expenses and insurance rates. The uncertain impact of 2.5 percent in 2024. FTO sanctions could further disrupt humanitarian aid, essential im- ports, and remittances—key lifelines for Yemenis. Banking sector Nevertheless, external imbalances intensified, leading to a depre- tensions, as seen in 2024, could resurface, adding further strain. ciation of the Yemeni Rial in the Aden market. The continued Ultimately, Yemen’s future depends on securing peace, rebuilding, blockade on IRG oil exports, combined with heavy reliance on and implementing critical reforms to strengthen state institutions imports, pushed the current account deficit to 18.0 percent of and restore business confidence. Recent history and projections 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.5 -2.0 -1.5 -1.5 0.5 1 Inflation (consumper price index) 29.5 0.9 30.4 20.2 16.1 Current account balance (% of GDP) -13.5 -16.0 -18.0 -11.7 -11.4 Net foreign direct investment inflow (% of GDP) 0.9 5.4 -0.1 0.1 0.1 Fiscal balance (% of GDP) -2.7 -6.8 -2.5 -3.8 -4.6 Revenues (% of GDP) 9.5 6.7 6.4 5.9 7.1 Debt (% of GDP) 77.9 112.4 94.8 99.3 92.1 Primary balance (% of GDP) -1.7 -4.9 -0.9 -2.3 -3.3 GHG emissions growth (mtCO2e) -1.2 -2.7 -1.7 -0.6 1.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Inflation rates refer to end-of-period figures. Macro Poverty Outlook / April 2025 185 Afghanistan Maldives Bangladesh Nepal Bhutan Pakistan India Sri Lanka South Asia Macro Poverty Outlook / April 2025 187 This outlook reflects information available as of April 10, 2025. 1 AFGHANISTAN Population Poverty million 42.4 .. 2 3 Life expectancy at birth School enrollment Afghanistan's economy is estimated to have grown by 2.5 years primary (% gross) percent in FY2024, driven by agriculture, construction, and commerce. Aid and remittances supported aggregate de- 62.9 110.0 4 5 mand, but uncertainty over external assistance, a persistent GDP GDP per capita trade deficit, and restrictive laws affecting women pose current US$, billion current US$ significant risks. The outlook remains fragile, requiring policy reforms, improved trade balance, and continued external 20.7 486.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2019. 4/ 2024. 5/ 2024. support for sustainable economic stability and growth. further stifles industrial and commercial activity, slowing econom- Key conditions and challenges ic recovery. Without meaningful reforms, Afghanistan risks pro- longed stagnation, deeper poverty, and continued dependence Afghanistan’s economy remains fragile, with a slow recovery fol- on humanitarian aid. lowing sharp contractions in 2021 and 2022. Foreign aid, once a key driver, has significantly declined since the Interim Taliban Ad- ministration (ITA) took power. While trade with neighboring coun- Recent developments tries and agricultural revival offers some stability, high unem- ployment and low household incomes persist. The banking sec- In FY2024 (through March 21, 2025), Afghanistan’s GDP is esti- tor struggles with liquidity shortages, international restrictions, and mated to have experienced modest growth, driven by agriculture, the shift to Islamic finance, limiting credit access. Although infla- mining, construction, and commerce. On the demand side, pri- tion has eased, food insecurity remains widespread due to climate vate consumption remained the primary growth driver, support- shocks and deficient infrastructure. ed by a modest rebound in investment, particularly in real estate and construction. However, overall demand growth was limited In the medium term, Afghanistan faces structural challenges that by declining exports. hinder sustainable growth. Financial isolation limits foreign in- vestment and access to global markets, while reliance on a cash- Deflationary pressures eased to negative 0.8 percent in January based informal economy creates inefficiencies. Policy uncertainty 2025 year-on-year, from negative 10.2 percent a year earlier as de- and restrictive social measures, particularly on female education mand recovered. Food prices fell 3 percent due to better harvests and workforce participation, weaken human capital and produc- and higher imports, while non-food prices increased 1.3 percent. tivity. Rapid population growth and limited job opportunities con- Core inflation turned positive at 2 percent, indicating modest de- tribute to persistent poverty, vulnerability, and expanding infor- mand growth. On average, domestic prices declined 4.3 percent in mal employment. Deficient energy and transport infrastructure 2024 from the previous year. FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Exports, imports, and investment GDP growth Percent, percentage points Percent of GDP 5 60 0 50 -5 40 -10 30 -15 20 -20 10 -25 2020 2021 2022 2023 2024 2025 2026 2027 0 Agriculture Industry 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Services Net taxes on production Real GDP Investment Exports of GNFS Imports of GNFS Sources: World Bank and National Statistics and Information Authority. Source: World Bank. 188 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. On the labor market, wages of both skilled and unskilled workers 31.2 percent of GDP. On-budget operating expenditures are es- continue to grow in both nominal and real terms despite high levels timated to have reached 16.6 percent of GDP, with higher de- of unemployment, possibly indicating human capital constraints velopment spending (from 0.2 pp of GDP in FY2023 to 1.5 pp and geographic mismatch between supply and demand. Restric- of GDP in FY2024). tive policies affecting women’s education, employment and phys- ical mobility exacerbate existing labor market challenges. The un- employment rate doubled between 2020 and 2023, with women Outlook and youth being the most affected. Afghanistan’s economic growth is expected to slow to 2.2 percent International assistance, remittances, and deflationary trends in 2025 due to aid disruptions before recovering to 2.5 percent in contributed to stabilizing poverty rates at around 48 percent as 2026-27, assuming no additional external shocks. Agriculture will of Spring 2023, a 4-percentage point decline compared to the remain the key growth driver, outpacing other sectors. However, same period in 2020. High levels of poverty are compounded by given sustained population growth, per capita GDP is expected to widespread vulnerability to shocks. Poverty in urban areas re- remain stagnant and insufficient to sustain poverty reduction. Eco- mains on an upward trend, reflecting the lack of economic op- nomic vulnerability, driven by external shocks and exacerbated by portunities. In rural areas, improvement in the security situation declines in aid, remains a major concern. and better access to markets supported a decline in poverty, which, however, remains vulnerable to volatile agriculture sector Afghanistan’s current account deficit is projected to widen to outcomes and shocks. 26.3 percent of GDP over the next three years, up from 24.6 percent in FY2024, driven by a 46.6 percent trade deficit. Afghanistan’s current account deficit is estimated to have The fiscal deficit is expected to remain around 2 percent of widened to 24.6 percent of GDP in FY2024, up from 17.6 percent GDP from FY2025 to FY2027, with revenue collection remaining in FY2023, driven by a 1.4 percentage-point (pp) of GDP increase slightly below 17 percent of GDP as the ITA seeks to offset de- in the trade deficit and a 5.6 pp decline in net income. The trade clining aid. However, borrowing constraints mean any revenue deficit grew due to a stronger Afghani (local currency), tariff hike increases will likely be matched by rising expenditures, limiting and temporary border closures with Pakistan. Declining net in- fiscal flexibility. come stemmed from reduced foreign aid. Undisclosed financial flows have contributed to financing the current account deficit, Afghanistan’s economic outlook remains bleak, with risks tilted to given the limited foreign direct investment (FDI) and the absence the downside, primarily due to aid uncertainty. The humanitari- of external borrowing capacity. an situation is even more precarious. According to the UN Office for the Coordination of Humanitarian Affairs (OCHA), nearly half Domestic revenue rose by 1.4 percentage points to 16.9 percent of of the population will require aid in 2025 as the country strug- GDP in FY2024, partially offsetting a 4 pp decline in external grants gles to meet both chronic and acute needs. Further aid declines to 14.3 percent of GDP. The fiscal deficit (cash basis) is projected would weaken economic activity, deepen fiscal challenges, and to increase to 2.1 percent of GDP, with total expenditures at strain the external sector. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -6.2 2.3 2.5 2.2 2.4 2.5 Private consumption 0.6 6.4 4.9 3.2 2.9 2.8 Government consumption -1.2 0.7 9.1 2.3 1.8 2.6 Gross fixed capital investment 29.2 -5.7 3.0 2.0 2.0 2.0 Exports, goods and services 18.6 -12.1 -3.0 2.5 2.0 2.0 Imports, goods and services 36.7 0.7 8.0 4.0 2.8 2.8 Real GDP growth, at constant factor prices -6.4 1.8 2.5 2.2 2.4 2.5 Agriculture -6.6 2.2 6.0 3.2 3.2 3.2 Industry -5.7 1.8 2.1 2.5 2.5 2.5 Services -6.5 1.5 -0.3 1.2 1.6 1.8 Inflation (consumer price index) 10.6 -7.7 -4.3 2.0 3.0 4.0 Current account balance (% of GDP) -18.8 -17.6 -24.6 -26.4 -26.4 -27.3 Net foreign direct investment inflow (% of GDP) 0.0 0.3 0.0 0.0 0.0 0.0 Fiscal balance (% of GDP) -1.0 -1.2 -2.1 -2.2 -2.2 -2.3 Revenues (% of GDP) 40.6 33.9 31.2 28.9 27.9 26.9 Debt (% of GDP) 13.9 13.6 13.8 14.4 14.9 14.9 Primary balance (% of GDP) -1.0 -1.2 -2.1 -2.2 -2.2 -2.3 GHG emissions growth (mtCO2e) 2.1 2.4 2.8 3.0 2.9 2.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 189 This outlook reflects information available as of April 10, 2025. 1 2 BANGLADESH Population Poverty million millions living on less than $3.65/day 173.4 50.9 3 4 Life expectancy at birth School enrollment Real GDP growth is expected to slow from 4.2 percent in years primary (% gross) FY24 to 3.3 percent in FY25, driven by declining investment amidst political uncertainty. Extreme poverty is projected 73.7 111.6 5 6 to rise from 7.7 percent in FY24 to 9.3 percent in FY25, GDP GDP per capita with inequality increasing by almost one Gini index point. current US$, billion current US$ The trade disruptions due to global trade policy uncertain- ty is expected to impact exports, investments and growth 450.4 2598.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. in the medium term. 4/ 2023. 5/ 2024. 6/ 2024. diversify exports, boost the quality of human capital, and Key conditions and challenges address climate risks. Bangladesh's economy continues to encounter challenges, includ- ing elevated inflation and vulnerabilities within the financial sec- Recent developments tor. Domestic political and global trade policy uncertainty could further hamper investment, exports, and growth prospects. How- Real GDP growth declined to 4.2 percent in FY24 from 5.8 percent ever, some external sector pressures have eased, as evidenced in FY23, primarily driven by a 17.1 percent decline in exports. On by narrowing balance of payment (BoP) deficits and stabilizing the production side, the slowdown was attributed to the industri- foreign exchange (FX) reserves. al sector, where growth moderated to 3.5 percent in FY24 from 8.4 percent in FY23. Economic activity further decelerated in the Labor market conditions worsened as labor force participation fell first half of FY25, as evidenced by a slowdown in revenue col- from 60.9 percent in 2023 to 59.2 percent in 2024, mainly due to lection, a decline in private sector credit growth and imports of declining female participation. The employment ratio dropped by capital goods, and rising non-performing loans (NPLs) from 9 per- 2.0 percentage points, while the unemployment rate rose slightly cent in January 2024 to 17 percent in FY25Q1 to 12.5 percent in to 3.6 percent, largely driven by discouraged workers exiting the FY24Q4. Despite inflationary pressures, remittances continued to market. All sectors experienced job losses, with services hit hard- support private consumption growth. est at 2.6 percent. Inflation remained elevated at 9.3 percent in February 2025 due Comprehensive reforms to create more and better jobs, im- to exchange rate depreciation and supply-side challenges. The prove the business environment, and revenue mobilization policy rate was raised by 150 basis points in FY25 to 10 per- will be critical to supporting growth. In the medium term, cent. High inflation and job losses have strained welfare, espe- Bangladesh will need to improve governance and transparency, cially for low-income households. In the first half of FY25, nearly FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 100 250000 90 10 80 200000 70 5 60 150000 0 50 40 100000 -5 30 20 50000 -10 10 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Bangladesh Bureau of Statistics and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 190 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 4 percent of workers lost jobs, with wages falling by 2 percent for The BoP balance is expected to improve in FY25, as robust remit- low-skilled and 0.5 percent for high-skilled workers. As a result, ex- tance inflow narrows the CAD. The financial account is expected treme poverty at the US$2.15 (2017 PPP) threshold is expected to to be supported by budget support from the development part- rise by 2.2 percentage points and inequality by less than half a Gini ners. As a result, FX reserves are expected to stabilize in FY25. In point. With over a million people leaving the country annually, re- the medium term, a decline in exports due to trade policy shifts mittance-receiving households are likely to remain more resilient will be partly offset by lower imports because of lower commodity amid the economic challenges. prices. Overall BoP balance is expected to remain stable, support- ing a gradual increase in FX reserves. The current account deficit (CAD) turned into a surplus of US$33 million in the first half of FY25 from a deficit of US$3.5 billion in The growth slowdown in FY25 will disproportionately affect vulner- the first half of FY24, as remittances and exports grew by 27.6 per- able populations. Extreme poverty is expected to rise to 9.3 per- cent and 11.0 percent, respectively. The financial account was sup- cent, pushing 3 million more people into poverty. Inequality is pro- ported by the disbursement of budget support by the development jected to worsen by almost one Gini point, partially offset by re- partners. Improvement in the overall BoP helped FX reserves to re- mittance-receiving households. Additionally, 3 in 5 households are main stable at US$20.4 billion as of March 2025 (3.0 months of im- likely to experience greater financial stress by depleting savings in port coverage). In the fiscal sector, revenue and capital expenditure response to the shock. growth slowed in the first half of FY25. The fiscal deficit is projected to widen to 4.4 percent of GDP in FY25 due to slow revenue collection. Although capital expenditure is ex- Outlook pected to decline, this will be offset by rising current expenditure driven by rising subsidies and interest payments. In the medium Real GDP growth is projected to moderate to 3.3 percent in term, the fiscal deficit is expected to remain within 5 percent of GDP. FY25 due to declining private and public investments growth. Policy uncertainty and rising borrowing and input costs are Downside risks to the outlook have increased substantially. In- expected to contract private investment growth and keep in- creased political instability ahead of the election, international dustrial growth subdued. Public investment will decline as the trade disruptions due to policy uncertainty, weak implementation government reduces the capital expenditure in FY25. However, of envisioned reforms, persistent inflation, energy shortages in the the real GDP is expected to rise gradually in the medium term, peak season, and further weakening of the banking sector could driven by critical reforms. weigh on economic activities. Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f 1 Real GDP growth, at constant market prices 7.1 5.8 4.2 3.3 4.9 5.7 Private consumption 7.5 2.0 6.0 5.5 5.7 6.3 Government consumption 6.2 8.5 9.8 1.4 4.2 3.1 Gross fixed capital investment 11.7 2.2 3.3 -2.4 4.5 5.5 Exports, goods and services 29.4 8.0 -17.1 14.5 4.2 7.1 Imports, goods and services 31.2 -9.8 -4.6 7.0 6.7 7.4 1 Real GDP growth, at constant factor prices 7.2 6.2 4.3 3.3 4.9 5.7 Agriculture 3.1 3.4 3.3 3.2 3.0 3.3 Industry 9.9 8.4 3.5 1.9 3.9 5.1 Services 6.3 5.4 5.1 4.3 6.0 6.6 Inflation (consumer price index) 6.1 9.0 9.7 10.0 7.7 5.8 Current account balance (% of GDP) -4.0 -2.7 -1.5 -0.5 -0.8 -1.0 Net foreign direct investment inflow (% of GDP) 0.4 0.4 0.4 0.2 0.3 0.3 Fiscal balance (% of GDP) -4.6 -4.6 -3.9 -4.4 -4.5 -4.6 Revenues (% of GDP) 8.5 8.2 8.3 7.9 8.2 8.3 Debt (% of GDP) 33.8 37.0 36.6 37.8 39.5 41.2 Primary balance (% of GDP) -2.7 -2.6 -1.7 -2.2 -2.3 -2.4 2,3 International poverty rate ($2.15 in 2017 PPP) 5.0 5.5 7.7 9.3 7.1 5.8 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 30.0 30.7 31.3 34.0 31.7 29.9 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 74.1 74.1 73.5 75.2 73.8 72.8 GHG emissions growth (mtCO2e) 5.1 2.7 1.2 3.1 7.9 11.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ FY23 estimates based on BBS provisional estimates. 2/ Calculations based on SAR-POV harmonization, using 2022-HIES. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 3/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 191 This outlook reflects information available as of April 10, 2025. 1 2 BHUTAN Population Poverty thousand thousands living on less than $3.65/ day 791.5 3.7 3 4 Economic growth remained robust at 4.9 percent in FY23/24 Life expectancy at birth School enrollment years primary (% gross) and is projected to increase to 6.6 percent in FY24/25 with new hydropower plants. In FY24/25, the fiscal deficit is ex- 72.2 106.1 pected to widen to 5.6 percent of GDP, and the current ac- 5 6 count deficit is expected to improve with higher hydropower, GDP GDP per capita current US$, billion current US$ mining, and forestry exports, and lower cryptocurrency min- ing equipment imports. Despite significant poverty reduc- 3.1 3968.6 tion, 19 percent of Bhutanese remain vulnerable to poverty. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. 4/ 2022. 5/ 2024. 6/ 2024. climate vulnerability and spatial inequalities remained. Poverty Key conditions and challenges rates range from 1.5 percent in Thimphu to 41.4 percent in Zhemgang, with 87 percent of the poor living in rural areas. 60 Increased emigration, especially of skilled workers, after the percent of employment in rural areas remains in low-productive COVID-19 pandemic has prompted the Bhutanese government to agriculture, with high vulnerability to climate change. prioritize private sector development and job creation under the 13th Five Year Plan (FYP), launched in July 2024. Hydropower sector Domestic risks include delays in hydropower projects, persistent is the main driver of economic growth but employs less than one fiscal deficits, and materialization of financial sector contingent li- percent of the labor force. The national unemployment rate abilities. External risks include volatile commodity prices due to dropped to 3.1 percent in Q4 of 2024 but remains high among geopolitical tensions, natural disasters, and climate-related haz- youth and those with higher secondary and bachelor’s degrees, es- ards, affecting livelihoods and infrastructure. The direct and indi- pecially women, and is a major factor driving emigration. Despite a rect impacts of recent global trade uncertainties are likely to be moderation in emigration in 2024, around 9 percent of Bhutanese negligible, as trade with US is limited and 80 percent of Bhutan’s still live abroad. The country faces persistent fiscal deficits partly trade exposure is with India. Sustained high levels of emigration of due to low spending efficacy and low tax revenue. International re- skilled workers may hinder medium-term growth. Cryptocurrency serves have remained low, and the current account deficit (CAD) operations and the Gelephu Mindfulness City project entail signifi- has been elevated since FY21/22 due to increased imports to fi- cant upside and also downside risks. nance the investment in cryptocurrency mining. Economic growth and remittances helped reduce poverty during Recent developments 2017-2022, nearly eradicating extreme poverty ($2.15/day). The number of people living below $3.65/day and $6.85/day also Real GDP grew by 4.9 percent in FY23/24 (July 2023 to June 2024), dropped significantly. While education and sanitation improved, supported by a 6.8 percent growth in the services sector, led by FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percent change Poverty rate (%) Real GDP per capita (constant LCU) 15 50 350000 3.7 6.2 4.8 7.5 7.6 45 10 3.3 5.0 6.6 300000 5.9 4.6 4.9 5.4 40 5 3.5 35 250000 30 200000 0 25 -5 20 150000 -3.3 -2.5 15 100000 -10 10 50000 5 0 0 Private consumption Public consumption 2012 2014 2016 2018 2020 2022 2024 2026 GFCF Export International poverty rate Lower middle-income pov. rate Import GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Statistics Bureau (NSB) and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 192 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. tourism-related services, financing, insurance, and real estate. The quarrying) and tourism. On the demand side, growth is supported agriculture sector grew modestly at 1.5 percent due to lower crop by exports and 13th FYP-related public investments. Medium-term yields caused by increasing vulnerability to climate change, shifts in growth will be driven by robust electricity production, construction land use, and wildlife-related crop damage. Industry growth at 3.0 of the Dorjilung hydropower plant, and mining and quarrying on percent was supported by strong growth in mining and quarrying the supply side and growth of exports and public investment on (base metals and ferro-silicon). Demand side growth was driven by the demand side. The lifting of housing construction loan morato- non-hydropower exports and consumption. Headline inflation de- rium and launching of the collateral-free concessional credit line in celerated from 4.6 to 4.3 percent, due to lower non-food inflation. FY24/25, which has a sluggish start, are expected to pick up and boost investment. The fiscal deficit narrowed to 0.2 percent of GDP in FY23/24, down from 4.7 percent of GDP in FY22/23, driven by Increased domestic Poverty reduction is expected to continue, with the $6.85/day poverty revenue from higher tax collection and increased transfers from rate falling to 6.0 percent in FY24/25 and 5.0 percent in FY25/26. How- state-owned enterprises and the central bank. Also, capital expen- ever, 19 percent of the population remain vulnerable to poverty diture remained low in FY23/24, as most of the capital spending of due to climate hazards, with nearly half of the poor exposed to the 12th FYP was frontloaded in FY20/21 to support pandemic re- landslides (Bhutan Poverty and Equity Assessment, forthcoming). covery. As a result, fiscal deficits narrowed despite increased cur- rent expenditures due to a major salary hike for public servants Fiscal deficits are expected to widen to 5.6 percent and 7.2 percent ranging from 55 to 74 percent, aimed at curbing the high attrition in FY24/25 and FY25/26 due to high capital expenditure during the rate of public servants. 13th FYP implementation phase. One-off profit transfers from com- missioning of Puna II in FY25/26 and disbursement over the 13th The CAD remained elevated at 22.1 percent of GDP in FY23/24, FYP of the BTN 100 billion (US$1.2 billion) grant from the Indian although this is a decline from 34 percent in FY22/23 due to a government will boost revenue. Primary non-wage recurrent ex- reduction in cryptocurrency related equipment imports and im- penditure is expected to remain moderate. Public debt is expected proved tourism exports. Hydropower exports declined despite the to rise to 128 percent of GDP in FY25/26 but is considered sustain- commissioning of the Nikachhu hydropower plant, as domestic en- able as most of it is hydropower-related. However, rising debt ser- ergy demand from cryptocurrency mining operations increased. vice may limit the fiscal space for spending on social programs. Gross international reserves increased modestly to US$624 million in June 2024 (4.9 months of FY23/24 total imports). The CAD is projected to decline to 17.6 and 9.2 percent of GDP in FY24/25 and FY25/26, before moderating further in the medium term due to continued decline in cryptocurrency mining related Outlook equipment imports. Export is projected to grow with higher hy- dropower exports from the commissioning of Puna-II, increased Real GDP growth is projected to rise to 6.6 percent in FY24/25, non-hydropower (mining and forestry), and tourism exports. As a led by commissioning of Puna-II hydropower plant, and growth result, international reserves are projected to increase to US$643 in the non-hydropower industries (construction, mining, and million in June 2025 (4.7 months of FY24/25 total imports). Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f Real GDP growth, at constant market prices 4.8 5.0 4.9 6.6 7.6 5.3 Private consumption 1.8 6.8 1.8 2.2 2.3 2.2 Government consumption 1.9 -0.5 5.8 4.5 -0.9 -0.9 Gross fixed capital investment 25.4 5.6 -2.6 5.7 9.0 11.0 Exports, goods and services -4.1 9.8 8.6 6.2 16.7 2.6 Imports, goods and services 13.2 7.5 -3.7 -0.4 5.4 3.6 Real GDP growth, at constant factor prices 4.9 4.8 4.9 6.6 7.6 5.3 Agriculture 0.1 0.1 1.5 2.8 3.9 3.7 Industry 4.8 2.7 3.0 9.4 13.7 9.3 Services 6.3 7.4 6.8 5.9 4.8 3.2 Inflation (consumer price index) 5.9 4.6 4.3 4.4 4.1 3.9 Current account balance (% of GDP) -28.1 -34.0 -22.1 -17.6 -9.2 -6.1 Fiscal balance (% of GDP) -7.0 -4.7 -0.2 -5.6 -7.2 -3.4 Revenues (% of GDP) 25.1 25.2 26.9 26.1 26.8 28.6 Debt (% of GDP) 118.8 116.1 109.2 109.1 127.7 129.1 Primary balance (% of GDP) -6.8 -4.1 0.6 -3.8 -5.7 -1.8 1,2 International poverty rate ($2.15 in 2017 PPP) 0.0 .. .. .. .. .. 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.5 0.4 0.3 0.3 0.2 0.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 8.4 7.7 7.0 6.0 5.0 4.4 GHG emissions growth (mtCO2e) -1.6 -1.7 -1.6 -1.6 -1.6 -1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SAR-POV harmonization, using 2022-BLSS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 193 This outlook reflects information available as of April 10, 2025. 1 2 INDIA Population Poverty million millions living on less than $3.65/day 1450.9 400.8 3 4 Life expectancy at birth School enrollment Growth is estimated to have slowed to 6.5 percent in FY25 years primary (% gross) (2024-25). Services growth was steady, agriculture activity accelerated, but industrial growth slowed. On the demand 67.7 112.0 5 6 side, growth was held back by lackluster investment. Poverty GDP GDP per capita at the lower-middle income country line fell from 61.8 to current US$, billion current US$ 28.1 percent between 2011-12 and 2022-23 (2017 PPP). Amid heightened global uncertainty, growth is projected to 3897.2 2686.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. reach 6.3 percent in FY26. 4/ 2023. 5/ 2024. 6/ 2024. between 2017 and 2021, a revised extreme poverty line of $3.00 Key conditions and challenges would constitute a 15 percent higher threshold than $2.15 ex- pressed in 2021 prices and result in a 5.3 percent poverty rate Between 2000 and 2023, India’s economy expanded nearly fourfold in 2022-23. A new LMIC line of $4.20 would imply a 5 percent in real terms. Rapid growth was driven by capital deepening and to- lower threshold for poverty than $3.65 adjusted in 2021 prices tal factor productivity, while labor accumulation contributed mar- and yield a poverty rate of 23.9 percent. ginally. Improvements in the business environment and greater participation in global trade characterized this period. While the The labor market is characterized by low female labor force par- COVID shock triggered a steep growth contraction in FY21 (-5.8 ticipation (35.6 percent in 2023, compared to 47 percent for percent), growth rebounded rapidly in FY22 (9.7 percent) and re- middle-income countries), high unemployment among tertiary- mained strong over the subsequent period (averaging 7.8 percent educated youth (29 percent), and high prevalence of unpaid between FY23 and FY25). As of FY25, real GDP was around 5 per- work (16.5 percent of jobs), despite a notable increase in female cent below the pre-pandemic trend level. worker-to-population ratio from 19.2 to 33.8 percent between 2017-18 and 2023-24. The extreme poverty rate decreased from 16.2 to 2.3 percent be- tween 2011-12 and 2022-23, while the poverty rate at the lower- middle income country (LMIC) line declined by 33.7 percentage Recent developments points (table footnote 2/). Free and subsidized food transfers sup- ported poverty reduction, and the rural-urban poverty gap nar- Growth is estimated to have slowed from 9.2 percent in FY24 rowed. The five most populous states account for 54 percent to 6.5 percent in FY25. Agricultural activity rebounded and con- of the extremely poor. Poverty estimates will change with 2021 struction and services growth remained stable. However, indus- PPPs and new international poverty lines based on an updated trial expansion decelerated. On the demand side, private con- reference set of national poverty lines. Given India’s inflation rate sumption growth accelerated thanks to increasing real wages FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual poverty rates and real private consumption per at factor cost capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant million LCU) 12 70 180000 Forecast 60 160000 9 140000 6 50 120000 3 40 100000 30 80000 0 60000 20 -3 40000 10 -6 20000 0 0 2011 2013 2015 2017 2019 2021 International poverty rate Lower middle-income pov. rate Agriculture Industry Services GDP at factor cost Real priv. cons. pc Sources: National Statistics Office (NSO) and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. Note: FY18/19 refers to the fiscal year 2018-19 (April 2018-March 2019) and so on. 194 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. and the positive rural outlook, but investment growth decelerat- ed owing to delays in public infrastructure spending and weak Outlook private investment. Growth is expected to reach 6.3 percent in FY26, lower than pre- Since 2021-22, employment has grown faster than the working- viously anticipated. This delayed recovery toward potential reflects age population (table footnote 1/). Recent data indicate a reversal heightened global uncertainty and its expected negative impact on of pandemic era urban-to-rural migration, with rural male workers domestic investment and global growth. On the one hand, private moving back to urban areas for work, while rural female employ- consumption should benefit from easing inflation (further support- ment in agriculture increased. ed by lower commodity prices), recent income tax cuts, and good agricultural prospects. However, overall investment growth is likely Headline inflation fell to 3.6 percent y-o-y in February 2025, thanks to be held back by elevated uncertainty. Shifts in trade policy and to lower food and fuel prices. With this additional headroom and the anticipated global economic slowdown are also expected to re- below-potential growth, the RBI’s Monetary Policy Committee re- duce external demand for India’s goods and services. duced the policy rate twice by 25 basis points, to 6.25 percent in February 2025 and 6.0 percent in April. Headline inflation is projected to converge to the RBI’s target of 4 percent over the medium term, mainly thanks to slower growth in The general government’s fiscal deficit is estimated to have nar- food prices and benign commodity prices. The overall fiscal deficit rowed to 7.6 percent of GDP in FY25, from 8.4 percent in FY24. This is projected to decline gradually, with robust revenue growth, con- was mainly thanks to consolidation at the central level, driven by tinued consolidation in current spending, and capital spending sta- strong tax revenue growth and a decline in current expenditure as bilizing as a share of GDP. The public debt-to-GDP ratio is expected a share of GDP. As a result, public debt is estimated to have de- to fall below 80 percent by FY28. The current account deficit is ex- clined from 81.8 percent of GDP in FY24 to 81.2 percent in FY25. pected to average around 1.2 percent of GDP over FY26-28 and re- The current account deficit remained stable at 0.7 percent of GDP main adequately financed by capital inflows. Foreign exchange re- in FY25. A modest widening of the merchandise trade deficit was serves are projected to remain stable at around 16 percent of GDP. offset by buoyant services exports. Net FDI increased to around 1 percent of GDP in FY25, while net foreign portfolio investment Growth should gradually converge back to potential over FY27-28 declined to 0.2 percent of GDP (from 1.2 percent in FY24) as port- assuming the current global uncertainties are resolved in an or- folios were rebalanced toward China and the US. As a result, for- derly fashion. The outlook, however, is subject to significant down- eign exchange reserves fell from US$ 646.4 billion at end-FY24 side risks, as policy shifts may continue to unfold globally. Elevated to US$ 638.6 billion in February 2025 (remaining at around 11 trade tensions would dampen demand for India’s exports and fur- months of import cover). ther delay the recovery in investment. Recent history and projections 2022/23 2023/24 2024/25e 2025/26f 2026/27f 2027/28f Real GDP growth, at constant market prices 7.6 9.2 6.5 6.3 6.5 6.7 Private consumption 7.5 5.6 7.6 7.1 7.0 7.0 Government consumption 4.3 8.1 2.4 6.2 5.7 6.0 Gross fixed capital investment 8.4 8.8 6.5 6.6 6.8 6.8 Exports, goods and services 10.3 2.2 7.1 6.0 6.5 7.1 Imports, goods and services 8.9 13.8 -1.1 8.3 7.5 7.5 Real GDP growth, at constant factor prices 7.2 8.6 6.4 6.3 6.5 6.7 Agriculture 6.3 2.7 4.6 3.9 3.5 3.5 Industry 2.5 10.8 5.6 5.4 5.8 6.1 Services 10.3 9.0 7.3 7.5 7.7 7.8 1 Employment rate (% of working-age population, 15 years+) 51.8 53.6 53.5 53.4 53.4 53.4 Inflation (consumer price index) 6.7 5.4 4.5 4.1 4.0 4.0 Current account balance (% of GDP) -2.0 -0.7 -0.7 -1.1 -1.2 -1.2 Net foreign direct investment inflow (% of GDP) 0.8 0.3 0.3 0.5 1.0 1.2 Fiscal balance (% of GDP) -9.6 -8.4 -7.6 -7.2 -7.0 -6.9 Revenues (% of GDP) 21.5 21.4 22.0 21.9 22.1 22.0 Debt (% of GDP) 82.7 81.8 82.0 81.3 80.4 79.4 Primary balance (% of GDP) -4.4 -3.2 -2.3 -1.9 -1.7 -1.6 2 International poverty rate ($2.15 in 2017 PPP) 2.3 .. .. .. .. .. 2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 28.1 .. .. .. .. .. GHG emissions growth (mtCO2e) 4.1 3.3 2.7 3.2 2.9 3.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ These estimates are based on the current weekly activity status in the Periodic Labour Force Surveys until 2023-24. The current weekly status (7-day recall) is aligned with ILO rec- ommendations. 2/ Calculations based on the2011-12 Consumption Expenditure Survey (CES) and the 2022-23 Household Consumption Expenditure Survey (HCES), using the modified mixed reference period and a spatially and intertemporally deflated welfare aggregate. The estimates in this brief will change due to a revision of international poverty lines and the adoption of 2021 PPPs. Macro Poverty Outlook / April 2025 195 This outlook reflects information available as of April 10, 2025. 1 2 MALDIVES Population Poverty thousand thousands living on less than $6.85/ day 527.8 18.9 3 4 Economic growth is expected to remain positive over the Life expectancy at birth School enrollment years primary (% gross) medium term driven by tourism. Substantial fiscal and exter- nal imbalances continue to present rising liquidity and sol- 80.8 97.5 vency concerns. Maintaining economic stability requires sig- 5 6 nificant fiscal consolidation, while protecting the poor and GDP GDP per capita current US$, billion current US$ vulnerable from declining welfare. The forecast is subject to heightened downside risks due to global trade uncertainties. 7.0 13292.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. capital spending, reforming state-owned enterprises and reducing Key conditions and challenges rising public health spending. Delay in implementation of these re- forms has led to increase in fiscal and external deficits, elevated Tourism represents about 21 percent of GDP directly and contin- public debt and declining foreign exchange reserves. This has also ues to bolster economic activity. Tourist arrivals have increased raised concerns regarding the financial health of certain sectors in significantly in recent years, with China, Russia, and Western Eu- the real economy. rope the leading markets. Spending per tourist has been moder- ating. Domestic employment sources are vulnerable to economic and fiscal shocks: 40 percent of employment is informal, gender Recent developments gaps are persistent, and formal sector employment is dominat- ed by the public sector. Only a third of resort island employees Tourist arrivals increased by 8.9 percent (y-o-y) and reached an are Maldivian. all-time high of 2.05 million in 2024. Real GDP is estimated to have grown by 5.5 percent (y-o-y) in 2024 due to robust perfor- Substantial increases in government spending, including for mance in tourism and related services, bringing poverty back be- subsidies and capital expenditures, and a reliance on non-con- low pre-pandemic levels. cessional borrowing in the last decade have led to heightened fiscal and external vulnerabilities. High levels of subsidies have, Overall headline inflation remained low at 1.4 precent (y-o-y) in nevertheless, contributed notably to supporting the budgets of 2024 reflecting the continued provision of subsidies on a wide vulnerable households. range of food and non-food items. Inflation has, however, picked up in recent months – to 4.1 and 4.8 percent (y-o-y) in November The government announced a homegrown fiscal adjustment re- and December—driven by a rapid increase in tobacco, restaurant form agenda in early 2024, focused on reducing non-targeted sub- and accommodation prices. Food price inflation has also been el- sidies and replacing these with targeted transfers, rationalizing evated, reaching an average of 6.6 percent (y-o-y) in 2024, posing FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 12 60 250000 10 8 50 200000 6 40 4 150000 2 30 0 100000 -2 20 -4 50000 2022Q3 2023Q1 2023Q3 2024Q1 2024Q3 10 Agri. and Fish. Manufacturing Electricity and water Construction 0 0 Wholesale and retail trade Tourism 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Transp. and comm. Others International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 196 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. concerns as poor and vulnerable households spend more than a This baseline outlook assumes limited fiscal expenditure reduction. third of their budget on food. As a result, the fiscal deficit is expected to remain elevated and only slowly narrow to 9.8 percent of GDP in 2027 assuming come back- Driven by a 50 percent (y-o-y) decline in fish exports and 4.0 per- loaded consolidation measures kick-in. With high fiscal deficits and cent (y-o-y) growth in goods imports, the trade deficit widened moderation in GDP growth over the medium term, public debt is from US$3.1 billion in 2023 to US$3.3 billion in 2024. High import projected to rise to 135.7 percent of GDP in 2027. costs and external debt repayments have put significant pressure on official reserves, which fell to US$371.2 million in September Given the assumption of limited fiscal adjustment, imports are 2024 (0.8 months of imports). Reserves subsequently recovered to expected to remain elevated. As a result, the current account US$832.1 million (1.7 months of imports) in February 2025, with deficit is expected to remain elevated and decline marginally to the support of a US$400 million currency swap agreement signed 18.4 percent of GDP in 2027. High external financing require- with the Reserve Bank of India, and new FX regulations for the ments—including rising debt servicing obligations in 2025 and tourism sector. Despite recovery in official reserves, the coverage 2026—are expected to put further pressure on official reserves of usable reserves—compared to short-term essential imports and and jeopardize macroeconomic stability. external debt service needs—remains low at less than one month. Risks to the outlook are significantly on the downside. Heightened The fiscal deficit is estimated to have widened to 12.3 percent of global trade uncertainties and potential global economic slowdown GDP in 2024 from 10.6 percent of GDP in 2023, as recurrent expen- may lead to a shock to tourism and harm the growth outlook, diture growth outpaced tepid revenue collection. Due to delays in which would limit the scope for redistribution. Limited domestic subsidy reforms and rising spending on health and wages, total ex- and external financing may further worsen the liquidity and sol- penditure is estimated to have grown by 6.4 percent (y-o-y) in 2024. vency situation, especially with the approaching spike in external Capital expenditure fell by 7.8 percent (y-o-y) in the first three quar- debt repayments. These risks could affect households through re- ters. Revenues grew slowly at an estimated 1.0 percent (y-o-y) in duced purchasing power, limited access to essential imports, and 2024, primarily due to the decline in non-tax revenues. fewer economic opportunities. Unmitigated budget cuts may im- pact public employment. Rising production costs could reduce la- bor demand and incomes, especially in the construction sector, in- Outlook creasing poverty and vulnerability. Limited local food production may also heighten food insecurity. On the upside, a decline in glob- The completion of the new terminal at Velana International Air- al commodity prices could help ease pressures on the current ac- port is expected to support increased tourist arrivals, leading to count and inflation. An immediate and sizeable fiscal adjustment, a projected economic growth of 5.2 percent on average over the which includes targeted mitigation measures to lessen the impact medium term. on household welfare, remains the key priority. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 13.8 4.7 5.5 5.7 5.3 4.7 Real GDP growth, at constant factor prices 14.3 4.6 5.5 5.7 5.3 4.7 Agriculture 6.2 3.2 -19.3 3.7 3.3 3.1 Industry 19.6 3.3 0.1 3.2 3.5 4.3 Services 14.3 4.8 7.6 6.0 5.6 4.8 Inflation (consumer price index) 2.3 2.9 1.4 4.3 3.8 2.0 Current account balance (% of GDP) -16.9 -21.2 -20.5 -20.1 -18.9 -18.4 Net foreign direct investment inflow (% of GDP) 11.9 11.6 11.5 11.2 10.8 10.6 Fiscal balance (% of GDP) -8.9 -10.6 -12.3 -11.8 -10.9 -9.8 Revenues (% of GDP) 30.5 33.7 31.9 33.4 33.4 32.5 Debt (% of GDP) 112.6 124.2 134.2 131.0 132.9 135.7 1 Primary balance (% of GDP) -5.3 -6.5 -7.5 -6.8 -6.1 -4.9 2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 2.7 2.5 2.2 .. .. .. GHG emissions growth (mtCO2e) 13.2 9.0 6.6 6.5 6.5 6.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The primary balance excludes interest payments received. 2/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Calculations based on SAR-POV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2024. Forecasts from 2025 to 2027 are not available for Maldives given uncertainty on the poverty outlook. Poverty estimates are based on the international poverty line for upper-middle-income countries (UMIC) set at $6.85 per person per day, in 2017 PPP. The upcoming shift to 2021 PPPs will be accompanied by a revision of the UMIC line and poverty rates will change accordingly. Macro Poverty Outlook / April 2025 197 This outlook reflects information available as of April 10, 2025. 1 2 NEPAL Population Poverty million millions living on less than $3.65/day 29.7 2.2 3 4 Life expectancy at birth School enrollment Growth is projected to increase in FY25, driven by domestic years primary (% gross) trade, as well as higher electricity and paddy production. Poverty is expected to decline, although a significant share 70.5 123.0 5 6 of the population remains vulnerable. The fiscal deficit will GDP GDP per capita remain unchanged, while the current account surplus will current US$, billion current US$ narrow due to tepid remittance growth. Risks include global trade uncertainties and deteriorating asset quality of the 42.9 1446.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. domestic financial sector. 4/ 2023. 5/ 2024. 6/ 2024. provinces, such as Sudurpashchim and Karnali, continue to lag in Key conditions and challenges essential infrastructure. Nepal's economy expanded at an average annual rate of 4.2 per- Structural reform to boost private sector led growth has suffered cent from FY12 to FY23, slower than that of its peers, due to slug- from weak implementation, as reflected in the non-implementa- gish productivity and a private sector hindered by transportation tion of eight business law amendments passed in 2024. In March syndicates, geographic vulnerabilities, and governance issues. 2025, Parliament passed five ordinances (introduced in January Sluggish job creation and a high youth unemployment rate (22.7 2025), demonstrating reform intent to support private sector-led percent) have made emigration a preferred option for many young growth. Sustained progress hinges on prioritizing and implement- male Nepalis, contributing to a loss of skilled workforce. ing planned reforms. Nevertheless, remittances have been critical for growth, account- ing for 23 percent of GDP, and for driving welfare improve- Recent developments ments, despite weak economic performance and major disrup- tions such as the 2015 earthquake and the COVID-19 pandemic. Growth increased from 4.3 percent in the first half of FY24 Without remittances, over 2.6 million additional people would be (H1FY24) to 4.9 percent in H1FY25, primarily due to a pickup classified as poor. in industry and agriculture. Industrial activity was supported by increased hydroelectric capacity. Higher paddy production, dri- Human capital and access to basic services have improved, though ven by a favorable monsoon amidst September 2024 floods, bol- with significant regional disparities. Nearly 94 percent of house- stered agriculture. However, services sector growth moderated holds have gained access to electricity, and substantial progress slightly, reflecting weaker growth in financial and insurance and has been made in reducing the distance to public hospitals and accommodation and food services. The financial sector continued expanding the availability of paved roads. However, the poorest to face subdued private credit demand and rising non-performing FIGURE 1 / The current account surplus narrowed in H1FY25 FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 15 90 120000 10 80 100000 70 5 60 80000 0 50 60000 -5 40 -10 30 40000 20 -15 20000 10 -20 0 0 H1FY20 H1FY21 H1FY22 H1FY23 H1FY24 H1FY25e 2010 2012 2014 2016 2018 2020 2022 2024 2026 Workers' remittances Balance of goods and services International poverty rate Lower middle-income pov. rate Current account balance Upper middle-income pov. rate Real GDP pc Sources: National Statistics Office, Nepal Rastra Bank, and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 198 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. loans. In February 2025, Nepal was re-listed on the Financial Action FY26 and FY27. As a result, poverty ($3.65/day) is expected to de- Task Force (FATF) grey list for not fully implementing money laun- cline to 5.5 percent, 4.8 percent, and 4 percent in 2025, 2026, and dering and terrorist financing reforms. 2027, respectively. The services sector, employing about one-fifth of the local workforce, will drive growth, backed by a rebound in Average headline inflation eased from 6.5 percent in H1FY24 to domestic trade. The industrial sector will benefit from expanded 5 percent in H1FY25, mainly due to lower housing, utilities, and hydroelectric capacity. However, a growth slowdown in the finan- restaurant and hotel inflation. However, food inflation remained cial and accommodation and food services sectors may weigh on elevated at 7.5 percent, with vegetable prices surging into double activity, while agriculture remains resilient. Consumer inflation is digits, with potential negative impacts on vulnerable households. forecast to average below 5 percent in the medium term, reflecting improved domestic agricultural production. The current account (CA) turned to a surplus of 3.9 percent of GDP in FY24, due to increased remittances. The surplus narrowed in The CA surplus is projected to narrow in the medium term, due to H1FY25 due to sluggish remittance growth, reflecting the lagged rising imports to support economic activity. Electricity exports are impact of the decline in migrant outflows, and higher merchandise expected to remain below import levels in FY25 but will increase in imports, partly driven by rising LPG and rice imports. This offset FY26 and FY27, with higher exports to Bangladesh and India. higher merchandise exports, aided by India’s tariff hikes on refined edible oil, while Nepal benefitted from zero-duty SAFTA access. De- The fiscal deficit is projected to stay at 2.5 percent of GDP in FY25, spite a services trade deficit, foreign exchange reserves remained as lower revenues are offset by decreased expenditures, partly due comfortable at 14.4 months of import cover by end-H1FY25. to lower budget allocations for medical allowances and goods and services. However, the deficit is expected to widen to 2.9 percent The fiscal deficit narrowed to 2.5 percent of GDP in FY24 and con- of GDP by FY27, in part due to higher interest payments and capi- tinued declining into H1FY25, as higher revenue outpaced slower tal spending. Public debt is expected to increase marginally, while expenditure. Revenue growth was broad-based, with higher excise remaining sustainable. duty collections on alcoholic beverages. While expenditure broadly declined, capital spending remained stable at 0.9 percent of GDP. The forecast faces domestic and external risks. Global trade uncer- tainties could slow growth, including in Nepal’s key partner coun- tries, which may lead to reduced tourist and remittance inflows. Outlook Domestically, deteriorating financial sector asset quality, frequent bureaucratic reshuffles, FATF grey list status, and delayed capital Growth is expected to pick up marginally from 3.9 percent in FY24 spending reforms may weigh on growth. On the upside, lower glob- to 4.5 percent in FY25, before averaging 5.4 percent annually in al oil prices may ease the import bill. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 5.6 2.0 3.9 4.5 5.2 5.5 Private consumption 6.8 0.7 1.1 1.6 2.1 2.3 Government consumption 9.6 -21.2 -4.2 -6.7 4.6 7.0 Gross fixed capital investment 3.4 -10.0 17.0 13.7 14.7 13.4 Exports, goods and services 34.1 3.3 18.1 18.7 13.4 10.5 Imports, goods and services 16.4 -18.7 -2.3 8.5 10.3 9.1 Real GDP growth, at constant factor prices 5.3 2.3 3.5 4.5 5.2 5.5 Agriculture 2.4 2.8 3.0 3.2 3.3 3.3 Industry 10.7 1.4 1.3 4.7 6.7 7.4 Services 5.3 2.4 4.5 5.0 5.8 6.1 Employment rate (% of working-age population, 15 years+) 75.6 75.6 75.7 75.9 76.1 76.4 Inflation (consumer price index) 6.3 7.7 5.4 5.0 4.5 4.3 Current account balance (% of GDP) -12.5 -0.9 3.9 3.6 2.8 2.4 Net foreign direct investment inflow (% of GDP) 0.4 0.1 0.1 0.2 0.2 0.3 Fiscal balance (% of GDP) -3.2 -5.8 -2.5 -2.5 -2.8 -2.9 Revenues (% of GDP) 22.9 19.3 19.4 19.2 19.4 19.7 Debt (% of GDP) 40.5 42.9 42.7 43.2 43.3 43.4 Primary balance (% of GDP) -2.2 -4.5 -1.0 -1.2 -1.3 -1.2 1,2 International poverty rate ($2.15 in 2017 PPP) 0.4 0.3 0.2 0.2 0.2 0.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 7.5 7.1 6.3 5.5 4.8 4.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 44.1 43.2 40.7 38.0 35.5 32.9 GHG emissions growth (mtCO2e) -1.0 -0.4 3.5 3.2 4.0 3.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SAR-POV harmonization, using 2022-LSS-IV. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 199 This outlook reflects information available as of April 10, 2025. 1 2 PAKISTAN Population Poverty million millions living on less than $3.65/day 251.3 90.4 3 4 Life expectancy at birth School enrollment Pakistan’s economy continues to stabilize with easing infla- years primary (% gross) tion, improving financial conditions, and current account and primary fiscal surpluses. Despite strengthening, growth is ex- 66.4 82.7 5 6 pected to remain tepid, making job creation and poverty re- GDP GDP per capita duction amid high population growth challenging. Downside current US$, billion current US$ risks persist due to tight fiscal space, high financing needs, modest reserves, and global trade uncertainty. Reforms re- 373.4 1486.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. main key to reviving the private sector and reducing poverty. 4/ 2022. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Amid the economic crisis at the start of FY24, Pakistan undertook Real GDP at factor cost rose by an average of 1.5 percent y-o-y measures to prevent a sovereign default, stabilize the currency, in H1 FY25, slower than the 2.1 percent expansion in H1 FY24. and curb inflation. Multilateral funding helped to bridge financing Agriculture, with 37 percent of the labor force, posted a muted gaps and restore confidence, allowing import controls to ease. growth of 0.9 percent, due to drought-like conditions, pest infes- Strong agricultural growth supported economic stabilization by tations, and high base effects. Industry contracted by 0.4 percent, year-end. However, fiscal consolidation, high interest rates, dou- driven by high input costs, increased taxes, and lower govern- ble-digit inflation, and supply chain disruptions weighed on eco- ment development spending. Services, employing 39 percent of nomic activity, leading to declining real labor incomes and stagnat- the workforce, grew by 2.4 percent but was weighed down by ing poverty. Weak growth has carried over to H1 FY25. Downside weak agricultural and industrial spillovers, and failed to offset re- risks remain elevated, with continued stabilization dependent on al income declines in agriculture and manufacturing. The employ- the IMF-EFF program staying on track. Domestic policy and glob- ment-to-population ratio remains far below potential, particularly al trade uncertainties also pose significant risks. Continued fiscal among the youth and women. consolidation and deep structural reforms, as included in the Prime Minister’s Economic Transformation Agenda and Implementation Plan The current account posted a surplus of 0.6 percent of GDP in and Uraan Pakistan remain critical. Trade liberalization, reducing H1 FY25, reversing a 0.8 percent deficit in H1 FY24. Despite lower the state’s economic presence, and addressing business environ- commodity prices, higher imports, driven by base effects, rising ment constraints are required for higher exports and real incomes, domestic demand and relaxed import controls, outpaced exports as well as better jobs, including for youth and women. and widened the trade deficit. Investment also surged, increasing FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 3.3 4 100 200000 2.5 90 180000 3 2.6 80 160000 1.8 70 140000 1.7 60 120000 2 1.3 50 100000 1 40 80000 30 60000 0 20 40000 10 20000 0 0 -1 2010 2012 2014 2016 2018 2020 2022 2024 2026 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Q1 FY25 Q2 FY25 International poverty rate Lower middle-income pov. rate Agriculture Industry Services GDP Upper middle-income pov. rate Real GDP pc Sources: Pakistan Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 200 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. demand for imported machinery in power, textiles, and mining. Higher remittances, stemming from reduced political uncertainty Outlook and the market-determined exchange rate, more than offset the wider trade and primary income deficits. With lower external in- Real GDP growth is projected at 2.7 percent in FY25, supported flows and higher debt repayments, the balance of payments sur- by expanding private consumption and investment driven subdued plus narrowed to 0.9 percent of GDP, while gross reserves grew to inflation, lower interest rates, and recovering consumer and busi- $12.9 billion at end-December 2024. ness confidence. Output growth is expected to pick up in FY26 and FY27 but will remain low due to continued tight monetary and Headline inflation averaged 7.2 percent y-o-y in H1 FY25 down fiscal policies aimed at rebuilding buffers, and mitigating risks of from 28.8 percent in H1 FY24. Food inflation declined due to imbalances and global trade uncertainties. Combined with slow- adequate supply and lower global prices, while energy infla- er wage and employment increases, and high population growth, tion fell with stabilizing electricity tariffs. Core inflation, though the poverty headcount for FY25 is estimated to remain broadly un- still high, moderated as transportation and production costs changed at 42.4 percent, close to peak levels during COVID-19, im- dropped. Nonetheless, the persistently high price levels con- plying an additional 1.9 million poor people from FY24. However, tinue to strain the most vulnerable households. With slowing the poverty rate is expected to decrease to 41.0 percent by FY27. inflation, the policy rate was reduced from 20.5 percent in July 2024 to 12.0 percent. Real interest rates, however, rose into The current account is expected to record a surplus of 0.2 per- the double digits. cent of GDP in FY25, supported by stronger remittances and low- er oil prices. Still, it is projected to swing to a deficit as domes- The overall fiscal deficit narrowed to 2.8 percent of GDP in H1 tic demand recovers, driving imports higher. Due to large inter- FY25 from 4.7 percent in H1 FY24, as revenues outgrew expen- est payments, the fiscal deficit is estimated to remain elevated at ditures. Total revenue and tax revenues rose to 18.0 and 12.3 6.8 percent of GDP in FY25, before gradually declining. Fiscal sus- percent of GDP, respectively, following policy changes (higher tainability will remain predicated on managing interest payments, taxes on industry and excise tax rates, and reduced GST ex- rationalizing expenditures, and strengthening revenue mobiliza- emptions) and improved collections. A one-time high State Bank tion through expanding the tax base and reducing exemptions. of Pakistan profits boosted non-tax revenue. Total expenditures Inflation is expected to bottom out at 5.0 percent in FY25, driven rose to 20.8 percent of GDP in H1 FY25 primarily due to high- by base effects and lower commodity prices, before rising in er interest payments. Fiscal consolidation limited development the medium term due to stronger demand and additional tax spending, weakening the construction industry that employs 17 measures. The planned expansion of poverty reduction programs percent of the poor in daily wage jobs. Consequently, the prima- (BISP) to 500,000 beneficiaries and inflation-adjustment of bene- ry fiscal surplus almost doubled to a historic high of 6.6 percent fits could help cushion the poor from economic shocks but will of GDP in H1 FY25. be insufficient to reduce poverty markedly. Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f Real GDP growth, at constant market prices 4.8 0.0 3.2 2.7 3.1 3.4 Private consumption 7.0 2.6 6.3 3.1 3.6 3.7 Government consumption -1.3 -3.9 -11.8 3.9 1.1 2.1 Gross fixed capital investment 4.6 -15.5 -3.6 3.6 3.3 3.6 Exports, goods and services 5.9 3.2 -1.1 0.7 1.7 2.5 Imports, goods and services 11.0 1.8 4.1 4.4 3.6 3.7 Real GDP growth, at constant factor prices 6.2 -0.2 2.5 2.7 3.1 3.4 Agriculture 4.2 2.2 6.2 1.7 2.9 3.1 Industry 7.0 -3.8 -1.7 1.7 2.6 3.0 Services 6.7 0.0 2.3 3.3 3.4 3.7 Employment rate (% of working-age population, 15 years+) 49.8 49.7 49.7 49.7 49.7 49.7 Inflation (consumer price index) 12.2 29.2 23.4 5.0 6.0 7.0 Current account balance (% of GDP) -4.7 -1.0 -0.5 0.2 -0.5 -1.0 Net foreign direct investment inflow (% of GDP) 0.5 0.2 0.6 0.6 0.6 0.6 Fiscal balance, including grants (% of GDP) -7.8 -7.7 -6.8 -6.8 -6.2 -5.6 Revenues (% of GDP) 12.1 11.5 12.6 15.4 14.3 14.3 Debt (% of GDP) 80.6 81.5 72.7 74.6 77.0 76.9 Primary balance, including grants (% of GDP) -3.1 -0.9 0.9 1.9 1.5 1.6 1,2 International poverty rate ($2.15 in 2017 PPP) 4.1 7.3 7.0 7.2 7.1 6.9 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 35.4 41.4 42.3 42.4 41.8 41.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 82.0 83.6 84.4 84.2 83.8 83.4 GHG emissions growth (mtCO2e) 4.1 2.1 4.2 4.9 4.7 4.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on SAR-POV harmonization, using 2018-HIES. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Poverty projections based on microsimulations using 2018-HIES and aggregate macroeconomic indicators (see Barriga-Cabanillas et al (2024)). Macro Poverty Outlook / April 2025 201 This outlook reflects information available as of April 10, 2025. 1 2 SRI LANKA Population Poverty million millions living on less than $3.65/day 22.0 2.5 3 4 Life expectancy at birth School enrollment The economic recovery continues, with growth, fiscal bal- years primary (% gross) ances, and external buffers exceeding expectations. Howev- er, household incomes, employment, and non-monetary 76.6 95.9 5 6 welfare remain well below pre-crisis levels, resulting in ele- GDP GDP per capita vated poverty and food insecurity. Amid high global econom- current US$, billion current US$ ic uncertainty, medium-term growth and poverty reduction prospects hinge on continued macro stability and the sus- 84.4 3828.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. tained and successful implementation of structural reforms. 4/ 2022. 5/ 2023e. 6/ 2023e. Key conditions and challenges Recent developments The economy began stabilizing in mid-2023, following the coun- The economy grew by 5 percent in 2024, driven by a construction- try’s worst post-independence economic crisis. Long-standing led rebound in industry and strong performance in tourism-related macroeconomic mismanagement and structural weaknesses, ex- services. Headline inflation, measured by the Colombo Consumer acerbated by exogenous shocks, led to the depletion of foreign Price Index, has remained negative since September 2024 (reach- reserves and a public debt default in 2022. Poverty increased ing -4.2 percent, y-o-y, in February 2025) due to downward ad- by 10 percentage points between 2021 and 2022 due to de- justments in energy prices, currency appreciation, and subdued clining real incomes amid job losses and high inflation. Reforms household demand. With declining inflation, the central bank re- under an IMF Extended Fund Facility (EFF) program helped sta- duced policy rates by 150 basis points in 2024, totaling a 800 basis bilize the economy, limiting the cumulative GDP contraction to points reduction since 2023. As commercial lending rates followed 9.5 percent between 2021 and 2023. Headline inflation eased suit, private credit began to recover, growing by 10.7 percent y-o-y (to 4 percent in December 2023 from 69.8 percent in Septem- in December 2024. ber 2022), usable official reserves rose (to 2.1 months of im- ports by end-2023 from 0.3 months at end-2022), and the public The merchandise trade deficit widened by 23.9 percent in 2024, and publicly guaranteed (PPG) debt-to-GDP ratio fell (to 111.7 as imports grew faster than exports. However, strong tourism rev- percent at end-2023 from 119.2 at end-2022). However, the re- enues and remittances flows supported a current account surplus forms, including utility pricing adjustments and new revenue mo- for the second consecutive year in 2024. Foreign exchange pur- bilization measures, strained household budgets. Facing higher chases by the central bank, amid the continued debt service sus- living costs, households adopted risky coping strategies, such as pension, and inflows from development partners, bolstered usable cutting human capital spending, borrowing more, and reducing reserves to 3.0 months of imports. This enabled the government to nutritious food intake. remove all remaining import restrictions, primarily on vehicles. The FIGURE 1 / Composition of tax revenue as a share of GDP FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 14 80 700000 12 70 600000 10 60 500000 50 8 400000 40 6 300000 30 4 200000 20 2 100000 10 0 0 0 2020 2021 2022 2023 2024p 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Income taxes VAT Excise taxes International poverty rate Lower middle-income pov. rate Trade taxes Others Tax revenue Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Sri Lanka, Budget Speech 2025, Department of Census and Source: World Bank. Notes: See footnotes in table on the next page. Statistics, and World Bank staff calculations. 202 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. rupee gained a cumulative 19.4 percent against the US dollar com- The current account is expected to be in deficit in 2025, as the pared to end-2022. impact from reduced exports (due to trade-related uncertainties), outweighs the impact on imports (from reduced demand and The primary surplus reached 2.2 percent of GDP in 2024, surpass- global oil prices). With a revival in domestic demand, inflation is ing the IMF EFF’s 2024 target (at Board approval) of 0.8 percent. projected to turn positive by mid-2025 but remain below the cen- This was driven by higher VAT revenues (due to increased rates tral bank’s medium-term target. Despite continued fiscal consoli- and the removal of exemptions) and under-execution of the capital dation, financing pressures will persist due to large T-bill refinanc- budget. Alongside growth and currency appreciation, the improved ing needs. Reflecting the crisis’s continued impact, over a third of primary balance helped reduce estimated PPG debt to 102.4 per- the population is expected to be in, or at the risk of falling into, cent of GDP at end-2024. External debt restructuring is nearly con- poverty in 2025. cluded, with nearly 98 percent of Eurobonds exchanged and strong progress made towards finalizing bilateral agreements with official Although fiscal and external buffers are being rebuilt, down- creditors. The IMF EFF’s third review was completed in March 2025. side risks remain exceptionally high. Moderating global growth, high global interest rates, and unprecedented trade Growth resulted in a poverty reduction of 2.7 percentage points in policy uncertainty are likely to constrain capital inflows, de- 2024, as 60 percent of the poorest quintile work in industry and ter investment, and weaken export demand, resulting in services. However, the economic recovery has not translated in- potential trade-related job losses. Further regressive indirect to widespread welfare improvements, with poverty (below $3.65 taxes could worsen the poverty outlook. The increased preva- per person per day, 2017 PPP), still at 24.5 percent, twice the 2019 lence of stunting and malnutrition raises concerns about long- level. Despite easing inflation, food prices more than doubled be- term human capital development and intergenerational poverty tween 2021 and 2024, contributing to elevated malnutrition and transmission. Limited economic opportunities and consequent food insecurity. The employment ratio declined from 46.0 percent increased outmigration of skilled workers pose concerns for the in Q2 2023 to 45.5 percent in Q2 2024 (y-o-y), and real wages re- recovery, and the quality of public service delivery, particularly main below their 2019 levels. Limited economic opportunities are in an aging society. driving emigration, with applications to the Foreign Employment Bureau increasing y-o-y in the first nine months of 2024. To ensure stronger medium-term growth, it is critical to maintain policy consistency and pursue structural reforms that support macro-fiscal-financial stability, enhance competitiveness, and at- Outlook tract fresh, non-debt-creating capital inflows. Developing human capital by improving education and health service delivery stan- Despite the recovery in 2024, medium-term growth is expected to dards is equally critical. Strengthening the social protection system remain modest, reflecting the scarring effects of the crisis, struc- will safeguard the most vulnerable and ensure the recovery’s ben- tural impediments to growth, and global economic uncertainties. efits are inclusive and broad-based. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f 1 Real GDP growth, at constant market prices -7.3 -2.3 5.0 3.5 3.1 3.1 Private consumption -0.5 -1.6 3.2 3.3 3.4 3.4 Government consumption 1.4 -5.4 -0.8 1.6 1.1 1.0 Gross fixed capital investment -24.5 -8.4 18.8 7.0 4.0 4.7 Exports, goods and services 10.2 12.0 5.6 -6.3 2.1 2.4 Imports, goods and services -19.9 6.5 11.1 -4.1 3.2 4.3 Real GDP growth, at constant factor prices -7.0 -2.6 4.6 3.5 3.1 3.1 Agriculture -4.1 1.6 1.2 1.5 1.8 1.9 Industry -16.0 -9.2 11.0 5.9 4.1 3.3 Services -2.6 -0.2 2.4 2.6 2.8 3.1 Employment rate (% of working-age population, 15 years+) 47.5 46.3 45.2 45.2 45.2 45.2 Inflation (consumer price index) 46.4 17.4 1.2 2.5 3.2 4.5 Net foreign direct investment inflow (% of GDP) 1.2 0.8 0.9 0.5 0.6 0.7 2 International poverty rate ($2.15 in 2017 PPP) 4.1 5.4 4.6 3.9 3.7 3.5 2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 22.7 27.1 24.5 22.7 21.9 21.2 2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 64.4 68.0 65.9 65.0 64.1 63.2 GHG emissions growth (mtCO2e) -6.7 -3.6 5.2 5.4 5.1 4.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Components of GDP by expenditure for 2022-2024 are estimates, as the data published on March 18, 2025, by authorities only included GDP by production. 2/ Calculations based on SAR-POV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. Macro Poverty Outlook / April 2025 203 Angola Ethiopia Niger Benin Gabon Nigeria Botswana Gambia, The Rwanda Burkina Faso Ghana São Tomé and Príncipe Burundi Guinea Senegal Cabo Verde Guinea-Bissau Seychelles Cameroon Kenya Sierra Leone Central African Republic Lesotho Somalia Chad Liberia South Africa Comoros Madagascar South Sudan Congo, Democratic Rep. Malawi Sudan Congo, Republic Mali Tanzania Côte d’Ivoire Mauritania Togo Equatorial Guinea Mauritius Uganda Eritrea Mozambique Zambia Eswatini Namibia Zimbabwe Sub-Saharan Africa Macro Poverty Outlook / April 2025 205 This outlook reflects information available as of April 10, 2025. 1 2 ANGOLA Population Poverty million millions living on less than $2.15/day 37.9 9.7 3 4 Life expectancy at birth School enrollment Angola’s economy grew strongly in 2024, driven by non-oil years primary (% gross) activities. Lower oil prices are projected to weigh on short- term growth. Limited infrastructure and human capital 61.9 86.7 5 6 continue to constrain growth potential. With subdued GDP GDP per capita employment and income growth, the poverty rate is current US$, billion current US$ projected to reach 36 percent. High risks, notably on the fiscal side, result from oil dependency and increased 96.7 2551.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. global uncertainty from recent trade policy shifts. 4/ 2022. 5/ 2024. 6/ 2024. The macro-institutional framework hinders private sector growth Key conditions and challenges and job creation due to weak rule of law. Fiscal expansion during the oil boom translated in rising debt, crowding out spending on From 2002 to 2014, Angola experienced strong oil-led infrastructure and human capital, and undermining productivity growth. With the lack of economic diversification, the drop growth. Poor public expenditure efficiency did not support the in oil prices from 2014 to 2016 led to a five-year re- economy and fiscal policy remained procyclical. Angola is also cession, worsened by the COVID-19 pandemic. Although vulnerable to climate shocks. the country has returned to growth since 2021, support- ed by sound policies and a favorable environment, Ango- Transforming the economy to create jobs is key to unleashing the la's economy remains undiversified, with oil accounting for country's potential, boosting productivity, reducing poverty, and about 30 percent of GDP. strengthening economic resilience. The development of the Lobito Corridor would accelerate economic diversification and promote The oil-based growth model failed to reduce poverty sustain- regional integration, provided it is supported by comprehensive ably. In 2018, about one-third of Angolans lived below the in- structural reforms. ternational poverty line ($2.15/day). Inequality is also high, with a Gini index of 0.51 and human capital is low, with an in- dex of 0.36. Job opportunities in the formal sector are scarce, Recent developments disproportionally affecting young people and women. National estimates indicate that the unemployment rate has remained Real GDP grew by 4.4 percent in 2024, the largest expansion since above 30 percent for several years, and about 80 percent of 2015. It was driven by commerce and transport services, diamonds jobs are informal. extraction, the oil industry, and fishing. The labor market remained FIGURE 1 / Contribution to potential GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 12 90 70000 10 80 60000 8 70 50000 60 6 40000 50 4 30000 40 2 20000 30 0 20 10000 -2 10 0 -4 0 -10000 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate TFP Capital Labour Potential Upper middle-income pov. rate Real GDP pc Source: World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 206 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. stable, with national estimates showing a slight increase in the un- employment rate from 30 percent in Q3 2022 to 30.8 percent in Outlook Q3 2024, while the labor force participation rate saw a modest in- crease from 89.4 percent to 89.7 percent. Growth is projected to slow to 2.7 percent in 2025 as lower global oil prices than projected in the budget are expected to translate in Inflation surged to 27.5 percent in 2024, driven by a rise in food reduced fiscal spending. Medium-term growth is projected around costs and diesel price. The central bank responded by raising the 2.9 percent annually, driven by the non-oil sector. Given the grow- main interest rate to 19.5 percent (+1.5 percentage points). The ing working age population, the unemployment rate is expected to growth of the credit to the private sector stagnated at 0.3 percent remain high. in real terms. The central bank is expected to keep monetary policy tight. Infla- The current account surplus rose to 6.7 percent of GDP support- tion is projected to slow but will remain high, averaging 18.7 per- ed by lower fuel imports and slightly higher oil exports. The ser- cent over 2025-2027, driven by the fuel subsidy reform, including a vices and primary income account deficits improved due to low- 50 percent diesel price hike in March 2025. Subdued employment er oil-related services expenses and lower interest payment on and income growth are expected to hinder poverty reduction. The external debt. Gross international reserves increased to US$15.7 poverty rate is forecasted to reach about 36 percent by 2027, high- billion in 2024, covering about 8.3 months of imports. The Kwan- lighting the need for strong social safety nets and increased invest- za depreciated by 10 percent against the US dollar in 2024 com- ment in human capital. pared to 65 percent in 2023. The real exchange rate appreciated by 16.7 percent. The current account surplus is expected to decline due to reduced oil exports. Gross international reserves are expected to remain Public finances deteriorated slightly compared to 2023. Total rev- comfortable. However, high debt service costs over the next two enue is estimated at 21.5 percent of GDP in 2024 from 21.1 years will continue to weigh on the foreign exchange market. percent, mainly due to higher oil revenue. Non-interest expendi- ture is estimated to have increased to 16.9 percent of GDP from The approaching political cycle presents risks for fiscal consolida- 13.7 percent, driven by higher payroll and goods and services tion. The fiscal deficit is projected to deteriorate to around 2.2 per- expenses, slightly offset by a reduction in subsidies and public cent of GDP in the medium term, with public debt projected at investment. The non-oil primary deficit increased to 7.8 percent around 72.4 percent of GDP. from 6.3 percent. The fiscal balance shifted from a surplus of 1.3 percent to a deficit of 1.5 percent of GDP. Public debt fell The outlook remains highly uncertain due to trade policy shifts. In to 70.9 percent of GDP, down from 89 percent in 2023 due to particular, the impact of commodity price decline may compound higher nominal GDP growth. the potential effects of trade uncertainty. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f 1 Real GDP growth, at constant market prices 3.0 1.0 4.4 2.7 2.6 3.2 Private consumption 4.0 3.1 6.2 7.3 4.4 4.0 Government consumption 8.4 -36.7 -1.9 2.8 3.1 3.9 Gross fixed capital investment 8.5 -5.3 7.2 3.7 3.8 3.9 Exports, goods and services 3.3 -6.2 5.0 -5.2 -2.8 0.2 Imports, goods and services 26.1 -6.8 -6.2 5.4 2.7 2.7 Real GDP growth, at constant factor prices 3.1 0.6 4.4 2.7 2.6 3.2 Agriculture 3.9 2.7 4.3 4.6 5.0 5.0 Industry 1.8 -1.0 4.5 1.1 0.2 2.0 Services 4.2 1.8 4.4 3.8 4.4 3.9 Employment rate (% of working-age population, 15 years+) 64.6 64.7 65.1 65.1 65.1 65.1 Inflation (consumer price index) 21.4 13.6 28.2 25.0 18.0 12.2 Current account balance (% of GDP) 10.4 4.6 6.7 1.0 2.0 2.4 Net foreign direct investment inflow (% of GDP) -5.9 -2.4 -1.8 -1.3 -0.9 -0.8 Fiscal balance (% of GDP) 6.5 1.3 -1.5 -2.1 -2.2 -2.2 Revenues (% of GDP) 27.7 21.1 21.5 22.3 21.7 21.7 Debt (% of GDP) 69.5 88.7 70.9 72.2 74.4 72.4 Primary balance (% of GDP) 10.6 7.2 4.4 3.0 2.7 2.6 2,3 International poverty rate ($2.15 in 2017 PPP) 35.4 35.9 35.6 35.7 35.8 35.7 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 57.7 58.3 57.9 58.0 58.1 58.0 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 81.4 81.6 81.4 81.5 81.6 81.5 GHG emissions growth (mtCO2e) -0.8 -0.4 -0.1 0.0 0.0 9.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ This macro-framework is using the national accounts in base year 2002. New national account statistics with 2015 as base year are under preparation. 2/ Calculations based on 2018-IDREA. Projection using neutral distribution (2018) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. 3/ Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. Macro Poverty Outlook / April 2025 207 This outlook reflects information available as of April 10, 2025. 1 2 BENIN Population Poverty million millions living on less than $3.65/day 14.5 6.0 3 4 Life expectancy at birth School enrollment In 2024, economic activity grew by 7.5 percent, boosted by years primary (% gross) strong performance across all sectors. Inflation fell to 1.2 percent and the lower middle-income poverty rate de- 60.0 113.0 5 6 creased by 2.8 percentage points to 38.5 percent. Benin GDP GDP per capita met the 3 percent WAEMU fiscal deficit target and debt current US$, billion current US$ declined to 53.4 percent of GDP in 2024. Key risks include worsening security in the north and climate shocks amid 21.6 1495.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. rising global uncertainties. 4/ 2022. 5/ 2024. 6/ 2024. domestic debt is critical for debt sustainability, as external debt Key conditions and challenges breaches high-risk thresholds in stress tests. The Benin economy adapted well to shocks, growing on average by 5.9 percent per year during 2020–2023, 3.7 percentage points Recent developments above the Sub-Saharan Africa average. The resilience of Benin’s economy is derived from ongoing diversification of the agri- Despite persistent regional security challenges spreading across cultural sector, development of agro-industries, tourism, and the northern part of Benin and trade uncertainties, GDP growth strong macroeconomic management. Improved fiscal space dur- reached 7.5 percent in 2024 (4.9 percent per capita), up from 6.4 ing 2017-19 allowed the government to implement countercycli- percent in 2023. The services sector, the major growth driver, was cal fiscal policy supporting the 2021–2026 government action boosted by trade, tourism and other services. Port activities in- plan. While the informal sector has served as a shock absorber, creased by 119 percent in December 2024, year-on-year due to particularly during border closures, it also hinders productivity rising exports (three-fold increase in tonnage) and recovering im- growth and revenue mobilization. ports. Rising agro-industries along with strong agriculture output also supported growth. The construction sector remains dynamic Despite increased revenue mobilization, a tax revenue to with the development of the Glo-Djigbé Industrial Zone and PAG-2 GDP ratio of 12.9 percent (in 2023) remains low compared projects. On the demand side, rising exports and private invest- to peers. High structural inequalities limit the poor’s ability ment, bolstered growth. Private consumption also contributed, in to benefit from growth. Amidst rising fragility in the north, line with subsiding inflation. boosting growth's impact on poverty reduction is crucial. Pre- serving macroeconomic gains while enhancing productivity and Inflation averaged 1.2 percent in 2024, down from 2.8 percent in create more high-quality jobs is vital. Fiscal consolidation has re- 2023 due to moderating energy and transport prices. Food price duced debt accumulation, but rebalancing its composition towards inflation doubled to 0.8 percent in 2024 but remained below FIGURE 1 / Fiscal conditions FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 25 2 100 1000000 90 900000 20 80 800000 0 70 700000 15 60 600000 -2 50 500000 10 40 400000 30 300000 -4 20 200000 5 10 100000 0 0 0 -6 2011 2013 2015 2017 2019 2021 2023 2025 2027 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Budget deficit (rhs) Revenues (lhs) Expenditures (lhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 208 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. headline inflation. The lower middle-income poverty rate ($3.65 in 2017 PPP) declined by 2.9 ppts to 38.4 percent in 2024, support- Outlook ed by dynamic economic activities and fall in inflation. The West African Economic and Monetary Union (WAEMU) inflation rate de- Economic growth is expected to average 7.1 percent during clined further in 2024 to 3.5 percent but remained above the 1–3 2025–2027. Secondary sector activity is projected to rise by 9.1 per- percent WAEMU target band. Regional foreign reserves increased cent, supported by the final PAG2 projects, notably construction from 3.5 months of imports in 2023 to 4.7 months in 2024, re- and agro-industries. Investments in transit services, and normaliz- flecting the resumption of international bond issuances, and IMF ing trade relations with neighbors, along with rising tourism and and World Bank disbursements. The Central Bank of West African telecom sectors, will boost services. Agriculture is expected to grow States kept its policy interest rates unchanged throughout 2024 by 6.2 percent, due to productivity enhancing reforms. Strong at 3.5 percent for liquidity calls and 5.5 percent for the marginal growth across sectors is anticipated to drive poverty reduction with lending facility. the lower middle-income poverty rate expected to decline to 30.3 percent by 2027. Inflation is projected to rise to 1.5 percent but The fiscal deficit declined to 3.0 percent of GDP in 2024, driven by remaining below the WAEMU target. The average regional infla- a 1.2 ppt of GDP decline in capital expenditures between 2023 and tion rate is expected to align with the WAEMU target band from 2024 and a 0.3 ppt of GDP increase in tax revenues to 13.2 percent 2025 onwards, while regional reserves are projected to rise to 5.4 of GDP. Debt declined to 53.4 percent of GDP in 2024, though ex- months of imports in 2025, supported by recovering exports, and ternal debt continues to rise, accounting for 72.6 percent of total lower Euro Area interest rates. debt. Although financing conditions in the WAEMU market remain tight, successful issuances of US-dollar denominated Eurobonds in The fiscal deficit is projected to remain below the 3 percent of February 2024 (US$ 750 million) and January 2025 (US$ 500 mil- GDP WAEMU criteria over 2025–27, reducing debt accumulation. lion), and a Euro 500 million commercial loan, supporting the Gov- With the completion of key investment projects, rising exports, ernment’s Liability Management Operations, are expected to im- and tourism, the CAD is expected to narrow to 4.3 percent by prove the debt profile. The proceeds also contributed to covering 2027. The CAD will be financed by foreign direct investment (FDI) the financing needs and the current account deficit (CAD), which and external public debt (Eurobond and project loans). The out- narrowed to 7.0 percent of GDP due to rising exports of cotton, and look is tilted to the downside due to security challenges, and agro-processed products. Credit to the non-financial private sector climate issues. Additionally, uncertainty in trade policy could im- and to the public sector moderated. Net non-performing loans in- pact investment and growth, slowing down the development of creased from 1.2 percent at end-2023 to 1.9 percent at end-2024 the industrial zone and the commencement of production by with the provisioning rate falling by 20.6 ppts to 54.7 percent. new export firms. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.3 6.4 7.5 7.2 7.1 7.0 Private consumption 5.8 6.0 5.0 3.9 4.0 4.1 Government consumption 3.5 0.5 1.1 15.7 8.3 10.1 Gross fixed capital investment -8.0 15.8 10.6 10.1 9.9 9.6 Exports, goods and services 14.5 4.3 4.4 6.2 7.3 7.7 Imports, goods and services -4.6 10.4 -0.8 4.1 3.1 4.6 Real GDP growth, at constant factor prices 6.0 6.3 7.5 7.2 7.1 7.0 Agriculture 4.8 5.1 5.9 6.2 6.2 6.3 Industry 7.9 7.3 9.7 9.5 9.1 8.8 Services 6.0 6.6 7.5 7.0 6.8 6.8 Employment rate (% of working-age population, 15 years+) 61.5 61.8 61.8 61.8 61.8 61.8 Inflation (consumer price index) 1.4 2.8 1.2 1.5 1.5 1.5 Current account balance (% of GDP) -5.7 -8.2 -7.0 -6.1 -4.9 -4.3 Net foreign direct investment inflow (% of GDP) 1.9 2.2 2.0 1.9 1.8 1.9 Fiscal balance (% of GDP) -5.5 -4.1 -3.0 -2.9 -2.9 -2.9 Revenues (% of GDP) 14.3 15.0 15.0 15.3 15.5 15.9 Debt (% of GDP) 54.2 54.5 53.4 51.3 49.7 48.3 Primary balance (% of GDP) -3.9 -2.6 -1.2 -1.2 -1.2 -1.3 1,2 International poverty rate ($2.15 in 2017 PPP) 12.6 12.1 10.9 9.5 8.0 7.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 43.2 41.3 38.5 36.2 33.0 30.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 81.2 79.5 77.3 74.8 71.6 69.0 GHG emissions growth (mtCO2e) -4.0 -2.0 0.6 1.9 2.3 2.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 209 This outlook reflects information available as of April 10, 2025. 1 2 BOTSWANA Population Poverty million millions living on less than $2.15/day 2.5 0.3 3 4 Life expectancy at birth School enrollment Botswana’s GDP contracted by 3.0 percent in 2024, primarily years primary (% gross) due to the weak global diamond market. The fiscal deficit is set to reach 9.2 percent of GDP amid eroded fiscal buffers. 65.9 96.9 5 6 GDP growth is projected at 0.6 percent in 2025, driven by a GDP GDP per capita gradual recovery in the diamond market and infrastructure current US$, billion current US$ investment. Risks are substantial on both the international and domestic fronts. Poverty is projected at 14 percent at 17.1 6789.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2015 (2017 PPPs). 3/ 2022. the $2.15 international poverty line. 4/ 2022. 5/ 2024. 6/ 2024. to enlarge markets, improve the business environment, attract in- Key conditions and challenges vestment, promote fiscal efficiency and stimulate innovation. Im- proving agricultural resilience and sustainability is also essential Botswana's historical economic success has been largely associat- as this sector employs about 9.6 percent of the labor force (or 18 ed with the discovery of diamonds in the 1960s, which transformed percent when subsistence farmers are included). Addressing high the nation, providing a solid foundation for growth and develop- poverty and income inequality through job creation is critical for ment. Effective, prudent, and transparent policies contributed to long-term stability. Strengthening regional integration and trade political stability, low levels of corruption, and strong fiscal disci- partnerships can open opportunities for Botswana's exports. pline. Significant investments led to the modernization of the coun- try’s infrastructure, while the allocation of public resources toward education and healthcare contributed to improvements in human Recent developments capital. Poverty declined from 29.1 percent in 2002/03 to 15.4 per- cent in 2015/16 based on the $2.15 per day international poverty Due to a sharp contraction in the global demand for diamonds, line (IPL), using 2017 purchasing power parity (PPP) prices. Despite the economy contracted by 3.0 percent in 2024, in contrast to 3.2 these achievements, Botswana’s limited economic diversification percent growth in 2023.Mining contracted by 24.1 percent whilst creates significant challenges that intensified in 2024. Weaknesses the value of diamond inventories reached about US$2 billion in De- in global diamond markets, have posed risks to the country’s fiscal cember 2024, the highest since the 2008 Global Financial Crisis. In and external positions, and more frequent climate shocks have im- February 2025, Botswana renewed its deal with De Beers covering pacted the agriculture sector, affecting rural livelihoods. the allocation of rough diamonds from Debswana for sale, and the establishment of the Diamonds for Development Fund to support As diamonds currently provide almost 90 percent of Botswana’s economic diversification. That is expected to provide some stabil- export revenues, economic diversification beyond diamonds ity and predictability to the diamond sector, although the recent would mitigate risks. Reforms are needed to enhance connectivity contraction in diamond markets is believed to be structural rather FIGURE 1 / The Fiscal position has deteriorated FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 50 8 70 90000 60 80000 40 4 70000 50 30 0 60000 40 50000 20 -4 30 40000 30000 10 -8 20 20000 10 10000 0 -12 0 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Revenues (lhs) Expenditure (lhs) Fiscal balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 210 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. than just cyclical. The unemployment rate increased to 27.6 per- The growth projection in 2025 is underpinned by the weak cent (2024Q1), and poverty is projected to increase to 13.7 percent prospects in the global diamond markets, an increase in cop- in 2024 under the $2.15 poverty line (2017 PPP). per production, and additional power generation from the new IPP contracts under the renewable energy drive. Poverty is pro- Headline inflation averaged 2.8 percent in 2024, below the 3-6 per- jected to remain high at 14 percent (around 358,000 people) cent objective range, and the policy rate, at 1.9 percent, remains in 2025 based on the $2.15 per day IPL (2017 PPP) given neg- significantly below the average among SACU countries. In December ative GDP per capita growth and the low labor intensity of the 2024, the Primary Reserve Requirement (PRR) was reduced from 2.5 sources of growth. percent to 0 percent to encourage credit expansion by banks. The fiscal deficit in FY25/26 is projected to narrow to 8.5 percent of Foreign exchange reserves decreased from US$4.8 million in No- GDP, and to decline gradually thereafter. Public debt ratio is pro- vember 2023 to US$3.9 million in November 2024, but remain ade- jected to rise to 39.7 percent of GDP in 2025, just below the 40 per- quate, at 7.2 months of import cover. The current account deficit is cent debt ceiling. Unless fiscal deficits are reduced, there is a risk estimated at 4.2 percent of GDP in 2024. that the debt limit may be breached. The government plans to im- prove fiscal efficiency including through targeted tax policy adjust- The fiscal deficit in FY24/25 is estimated at 9.2 percent of GDP, as ments, better screening, selection and management of projects, expenditure has surged by 7.5 percent of GDP over the last two and improvement of procurement processes. years, and diamond revenues have disappointed (down by 50.7 percent in 2024/25), albeit partially offset by higher SACU revenues. Inflation is projected to remain within the Central Bank’s objective The gross debt ratio peaked at about 35.3 percent of GDP, and do- range. But risks are tilted to the upside, exacerbated by geopolitical mestic debt increased from 8.7 percent in 2019 to 18 percent of tensions and potential hikes in energy prices. GDP in 2024. The level of public debt remains below the 40 percent limit, but the Government Investment Account, an important fiscal The outlook remains uncertain and depends largely on the dia- buffer, has been nearly depleted. mond market's trajectory, which may be affected by a slowdown in major trade partners, volatile commodity prices, and changes in advanced economies’ trade policies. Other risks to the recov- Outlook ery include climate-related disruptions in agriculture, and wors- ening fiscal pressures. Inadequate structural reforms may under- Real GDP growth is projected to rebound to 0.6 percent in mine Botswana’s capacity to reduce poverty and inequality and 2025, and converge to around 4.0 percent in the medium term. withstand future shocks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f 1 Real GDP growth, at constant market prices 5.6 3.2 -3.0 0.6 4.2 3.8 Private consumption 3.0 5.6 1.9 2.9 3.2 3.0 Government consumption 2.5 4.8 7.3 2.3 1.2 1.4 Gross fixed capital investment 0.3 4.2 16.4 -10.8 1.2 1.2 Exports, goods and services -5.4 -12.4 -10.4 -26.6 16.6 9.9 Imports, goods and services -11.7 -7.1 12.3 -25.0 6.5 3.1 Real GDP growth, at constant factor prices 5.9 2.8 -3.0 0.6 4.2 3.8 Agriculture 1.2 1.8 -0.3 3.1 1.4 1.4 Industry 7.7 2.3 -13.5 20.9 2.8 2.9 Services 5.0 3.2 3.6 -10.3 5.3 4.5 Inflation (consumer price index) 12.2 5.1 2.8 4.0 5.0 5.0 Current account balance (% of GDP) -1.2 -0.6 -4.2 -3.9 -3.0 -2.4 Net foreign direct investment inflow (% of GDP) 2.9 3.4 0.7 0.6 0.6 0.5 2 Fiscal balance (% of GDP) -1.9 -4.2 -9.2 -8.5 -7.8 -7.2 Revenues (% of GDP) 28.5 28.1 25.5 24.9 24.8 24.6 3 Debt (% of GDP) 20.4 22.5 35.3 39.7 38.9 37.8 2 Primary balance (% of GDP) -1.2 -3.2 -8.2 -7.0 -6.0 -5.1 4,5 International poverty rate ($2.15 in 2017 PPP) 13.2 12.7 13.7 14.0 13.5 13.0 4,5 Lower middle-income poverty rate ($3.65 in 2017 PPP) 34.5 33.9 35.4 35.8 35.0 34.2 4,5 Upper middle-income poverty rate ($6.85 in 2017 PPP) 60.9 60.4 61.5 61.9 61.1 60.8 GHG emissions growth (mtCO2e) 0.2 -1.1 -4.1 0.3 1.5 2.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The projections presented in this report reflect revised diamond production volumes. The updated figures are based on the most recent production data and industry assessments available at the time of publication. 2/ Fiscal balances are reported in fiscal years (April 1st -March 31st). 3/ Refers to Public and Publicly Guaranteed debt. 4/ Calculations based on 2015-BMTHS. Actual data: 2015/16. Nowcast: 2017-2024. Forecasts are from 2025 to 2027. 5/ Projection using neutral distribution (2015) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 211 This outlook reflects information available as of April 10, 2025. 1 2 BURKINA FASO Population Poverty million millions living on less than $2.15/day 23.5 5.6 3 4 Life expectancy at birth School enrollment In 2024, GDP growth is estimated at 4.9 percent (2.5 percent years primary (% gross) per capita), driven by services and agriculture. This led to a lower extreme poverty rate at 23.2 percent, despite inflation 59.8 72.3 5 6 at 4.2 percent. Growth is projected to be lower in 2025 and GDP GDP per capita gradually strengthen to 5.0 percent by 2027 assuming con- current US$, billion current US$ tinued improvement in security conditions. This outlook is subject to downside risks from security threats, climate 24.2 1027.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. shocks, debt roll-over, and financial sector challenges. 4/ 2023. 5/ 2024. 6/ 2024. On January 29, 2025, Burkina Faso formally exited Economic Key conditions and challenges Community of West African States (ECOWAS) along with Mali and Niger, following a joint withdrawal announcement in January 2024 Burkina Faso’s economy remains undiversified and vulnerable to and unsuccessful mediation efforts. The three countries, forming insecurity, climate, and commodity shocks. The economic land- the Confederation of Sahel States (AES), have replaced the ECOW- scape is dominated by low-productivity services; rain-fed agricul- AS passport with their own unified passport. However, Burkinabe ture, which is highly sensitive to weather conditions; and gold citizens and businesses retain access to key ECOWAS member- mining, which represents 80 percent of exports and attracts most ship benefits, including the free movement of people and goods, of inward FDI. Export diversification is constrained by weak pro- pending further decisions. The authorities have reiterated Burki- ductivity, and low human capital, leaving the country vulnerable na Faso’s intention to remain in the West African Economic and to shifts in international trade policy. Monetary Union (WAEMU). The security crisis continues to hinder economic growth, im- pacting particularly rural areas and the mining sector, de- Recent developments spite some improvement in 2024. Fatalities, as recorded by the Armed Conflict Location and Event Data (ACLED) de- GDP growth increased to 4.9 percent in 2024 (2.5 percent creased by 12 percent, and incidents dropped by 26 percent, per capita). On the supply side, services remained the key compared to 2023, which saw a peak in violence. This led growth driver, contributing 3.1 percentage points (pp) to to improved access to agricultural lands and enabled the overall GDP growth. This was partly due to strong growth reopening of some mines after two years of suspension. in public administration services, which account for 22 Nevertheless, industrial gold output has further declined. percent of the economy. Services growth was also sup- Additionally, donor support is expected to remain low in ported by improved security, which spurred retail, trade, the medium term. and repair services. FIGURE 1 / Real GDP growth and supply-side contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 100 600000 5 90 500000 4 80 3 70 400000 2 60 1 50 300000 0 40 200000 -1 30 -2 20 100000 -3 10 2022 2023 2024e 2025f 2026f 2027f 0 0 Agriculture Industry 2022 2023 2024 2025 2026 2027 Services Net taxes on production International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Bureau of Statistics and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 212 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Agriculture contributed 1.9 pp to GDP growth in 2024, supported by favorable weather, expanded cultivated areas, rapid lowland de- Outlook velopment boosting rice production, improved land access in some conflict-affected areas, and more effective government support, Following a year of above average agricultural output growth, including timely provision of improved seeds, fertilizers, and free GDP growth is projected to be lower in 2025 at 4.3 percent and plowing services. In contrast, the secondary sector subtracted from gradually rise to 5.0 percent by 2027, assuming sustained se- growth, due to a drop in gold production caused by insecurity (e.g., curity improvements, average climate conditions, and a stable closure of the Boungou mine). policy environment. Gold production is projected at 56 tons in 2025, 64 tons in 2026, and 65 tons in 2027, boosting exports The current account deficit (CAD) narrowed to 6.4 percent of and reducing the CAD. The exit from ECOWAS is expected to GDP, due to a sharp rise in gold prices that outpaced the pro- have limited economic impact. Shifts in international trade policy duction drop. Inflation rose to 4.2 percent, driven by insecuri- impact Burkina Faso mainly indirectly through changes in gold ty and logistical constraints, coupled with price speculation due and oil prices. to a late start of the rainy season. Despite the higher inflation, strong growth in agriculture and services led the projected ex- The government remains committed to fiscal consolidation, but treme poverty rate to fall by 3 pp to 23.2 percent. Poverty reduc- expenditure needs will remain high. Public debt as a share of tion was broad-based but stronger in rural areas as food price GDP is anticipated to slowly trend downward. The regional infla- inflation matters less for farmers. tion rate is expected to align with the WAEMU target band from 2025 onwards (including for Burkina Faso), while re- WAEMU inflation fell to 3.5 percent in 2024 but remained above gional reserves are projected to rise to 5.4 months of im- the target band of 1–3 percent. Regional foreign reserves increased ports in 2025, supported by recovering exports and lower from 3.5 months of imports in 2023 to 4.7 months in 2024, reflect- Euro Area interest rates. ing the resumption of international bond issuances, IMF, and World Bank disbursements. The Central Bank of West African States Moderate growth projections and expected lower inflation should maintained its policy rates at 3.5 percent for liquidity calls and 5.5 contribute to continuing poverty reductions of about 1 percentage percent for the marginal lending facility. point per year. With high population growth, the decrease in the number of poor is very limited, with more than 5.5 million Burkin- The fiscal deficit improved to 5.6 percent of GDP, driven by lower abes expected to remain poor. expenditure on public wages (-0.4 pp) and subsidies (-0.3 pp) amid robust revenue mobilization. The deficit was predominantly fi- Downside risks to the outlook include a reversal of security gains, nanced by domestic borrowing from the regional market, where climate shocks, debt roll-over, financial sector challenges, and ad- Burkina faced a significant surge in interest rates exceeding 9 per- verse international dynamics. On the upside, reforms to improve cent for 12-month bills. While debt roll-over is high, the risk of debt the investment climate for private sector companies, especially in distress remains moderate. energy, could lift the growth potential. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.5 3.0 4.9 4.3 4.7 5.0 Private consumption 4.4 5.0 5.8 4.4 6.1 6.3 Government consumption 5.2 4.5 11.6 5.3 2.4 3.6 Gross fixed capital investment 4.2 8.9 8.7 4.8 2.8 2.3 Exports, goods and services -2.8 -2.2 -3.1 2.0 2.6 2.7 Imports, goods and services 8.2 9.0 7.5 4.2 3.5 3.3 Real GDP growth, at constant factor prices 0.7 3.3 4.9 4.3 4.7 5.0 Agriculture 5.5 1.1 11.0 2.9 3.9 4.4 Industry -8.0 2.2 -2.8 3.0 2.4 2.3 Services 4.2 4.6 6.6 5.5 6.0 6.5 Inflation (consumer price index) 14.1 0.7 4.2 3.0 2.5 2.0 Current account balance (% of GDP) -7.2 -8.0 -6.4 -5.8 -5.3 -4.9 Net foreign direct investment inflow (% of GDP) 3.4 1.9 1.2 1.1 1.0 0.9 Fiscal balance (% of GDP) -10.3 -6.5 -5.6 -4.7 -3.8 -3.6 Revenues (% of GDP) 20.9 21.4 21.4 21.3 21.4 21.3 Debt (% of GDP) 56.4 54.0 54.9 54.4 53.7 52.7 Primary balance (% of GDP) -8.3 -4.2 -3.6 -2.7 -1.6 -1.2 1,2 International poverty rate ($2.15 in 2017 PPP) 26.4 26.2 23.2 21.4 19.8 19.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 62.5 61.3 58.0 55.7 54.3 52.8 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 88.9 88.2 86.5 85.0 84.0 83.1 GHG emissions growth (mtCO2e) 3.5 3.9 4.1 4.1 4.1 4.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 213 This outlook reflects information available as of April 10, 2025. 1 2 BURUNDI Population Poverty million millions living on less than $2.15/day 14.0 7.8 3 4 Life expectancy at birth School enrollment Real GDP growth reached 3.5 percent in 2024, up from 2.7 years primary (% gross) percent in 2023, supported by agriculture and government spending but weighed down by severe fuel shortages. 62.0 105.2 5 6 Poverty incidence remains among the highest globally, at GDP GDP per capita nearly 63 percent in 2024, while double-digit inflation, current US$, billion current US$ triple-digit forex premium, regional tensions, and global economic slowdown weigh on growth. 3.6 254.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2020 (2017 PPPs). 3/ 2022. 4/ 2020. 5/ 2024. 6/ 2024. over monetary policy. Rising domestic debt and low invest- Key conditions and challenges ment in infrastructure and human capital have exacerbated social vulnerabilities. Burundi’s economy remains fragile, constrained by weak funda- mentals, rapid population growth, soil erosion, and weak gov- Poverty remains widespread, with 63 percent of the population ernance. Over 85 percent of the labor force is engaged in agri- living on less than $2.15 per day (2017 PPP) in 2024. Education culture, primarily in low-productivity subsistence farming. Key and healthcare outcomes remain weak; fewer than half of chil- traditional exports, such as coffee and tea, face declining vol- dren complete primary school, gross secondary enrolment is just umes. Although Burundi has significant deposits of energy tran- 46 percent, and chronic malnutrition affects 56 percent of chil- sition minerals, the mining sector remains underdeveloped due dren under five. mainly to inadequate infrastructure, limiting its contribution to 0.5 percent of GDP. Strengthening governance and infrastructure, including trans- portation and digital technologies is critical to boosting private sec- Structural Balance of Payments (BOP) deficits compound these tor, attracting FDI, and unlocking growth and export-driving sectors challenges. Foreign direct investment (FDI) remains negligible, and such as mining and agro-industry. Equally, critical are measures to grants, which averaged 20–25 percent of GDP before the 2015 po- restore macroeconomic stability, including unifying exchange rates litical crisis, has since dropped to 4.1 percent. In 2024, export earn- and consolidating public finances. ings covered only 25 percent of imports, far below the Sub-Saharan Africa average. Recent developments Since the crisis, macroeconomic imbalances have persisted, in- cluding large fiscal and external deficits, an overvalued official ex- Official estimates indicate real GDP growth of 3.3 percent (y-o- change rate fueling a parallel forex market, and fiscal dominance y) in Q3 2024, following 5.8 percent in Q1 and 4.2 percent in FIGURE 1 / Public debt, fiscal and current account deficits FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent of GDP Percent of GDP Poverty rate (%) Real private consumption per capita (constant LCU) 80 20 100 134000 70 90 133000 60 15 80 132000 70 50 131000 60 40 10 130000 50 129000 30 40 128000 20 5 30 20 127000 10 10 126000 0 0 0 125000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Public domestic debt Public external debt International poverty rate Lower middle-income pov. rate Fiscal deficit (rhs) Current account deficit (rhs) Real priv. cons. pc Sources: Official statistics and World Bank staff estimation. Source: World Bank. Notes: See footnotes in table on the next page. 214 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Q2. Annual growth is estimated at 3.5 percent, up from 2.7 percent in 2023. On the supply side, growth was dri- Outlook ven by services (4.2 percent), notably public administra- tion—which accounts for 39 percent of GDP in 2023, and Despite persistent BOP strains and global uncertainty, growth is a rebound in agriculture (3.7 percent, up from 1.5 per- projected to stabilize at 3.5 percent in 2025. A rebound in coffee ex- cent in 2023), supported by favorable weather. Industrial ac- ports—driven by governance and pricing reforms—is expected to tivity expanded by just 1.0 percent (down from 3.4 percent support agricultural output, while manufacturing will benefit from in 2023), weighed down by fuel shortages and foreign ex- a new hydropower plant coming online by mid-2025. Medium-term change constraints, though a recovery began in Q2-Q3 with growth is projected to average 3.8 percent in 2026–27, supported the commissioning of three power plants. On the demand by agriculture, manufacturing, and public spending. side, growth was supported by public (+4.4 percent) and pri- vate (+2.2 percent) consumption. Inflationary pressures are expected to intensify, fueled by rising monetary financing, a widening exchange rate premium, and glob- Annual inflation averaged 20.2 percent in 2024, down from al uncertainties. Average inflation is projected to nearly double 27.1 percent in 2023, but disinflation stalled mid-year, as to 39.1 percent in 2025, before moderating to 27.9 percent over deficit monetization intensified. Inflation fell to its low- 2026–27. High inflation will continue to weigh on household wel- est point in May 2024, at 12.1 percent (y-o-y), but rose fare, with per capita consumption growth averaging 0.8 percent in to 39.7 percent by February 2025, driven by rising food, 2026–27 and poverty remaining at 62 percent. transport, and utility costs amid fuel shortages and widen- ing forex parallel market premium. Rising food inflation dis- The fiscal deficit is expected to narrow to 5.6 percent of GDP in proportionately affects low-income households, threatening 2025 and to 4.4 percent by 2027, driven by improved revenue poverty reduction prospects. performance and spending-driven fiscal consolidation. Public debt, while high, is projected to decline gradually, reaching 64.6 percent The fiscal deficit narrowed to 6.9 percent of GDP in 2024 (from by 2027. The CAD is forecasted to remain elevated, averaging 10.7 9.3 percent in 2023), driven by improved revenue collection, but percent of GDP over 2025-27 as mining exports expand and forex was financed primarily through costly domestic borrowing, includ- constraints lessen. ing Central Bank advances. Public debt rose to 69.3 percent of GDP (up from 68.4 percent). Unlocking growth and improving living standards will require sus- tained structural reforms, particularly on exchange rate alignment The current account deficit (CAD) narrowed to 11.5 percent of and attracting FDI and concessional financing. While downside GDP as import growth slowed and exports edged up, though risks include fiscal slippages and a trade-driven global slowdown, trade credits remained the primary financing source. By February upside potential includes favorable commodity price shocks—es- 2025, international reserves covered only 1.6 months of imports, pecially gold amid global uncertainty—and near-term gains from while the forex premium was 156 percent (from 59 percent a the planned Musongati nickel railway, contingent on effective use year earlier). of local content. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.8 2.7 3.5 3.5 3.7 4.0 Private consumption 2.4 2.2 2.2 2.7 3.0 3.3 Government consumption 5.9 5.4 4.4 5.2 5.2 6.0 Gross fixed capital investment 4.0 4.0 3.7 4.6 4.4 5.7 Exports, goods and services 5.8 2.9 1.0 7.0 7.8 8.2 Imports, goods and services 7.0 4.2 1.4 4.5 4.8 5.7 Real GDP growth, at constant factor prices 1.8 2.7 3.5 3.5 3.7 4.0 Agriculture -0.8 1.5 3.7 3.7 3.8 4.2 Industry 3.2 3.4 1.0 2.5 3.2 3.5 Services 3.1 3.1 4.2 3.6 3.7 4.0 Inflation (consumer price index) 18.8 27.1 20.2 39.1 31.3 24.5 Current account balance (% of GDP) -15.9 -14.4 -11.5 -10.8 -10.7 -10.7 Net foreign direct investment inflow (% of GDP) 0.3 0.0 0.0 0.0 -0.1 -0.1 Fiscal balance (% of GDP) -10.7 -9.3 -6.9 -5.6 -5.3 -4.4 Revenues (% of GDP) 22.8 24.9 23.8 25.0 25.2 26.1 Debt (% of GDP) 70.2 68.4 69.3 68.2 66.1 64.6 Primary balance (% of GDP) -8.2 -6.9 -4.8 -3.2 -2.6 -1.6 1,2 International poverty rate ($2.15 in 2017 PPP) 62.1 62.4 62.7 62.5 62.1 61.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 86.2 86.2 86.4 86.2 86.2 86.0 GHG emissions growth (mtCO2e) 2.6 2.4 2.6 2.9 2.3 2.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2020-EICVMB. Actual data: 2020. Nowcast: 2021-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2020) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 215 This outlook reflects information available as of April 10, 2025. 1 2 CABO VERDE Population Poverty thousand thousands living on less than $3.65/ day 524.9 99.1 3 4 Growth remains tourism-driven and reached an estimated Life expectancy at birth School enrollment years primary (% gross) 7.3 percent in 2024. Strong growth in services, the recovery in agriculture, and low inflation are expected to have re- 74.7 96.4 duced poverty to 14.4 percent in 2024. However, the out- 5 6 look faces downside risks from the uncertainty around GDP GDP per capita current US$, billion current US$ global trade policy shifts—which could weaken tourism demand and disrupt global supply chains—and limited 2.8 5269.8 progress with SOE reforms. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2015 (2017 PPPs). 3/ 2022. 4/ 2021. 5/ 2024. 6/ 2024. growth—ultimately unlocking Cabo Verde’s potential and ensuring Key conditions and challenges long-term economic stability. Cabo Verde has made significant progress since indepen- dence, but structural challenges remain—including poor con- Recent developments nectivity and infrastructure gaps, which contribute to high costs of essential services like electricity. The economy has Tourism remains the mainstay of the economy. Growth reached been heavily reliant on all-inclusive tourism offerings, which an estimated 7.3 percent in 2024, driven by strengthening in along with a strong state presence and limited linkages be- tourism activity and a gradual recovery in agricultural activity af- tween foreign direct investment (FDI) sectors and the broad- ter years of drought. Tourist arrivals neared 1.2 million (+16.5 er economy, has limited diversification efforts. Poverty is percent y/y) and, while still a small share, there has been an higher in rural areas, with significant heterogeneity in living increase in tourists outside the all-inclusive offering. Services ac- conditions across islands. Recent shocks, such as the pan- counted for nearly 70 percent of output (5.4pp of growth), with demic and soaring inflation in 2022 have further exposed hotels and transport representing a large share. Service exports the economy’s vulnerabilities. Additionally, Cabo Verde grap- (+27.2 percent y/y) and private consumption (+6.3 percent y/y) ples with high public debt, partly due to debt-financed fiscal remain key drivers of growth. policies after the 2008/09 Global Financial Crisis and support to underperforming state-owned enterprises (SOEs) through Lower energy and food prices put average headline inflation on-lending and guarantees. at 1 percent, down from 3.7 percent in 2023. At an average 1 percent, food inflation was significantly lower than previous Fiscal and structural reforms are essential to build resilience years (15.7 percent in 2022, 8.9 percent in 2023). Strong growth against external shocks, boost private sector productivity, re- in services, the recovery of agriculture, the moderation of infla- duce transport costs, and promote sustainable, inclusive tion, and sustained remittances, contributed to reducing poverty FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 20 60 600000 15 50 500000 10 5 40 400000 0 30 300000 -5 -10 20 200000 -15 10 100000 -20 -25 0 0 2015 2017 2019 2021 2023 2025 2027 2015 2017 2019 2021 2023 2025 2027 Agriculture Industry Services International poverty rate Lower middle-income pov. rate Net taxes GDP Upper middle-income pov. rate Real GDP pc Sources: INE and World Bank estimates. Source: World Bank. Notes: See footnotes in table on the next page. 216 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. (US$3.65 per day PPP 2017 line) by 1.8 percentage points, reaching public sector efficiency and efforts to crowd-in private investment. 14.4 percent in 2024, down from 16.2 percent in 2023. Lower oil prices will contribute to keeping inflation low in 2025, and in line with the Euro-area over the medium-term (2 percent). Un- Strong tourism performance put the current account (CA) at a sur- der these favorable conditions, poverty is projected to continue de- plus of 3.7 percent of GDP in 2024 (2.5 percent deficit in 2023). clining, reaching 13.3 percent in 2025 and falling to 11.2 percent by Tourism earnings (over 70 percent service export earnings) surged, 2027, equivalent to lifting approximately 7,000 Cabo Verdeans out underscoring the sector's critical role in supporting external bal- of poverty (compared to 2024). ances. A six percent increase in remittances, a key source of foreign exchange, further enhanced external stability. The CA improve- The accelerated implementation of public investments will off-set ment has masked a weaker financial account—as the interest rate the potential benefit of lower oil and commodity import prices, differential with the Eurozone led to outflows from financial insti- with the current account deficit (CAD) peaking at 2.3 percent of tutions. Despite this, at EUR 736 million at end-2024, gross interna- GDP by 2026. Gross international reserves will remain stable at tional reserves remain adequate, covering 5.9 months of imports. 5.5 months of imports, enough to support the currency peg. The fiscal deficit widened to 1.1 percent of GDP in 2024 (0.3 percent Increased public investments and continued roll-out of wage-bill in 2023) driven by higher public investment, local elections spend- reforms will widen the fiscal deficit to 1.5 percent of GDP in 2025. ing and expanded social programs. Revenues remained relatively Despite this, sustained efforts to enhance tax collection, added stable at 24.7 percent of GDP, supported by stronger than expect- proceeds from SOE restructuring and commitment to contain ex- ed tax revenues. This, along with strong GDP growth, lowered cen- penditures will reduce the deficit to 0.6 percent of GDP by 2027, tral government debt by 6.2pp to 110.2 percent of GDP (117.7 per- with a primary surplus of 1.1 percent. This should allow public cent including SOEs’ guaranteed debt). Despite this, the fiscal po- debt—excluding SOEs’ guaranteed debt—to decline to 93.9 percent sition continues to be subject to risks from support to SOEs, rigid of GDP by 2027. expenditures and elevated debt servicing costs. Ongoing global uncertainties—including the escalation of trade policy changes—pose risks to the outlook. For example, subdued Outlook global growth and reduced partner engagement could negatively impact tourism demand, foreign investment and remittances—all Growth is projected at 5.9 percent in 2025 as low-cost airline oper- vital to the economy. Political pressures ahead of the 2026 elec- ators settle into the market, and will trend towards its potential of tions may impact the pace of reforms, while climate change and around 5 percent over the medium-term, supported by improved natural hazards pose long-term challenges. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 15.8 5.5 7.3 5.9 5.3 4.9 Private consumption 13.7 6.6 6.3 6.2 6.1 5.2 Government consumption -2.8 2.5 2.3 8.1 2.6 5.4 Gross fixed capital investment -10.3 -12.9 1.5 4.0 7.8 3.2 Exports, goods and services 78.9 -6.1 23.9 5.0 5.1 6.7 Imports, goods and services 18.2 -8.7 10.0 5.8 6.1 6.2 Real GDP growth, at constant factor prices 12.4 5.4 7.3 5.9 5.3 4.9 Agriculture -6.6 -7.1 8.1 5.7 5.7 4.6 Industry 7.5 1.3 3.2 3.2 3.3 3.1 Services 14.7 6.9 7.9 6.3 5.6 5.2 Inflation (consumer price index) 7.9 3.7 1.0 1.8 2.0 2.0 Current account balance (% of GDP) -3.5 -2.5 3.7 -1.4 -2.3 -1.6 Net foreign direct investment inflow (% of GDP) 4.6 6.0 3.3 3.0 2.9 2.9 Fiscal balance (% of GDP) -4.0 -0.3 -1.1 -1.5 -1.3 -0.6 Revenues (% of GDP) 22.6 25.1 24.7 26.7 25.2 24.6 Debt (% of GDP) 126.7 116.4 110.2 104.6 99.3 93.9 Primary balance (% of GDP) -1.8 2.0 1.3 0.5 1.1 1.1 1,2 International poverty rate ($2.15 in 2017 PPP) 4.3 4.2 3.5 3.0 2.7 2.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 17.0 16.2 14.4 13.3 12.1 11.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 46.5 44.6 41.2 38.7 37.0 35.5 GHG emissions growth (mtCO2e) 0.6 4.3 4.0 4.3 4.4 0.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2015-IDRF. Actual data: 2015. Nowcast: 2016-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 217 This outlook reflects information available as of April 10, 2025. 1 2 CAMEROON Population Poverty million millions living on less than $3.65/day 29.4 12.6 3 4 Life expectancy at birth School enrollment Cameroon’s economy grew 3.7 percent in 2024, but years primary (% gross) poverty rose to 23.3 percent due to persistent job scarcity. Fiscal consolidation cut the deficit to 0.4 percent of GDP 61.0 112.6 5 6 and reduced debt to 41.7 percent of GDP. Medium-term GDP GDP per capita growth is supported by better power supply and public current US$, billion current US$ investment, but risks from uncertain international aid, markets, and upcoming elections threaten growth, trade, 53.1 1806.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. and inflation despite only moderate projected impacts. 4/ 2023. 5/ 2024. 6/ 2024. doubled, reshaping the poverty landscape. Rising conflict, affect- Key conditions and challenges ing now nine out of ten regions, and natural disasters have pro- pelled rural-urban migration, increasing pressure on urban areas Cameroon’s economy has shown resilience in the face of ex- for jobs and services. These vulnerabilities may intensify during ternal shocks, but multiple structural weaknesses hinder its this election year. potential. With infrastructural deficiencies, underdevelopment of the financial system, and overlapping crises between 2020 and 2023, per capita incomes stagnated, and GDP growth av- Recent developments eraged 2.6 percent, far below the target of 6.6 percent set out in the National Development Strategy (NDS30). Labor force Cameroon’s real GDP grew by 3.7 percent in 2024. Cocoa participation fell from 79.1 to 64.3 percent between 2005 and and cotton exports rose thanks to higher yields and prices 2021. Cameroon needs a major rethink of its growth model, and improved power supply, aiding commodity processing emphasizing private sector participation, redefining the state’s and industrial growth. Though oil production slowed, the role in the economy, and addressing the root causes of low current account deficit fell from 4.1 to 3.1 percent of GDP labor productivity. between 2023 and 2024, thanks to higher agricultural ex- ports and lower imports. Public investment and private con- The number of people living under the international poverty line sumption fueled growth on the demand side. Average infla- ($2.15 in 2017 PPP) is estimated to have increased from 6.2 to tion dropped from 7.4 percent to 4.5 percent by year-end, ow- over 6.9 million between 2021 and 2024. Low economic growth ing to declining food and transportation sub-components and combined with rapid population growth and insufficient job cre- government price controls. Monetary policy remained tight to ation explains the lack of progress in poverty reduction. Previous- bolster the region’s external position and curb inflation below ly, between 2014 and 2021, the poverty incidence in urban areas the 3.0 percent target. However, fiscal pressures from other had nearly doubled, and the number of urban poor more than Central African Economic and Monetary Community (CEMAC) FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 90 920000 80 900000 10 70 880000 5 60 860000 50 0 840000 40 820000 30 -5 20 800000 -10 10 780000 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 760000 Gov. cons. Exports GFCF 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 218 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. countries affected CEMAC’s net foreign assets, delaying the IMF program review for Cameroon. Outlook Continued fiscal adjustment brought the fiscal deficit down from Real GDP growth is projected at 3.8 percent on average in 0.7 percent to 0.4 percent of GDP in 2024. Revenue measures 2025-2027, driven by higher power supply, and the scaled-up like tax administration digitalization and tax base broadening public investment program supported by higher tax revenues. have accompanied measures to streamline current expenditures Inflation is anticipated to reach the 3 percent target by 2027. in goods and services and fuel subsidies. As a result, non-oil The fiscal deficit would remain around 1.1 percent of GDP in revenue to GDP ratio increased from 13.7 percent to 13.9 per- the medium term, allowing the debt to GDP ratio to further cent while current expenditures declined from 13.9 percent of decrease. The projected increase in tax revenue will not ful- GDP to 12.6 percent of GDP between 2023 and 2024. The pri- ly counterbalance falling oil revenues (induced by depleting oil mary balance remained positive and doubled, reducing public fields), while current expenditures are expected to continue debt further to 41.7 percent of GDP by end-September 2024 being streamlined. The current account deficit will remain at against 43.0 percent at the end of 2023. Cameroon’s public debt around 4.3 percent of GDP over the medium term, reflecting is sustainable but faces high risk of distress due to the debt ser- the decline in oil production, the mixed effect of the govern- vice-to-public revenue and debt service-to-export revenue ratios ment industrial policies, and higher imports needed for the breaching the thresholds. scaled-up public investment. To compensate for inflationary pressures, tax breaks for sectors Real per capita growth is projected to be insufficient to alleviate like agriculture were introduced and the minimum wage and pub- poverty over the next three years. As a result, an additional lic sector salaries were raised. The minimum wage for public em- 125,937 people are expected to fall into extreme poverty, bring- ployees covered by the Labor Code increased from CFA 36,270 ing the total to over 7 million by 2027. This outlook remains vul- to CFA 41,875; the agricultural minimum wage increased to CFA nerable to several risks, including: (i) uncertainty and shifts in the 45,000; and the non-agricultural minimum wage increased to CFA global aid, trade, investment, and commodity and financial mar- 60,000. Since close to 90 percent of the workforce is in the infor- kets context, (ii) a continued security crisis, (iii) lower-than-expect- mal sector, these measures are expected to have a limited impact ed budget support from external donors, (iv) ongoing energy sup- on most of the workforce and on poverty, although they could ply shortages, and (v) potential tensions surrounding the presi- slow down job creation. dential elections in October 2025. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.7 3.2 3.7 3.7 3.8 3.9 Private consumption 4.3 3.5 4.9 3.8 3.9 4.1 Government consumption -5.7 2.9 -5.1 4.5 2.4 3.3 Gross fixed capital investment 10.5 3.2 7.5 5.0 5.7 4.9 Exports, goods and services 3.2 0.1 -2.4 -1.4 -0.9 -0.6 Imports, goods and services 5.3 1.9 2.1 2.2 2.2 2.4 Real GDP growth, at constant factor prices 3.6 3.1 4.0 3.7 3.8 3.9 Agriculture 3.4 2.2 3.9 3.6 3.4 3.4 Industry 3.3 2.3 1.6 2.7 3.0 3.2 Services 3.8 3.8 5.2 4.2 4.3 4.4 Inflation (consumer price index) 6.3 7.4 4.5 3.7 3.2 3.0 Current account balance (% of GDP) -3.3 -4.1 -3.1 -4.0 -4.3 -4.3 Fiscal balance (% of GDP) -1.1 -0.7 -0.4 -1.0 -1.0 -1.2 Revenues (% of GDP) 16.3 16.6 15.8 15.4 15.6 15.5 Debt (% of GDP) 43.7 43.0 41.7 39.2 38.7 36.9 Primary balance (% of GDP) -0.3 0.3 0.6 0.2 0.2 0.1 1,2 International poverty rate ($2.15 in 2017 PPP) 22.8 23.6 23.3 23.0 22.7 22.3 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 46.5 47.6 47.5 47.1 46.5 45.9 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 76.0 76.8 76.7 76.1 75.8 75.3 GHG emissions growth (mtCO2e) 0.4 0.9 2.2 2.5 2.1 0.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-ECAM-V. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 219 This outlook reflects information available as of April 10, 2025. CENTRAL AFRICAN 1 2 Population Poverty million millions living on less than $2.15/day 5.9 3.4 REPUBLIC Life expectancy at birth years 3 School enrollment primary (% gross) 4 Economic growth increased moderately to 1.5 percent in 54.5 110.7 5 6 2024, hampered by limited access to energy and essential GDP GDP per capita current US$, billion current US$ services. This leaves 65.3 percent of households living in extreme poverty. Concerns for 2025, an election year, 2.8 481.7 include a fragile liquidity situation and dwindling global Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. flows of aid, especially humanitarian assistance and social 4/ 2017. 5/ 2024. 6/ 2024. sector support, will create further hardship for most of the population exposed to poverty. electricity supply. Key sectors, including agro-processing (e.g., Key conditions and challenges breweries), telecom, and retail, showed signs of recovery while food agriculture (e.g., cassava) remained steady. The telecom sec- As a result of weak institutions and high levels of instability, the tor recovery was driven by increased cell phone activity, 3G net- Central African Republic (CAR) continues to be plagued by extreme work expansion, and 4G license sales in late 2024 and early 2025, poverty despite its natural wealth. Since the 2012 civil war, per capi- along with increased mobile money use. Public sector expansion ta income has dropped by a third and currently around two-thirds was enabled by external financing. of the population lives on less than US$2.15-a-day (2017 PPP). Chronic fuel shortages due to reduced imports by river (structurally Despite a slight recovery and boost in consumption in late 2024, 80-85 percent of fuel imports) have hurt economic activity and gov- inflation is estimated to be historically low at 1.5 percent for the ernment revenues in recent years, with some easing in late 2024. year. After keeping the policy rate at 5 percent for two years, the Weak revenue mobilization, social sector spending pressures, and Bank of Central African States (BEAC) lowered it to 4.5 percent in a freeze in donor budget support have strained public finances. March 2025. CAR's banking sector remains underdeveloped, with CAR is at high risk of debt distress, and liquidity risks threaten its only four commercial banks and limited financial services.Bank bal- ability to pay civil service salaries and essential services. ance sheets expanded by 14.4 percent, driven by increased loans, deposits, and cash surpluses. The non-performing loans (NPL) ratio improved to 12.7 percent in 2024 from 16.4 percent in 2023. Recent developments The fiscal deficit is estimated to have risen to 4.9 percent in 2024 Economic growth is estimated to have increased from 0.7 percent from 3.5 percent in 2023 due to increased spending on goods in 2023 to 1.5 percent in 2024 on account of increased fuel and and services and transfers, including to foreign missions, overseas FIGURE 1 / The dynamic and composition of public debt in recent FIGURE 2 / Actual and projected poverty rates and real GDP per years capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 70 100 300000 60 90 250000 80 50 70 200000 40 60 50 150000 30 40 20 100000 30 10 20 50000 10 0 0 0 2020 2021 2022 2023 2024e 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 External debt Domestic debt International poverty rate Lower middle-income pov. rate General government debt Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 220 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. health services, and equipment for local armed forces, offsetting further improve the fuel supply. A 30,000-ton diesel donation minimal domestic capital spending and sustained DRM efforts. from Russian Federation may temporarily boost private activities CAR's public and publicly guaranteed (PPG) debt is estimated to in 2025, with potential fiscal benefits if managed well. Poverty is have reached 60.7 percent of GDP in 2024, up from 58.2 percent in expected to remain around 65-66 percent due to weak growth the 2023 with domestic/regional debt having risen to 28.8 percent and declining per capita income. Moreover, the halt of USAID's of GDP mainly due to bond issuance towards the end of 2024 to support to CAR of about US$110 million as of early 2025 could compensate for delays in the disbursement of the Extended Credit push up to 133 thousand more people into extreme poverty. Facility program under the third review. The fiscal deficit is projected to narrow to 2.3 percent of GDP The current account deficit remained at approximately 9.0 percent of in 2025 and 1.5 percent in 2026-27, dependent on donor grants, GDP, driven by increased energy and equipment imports, coupled DRM, and PFM reforms. Public debt should stabilize at 57.3 per- with reduced gold and diamond exports, due to temporal reduction cent of GDP by 2027, with domestic debt at 26.9 percent. The in gold output and diamond pricing. These minerals, along with tim- current account balance may improve with increased gold and ber, are key to the export portfolio. Although gold prices surged by sawn wood production but will still face deficits due to energy, 22.9 percent to US$2,387.7 per troy ounce in 2024 and CAR resumed equipment, and food expenditures. Enhancing energy production official diamond exports under the Kimberley Process after an and access is crucial for attracting investments key tradable sec- 11-year embargo, gold production declined due to security issues tors. Inflation is expected to stabilize below 3.0 percent by 2027, in mining zones, and diamonds faced competition from synthetic conditional on energy price moderation. alternatives. Structural challenges include mineral smuggling, low competitiveness, and weak global value chain integration. Reduced global flows of aid, especially humanitarian assistance and social sector support, will create further hardship for the Extreme poverty remains widespread. In 2024, around 65.3 per- large share of the country’s population already living in extreme cent of the population—3.9 million people—were estimated to live poverty. The changing trade, investment, and financial and com- with less than US$2.15 (2017 PPP) per person per day. Spatial dis- modity markets context is projected to have moderate immediate parities are stark and extreme poverty incidence in rural areas impacts on growth and trade due to CAR’s very limited exports, reaches 76.1 percent, compared to 49.8 percent in other urban ar- including to the US. eas and 20.2 percent in Bangui. Downside risks prevail. Elections could cause fiscal slippages and stability risks. The shifting global economic context carries signif- Outlook icant risks for CAR’s economic recovery, especially if aid flows re- main limited or further decline, uncertainty in trade policy persists, Real GDP growth is projected to reach 2.1 percent in 2025 and and the cost of borrowing remains elevated or further increases. 2.5 percent in 2026-27, still below the 3.1 percent population Risks also arise from rearrangements in the global security archi- growth rate. This remains contingent on policy adjustments to tecture to CAR’s very fragile emergence from conflict. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 0.5 0.7 1.5 2.1 2.2 2.8 Private consumption 0.0 1.2 2.1 1.2 2.3 2.9 Government consumption -8.2 3.5 11.2 -6.4 2.0 2.1 Gross fixed capital investment -4.5 -2.7 5.3 4.8 1.9 4.2 Exports, goods and services 2.6 9.0 5.5 13.8 6.7 4.1 Imports, goods and services -5.5 5.5 9.9 4.0 4.9 4.3 Real GDP growth, at constant factor prices 1.0 0.7 1.6 2.1 2.2 2.9 Agriculture 2.2 2.3 1.7 1.9 2.2 2.3 Industry -3.9 -0.5 0.9 1.2 1.3 1.4 Services 2.4 0.1 1.8 2.7 2.5 4.0 Employment rate (% of working-age population, 15 years+) 66.0 66.2 66.2 66.2 66.2 66.2 Inflation (consumer price index) 5.6 3.0 1.5 2.7 3.3 2.8 Current account balance (% of GDP) -12.9 -9.3 -9.0 -8.5 -8.1 -7.6 Fiscal balance (% of GDP) -5.3 -3.6 -4.9 -2.3 -1.3 -1.8 Revenues (% of GDP) 12.3 14.5 14.6 16.2 17.0 16.5 Debt (% of GDP) 51.0 58.2 60.5 59.5 58.6 57.3 Primary balance (% of GDP) -4.9 -3.0 -4.7 -2.1 -1.0 -1.5 1,2 International poverty rate ($2.15 in 2017 PPP) 64.0 65.9 65.3 65.2 65.5 65.3 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 84.8 86.1 85.6 85.5 85.5 85.4 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 95.7 96.4 96.2 96.0 96.0 95.8 GHG emissions growth (mtCO2e) -0.3 -0.3 -0.4 -0.3 -0.2 -0.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 221 This outlook reflects information available as of April 10, 2025. 1 2 CHAD Population Poverty million millions living on less than $2.15/day 20.3 5.7 3 4 Life expectancy at birth School enrollment In 2024, GDP growth is estimated at 3.7 percent (-1.4 percent years primary (% gross) per capita), driven by the non-oil sector. Demand pressures, floods, and fuel price adjustments pushed inflation to 5.7 per- 53.0 91.8 5 6 cent. Hence, the poverty rate has risen to 39.4 percent. Growth GDP GDP per capita is projected to rise gradually, supported by an expansion in current US$, billion current US$ non-oil activities. The outlook is subject to downside risks, in- cluding lower oil prices compounded by global trade policy 20.8 1023.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. uncertainties, climate shocks, and heightened insecurity. 4/ 2023. 5/ 2024. 6/ 2024. 2024 presidential election and the conclusion of the parlia- Key conditions and challenges mentary, regional, and local elections. However, Chad con- tinues to be adversely affected by conflicts and violent Chad’s economic growth has been volatile and weak, reflecting groups in neighboring countries, which can strain stability its dependence on the oil sector. The oil sector accounts for 15 and public finances. In 2024, military spending surged by percent of Chad’s economic output, 41 percent of fiscal revenues, 19.1 percent above the initial budget, reaching 23.5 percent and 76 percent of exports. of spending. According to UNHCR, Chad was hosting over 1.3 million refugees (mostly Sudanese from the war in Sudan) as Chad is also highly susceptible to climate variability and nat- of February 2025. ural disasters. Agriculture accounts for 40 percent of out- put and provides a livelihood for a significant portion of the population. In recent years, repeated episodes of droughts Recent developments and floods have impaired agricultural production and, com- bined with conflict and displacement, led to chronic food Chad’s economy is estimated to have grown by 3.7 percent in insecurity. During July-October 2024, torrential rains flood- 2024 (-1.4 percent per capita due to the large influx of refugees), ed over 217,000 houses, destroyed 432,000 hectares of crops, driven mainly by the non-oil sector (+4.6 percent), while the oil killed thousands of livestock, and adversely impacted 1.5 million sector growth was modest (+1.4 percent), reflecting a 4.2 percent people. As of December 2024, 2.4 million people (14 percent of increase in oil production. the population) were acutely food insecure, up by 400,000 from the previous year. On the supply side, services are estimated to have contributed 3.0 pp to growth, followed by the non-oil industry with 0.8 pp. Chad’s most recent political transition was completed with Agriculture contributed negatively (-0.2 pp) due to severe floods. the declaration of President Deby as the winner of the Refugee-driven private consumption was the main demand driver, FIGURE 1 / Oil revenues, non-oil revenues, and grants FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 16 100 800000 14 90 700000 12 80 600000 70 10 500000 60 8 50 400000 6 40 300000 4 30 200000 20 2 100000 10 0 0 0 2022 2023 2024e 2025f 2026f 2027f 2022 2023 2024 2025 2026 2027 Oil revenues Grant revenues International poverty rate Lower middle-income pov. rate Non-oil revenues Total revenues and grants Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 222 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. contributing 3.0 pp, followed by public consumption, boosted by spending on wages and elections. Outlook The current account deficit (CAD) is estimated to have risen to 1.8 per- GDP growth is projected at 3.5 percent (0.03 percent per capita) in cent of GDP in 2024 reflecting increased investment income trans- 2025, supported by a further expansion in non-oil activity, particular- ferred abroad and a deteriorating goods and services balance. ly by services and agriculture. Over the medium term, GDP growth is expected to accelerate due to the expected rebound in oil pro- The food demand pressures led to higher prices, while floods duction, increased public investment, and private consumption. caused food supply shortages. These factors collectively drove inflation to 5.7 percent in 2024. Food and transportation prices Following a peak at 3.8 percent of GDP in 2025, the fiscal deficit is rose by 8.5 percent, and 15 percent, respectively, over the year. expected to improve to 2.6 percent of GDP by 2027, owing to con- The poverty rate is estimated to have increased by 2.6 pp to tinued efforts to mobilize non-oil revenues and contain non-prior- 39.4 percent in 2024, with a total of 7.9 million people living in ity spending. Public debt is projected to stabilize. Amid lower oil extreme poverty. prices due to the shifts in international trade policy, the CAD is projected to deteriorate to 4.1 percent of GDP in 2025. The infla- The Bank of Central African States (BEAC) sought to contain infla- tion rate is projected to gradually converge to the BEAC target of tionary pressures and support the exchange rate regime. It low- 3 percent by 2027. ered its main policy rate from 5.00 percent to 4.50 percent at the end of March 2025, marking its first cut since 2023, while liquidi- Flood damages and crop losses are expected to lead to a drop in ty injections, which had been suspended for more than a year, re- production and household incomes, and as a result, the extreme sumed. The Central African Economic and Monetary Community poverty rate is expected to increase by 1.0 pp to 40.4 percent in (CEMAC)'s external reserves fell to 4.4 months of import cover at 2025, which translates into an additional 0.48 million people in ex- end-2024, below the 5-month target. treme poverty. Amid continued security restrictions, low social pro- tection coverage, and the ongoing Sudan crisis, extreme poverty is Chad’s fiscal deficit is estimated at 1.9 percent of GDP in 2024. projected to reach 40.6 percent in 2026. Total revenues reached 13.7 percent of GDP, driven by an 18.5 percent increase in non-oil revenues. Government spending is Downside risks to the outlook include a further decline in oil prices, estimated to have risen sharply to 15.6 percent of GDP due to in- regional conflicts, global trade policy uncertainties and natural cat- creased expenditures on elections, military equipment, and flood astrophes. The suspension of specific bilateral aid may affect exter- management. As a result, the non-oil primary balance remained nal financing and assistance to Sudanese refugees. The proactive in deficit at 7.4 percent of GDP. Public debt slightly increased to implementation of the National Development Plan presents an up- 33.3 percent of GDP. side risk to the outlook. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 13.0 4.1 3.7 3.5 4.5 4.4 Private consumption 4.7 4.2 4.5 4.6 4.7 4.9 Government consumption 8.5 2.5 20.6 5.9 1.5 2.0 Gross fixed capital investment 0.9 28.0 1.1 5.7 6.8 6.8 Exports, goods and services 47.7 -7.4 0.2 0.9 6.8 2.6 Imports, goods and services 6.8 7.1 7.3 7.1 7.5 4.2 Real GDP growth, at constant factor prices 3.6 4.1 3.7 3.5 4.5 4.4 Agriculture 4.1 1.8 -0.5 2.4 2.6 3.1 Industry 2.4 6.7 4.4 -0.2 8.2 3.5 Services 4.1 4.9 8.0 7.6 3.9 6.4 Employment rate (% of working-age population, 15 years+) 59.6 59.3 57.7 59.7 59.7 59.7 Inflation (consumer price index) 5.8 4.1 5.7 4.6 3.5 3.0 Current account balance (% of GDP) 9.4 -0.7 -1.8 -4.1 -2.3 -1.4 Fiscal balance (% of GDP) 2.9 -0.5 -1.9 -3.8 -2.4 -2.6 1 Revenues (% of GDP) 13.1 13.5 13.7 13.6 15.4 15.3 Debt (% of GDP) 29.9 29.9 33.3 32.3 32.5 33.1 Primary balance (% of GDP) 3.3 0.2 -1.2 -3.1 -1.7 -2.0 2,3 International poverty rate ($2.15 in 2017 PPP) 30.8 36.8 39.4 40.4 40.6 40.7 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 62.8 68.3 72.3 72.7 73.4 73.6 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 88.8 90.6 91.5 91.2 91.5 91.7 GHG emissions growth (mtCO2e) 2.1 2.1 2.0 2.1 1.9 2.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ 2024 data includes one-off non-oil, non-tax revenues, such as windfalls from the increase in the fuel price and dividends from the Société de raffinage de N'Djamena. 2/ Calculations based on 2022-EHCVM. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 3/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 223 This outlook reflects information available as of April 10, 2025. 1 2 COMOROS Population Poverty million millions living on less than $2.15/day 0.9 0.1 3 4 Life expectancy at birth School enrollment years primary (% gross) Economic growth increased to 3.4 percent in 2024, but the fiscal deficit widened significantly. Poverty remained high at 63.7 94.7 5 6 38 percent. Growth is projected to rise to 4 percent by GDP GDP per capita 2027, as higher tourism revenues from hosting an interna- current US$, billion current US$ tional sporting event are expected to boost private con- sumption. Enhancing revenue mobilization and managing 1.4 1596.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2014 (2017 PPPs). 3/ 2022. contingent liabilities remain critical reform priorities. 4/ 2023. 5/ 2024. 6/ 2024. the development of the small private sector. Low human Key conditions and challenges capital and productivity further hamper economic progress, while limited access to finance curtails entrepreneurship and Comoros faces significant structural challenges, leading to business growth. Additionally, the dominance of traditional low economic growth and stagnating income per capita systems and informal power structures weakens state insti- over the past decades. Weak institutions, a small domestic tutions, compounding governance issues and impeding effec- market, and geographic remoteness have hindered broad- tive policy implementation. er economic progress, contributing to persistent poverty and causing Comoros to lag other small island nations. From The relatively slow pace of reforms to promote economic 2001 to 2022, GDP per capita increased by only US$367 (con- transformation and private sector development have hin- stant 2017 PPP US$), one of the lowest rises among peer dered growth and kept poverty at 38 percent ($3.65/day, nations. The economy relies heavily on private sector con- 2017 PPP) for a decade. Low revenue collection, owing to tax sumption, particularly from grands mariages, which are large exemptions and administrative inefficiencies, undermines fis- traditional weddings, often financed by years of household cal sustainability, while high risk of debt distress limits fund- savings, that drive household spending but do little to foster ing access. Climate risks like cyclones and rising sea levels sustainable growth. further disrupt economic activity, exacerbate poverty, and threaten development. Political economy factors have shaped Comoros' economic trajectory, contributing to growth volatility over the past 40 years. Despite improved political stability in the last two Recent developments decades, economic progress remains sluggish, constrained by several structural challenges. State-owned enterprises Growth increased to 3.4 percent in 2024, up from 3 percent (SOEs) dominate key sectors, limiting competition and stifling in 2023. The services sector remained the main driver of FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percentage points Percent Poverty rate (%) Real GDP per capita (constant LCU) 20 5 80 580000 570000 15 70 4 560000 10 60 550000 3 50 540000 5 530000 40 0 520000 2 30 510000 -5 20 500000 1 -10 490000 10 480000 -15 0 0 470000 2022 2023 2024 2025 2026 2027 2014 2016 2018 2020 2022 2024 2026 Gov. cons. Exports GFCF International poverty rate Lower middle-income pov. rate Private cons. Imports GDP (rhs) Upper middle-income pov. rate Real GDP pc Sources: World Bank, IMF, and Government of Comoros calculations. Source: World Bank. Notes: See footnotes in table on the next page. 224 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. growth, while industry, though the fastest growing sector at 3.8 percent, had limited impact due to its small share in GDP. Outlook Growth in the construction sector was fueled by ongoing public investments in the Galawa Hotel and El-Maarouf Hospital pro- Growth is expected to reach 4 percent in 2027, for only the jects. On the demand side, private consumption was support- third time since 2010. Private consumption is expected to remain ed by lower inflation, which averaged 5 percent in 2024, but a strong in the medium-term, as inflation converges to 3 percent. widening trade deficit partly offset these gains and weighed on Public investments under Plan Comores Emergent 2030 and overall growth. preparations for the 2027 Indian Ocean Island Games, which Co- moros will host, will expand supply capacity, paving the way for a The fiscal deficit widened from 1.3 to 3.9 percent of GDP in 2024, tourism surge in 2027. However, an expected deterioration in the due to higher spending, with 1.5 percent of GDP financed domes- terms of trade could weigh on the outlook. Poverty is expected tically. Total revenue, including grants, stayed constant at 16.6 to fall to 36 percent by 2027. percent of GDP. Customs revenues rose by 0.3 percent of GDP, but corporate income and consumption tax revenues fell by 0.1 Hosting the Games offers a chance to advance Comoros’ tourism and 0.3 percent of GDP, respectively, highlighting the urgent need ambitions, but limited fiscal space and high debt risks require for a strategy to mitigate upcoming WTO-related customs losses. strategic planning to prevent wasteful spending. Capital invest- On the expenditure side, lower-than-expected current spending ment must be carefully managed, prioritizing transparency, sus- was outweighed by higher-than-planned capital expenditures. To- tainability, and long-term benefits. To ease fiscal pressure and im- tal expenditures rose from 17.8 to 20.5 percent of GDP. Public prove debt sustainability, Comoros should boost domestic revenue debt remains sustainable, despite increasing to 36.8 percent of and control spending by cutting tax exemptions, restructuring SOE GDP in 2024. liabilities, increasing procurement transparency, and enhancing public investment management. Domestic credit remained stable at 24.4 percent of GDP in 2024, but its composition shifted toward the public sector. Private sec- The current account deficit is expected to expand in 2025 due to tor credit growth slowed to 1.6 percent, while credit to the pub- the importation of six generators, valued at 0.3 percent of GDP, to lic sector surged by 8.2 percent in 2024. This reflects the rising reinforce energy infrastructure amid severe power cuts. Service ex- fiscal deficit, with increased public borrowing absorbing liquidi- ports are projected to grow, as tourism surges for the Games; how- ty. Vulnerabilities in the financial sector stem from a high level ever, gains may be offset by rising goods imports. External imbal- of nonperforming loans (17 percent of total loans) and declining ances, alongside fiscal pressures, could exacerbate vulnerabilities. provision rates. Downside risks to the outlook include materializing contingent lia- The current account deficit widened from 2.6 to 3.2 percent of GDP bilities, climate-related disasters and heightened global uncertain- in 2024, as goods exports fell by 5 percent. Imports remained sta- ty from US reciprocal tariffs that affect Comoros through indirect ble, while remittance inflows grew 5.4 percent in nominal terms but channels, such as commodity prices, remittances, supply chains, declined as a share of GDP. exchange rates, and investment. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.8 3.0 3.4 3.7 3.8 4.0 Private consumption 0.2 1.9 3.2 3.7 3.4 3.8 Government consumption 5.4 11.6 -2.3 1.3 2.8 3.2 Gross fixed capital investment -62.2 69.8 -13.3 4.3 7.1 6.6 Exports, goods and services 100.8 -10.1 4.6 4.9 5.5 5.5 Imports, goods and services -4.0 8.2 -4.3 3.7 4.5 5.0 Real GDP growth, at constant factor prices 2.6 3.0 3.4 3.7 3.8 4.0 Agriculture -2.6 4.1 3.3 3.7 3.5 3.4 Industry 13.4 3.0 3.8 3.0 2.9 3.3 Services 3.0 2.5 3.4 3.8 4.1 4.4 Inflation (consumer price index) 12.4 8.5 5.0 4.0 3.3 3.0 Current account balance (% of GDP) -0.6 -2.6 -3.2 -4.0 -4.6 -5.0 Fiscal balance (% of GDP) -3.9 -1.3 -3.9 -3.7 -3.3 -3.1 Revenues (% of GDP) 14.1 16.5 16.6 16.3 16.6 16.7 Debt (% of GDP) 34.1 34.8 36.8 37.6 38.0 37.8 Primary balance (% of GDP) -3.7 -0.9 -3.5 -3.3 -2.9 -2.6 1,2 International poverty rate ($2.15 in 2017 PPP) 18.1 18.1 17.9 17.6 17.0 16.5 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 38.4 38.2 38.1 37.2 36.7 35.8 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 67.8 67.2 66.9 65.9 65.2 64.4 GHG emissions growth (mtCO2e) 2.0 1.3 1.8 1.6 1.7 1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2015-EESIC. Actual data: 2014. Nowcast: 2015-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2014) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 225 This outlook reflects information available as of April 10, 2025. DEMOCRATIC REP. 1 2 Population Poverty million millions living on less than $2.15/day 109.3 75.8 OF CONGO Life expectancy at birth years 3 School enrollment primary (% gross) 4 The DRC’s economy slowed down in 2024 but remained 59.7 119.9 5 6 resilient. Positive terms-of-trade, strong export earnings, GDP GDP per capita current US$, billion current US$ and FDI inflows contributed to building up foreign reserves, stabilizing the Congolese franc, and lowering inflation rates. 77.7 710.9 However, escalating conflict in the East has increased secu- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2020 (2017 PPPs). 3/ 2022. rity costs and strained the fiscal situation. While growth 4/ 2023. 5/ 2024. 6/ 2024. prospects are favorable, economic growth has yet to trans- late into significant poverty reduction. set to benefit from structural reforms supported by the IMF Ex- Key conditions and challenges tended Credit Facility, Resilience and Sustainability Facility, and the World Bank's Development Policy Financing. These programs The Democratic Republic of Congo (DRC) has faced decades of aim to enhance macroeconomic stability, financial management, insecurity in its eastern region. Mineral-rich areas have become public administration, business climate, governance, and trans- battlegrounds for armed groups, creating an illicit economy of parency. However, volatile security and high dependence on ex- natural resource exploitation. The situation worsened with the tractive industries expose the DRC to fluctuating global commod- loss of control over North Kivu and South Kivu, causing an esti- ity prices and demand, impacting growth and fiscal revenue. Ad- mated US$900 million decline in government revenue. This tur- dressing challenges in DRC requires significant national and inter- moil affects 14 percent of DRC's population, leading to significant national engagement to strengthen governance, bolster conflict human rights violations and a surge in internally displaced per- resolution, and restore security and state authority. sons (IDPs), with over 400,000 new IDPs in January 2025 alone, adding to the existing 4.6 million in the Kivu. The conflict exacer- bates challenges like widespread extreme poverty and poor ser- Recent developments vice delivery. Weak governance, resource exploitation by armed factions, and high socioeconomic vulnerability contribute to ongo- The economy showed resilience, growing by 6.5 percent in 2024, ing violence and economic difficulties, hindering sustainable de- moderating from 8.6 percent in 2023. Growth was driven by the velopment and poverty reduction. The current escalation, main- extractive industry, which increased by 12.8 percent. Copper and ly in North Kivu and South Kivu, increases the fiscal impact of cobalt production, key exports, rose by 12.1 percent and 30.1 per- the government's response and could undermine the administra- cent in 2024, respectively, due to increased domestic production tion's reform agenda and economic stability. The economy was from the Kamoa-Kakula mining project. Non-mining sectors grew FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 100 180000 90 160000 8 80 140000 70 6 120000 60 100000 4 50 80000 40 60000 2 30 20 40000 0 10 20000 2020 2021 2022 2023 2024 2025 2026 2027 0 0 Agriculture Industry 2012 2014 2016 2018 2020 2022 2024 2026 Services Net taxes on production International poverty rate Lower middle-income pov. rate GDP at constant prices Upper middle-income pov. rate Real GDP pc Sources: Democratic Republic of Congo Statistical Authorities and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 226 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. by 3.2 percent, supported by construction and services. Poverty cobalt exports for four months starting February 2025 to address remained high at 72.9 percent in 2024, highlighting the difficulty oversupply. With cobalt production closely tied to copper’s, this of converting resource-driven growth into broad-based improve- may cause storage challenges and higher costs for mining compa- ments in living standards. nies. Non-mining sectors will gradually support growth, reaching 5.9 percent by 2027 (from 3.8 percent in 2025), driven by construc- The current account deficit (CAD) narrowed to 3.4 percent of GDP tion and infrastructure. Growth is fueled by private investment and in 2024 (from 6.3 percent in 2023) due to increased mining ex- exports. However, it is difficult to gauge the full impact of recent ports, despite high infrastructure costs and income payments to measures as policy shifts may continue to unfold. The CAD is ex- foreign investors. Foreign direct investment (FDI) and external fi- pected to widen to 4.2 percent of GDP in 2025 due to the cobalt nancing boosted foreign reserves to 2.5 months of imports at export ban but will narrow to 3.5 percent by 2027 with rising cop- end-2024, limiting exchange rate fluctuations. The CDF depreci- per export earnings. FDI and external financing will uplift reserves, ated by 8.7 percent at the end of 2024, leading to a drop in in- expected to cover three months of imports by 2027. A strong ex- flation to 11.3 percent. The central bank (BCC) pursued a tight ternal position and absence of BCC’s financing of the budget deficit monetary policy, raising its primary rate from 8.25 percent to 25 will support a stable currency and contain inflation to the medium- percent over three years. term target of 7 percent. Despite increased revenue from mining exports and tax collection, High public-sector wage bills and security costs will keep spending high security costs and wages widened the fiscal deficit to 2.0 per- levels high, worsening the fiscal deficit to 3.8 percent of GDP in cent of GDP in 2024 (from 1.7 percent in 2023). Total expenditures 2025 before decreasing to 1.9 percent by 2027 due to expenditure rose slightly to 16.8 percent of GDP. Military spending remained control and tax administration measures. Defense spending could at 2.0 percent of GDP, while capital spending rose to 3.9 percent rise above 2.5 percent of GDP in 2025 (from 2 percent in 2024), po- (from 3.7 percent in 2023). Higher domestic revenue at 14.4 per- tentially impacting social expenditures and poverty reduction. The cent of GDP in 2024 (from 13.8 percent in 2023) partially offset the government is amending the 2025 budget due to fiscal pressures increase in expenditure, with the balance covered by domestic and from the ongoing conflict. external concessional borrowing. Public debt remained low at 22.1 percent of GDP, with a moderate risk of distress. Extreme poverty is projected to decrease to 71.8 percent by 2026 given favorable economic prospects. Stronger poverty reduction will require using natural resource revenues for pro-poor invest- Outlook ments. Risks are tilted to the downside, as the impact of commod- ity price declines may compound the potential effects of trade un- GDP growth is expected to slow to 5.1 percent in 2025-27 as mining certainty and continued conflict in the east, and persistent health production expansion decelerates. The government suspended outbreaks (mpox) would further strain public spending. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.9 8.6 6.5 4.8 5.0 5.3 Private consumption 3.1 3.5 3.7 3.8 3.9 4.0 Government consumption 22.2 -12.9 9.1 9.2 5.0 4.5 Gross fixed capital investment 27.7 98.0 11.3 5.5 5.6 6.0 Exports, goods and services 18.9 15.7 12.9 4.6 5.4 6.0 Imports, goods and services 24.9 85.6 11.6 5.2 5.2 5.6 Real GDP growth, at constant factor prices 8.9 8.6 6.5 4.8 5.0 5.3 Agriculture 2.4 2.2 2.3 2.5 2.5 2.5 Industry 15.7 14.6 10.2 6.0 6.1 6.0 Services 3.3 3.0 2.6 3.8 4.3 5.4 Employment rate (% of working-age population, 15 years+) 62.7 62.8 62.8 62.8 62.8 62.8 Inflation (consumer price index) 9.3 19.9 17.7 8.9 7.5 7.0 Current account balance (% of GDP) -4.9 -6.3 -3.4 -4.2 -4.0 -3.5 Fiscal balance (% of GDP) -0.9 -1.7 -2.0 -3.8 -2.4 -1.9 Revenues (% of GDP) 16.6 15.1 15.0 14.5 15.9 16.5 Debt (% of GDP) 21.8 24.3 22.1 26.0 25.3 24.2 Primary balance (% of GDP) -0.5 -1.3 -1.6 -3.5 -1.8 -1.3 1,2 International poverty rate ($2.15 in 2017 PPP) 76.0 74.3 72.9 72.5 71.8 70.9 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 90.6 89.7 89.3 89.1 89.0 88.5 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 97.2 97.0 96.8 96.8 96.7 96.6 GHG emissions growth (mtCO2e) 0.2 0.2 0.1 0.1 0.1 0.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2020-EGI-ODD. Actual data: 2020. Nowcast: 2021-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2020) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 227 This outlook reflects information available as of April 10, 2025. REPUBLIC OF 1 2 Population Poverty million millions living on less than $3.65/day 6.2 2.7 CONGO Life expectancy at birth years 3 School enrollment primary (% gross) 4 Income per capita modestly increased in 2024 for the first 63.1 89.0 5 6 time since 2015. Poverty is thus estimated to be stable. GDP GDP per capita current US$, billion current US$ Tax reforms drove an estimated budget surplus of 2.0 percent of GDP in 2024. Modest growth (2.8 percent) is 15.7 2509.0 expected in 2025, held back by global trade policy uncer- Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2011 (2017 PPPs). 3/ 2022. tainty, anticipated decline in oil prices, and tightened inter- 4/ 2023. 5/ 2024. 6/ 2024. national financial conditions. balanced exploitation of natural resources, and a strengthened Key conditions and challenges institutional and business environment. Between 2015 and 2023, the Republic of Congo’s real GDP shrank annually on average by -1.9 percent, resulting in a 32.3 percent Recent developments decline in GDP per capita. The 2014-16 oil price collapse and the COVID-19 pandemic led to a prolonged recession and an increase in In 2024, the Republic of Congo experienced modest growth of 2.6 extreme poverty from 33.5 percent in 2015 to 46.6 percent in 2022. percent, driven by a 3.9 percent increase in the non-oil sectors, de- spite a 1.7 percent decline in oil production due to technical issues. The debt-to-GDP ratio peaked at 103.5 percent in 2020 but de- This allowed the country to register its first increase in GDP per creased to 93.5 percent in 2024 due to rising oil prices, improved capita (0.3 percent) since 2015. The poverty rate has remained rel- debt management, and restructuring agreements. Persistent liq- atively flat (from 46.8 percent to 46.7 percent). uidity pressures prompted the government to implement the Na- tional Treasury Optimization Program (NTOP) to reprofile CFA Revenue losses from lower oil prices and production have been off- 2,314 billion of regional debt. However, Congo remains in debt dis- set by increased non-oil tax revenues. However, the fiscal surplus tress due to persistent accumulation of external arrears. has decreased due to higher social expenditures, wage bills, inter- est payments, and public investments. The debt-to-GDP ratio im- The economy's reliance on oil revenues and structural weakness- proved from 96 percent in 2023 to 93.5 percent in 2024. es in non-oil sectors expose it to oil price volatility and hinder long-term growth. Boosting long-term growth requires diversifica- The current account surplus decreased from 8.6 percent of GDP tion of national assets, investment in human and physical capital, in 2023 to 4.0 percent in 2024 due to a decline in exports. In the FIGURE 1 / Real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent change Poverty rate (%) Real GDP per capita (constant LCU) 6 100 1200000 4 90 1000000 2 80 70 0 800000 60 -2 50 600000 -4 40 -6 400000 30 -8 20 200000 -10 10 -12 0 0 2019 2020 2021e 2022e 2023e 2024f 2025f 2026f 2027f 2011 2013 2015 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Oil GDP Non-Oil GDP Real GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 228 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. second half of 2024, the government faced significant debt service percent of GDP), and expenditures on goods and services (by 0.2 per- obligations coming due in the regional market which led to sub- cent of GDP). This would result in a budget surplus of 2.7 percent of stantial liquidity pressures. These pressures led to the accumula- GDP and a decrease in public debt to 89.6 percent of GDP in 2025. tion of both external and internal arrears, impeding the execution of essential expenditures, such as social services and the payment Due to the projected decline in oil prices, the current account is of certain salaries. To mitigate these fiscal challenges, the govern- expected to record a deficit (3.1 percent of GDP) since 2016. This ment implemented the NTOP, reprofiling 40 percent of domestic deficit is driven by a significant drop in export revenues that the an- debt (FCFA 935.6 billion) and thereby extending average maturity ticipated decrease in the import bill will not offset. from 2.3 to 6.4 years. The banking sector remains liquid but vulner- able to non-performing loans at 18.2 percent of total loans. Inflationary pressures are expected to further decrease, and infla- tion should reach the CEMAC convergence criterion of 3 percent Inflation decreased from 4.3 to 3.8 percent between 2023 and 2024 over 2026-2027. but remained above the BEAC target of 3 percent. To boost growth in CEMAC countries, the BEAC reduced its policy rate from 5 to 4.5 Following three payment delays on the regional market in 2024 and percent in March 2025. the NTOP, banks showed lower appetite for Congolese public secu- rities. Between December 2023 and December 2024, the subscrip- tion rate for Treasury Bills in the regional market dropped sharply Outlook from 73 percent to 12.74 percent, and for Treasury Bonds from 36 percent to 14 percent. However, the average subscription rate The Congolese economy is projected to grow by 2.8 percent in has recently shown improvement, with Treasury Bills and Treasury 2025 and 3.1 percent on average during 2026-2027, slightly reduc- Bonds increasing from 12.74 percent in December 2024 to 30.70 ing poverty by 0.2 in 2025, driven by modest growth in both the percent in January 2025, and further to 67.78 percent in March oil and non-oil sectors. Uncertainties in global trade policy, declin- 2025. Nonetheless, investors are demonstrating a stronger prefer- ing oil prices, and tightening international financial conditions are ence for short-term maturities. To rebuild investors’ confidence in expected to dampen private investment, particularly in the non- treasury securities, the government has committed to implement- oil sector. Despite early-year investments in the oil sector, reduced ing debt and cash management reforms. global demand and lower oil prices are projected to decrease ex- port revenues and constrain production. The Congolese economy faces significant risks from tightening in- ternational financial conditions, declining oil prices, and reduced Despite progress in mobilizing non-oil revenues, significant fiscal global demand. It is difficult to gauge the full impact of recent mea- consolidation will be required in 2025 due to the sharp decline in oil sures as global policy shifts and uncertainty may continue to un- revenues and tighter financing conditions. This will entail reductions fold. Continued monitoring and proactive policy measures are es- in public investment (by 1 percent of GDP), current transfers (by 0.8 sential to support sustainable growth and fiscal stability. Recent history and projections 2022 2023e 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.5 1.9 2.6 2.8 3.1 3.0 Private consumption 5.0 4.9 6.5 5.1 3.5 3.6 Government consumption -5.0 0.6 0.5 -6.5 3.2 4.1 Gross fixed capital investment 10.0 8.6 5.6 3.0 3.1 3.8 Exports, goods and services -0.7 1.0 -0.5 3.0 3.9 1.7 Imports, goods and services 5.9 8.9 5.0 2.0 4.6 2.8 Real GDP growth, at constant factor prices 1.5 1.9 2.5 2.7 3.2 3.1 Agriculture 3.0 2.8 4.2 2.3 3.3 3.4 Industry -0.6 0.7 0.3 3.0 3.7 2.2 Services 4.4 3.4 4.3 2.9 3.1 4.2 Employment rate (% of working-age population, 15 years+) 53.9 54.4 54.4 54.4 54.4 52.7 Inflation (consumer price index) 3.0 4.3 3.8 3.8 3.0 3.0 Current account balance (% of GDP) 15.4 8.6 4.0 -3.1 1.3 1.7 Net foreign direct investment inflow (% of GDP) 7.9 9.5 5.0 5.5 5.5 5.3 Fiscal balance (% of GDP) 7.9 3.6 2.0 2.7 3.4 3.6 Revenues (% of GDP) 28.6 24.3 25.2 23.9 25.2 26.4 Debt (% of GDP) 86.6 96.0 93.5 89.6 83.2 79.3 Primary balance (% of GDP) 10.2 6.4 5.6 6.5 6.1 6.2 1,2 International poverty rate ($2.15 in 2017 PPP) 46.6 46.8 46.7 46.5 46.1 45.5 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 70.9 71.0 70.9 70.7 70.3 70.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 90.7 90.8 90.7 90.7 90.4 90.4 GHG emissions growth (mtCO2e) 2.8 2.5 2.3 1.4 1.2 0.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2011-ECOM. Actual data: 2011. Nowcast: 2012-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2011) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 229 This outlook reflects information available as of April 10, 2025. 1 2 CÔTE D'IVOIRE Population Poverty million millions living on less than $3.65/day 31.9 11.4 3 4 Life expectancy at birth School enrollment Growth remained strong at 6 percent in 2024 thanks to years primary (% gross) fiscal management and better terms of trade, bolstering investor confidence. Lower middle-income poverty de- 63.5 101.7 5 6 creased from 38.9 to 37.1 percent. Trade uncertainties GDP GDP per capita will affect 2025. Structural reforms under the new Devel- current US$, billion current US$ opment Plan and rising extractive production should sup- port productivity-led growth and quality job creation in 87.2 2729.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2021. the medium-run. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments The Ivorian economy remained resilient against global and Economic growth should slow to 6 percent in 2024 from 6.5 per- regional crises, achieving 6.6 percent real growth (4.0 per- cent in 2023, reflecting weaker construction activity and subdued cent per capita) over 2021–2023. However, poverty at the agricultural recovery. Improved farmgate prices and the dimin- lower middle-income poverty line varied around 38.4–38.9 ishing effects of El Niño boosted the yields of cocoa and cot- percent during this period, indicating limited growth impact tonseed, while outputs of cashew and banana declined. Indus- on poverty. To halve poverty and attain upper- middle-in- try momentum decelerated as buoyant hydrocarbon and gold come status by 2030, amidst global and climatic uncertain- were partly countered by the construction decline. Service growth ties, the country needs to focus on productivity-led growth was primarily driven by telecommunications and transportation. that creates quality jobs through deeper structural reforms, On the demand side, private consumption and investment drove skilling the workforce, increasing foreign direct investment growth. Declining inflation, higher cocoa farmgate prices and (FDI), and enhancing fiscal space driven by revenue col- increased employment supported domestic demand. Public in- lection. Strong economic management and prospects, and vestment and consumption contributed 0.5 ppts to growth in growing hydrocarbon and extractive production have im- 2024, as in 2023, reflecting continued fiscal consolidation. Exter- proved investor confidence, leading to upgraded risk ratings nal trade contributed -1.1 ppts, as imports outpaced exports. by major rating agencies. Nevertheless, significant headwinds including trade tensions, uncertainties related to global trade Despite increased energy tariffs, inflation decreased to 3.5 percent and the October 2025 elections, regional insecurity, renewed in 2024 from 4.4 percent in 2023, reflecting tightened monetary inflationary pressures, and climate change, pose risks to mar- policy, softening commodity and food prices. The West African Eco- ket confidence, supply chains, external and fiscal sustainability, nomic and Monetary Union (WAEMU) inflation rate declined further and financial stability. in 2024 to 3.5 percent but remained above the 1–3 percent WAEMU FIGURE 1 / Budget balance and change in public debt FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant million LCU) 10 100 1.8 8 90 1.6 6 80 1.4 4 70 1.2 2 60 1.0 50 0 0.8 40 -2 0.6 30 -4 0.4 20 -6 0.2 10 -8 0 0.0 2015 2017 2019 2021 2023 2025 2027 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Changes in government debt Budget balance International poverty rate Lower middle-income pov. rate WAEMU fiscal budget target Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 230 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. target band. Regional foreign reserves increased from 3.5 months investment. This should attract more FDI and boost the do- of imports in 2023 to 4.7 months in 2024, reflecting the resump- mestic private sector, improve trade competitiveness, and devel- tion of international bond issuances, IMF and World Bank dis- op agricultural value chains. Sustained investments in transport bursements, and improved terms of trade in Cote d’Ivoire, the and digital infrastructure investments will foster productivity-led, main regional contributor to WAEMU reserves. The Central Bank quality job-creating and more inclusive growth in the medium of West African States kept its policy interest rates unchanged term. Additionally, a thriving extractive exploitation could signifi- throughout 2024 at 3.5 percent for liquidity calls and 5.5 percent cantly enhance prospects, further boost investor confidence, and for the marginal lending facility. ease financing conditions. The fiscal deficit is set to decrease from 5.2 percent of GDP in 2023 The new Medium-Term Revenue Strategy aims to mobilize domes- to 4 percent in 2024, thanks to revenue-based fiscal consolidation tic revenue to reduce the fiscal deficit to the 3 percent regional and some expenditure measures. Revenues rose 0.4 ppts to 16.5 target by 2025. It also aims to stabilize debt at 58 percent of GDP percent of GDP in 2024, although the tax-to-GDP growth fell short and allow for sustained prioritization of social and infrastructure of its target by 0.3 ppt. This led to a 0.4 ppts-cut in capital expen- spending. Improved terms of trade and private sector-led export diture and reduced security spending. Financing needs were met diversification should boost the trade balance and narrow the CAD. through regional market borrowing (one-third) and external bor- The regional inflation rate is expected to align with the WAEMU tar- rowing (two-thirds), increasing public debt to 59.6 percent of GDP get band from 2025 onwards, while regional reserves are projected from 58.5 percent in 2023. The current account deficit (CAD) is set to rise to 5.4 months of imports in 2025, supported by recovering to narrow significantly, from 8.2 percent of GDP in 2023 to 4.5 per- exports, and lower Euro Area interest rates. cent in 2024, driven by stronger terms of trade (+19.1 percent) and an improved fiscal stance. In 2025, subdued inflation and strong nominal growth in the agri- cultural sector, driven by higher export prices, should further re- duce poverty from 37.1 percent in 2024 to 34.0 percent in 2025 (at Outlook $3.65/day, 2017 PPPs). However, poverty reduction is set to mod- erate in 2025–2027, averaging a 0.7 percentage point decrease as Despite persistent global economic uncertainties, and Cote agricultural nominal growth abates. Risks to the outlook remain tilt- d’Ivoire’s commodity export exposure to trade uncertainty, ed to the downside. Downside risks to growth from global trade un- growth should remain strong though moderate to 5.8 percent certainty arise through the commodity price and investment chan- in 2025 and average 6.3 percent in 2026–2027. The forthcoming nels. Climate change threatens agriculture, while regional insecu- development plan aims to deepen structural reforms, improve rity and election related-uncertainty risk weakening market senti- human capital and skills, and enhance the efficiency of public ment, and tightening financing conditions. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.4 6.5 6.0 5.8 6.1 6.4 Private consumption 4.6 5.5 6.3 6.0 5.5 5.7 Government consumption 4.0 3.9 3.1 2.3 -0.4 -1.4 Gross fixed capital investment 13.2 8.5 10.5 7.0 10.9 10.5 Exports, goods and services 11.9 4.8 0.2 3.9 7.5 9.1 Imports, goods and services 21.1 7.7 4.0 4.0 8.4 8.9 Real GDP growth, at constant factor prices 6.1 6.4 6.0 5.8 6.1 6.4 Agriculture 5.9 -2.1 3.5 5.1 2.0 3.2 Industry 12.0 18.5 2.8 6.5 7.0 10.7 Services 3.7 3.8 8.4 5.7 6.9 5.2 Employment rate (% of working-age population, 15 years+) 63.7 63.7 63.7 63.7 63.7 61.8 Inflation (consumer price index) 5.2 4.4 3.5 3.0 2.6 2.3 Current account balance (% of GDP) -7.6 -8.2 -4.5 -4.1 -3.9 -4.0 Net foreign direct investment inflow (% of GDP) 2.0 2.5 3.8 3.7 3.2 3.0 Fiscal balance (% of GDP) -6.7 -5.2 -4.0 -3.0 -3.0 -3.0 Revenues (% of GDP) 15.1 16.1 16.5 17.1 17.4 18.1 Debt (% of GDP) 57.3 58.5 59.6 58.6 57.1 55.8 Primary balance (% of GDP) -4.6 -2.7 -1.3 -0.3 -0.4 -0.4 1,2 International poverty rate ($2.15 in 2017 PPP) 9.2 10.5 8.8 7.2 6.8 7.0 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 37.4 38.9 37.1 34.0 33.0 32.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 76.0 76.3 76.1 74.7 73.7 72.7 GHG emissions growth (mtCO2e) 1.7 0.4 0.2 0.3 0.8 1.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 231 This outlook reflects information available as of April 10, 2025. EQUATORIAL 1 2 Population Poverty million millions living on less than $6.85/day 1.9 1.0 GUINEA Life expectancy at birth years 3 School enrollment primary (% gross) 4 The economy grew by an estimated 1.6 percent in 2024, 61.2 107.8 5 6 driven by a rebound in the hydrocarbon sector. Poverty is GDP GDP per capita current US$, billion current US$ estimated to have increased on account of sluggish growth in agriculture and services, along with rising food prices. 12.8 6786.7 Fiscal and external balances improved thanks to increased Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. export earnings. GDP is projected to contract over the medi- 4/ 2022. 5/ 2024. 6/ 2024. um term. A sharper-than-expected decline in oil production and prices represents the main risk to the outlook. reforms are encouraging, including a decree establishing a trea- Key conditions and challenges sury single account, a new draft procurement law, a revised tax law, and a Presidential decree with measures to support the sus- Equatorial Guinea has experienced a prolonged recession over tainability of the economy and public finances. much of the past decade amid a shrinking hydrocarbon sector, declining investment, and a series of external and domestic shocks. In 2023, gross national income per capita was estimated Recent developments at US$5,240, which was 58 percent below its peak level in 2008. In 2022, 54.8 percent of the population lived on less than $6.85 Following a contraction by 5.1 percent in 2023, the Equatoguinean per person per day (in 2017 PPP). Despite high levels of urban- economy is estimated to have modestly recovered in 2024. GDP is ization, about 24 percent of the population lacked access to elec- estimated to have grown by 1.6 percent, driven by a rebound in the tricity, 32.4 percent lacked access to piped water or a water well, hydrocarbon sector, offsetting sluggish growth registered in agri- and 20.3 percent lacked adequate sanitation. The education sys- culture (0.4 percent) and services (0.04 percent) sectors. tem underperforms, suffering from overcrowding and high rep- etition rates, resulting in primary and secondary net enrollment Fiscal revenues exceeded anticipated levels by 0.5 percent in rates of 82 and 59 percent, respectively. 2024H1 while expenditure execution reached 98 percent by end- June 2024. A 6.4 percent increase in hydrocarbon production in Strong reforms are needed to diversify the growth drivers and 2024H2 (thanks to repairs and the connection of wells at the productive assets. These include improving domestic revenue Zafiro platform) raised the fiscal balance to an estimated 2.6 mobilization and the efficiency of public spending, strengthening percent of GDP. Meanwhile, the non-oil fiscal deficit widened the business environment, and investing in human capital. Recent slightly from 23.3 to 23.4 percent of non-oil GDP between 2023 FIGURE 1 / Public finances FIGURE 2 / Actual and projected poverty rates Percent of GDP Poverty rate (%) 30 60 25 50 20 40 15 30 10 20 5 10 0 0 -5 2022 2023 2024 2025 2026 2027 2017 2018 2019 2020 2021 2022 2023 2024f 2025f 2026f 2027f International poverty rate Lower middle-income pov. rate Fiscal balance Revenues Expenditures Upper middle-income pov. rate Sources: National authorities and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 232 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. and 2024. The current account deficit is estimated to have nar- global financial environment will also have adverse impacts on rowed to 0.9 percent of GDP thanks to an increase in hydrocar- the country’s fiscal and trade balances and investment. Without bon export earnings. significant progress in diversification and structural reforms, the decline of the hydrocarbon sector and lower oil prices will con- The debt-to-GDP ratio declined to 31.3 percent in 2024. The gov- tinue to undermine the Equatoguinean economy. Growth could ernment has recently negotiated arrears settlements with banks reach 0.6 percent in 2026, following an expected rebound in the and construction companies over a period of 10 years. As a result, gas sector, before contracting again in 2027. Between 2024 and the ratio of non-performing loans to total loans decreased to 30 2027, poverty is expected to decline from 57.0 percent to 55.8 percent by July 2024 from 32.5 percent in end-2023 and is expected percent, following an expansion in the labor-intensive agriculture to continue declining. After keeping the policy rate at 5 percent for and service sectors. two years, the Bank of Central African States lowered it to 4.5 per- cent in March 2025. Still, overall inflation increased from 2.4 to 3.4 Despite fiscal consolidation, the fiscal balance is projected to de- percent between 2023 and 2024, mainly on account of higher food crease in 2025-2027, as spending cuts fail to offset declining hydro- inflation (4.1 percent). carbon revenues due to the anticipated drop in oil prices and pro- duction. The current account balance is projected to deteriorate to Sluggish growth in agriculture and services, along with soaring food an average of 2.5 percent of GDP over 2025-2027 due to declining prices, did not boost job creation and earnings enough to maintain export earnings. The impact of commodity price declines may com- living standards, leading to a 1.2 percentage point rise in poverty. pound the potential effects of global trade uncertainty. Downside risks to the outlook include a stronger decline in hydro- Outlook carbon production or prices; heightened global economic uncer- tainty and trade policy shifts which can impact exports and po- Another recession is expected in 2025 with a forecasted growth tentially deter investment and increase food prices and insecurity; of -3.1 percent as hydrocarbon production decreases and oil tighter global financial conditions; and lower demand from main prices fall amid the shifting international trade, investment, and trading partners (China and the European Union). It is difficult to financial and commodity markets context. Aside from their im- gauge the full impact of recent events as global policy shifts may pact on economic growth, lower projected oil prices and a tighter continue to unfold. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.2 -5.1 1.6 -3.1 0.6 -1.1 Private consumption 3.9 4.4 -5.0 1.9 2.0 1.8 Government consumption 7.0 5.7 1.0 -7.5 1.3 -0.4 Gross fixed capital investment 7.6 11.1 0.0 -9.0 1.7 -3.0 Exports, goods and services 5.7 -28.9 6.9 -2.9 0.6 -1.9 Imports, goods and services 11.2 -25.5 -1.8 -0.4 3.8 2.6 Real GDP growth, at constant factor prices 2.9 -4.7 1.6 -3.1 0.6 -1.1 Agriculture 6.9 2.4 0.4 3.2 2.0 2.1 Industry 1.8 -12.9 2.9 -10.6 0.5 -2.6 Services 4.4 7.6 0.0 6.2 0.7 0.3 Inflation (consumer price index) 4.9 2.4 3.4 2.9 2.6 2.1 Current account balance (% of GDP) -0.9 -1.5 -0.9 -2.5 -2.1 -2.8 Net foreign direct investment inflow (% of GDP) 4.9 1.2 1.0 0.8 0.6 0.6 Fiscal balance (% of GDP) 11.4 2.5 2.6 0.4 0.5 -0.4 Revenues (% of GDP) 26.5 21.9 22.3 19.6 19.1 17.4 Debt (% of GDP) 33.4 36.9 31.3 31.5 29.4 27.8 Primary balance (% of GDP) 12.5 3.6 3.7 1.5 1.5 0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 4.2 4.5 5.0 4.7 4.8 4.9 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 20.8 21.6 22.9 22.2 22.3 22.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 54.8 55.8 57.0 54.8 54.8 55.8 GHG emissions growth (mtCO2e) 1.9 -5.4 1.5 -3.1 0.2 -0.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2022-ENH2. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 233 This outlook reflects information available as of April 10, 2025. 1 ERITREA Population Poverty million 3.5 .. 2 3 Life expectancy at birth School enrollment Growth in 2024 was supported by strong mining activity and years primary (% gross) lower inflation as a result of moderation of global fuel and food prices. Increased government spending and investment 66.6 83.0 4 5 to develop the Colluli potash mine is expected to support GDP GDP per capita growth of around 3.5 percent in the near term. Downside current US$, billion current US$ risks to the outlook include production delays at the Colluli mine, volatility in global commodity prices, geopolitical and 2.9 822.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2022. 4/ 2024. 5/ 2024. regional tensions, and climate vulnerabilities. (including roads and key ports), that present both operational and Key conditions and challenges logistical constraints. Furthermore, the absence of a competition law framework discourages foreign capital inflows, as do strict im- Eritrea is a subsistence agriculture economy that relies on the min- port restrictions. The latter also limit foreign currency demand ing industry (mainly zinc and gold) for foreign exchange. About 70 amid low reserves. Informal cross-border trade has improved since percent of the population lives in rural areas, relying on rainfed the conflict in northern Ethiopia ended. farming, livestock, and fisheries. Frequent weather shocks due to climate change impact economic activity and livelihoods. The capacity to produce data remains severely constrained. National accounts data are limited to unofficial GDP esti- With the lifting of UN sanctions in November 2018 Eritrea emerged mates by the Ministry of Finance, which are not, however, from a decade of international isolation, a period during which endorsed by the government. Inflation estimates cover only As- it relied on domestic sources of growth. Competition is limited mara, the capital city, and full balance of payment accounts are by state-owned enterprises' dominance and widespread govern- not being produced. Poverty statistics have not been produced ment restrictions. Zinc, copper, and gold account for more than for over a decade. 90 percent of exports, making the economy susceptible to fluc- tuations in metal prices and external demand from China, which accounts for over 50 percent of total exports. Fiscal dominance Recent developments and the underdeveloped financial sector have rendered mone- tary policy under a fixed exchange rate ineffective, weakening Real GDP growth is estimated to have increased to 2.9 percent in economic fundamentals. 2024, mainly supported by strong copper and gold mining output and the moderation in global food and fuel prices which support- Despite vast mineral and commodity wealth the development of ed a rise in private consumption. Meanwhile, inflation continued its the mining sector is constrained by under-developed infrastructure downward trend falling to 4.1 percent in 2024. FIGURE 1 / Evolution of total public debt FIGURE 2 / Primary and overall fiscal balances Percent of GDP Percent of GDP 250 0 -1 200 -2 150 -3 100 -4 50 -5 0 -6 2021 2022 2023 2024e 2025f 2026f 2027f 2021 2022 2023 2024e 2025f 2026f 2027f Domestic debt External debt Total public debt Overall fiscal balance Primary fiscal balance Sources: Ministry of Finance, Planning and Economic Development, IMF, and World Sources: Ministry of Finance, Planning and Economic Development, IMF, and World Bank staff estimates. Bank staff estimates. 234 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Eritrea continued to maintain a large current account surplus the Colluli mine. As global food prices continue to ease, average in- which improved in 2024 supported by strong increase in global flation is expected to decrease further and stabilize around 4 per- metal prices amid tight import and capital controls. International cent in the near term.The current account surplus is expected to gold prices rose 23 percent to multi decade highs amid global risk remain large at around 14 percent of GDP in 2025, helped by ro- aversion and geo-political risk, contributing to higher export rev- bust mining sector performance amid tight import controls. How- enues. Higher zinc and copper prices resulted in strong mining ex- ever, the current uncertainly in global trade policy could hurt ex- port revenues as well as higher government revenues. Public debt port prospects although operationalizing of the Colluli project was estimated at around 211 percent of GDP at end-2024, of which might play an offsetting role in later years. Gradual fiscal consolida- nearly 80 percent is owed to domestic banks. The country is in debt tion and higher mining sector receipts should support a narrowing distress, and as of May 2024, Eritrea was at a pre-decision point in of the fiscal deficit over the medium term.Once Colluli mining com- the Highly Indebted Poor Countries (HIPC) list. mences it is expected to generate annual revenues of US$200mn. The economic recovery is expected to support a reduction in the Following an engagement hiatus in 2020, Eritrea has begun to public debt-to-GDP ratio. The poverty rate is not expected to de- re-engage with international development partners and revitalize cline significantly in the coming years, however. Significant im- some bilateral relations since 2023.The African Development Bank provements in the agricultural sector and increased productive has been supporting several projects including the building of a employment in urban areas are critical to addressing the wide- 30-MW solar photovoltaic power plant in Dekemhare, which is spread deprivation in the country. scheduled to be completed in 2027. China is Eritrea’s principal commercial partner dominating the mining and infrastructure Significant downside risks include weaker than-expected global sector as well as being a major trading partner. In early 2023, the or Chinese demand for commodity exports, volatility in metals Chinese company Sichuan Road and Bridge Group acquired a 50 and minerals prices, production delays at the Colluli mine, percent stake in the Colluli potash mine—one of the largest and spillovers from the Sudan conflict, and recent escalation in ten- most easy-to-exploit deposits in the world. Once it becomes oper- sions with Ethiopia. Climate vulnerabilities could intensify in the ational (expected by end-2026), it could contribute up to 10 percent coming years, increasing an already high risk of food insecurity. of GDP value added. Eritrea’s re-engagement with the international community could help to significantly reduce external arrears and provide much- needed financing to build essential infrastructure over the medi- Outlook um term. This would help reduce the risks associated with cli- mate change and foster the development of the private and fi- GDP growth is projected to increase to 3.2–3.5 percent in the near- nancial sectors, which could enhance job creation and promote medium termas domestic demand is boosted by construction of inclusive growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.5 2.6 2.9 3.1 3.4 3.5 Private consumption 3.6 4.0 2.1 2.3 2.2 2.2 Government consumption 5.7 3.7 1.9 2.0 3.4 4.1 Gross fixed capital investment 13.1 22.7 4.2 4.0 3.7 4.2 Exports, goods and services 9.2 5.1 3.2 3.5 3.3 3.0 Imports, goods and services 11.0 5.3 4.2 4.3 4.3 4.4 Real GDP growth, at constant factor prices 2.5 2.6 2.9 3.1 3.4 3.5 Agriculture 1.6 3.5 3.6 3.2 3.2 3.2 Industry 3.2 2.9 3.3 3.3 3.1 3.1 Services 1.3 1.5 1.6 2.4 4.0 4.7 Inflation (consumer price index) 7.4 6.4 4.1 3.9 4.0 4.0 Current account balance (% of GDP) 13.0 14.1 14.5 13.9 14.0 14.7 Net foreign direct investment inflow (% of GDP) 1.3 1.2 1.2 1.3 1.3 1.0 Fiscal balance (% of GDP) -5.6 -4.8 -4.8 -4.3 -4.1 -4.0 Revenues (% of GDP) 27.0 27.6 26.6 26.9 27.7 28.2 Debt (% of GDP) 239.8 219.4 211.8 202.4 190.8 177.2 Primary balance (% of GDP) -4.2 -3.7 -3.6 -3.1 -2.9 -2.8 GHG emissions growth (mtCO2e) 0.7 0.8 1.3 1.3 1.4 1.3 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Macro Poverty Outlook / April 2025 235 This outlook reflects information available as of April 10, 2025. 1 2 ESWATINI Population Poverty million millions living on less than $3.65/day 1.2 0.7 3 4 Life expectancy at birth School enrollment Real GDP is projected to grow by 5.0 percent in 2025, driven years primary (% gross) by public and private sector investment. Inflation is expected to rise to 5.6 percent because of higher electricity and water 56.4 113.5 5 6 tariffs and anticipated public wage increases. The budget GDP GDP per capita deficit is projected to increase to 3.5 percent of GDP in 2025 be- current US$, billion current US$ cause of expenditure pressures and lower SACU revenues. The poverty rate is projected to hover around 52 percent, 5.1 4097.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2016 (2017 PPPs). 3/ 2022. using the poverty line for lower-middle-income countries. 4/ 2023. 5/ 2024. 6/ 2024. and full implementation of an Integrated Financial Management Key conditions and challenges Information System. Eswatini's long-term growth has been low and volatile, averaging With economic growth both modest and not inclusive, progress less than 2 percent annually, constrained by structural factors such in poverty reduction has been limited. About 53.5 percent of the as a weak business environment, overdependence on Southern population live below the lower-middle-income poverty line of African Customs Union (SACU) revenues, as well as vulnerability to $3.65 per day (2017 PPP). The unemployment rate surged from climate shocks. Overall, Eswatini’s growth performance was signifi- 23 percent in 2016 to 35 percent in 2023, and job opportuni- cantly lower than the average of 4.6 percent among lower-middle- ties are concentrated in the informal sector. Eswatini’s economy income countries. remains one of the most unequal in the world, with a Gini coef- ficient of 54.6 in 2016. Sustainable development necessitates shifting to a private- led economic growth model, by addressing structural chal- lenges to the business climate, strengthening public financial Recent developments management to improve the efficiency and effectiveness of public spending. The public financial management system Economic growth increased to 4.8 percent in 2024, from 3.4 per- faces weaknesses in budget preparation and execution, com- cent in 2023, as most sectors performed well. Growth in the agri- mitment controls, and public procurement processes. These culture sector benefitted in particularly from an increase in sugar inefficiencies have resulted in underspending on capital in- production, while manufacturing, especially soft drink concen- vestments and the accumulation of arrears to the private trates and sugar, benefited from higher external demand. Mining sector, with the stock of arrears rising from 2.4 percent of GDP production expanded because of increased coal output. Stroger in 2023 to 2.7 percent in 2024. Addressing PFM related chal- external demand led to a 13 percent rise in exports, while higher lenges requires adequate implementation of the 2017 PFM Act SACU revenues supported domestic demand. FIGURE 1 / SACU revenues and macroeconomic variables FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Months of imports, percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 16 4 100 70000 90 12 60000 3 80 8 70 50000 60 40000 4 2 50 40 30000 0 1 30 20000 -4 20 10000 10 -8 0 0 0 2018 2019 2020 2021 2022 2023 2024e 2025f 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Current account (lhs) SACU revenue (lhs) International poverty rate Lower middle-income pov. rate Fiscal deficit (lhs) International reserves (rhs) Upper middle-income pov. rate Real GDP pc Sources: Eswatini Ministry of Finance and World Bank staff projections. Source: World Bank. Notes: See footnotes in table on the next page. 236 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Inflation slowed from 5.0 percent in 2023 to 4.0 percent in 2024, as finance, information and communication technology (ICT), trans- global inflationary pressures eased. Food inflation eased from 12.8 portation, wholesale, and trade expected to record higher growth. percent to 3.9 percent, but food insecurity remains a challenge, Mining and quarrying are expected to continue expanding in 2025 with 25 percent of the population estimated to be food insecure. -2026, supported by double-digit growth in coal production. Higher The Central Bank lowered the interest rate by 50 basis points to electricity and water tariffs and demand-pulled inflation linked to 7.00 percent between September and November 2024, following the expected public sector wage increases are expected to con- South Africa’s policy rate trend. tribute to inflation of 5.6 percent in 2025. The fiscal situation deteriorated in FY 2024/25, with the fiscal deficit The fiscal deficit is projected to increase to 3.5 percent in 2025 and widening to 2 percent of GDP in 2024/25, up from 0.1 percent in 2023/ 4.5 percent in 2026 as SACU transfers are expected to fall by 20 24 despite an increase in SACU revenues. Public expenditure in- percent in nominal terms in 2025. A higher wage bill and capital creased as the government relaxed the hiring freeze, and as capital expenditure are expected to contribute to the widening of the fis- spending and interest payments rose. Public debt grew to 41 percent cal deficit in 2025-26. Fiscal consolidation is expected to resume in of GDP by the end of 2024 and government arrears with the private 2027, bringing the fiscal deficit down to about 2.7 percent of GDP, sector increased. Higher expenditure arrears partly reflect continued benefitting from public financial and investment management re- deficiencies in cash flow management and commitment controls. forms. Public debt is expected to peak at 42.6 percent of GDP in 2027. The current account surplus is expected to decline as SACU The current account surplus rose from 2.2 percent in 2023 to 3.8 revenues decline while higher capital spending from planned con- percent of GDP in 2024, benefitting from higher SACU revenues struction activities will result in higher imports. and key commodity exports, which more than compensated for the increase in imports. Nevertheless, international reserves declined There are significant risks to this outlook, linked to both global to 2.4 months of import cover in 2024 as the government used re- and domestic developments. Downside risks to the outlook include serves to pay its external obligations. heightened global trade uncertainties that impact Eswatini through both direct and indirect channels, including fluctuations in commod- ity prices, remittances, exchange rates, investment, and weaker Outlook growth in its main trading partners. Domestically, volatile SACU rev- enues and weak control over current spending remain key fiscal risks. Real GDP growth is projected to increase to 5.0 percent in 2025 The suspension of funding from the United States Agency for Inter- driven by public and private sector investments, including in a se- national Development could threaten the delivery of health services, ries of large projects such as the Mkhondvo–Ngwavuma Water pro- while delays in private and public construction projects would damp- ject. However, growth is expected to slow gradually in the medi- en growth prospects. Given this outlook amidst persistently limited um term, to reach about 2.8 percent in 2027 once these invest- job creation, poverty is projected to remain high at around 52 per- ments are completed. Growth is expected to be broad-based, with cent, using the poverty line for lower-middle-income countries. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.1 3.4 4.8 5.0 4.0 2.8 Private consumption 5.8 5.1 5.3 5.1 5.5 4.6 Government consumption -3.2 5.3 5.4 6.5 5.7 4.1 Gross fixed capital investment -11.9 10.3 3.4 11.9 7.2 3.3 Exports, goods and services -4.2 9.2 13.0 5.8 4.7 4.2 Imports, goods and services 2.2 12.9 10.0 8.7 8.3 7.0 Real GDP growth, at constant factor prices 0.9 3.3 4.8 5.0 4.0 2.8 Agriculture 3.0 -7.9 6.2 4.4 4.6 5.0 Industry 0.2 0.5 8.4 5.7 6.4 4.0 Services 1.2 6.5 2.4 4.6 2.3 1.7 Employment rate (% of working-age population, 15 years+) 30.6 32.8 32.8 32.8 32.8 32.8 Inflation (consumer price index) 4.8 5.0 4.0 5.6 5.0 4.5 Current account balance (% of GDP) -2.7 2.2 3.8 0.1 0.4 0.4 Net foreign direct investment inflow (% of GDP) 0.7 1.1 1.3 0.9 1.5 1.2 Fiscal balance (% of GDP) -4.8 -0.1 -2.0 -3.5 -4.5 -2.7 Revenues (% of GDP) 26.0 31.7 31.0 29.2 25.4 26.4 Debt (% of GDP) 40.5 40.0 40.9 40.6 42.3 42.6 Primary balance (% of GDP) -2.5 2.8 0.7 -1.1 -1.2 0.3 1,2 International poverty rate ($2.15 in 2017 PPP) 34.6 33.4 31.5 30.3 29.2 28.5 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 56.8 56.2 54.8 53.5 52.6 52.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 77.4 77.0 76.5 75.5 75.0 74.7 GHG emissions growth (mtCO2e) 0.7 0.8 2.9 5.1 5.1 2.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2016-HIES. Actual data: 2016. Nowcast: 2017-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 237 This outlook reflects information available as of April 10, 2025. 1 2 ETHIOPIA Population Poverty million millions living on less than $2.15/day 132.1 39.0 3 4 Life expectancy at birth School enrollment years primary (% gross) Macroeconomic reforms initiated in mid-2024 have reduced exchange rate spreads and inflation. Reforms to modernize 65.6 84.5 5 6 monetary policy, mobilize revenues, and enhance safety nets GDP GDP per capita are ongoing. Sustaining reforms and easing barriers to pri- current US$, billion current US$ vate investment and job creation are crucial for external sus- tainability, inclusive growth, and mitigating social risks amid 221.6 1677.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. humanitarian needs. 4/ 2023. 5/ 2024. 6/ 2024. exchange rate, easing current account restrictions, and adopting Key conditions and challenges a new interest rate-based monetary policy. These reforms, backed by the IMF, World Bank, and proposed G-20 debt relief, helped Ethiopia’s state-led development model improved infrastruc- narrow the official-parallel exchange rate spread from over ture and living standards but relied on an overvalued cur- 100 percent to low teens, although it has widened recently rency, unsustainable debt, and restrictive regulations that reaching 20 percent by end-March 2025. Market inefficien- hindered private investment. This weakened competitiveness, cies, including high foreign exchange (FX) fees, incentivize fueled inflation, and failed to generate enough jobs for two continued use of the parallel market. Sustained reforms are million new job seekers annually. Poverty increased from 27 essential for translating macroeconomic improvements into percent to 32 percent between 2016 and 2021 ($2.15/day), better livelihoods, higher earnings, productive jobs, and im- human capital remained low, and agriculture still employs proved public services. 70 percent of the workforce. Limited global trade integra- tion and budget constraints further reduced social and capi- tal spending. Multiple crises, including COVID-19, the Ukraine Recent developments war, the Tigray conflict, and droughts, exacerbated economic imbalances, culminating in a debt default in late 2023. Dou- Ethiopia’s GDP growth was 8.1 percent in FY2023/24, driven ble-digit inflation worsened living standards, while the Tigray by strong harvests, increased mining, and higher electricity conflict displaced over three million people, creating a $20 generation activity. Following the July 2024 exchange rate re- billion humanitarian and reconstruction need. About 15 mil- form, goods exports doubled year-on-year (yoy) in H1 FY25, lion people still rely on food aid. with coffee shifting to export markets and gold moving from informal to official channels. Remittances also grew by 23 per- To stabilize the economy, the government launched macro- cent. Tight monetary conditions, including caps on bank lend- economic reforms in July 2024, targeting a market-determined ing growth (initially 14 percent, later loosened to 18 percent), FIGURE 1 / Nominal exchange rate of Ethiopian Birr (ETB) FIGURE 2 / Actual and projected poverty rates and real GDP per capita ETB/US$ Percent Poverty rate (%) Real GDP per capita (constant LCU) 160 120 100 30000 140 90 100 25000 120 80 80 70 100 20000 60 80 60 50 15000 60 40 40 10000 40 30 20 20 20 5000 10 0 0 0 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Premium (rhs) Official (lhs) Parallel market (lhs) Upper middle-income pov. rate Real GDP pc Source: National Bank of Ethiopia. Source: World Bank. Notes: See footnotes in table on the next page. 238 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. helped contain domestic and FX demand. Gradual fuel price ad- justments and government imports of essential goods mitigated Outlook inflationary pressures, bringing inflation down from 19 percent yoy in July to 15 percent in February. Real interest rates turned Near-term growth will be constrained by tight monetary policy, se- positive despite the monetary policy rate remaining unchanged curity challenges, and exchange rate uncertainty. However, GDP at 15 percent. The balance of payments and current account growth is projected to rebound in the medium term, supported by improved in H1 FY25 due to stronger exports, remittances, In- debt relief and reforms that enhance investor confidence, produc- ternational Financial Institutions (IFI) disbursements, and modest tivity, and exports. Inflation will remain high as fuel and fertilizer foreign direct investment (FDI) growth. Service exports remained subsidies are phased out but is expected to ease to single digits flat, primarily reflecting stable Ethiopian Airlines revenue, while with improved supply capacity and reduced localized conflicts. De- electricity exports tripled, supported by growing data-center and spite higher export revenues, pent-up import demand will widen crypto-mining demand. the current account deficit to over 3 percent of GDP in FY25 be- fore stabilizing at 2 percent as external competitiveness strength- To ease reform impacts, a supplementary budget in November ens. The overall impact of recent tariff measures on the current ac- introduced spending measures worth 1.5 percent of GDP, includ- count is likely to be neutral, with weaker demand for Ethiopian ex- ing a 20 percent increase in safety net benefits, overdue increase ports offset by lower import prices (especially fuel). Relatively high- in public sector salaries, and temporary fuel and fertilizer subsi- er US tariffs on Ethiopia’s major export competitors could help im- dies. Tax revenues surged by 81 percent yoy in H1 FY25, driven prove the competitiveness of Ethiopian coffee, textile, and leather by VAT reforms that eliminated exemptions and standardized the exports in the US and revive supplier relationships previously af- tax base across federal and regional jurisdictions. Trade valuation fected by Ethiopia’s suspension from the Africa Growth Opportu- adjustments from the exchange rate reform also boosted rev- nities Act (AGOA).Further tax reforms (if implemented effectively) enues. Additionally, a four-year electricity tariff adjustment was and IFI disbursements will help reverse declining real public spend- launched to improve cost recovery, attract private investment, ing. Poverty is expected to decline gradually, reaching 35 percent and expand energy access. by 2027, but significant investment is needed to improve human capital, enhance resilience, and boost agricultural production. Household economic sentiment remained negative in 2024 due to past economic shocks. While inflation did not spike post-FX The outlook is predicated on reforms to sustain hard won ex- reform as initially feared, persistent inflation has eroded real change rate and macro stability and deeper structural reforms to incomes, pushing poverty to an estimated 37 percent by 2025. increase financial intermediation, ease constraints to private sector The government’s reform agenda aims to reverse this trend investment, exports and trading and tax reforms to ensure fair and by fostering private-sector employment, integrating smallholder predictable revenue mobilization. Key risks include weaker forex farmers into markets, and strengthening safety nets to protect inflows, unforeseen fiscal burdens, reform delays, and social un- vulnerable populations. rest, particularly in fragile rural areas. Recent history and projections 2021/22 2022/23 2023/24e 2024/25f 2025/26f 2026/27f Real GDP growth, at constant market prices 6.4 7.2 8.1 6.4 6.5 7.2 Private consumption 4.5 6.1 7.1 5.2 6.1 6.7 Government consumption 1.5 -16.0 -5.8 31.3 5.8 0.8 Gross fixed capital investment 11.0 11.2 13.8 5.1 8.2 9.5 Exports, goods and services 11.7 -0.8 4.5 11.2 2.4 3.6 Imports, goods and services 10.8 -4.1 13.0 9.9 8.1 8.1 Real GDP growth, at constant factor prices 6.4 7.2 8.1 6.4 6.5 7.2 Agriculture 6.0 6.3 7.0 6.2 5.9 5.8 Industry 4.8 6.9 9.2 5.2 7.1 7.3 Services 7.9 8.0 8.3 7.5 6.7 8.2 Employment rate (% of working-age population, 15 years+) 77.5 77.6 77.8 78.0 78.4 78.9 Inflation (consumer price index) 33.7 32.6 26.7 20.7 16.9 10.6 Current account balance (% of GDP) -4.0 -2.8 -2.8 -3.2 -3.2 -2.8 Fiscal balance (% of GDP) -4.2 -2.7 -2.0 -1.7 -2.0 -1.9 Revenues (% of GDP) 8.2 7.9 7.5 9.8 10.3 11.3 Debt (% of GDP) 30.8 25.3 22.6 28.4 29.5 30.3 Primary balance (% of GDP) -3.6 -2.1 -1.5 -1.1 -0.9 -0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 35.7 36.6 37.3 37.3 37.0 35.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 73.1 70.8 69.3 67.9 66.4 64.8 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 95.0 93.1 91.3 89.6 87.8 86.1 GHG emissions growth (mtCO2e) 1.6 3.8 3.7 3.3 3.1 2.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. Growth projections reflect limited available information, and are subject to revision as better data becomes available. 1/ Calculations based on 2021-HCES. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 239 This outlook reflects information available as of April 10, 2025. 1 2 GABON Population Poverty million millions living on less than $6.85/day 2.5 0.7 3 4 Life expectancy at birth School enrollment Growth accelerated to an estimated 2.9 percent in 2024, years primary (% gross) supported by oil, mining, wood industries, and public works. Higher growth is needed to reduce poverty. Meanwhile, ex- 65.7 99.9 5 6 pansionary fiscal policies are adding to debt sustainability GDP GDP per capita risks. The projected decline in oil prices will aggravate fiscal current US$, billion current US$ challenges. A return to constitutional order, strong fiscal consolidation, and prioritized social and productive invest- 20.9 8238.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. ments are key for growth and poverty reduction. 4/ 2021. 5/ 2024. 6/ 2024. the need for major adjustments. These developments reduced the Key conditions and challenges country's regional borrowing capacity and increased debt pressures, constraining the fiscal space needed to meet rising social demands Gabon’s political transition crossed key milestones with a new Con- during the transition. To alleviate liquidity pressures, Gabon conduct- stitution and Electoral Code approved, and presidential elections in ed a two-stage early repurchase of its June 2025 Eurobond, with the April 2025. An orderly return to constitutional order is vital for so- second stage involving a costly private placement in February. Ensur- cial cohesion and growth. Gabon’s rich forests, minerals, and young ing transparent, sustainable public finances, and improving infra- population are key growth factors. To benefit from these, the Tran- structure and business climate is crucial for growth and job creation. sition’s Development Plan aims to develop agriculture, mining, fish- eries, support small and medium enterprises, and expand social housing and public services. Recent developments Yet, challenges remain significant. Unemployment is high at 20 per- GDP grew by an estimated 2.9 percent in 2024. Oil output grew cent and poverty affects a third of the population. While most poor by 1.9 percent amid lower OPEC+ restrictions and exploitation of are urban, rural poverty is compounded by low access to basic ser- new oilfields, while manganese production recovered from railway vices. Major infrastructural, institutional, and human capital gaps re- disruptions in 2023, and the wood industry was bolstered by sus- main, and the country has recently been facing frequent power cuts. tained Chinese and European demand. Large public works ben- efited construction and services. While higher public spending in Despite initiatives to strengthen transparency, scant information 2024 boosted imports, the current account surplus remained high on financing sources of large investments raise concerns about at 30.7 percent of GDP, thanks to robust commodity exports. a deteriorating fiscal and financial position. Fitch’s downgrade of Gabon in January 2025 and worsening debt sustainability risks re- Tax collection measures, including digitalization of tax filing and ported by the IMF debt sustainability analysis in mid-2024 suggest of the Northern-border customs office, were countered by a FIGURE 1 / Fiscal position and public debt FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant million LCU) 4 90 40 2.60 0 35 70 2.55 30 -4 50 2.50 25 -8 30 20 2.45 -12 15 2.40 -16 10 10 2.35 -20 -10 5 2020 2021 2022 2023 2024e 2025p 0 2.30 Public debt (rhs) 2017 2019 2021 2023 2025 2027 Fiscal balance (lhs) International poverty rate Lower middle-income pov. rate Non-oil primary balance (lhs, non-oil GDP) Upper middle-income pov. rate Real GDP pc Sources: National authorities and World Bank staff calculations. Source: World Bank. Notes: See footnotes in table on the next page. 240 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 3.1-percent oil price drop in 2024 which slashed oil revenues by 4 timber, palm oil and rubber industries compensate for a decline percent. Meanwhile, public spending increased by 24 percent due in oil. The recent start of iron ore production at Belinga, one of to large public works, reintroduction of fuel subsidies for indus- Africa’s largest deposits, should boost the mining sector. Higher tries, higher transfers, and constitutional referendum costs. The mineral, wood, rubber and oil palm exports, coupled with lower im- overall balance dipped from a 1.8 percent surplus in 2023 to an ports due to more constrained public spending, should maintain estimated -3.7 percent deficit in 2024. The non-oil primary bal- high current account surpluses. ance plummeted to an estimated -15.9 percent of non-oil GDP, whereas the public debt stood above the Central African Econom- Domestic revenue mobilization efforts would gradually expand ic and Monetary Community convergence criteria at 72.5 percent tax collection, but declining oil production and prices would of GDP, due to higher spending and accumulation of arrears. shrink revenues, compromising public investments in view of rigid recurrent expenditures. Moreover, elections could raise Inflation receded over 2024, with monthly inflation at 0.9 percent spending pressures in 2025. The fiscal deficit is projected at in December, reflecting stronger price controls, stabilizing global around 4.9 percent of GDP in 2025-27, keeping debt sustainabil- prices, and a restrictive monetary policy, as Bank of Central African ity risks high. A tight monetary policy by BEAC should keep infla- States (BEAC) kept the policy rate at five percent from March 2023 tion under control. The limited investment outlook would impact to March 2025, when it was lowered to 4.5 percent. Despite tight the services sector, employing two-thirds of the workforce, push- monetary policy and high bank exposure to state borrowing, credit ing poverty up by 3.2 percentage points to 37.8 percent (about to firms increased by an estimated 8.5 percent in 2024. Non-per- 980,000 people) in 2025. forming loans remained low. The changing global trade, investment, financial and commodity Recent growth remains insufficient to reduce poverty. Historically, markets context dims Gabon’s growth, trade, and fiscal outlook. poverty had been rising, but moderate growth helped stabilize Lower oil prices due to reduced demand from advanced poverty between 2023 and 2024. In 2024, about 34.6 percent of economies and increased supply will reduce oil revenues, further Gabon's population was living on less than $6.85 per day (in 2017 raising fiscal deficits. Tighter global financial conditions could slow PPP). However, due to population growth, the absolute number down investment in the extractive sectors and add to the current of people living in poverty increased by 20,000, to nearly 880,000 liquidity challenges. Gabon’s borrowing capacity is limited due to people in 2024. banks’ sovereign exposure, exacerbated by the recent Central African Banking Commission risk weight increase. Challenges in mobilizing financing could result in further accumulation of arrears Outlook or cuts in capital expenditures, affecting growth. To address de- velopment needs while securing a viable fiscal path, Gabon needs Growth is projected at around 2.4 percent in 2025-27, as uncertain- strong fiscal consolidation, with efficient, prioritized spending on ty in the post-electoral period declines and expanding manganese, human and natural capital, and targeted poverty alleviation. Recent history and projections 2022 2023 2024 2025f 2026f 2027f Real GDP growth, at constant market prices 3.0 2.4 2.9 2.1 2.2 3.0 Private consumption -0.3 2.1 2.6 -0.8 2.1 4.4 Government consumption 3.8 1.5 4.5 4.8 0.3 -0.4 Gross fixed capital investment 8.4 6.2 6.9 -4.3 -2.0 -1.9 Exports, goods and services 12.9 -2.5 4.0 0.0 -1.5 -0.5 Imports, goods and services 12.5 1.3 6.8 -5.1 -4.1 -3.5 Real GDP growth, at constant factor prices 3.5 2.5 2.7 2.1 2.2 3.0 Agriculture 9.7 -2.0 -1.3 7.3 6.6 5.0 Industry 3.4 3.8 0.3 1.4 3.9 2.5 Services 2.4 2.6 5.0 1.5 0.4 2.9 Inflation (consumer price index) 4.3 3.7 2.4 2.3 2.2 2.3 Current account balance (% of GDP) 34.4 28.5 30.7 17.9 22.4 24.0 Net foreign direct investment inflow (% of GDP) 1.6 1.8 1.6 1.6 1.2 1.0 Fiscal balance (% of GDP) -0.8 1.8 -3.7 -5.4 -4.7 -4.6 Revenues (% of GDP) 21.1 24.6 23.7 24.3 23.0 22.4 Debt (% of GDP) 57.0 70.6 72.5 80.2 82.6 86.1 Primary balance (% of GDP) 1.8 4.8 -0.6 -1.8 -0.9 -0.7 1,2 International poverty rate ($2.15 in 2017 PPP) 2.0 2.6 2.6 3.1 2.9 3.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 7.9 9.6 9.7 10.9 10.4 10.2 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 31.8 34.5 34.6 37.8 36.3 35.8 GHG emissions growth (mtCO2e) -1.8 -2.5 -1.0 -0.4 1.2 1.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2017-EGEP. Actual data: 2017. Nowcast: 2018-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 241 This outlook reflects information available as of April 10, 2025. 1 2 THE GAMBIA Population Poverty million millions living on less than $2.15/day 2.8 0.4 3 4 Life expectancy at birth School enrollment Growth accelerated to an estimated 5.7 percent in 2024, years primary (% gross) mainly driven by agriculture and services. Inflation de- creased to 11.7 percent. Extreme poverty incidence declined 62.9 93.7 5 6 to 16.7 percent in 2024. Growth is projected to expand by GDP GDP per capita 5.6 percent in 2025, supported by all sectors. Debt vulnera- current US$, billion current US$ bilities, balance of payment pressures, and global geopoliti- cal tensions and spillovers of the global trade environment 2.5 908.5 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2020 (2017 PPPs). 3/ 2022. cloud the outlook. 4/ 2023. 5/ 2024. 6/ 2024. jobs, and exposure to shocks, including climate events, meant that Key conditions and challenges in 2020, an estimated 17.2 percent of the population lived in ex- treme poverty (measured at the international poverty line of $2.15 The Gambia has gained economic growth momentum since its de- per day PPP 2017). A National Development Plan 2023–2027 is be- mocratic transition in 2017, with economic activity expanding by ing implemented to address these challenges, but limited capacity 5.0 percent on annual average over 2017–2024, higher than the 2.8 and fiscal space restrict progress. percent annual average over 1990–2016. The Gambia, however, still faces structural constraints that hinder Recent developments the transformation of its economy. These include persistent gov- ernance and institutional challenges, low economic diversification, Growth accelerated to an estimated 5.7 percent (3.4 percent poor infrastructure supply, limited human capital development per capita) in 2024, driven mainly by agriculture and services and weak business environment, all of which hampered productiv- which benefited from fertilizer support, high-yielding seeds and ity growth and private sector development. increased tourism. Industry slowed following the completion of major infrastructure projects related to the Organization of These constraints add to downside risks from high dependence on Islamic Cooperation (OIC) Summit. Robust private investment imports, putting persistent pressure on the balance of payments, and consumption, supported by remittances, and public con- and heightened fiscal vulnerabilities, including high public debt, sumption driven by the hosting of the OIC Summit, boosted low domestic revenue collection and weak performance of State- growth on the demand side. Inflation moderated to 11.7 per- Owned Enterprises (SOEs), alongside exacerbated climate shocks. cent in 2024 as energy and food prices slowed. Higher labor incomes—driven by a successful harvest, public construction Profound deficits in human capital endowments, weak attachment works, and a recovery of tourism—and soaring remittances to formal labor markets, the high prevalence of low-productivity supported household consumption and contributed to better FIGURE 1 / Real GDP growth and demand side contribution to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 30 100 35000 90 30000 20 80 70 25000 10 60 20000 50 0 40 15000 -10 30 10000 20 5000 -20 10 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: The Gambian authorities and World Bank estimates. Source: World Bank. Notes: See footnotes in table on the next page. 242 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. household living standards. In combination with lower inflation, private and public investment, and private consumption supported extreme poverty is estimated to have declined to 16.7 percent by robust remittances, albeit dependent on the pace of growth in in 2024, from 17.3 percent in 2023. advanced economies. Inflation is projected to return to single dig- its in 2025, and average 6.8 percent over 2025–2027, reflecting do- The fiscal deficit decreased to an estimated 3.5 percent of GDP mestic monetary tightening and easing global commodity prices. in 2024, as increased domestic revenue and decreased capital spending offset higher interest payments and current transfers. Rising economic activity, higher remittances, and declining inflation Public debt continued to decline to an estimated 70.6 percent are expected to improve household welfare. Consequently, pover- of GDP in 2024. Nevertheless, The Gambia remains at high risk ty is projected to continue declining, reaching 15.9 percent in of debt distress. 2025 and falling to 14.4 percent by 2027, lifting around 35,000 Gambians out of extreme poverty (compared to 2024). Nonethe- The current account deficit (CAD) increased to an estimated 5.7 less, structural impediments to poverty reduction remain. Invest- percent of GDP in 2024, reflecting large OIC event-related imports. ments in better access to health and education facilities and The Central Bank has maintained a tight monetary stance, keeping stronger private sector-led growth with higher productivity jobs its policy rate at 17 percent in November 2024, unchanged since will be critical for future inclusive growth. August 2023. International reserves, while remaining at comfort- able levels, are estimated to have declined to 4.7 months of im- The CAD is set to deteriorate to 5.9 percent of GDP in 2025 due ports in 2024, from 4.9 months in 2023, as the currency depreci- to lower service exports and remittances, while narrowing in the ated by 7.2 percent in nominal terms over the same period. The medium term assuming an improved global trade environment. banking industry remains stable and financially sound, despite ele- The fiscal deficit is projected to narrow to 1.2 percent of GDP vated non-performing loans. over 2025–2027, supported by spending control efforts, including shifting to program-based budgeting and rationalization of subsi- dized agencies, alongside domestic revenue mobilization reforms, Outlook including tax policy enhancement with a review of the investment code to reduce tax expenditures, enhanced tax compliance, and Growth is projected to average 5.5 percent (3.3 percent per capita) digitization of tax administration. This will allow public debt to de- in 2025–2027, driven by all sectors, despite a deceleration in ser- crease from 70.6 percent of GDP in 2024 to below 60 percent on av- vices as tourism is expected to slow down due to global economic erage in 2025–27. Nevertheless, The Gambia is expected to remain uncertainty, alongside capital spending-based fiscal consolidation at high risk of debt distress. The end of the debt-service deferrals in 2026. On the demand side, growth is expected to be driven by in 2024 represents a fiscal risk in the short to medium term. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.5 4.8 5.7 5.6 5.3 5.5 Private consumption 2.6 -4.7 4.4 4.2 4.1 4.1 Government consumption -2.6 5.8 7.1 4.2 5.8 3.7 Gross fixed capital investment 3.6 7.6 7.1 6.8 5.4 5.2 Exports, goods and services 8.8 28.0 18.4 17.0 17.0 17.4 Imports, goods and services -1.8 4.8 7.2 6.0 6.3 5.7 Real GDP growth, at constant factor prices 5.5 4.8 5.7 5.6 5.3 5.5 Agriculture 7.5 2.4 4.0 4.2 5.5 5.2 Industry 3.8 10.1 2.5 5.8 5.0 7.2 Services 5.2 4.0 7.7 6.2 5.2 5.0 Employment rate (% of working-age population, 15 years+) 58.5 58.5 58.5 58.5 58.5 56.6 Inflation (consumer price index) 11.5 16.9 11.7 9.0 6.5 5.0 Current account balance (% of GDP) -4.2 -5.5 -5.7 -5.9 -3.6 -2.1 Fiscal balance (% of GDP) -5.8 -3.8 -3.5 -1.4 -1.4 -0.8 Revenues (% of GDP) 19.2 20.7 21.1 23.0 22.8 22.7 Debt (% of GDP) 84.0 76.9 70.6 64.8 59.6 55.9 Primary balance (% of GDP) -3.6 -1.7 -0.5 1.6 1.3 1.4 1,2 International poverty rate ($2.15 in 2017 PPP) 16.5 17.3 16.7 15.9 15.2 14.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 46.4 47.6 46.5 45.3 44.1 42.9 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 82.2 83.3 82.2 81.0 80.0 79.2 GHG emissions growth (mtCO2e) 1.5 2.0 2.1 2.3 2.2 2.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2020-IHS. Actual data: 2020. Nowcast: 2021-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 243 This outlook reflects information available as of April 10, 2025. 1 2 GHANA Population Poverty million millions living on less than $3.65/day 34.4 14.3 3 4 Life expectancy at birth School enrollment Achieving stability will require significant efforts to enhance years primary (% gross) fiscal discipline, contain expenditures, expand revenue base, and complete debt restructuring. A tight monetary policy is 63.9 96.5 5 6 also needed to reduce pressure on the Cedi, tackle stubborn GDP GDP per capita inflation, and accumulate reserves. Mitigating adverse im- current US$, billion current US$ pacts of necessary reforms on the poorest will be important. 82.8 2406.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2016 (2017 PPPs). 3/ 2022. 4/ 2022. 5/ 2024. 6/ 2024. improve the business environment and export competitiveness, Key conditions and challenges strengthen public sector management, and accelerate a transition to digital and climate change adaptation. Global headwinds will Ghana has nearly completed a comprehensive debt restructuring. have a bearing on Ghana’s economy, which heavily depends on However, 2024, an election year, saw a reversal of fiscal gains with un- global demand for commodities (oil, cocoa and gold) and benign budgeted expenditures, accumulation of arrears, and lower revenue financial conditions. collection. Fiscal sustainability depends on critical fiscal discipline re- forms, boosting domestic revenue, and addressing state-owned en- terprise liabilities in the energy and cocoa sectors. These efforts Recent developments are supported by an IMF Extended Credit Facility program, and the World Bank’s programmatic Development Policy Operations. GDP growth accelerated to 5.7 percent in 2024, driven by recovery in industry (7.1 percent), led by mining and construction. Services, Ghana had significantly reduced poverty before COVID-19, but led by information and communications, finance and insurance, has experienced subsequent reversals due to high inflation and expanded by 6.1 percent. Agriculture grew by 2.8 percent, owing slowing economic growth. The rising poverty trend halted in 2024 to improvements in livestock and crop production, despite a con- despite ongoing inflationary pressures, especially food prices. traction in cocoa output. On the expenditure side, growth was bol- However, stubborn inflation still affects households’ purchasing stered by public and private consumption expansion and a re- power, while slower growth and economic stabilization may jeop- bound in investment spending. ardize continued poverty reduction if adverse impacts on the poorest are not mitigated. Monetary policy failed to tame persistent inflation, which acceler- ated in the second half of 2024 to 23.8 percent due to higher food Faster growth will require a sustained record of macroeconomic prices. Despite an appreciation of the Cedi in the last quarter of stability, along with reforms to address energy sector liabilities, 2024 due to central bank interventions, the currency depreciated FIGURE 1 / Fiscal targets and outturn FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 25 23.3 90 7000 21.5 21.5 80 6000 20 18.5 17.4 15.8 70 15.2 15.6 5000 15 60 50 4000 10 7.7 40 3000 5.7 4.2 30 5 3.3 2000 20 10 1000 0 Budget Outturn Budget Outturn 0 0 2023 2024 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Total revenue and grants Total expenditure Fiscal deficit Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 244 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. by 19.0 percent against the US dollar y-o-y given high foreign ex- in 2024, a half percentage point decrease from the previous year. change demand, and uncertainties surrounding bond restructuring At the international extreme poverty line (US$2.15/day, 2017 PPP), uncertainties and elections. poverty was 25.9 percent in 2024. The external sector achieved a current account surplus of 3.2 per- cent of GDP in 2024, driven by higher gold and crude oil exports Outlook and strong remittance inflows. Gross international reserves in- creased to US$6.4 billion (2.6 months of imports) from US$3.6 bil- Economic growth in 2025 is expected to moderate to 3.9 percent lion in 2023, owing to the over 3 billion worth of gold reserves ac- due to a larger fiscal adjustment, reduced momentum in the ex- cumulated under the Domestic Gold Purchase program. tractives sector, global shifts in trade policy, and elevated interest rates. Medium-term growth is anticipated to return to potential The fiscal outturn for 2024 deteriorated, with primary and overall when the impact of fiscal stabilization fades, non-extractive sector fiscal deficits exceeding targets at 3.7 percent and 7.7 percent of performance improves, and PECAN oil fields production com- GDP, respectively, due to accumulating arrears and unbudgeted mences. Inflation is expected to subside with renewed fiscal con- commitments (4.2 percent of GDP). Revenue and grants totaled solidation and containment of the public wage bill, slowly returning 15.6 percent of GDP (below the 17.1 percent target), while expen- to its target by 2027. ditures (commitment basis) rose to 23.3 percent of GDP (versus a 20.7 percent target). Nevertheless, the public debt to GDP ratio The overall fiscal deficit for 2025 is projected at 2.7 percent of GDP, declined to 70.5 percent due to the Eurobond haircut and strong with a primary surplus target of 1.5 percent, contingent on the gov- GDP growth. ernment's ability to fully reverse the 2024 fiscal slippages and im- provements in tax collection. Over the medium term, the govern- The banking sector remained stable in 2024, with assets growing ment aims to broaden the tax base, improve tax compliance, and by 33.8 percent. The capital adequacy ratio increased to 14 per- enhance expenditure controls. cent and 11.3 percent, with and without regulatory reliefs, re- spectively. However, some banks had significant capital shortfalls Poverty is projected to increase again, reaching 51.4 percent (LMIC at the end of 2024, and the non-performing loans ratio remained poverty line) and 27.0 percent (extreme poverty line) by 2027. high at 21.8 percent. While economic stabilization is a pre-condition for continued poverty reduction, compensating mechanisms and continued Improved growth in 2024, especially in services, and to a lesser ex- strengthening of social programs, such as LEAP (Livelihood Em- tent in agriculture, benefited poorer households and paused the powerment Against Poverty), will ensure the poorest are protected increase in poverty incidence. Poverty at the lower-middle-income from any adverse consequences of fiscal measures, especially en- poverty line (US$3.65/day, 2017 PPP) is estimated at 49.0 percent ergy tariff increases. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.8 3.1 5.7 3.9 4.6 4.8 Private consumption 5.6 10.1 4.2 5.6 4.0 3.9 Government consumption 0.0 0.5 8.0 -5.9 10.9 9.5 Gross fixed capital investment 0.7 -29.2 13.9 3.5 3.9 5.2 Exports, goods and services 0.2 5.1 9.1 3.8 8.3 8.5 Imports, goods and services 1.4 -1.2 9.5 5.5 7.8 7.4 Real GDP growth, at constant factor prices 3.8 3.1 5.7 3.9 4.6 4.8 Agriculture 4.2 5.9 2.8 3.4 4.3 3.6 Industry 0.6 -1.7 7.1 2.4 3.2 4.3 Services 6.3 5.6 6.1 5.3 5.8 5.8 Employment rate (% of working-age population, 15 years+) 66.5 66.4 66.7 66.7 66.7 66.7 Inflation (consumer price index) 31.9 39.2 22.9 17.2 9.4 8.0 Current account balance (% of GDP) -2.3 -2.3 3.2 1.6 1.3 0.8 Net foreign direct investment inflow (% of GDP) 2.0 1.6 2.1 2.6 2.8 2.9 Fiscal balance (% of GDP) -11.8 -3.3 -7.7 -2.7 -2.0 -1.7 Revenues (% of GDP) 15.7 15.2 15.6 16.1 16.8 16.8 1 Debt (% of GDP) 92.7 78.9 70.5 66.4 62.7 59.9 Primary balance (% of GDP) -4.4 -0.3 -3.7 1.5 1.5 1.5 2,3 International poverty rate ($2.15 in 2017 PPP) 25.5 26.4 25.9 26.6 26.8 27.0 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 48.2 49.3 49.0 49.8 51.0 51.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 77.9 78.5 78.6 79.0 79.8 80.3 GHG emissions growth (mtCO2e) 10.1 8.5 6.0 3.2 3.7 4.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Starting from 2022, public debt numbers include, in addition to central government debt, explicitly guaranteed (and certain implicitly guaranteed) SOE debt, cocobills issued by Co- cobod, and reconciled domestic arrears to suppliers. 2/ Calculations based on 2016-GLSS-VII. Actual data: 2016. Nowcast: 2017-2024. Forecasts are from 2025 to 2027. 3/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 245 This outlook reflects information available as of April 10, 2025. 1 2 GUINEA Population Poverty million millions living on less than $3.65/day 14.8 5.9 3 4 Life expectancy at birth School enrollment In 2024, growth reached 5.7 percent, driven primarily by in- years primary (% gross) vestment. The fiscal deficit increased to 3.0 percent of GDP, and inflation peaked at 9.3 percent. Despite a 3.1 percent 59.0 98.0 5 6 rise in GDP per capita, poverty increased due to higher infla- GDP GDP per capita tion and insufficient non-mining sector job creation. In current US$, billion current US$ 2025-27, growth is projected to accelerate to 8.9 percent but uncertainties related to global trade and commodity 25.3 1715.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. prices represent significant risks. 4/ 2021. 5/ 2024. 6/ 2024. underdeveloped financial sector, weak institutional capacity, low Key conditions and challenges human capital levels, and significant gender gaps in education, op- portunities, and earnings. Reforms are also needed to reduce in- Growth was robust during 2019-24, averaging 5.2 percent (2.5 per- equitable subsidies and enhance public spending efficiency and cent per capita), driven mainly by the mining industry but also by revenue mobilization, particularly from mining, to create space for productivity gains in agriculture. However, weak mining linkages public investment that addresses structural inequalities. to non-mining sectors, headwinds from Dutch-Disease dynamics and external shocks limited job creation and poverty reduction. In- deed, over the same period, Guinea’s international poverty rate Recent developments (<$3.65-a-day in 2017 PPP) increased by 7.0 percentage points pushing 1.8 million additional people into poverty. Driven primarily by investment, the economy expanded by 5.7 per- cent in 2024 (3.1 percent per capita) from 5.5 percent in 2023, de- Guinea has abundant natural resources, a growing population, and spite a fuel depot explosion in December 2023. The mining sector a privileged geographic location. The Simandou iron ore project, grew at 7.7 percent, fueled by increased investment and new pro- with exports expected by 2026, has the potential to transform duction, while the non-mining sector grew by an estimated 5.1 per- Guinea's economy and create jobs if appropriate reforms are im- cent. Despite increased revenues, higher capital spending and in- plemented. However, this transformation is challenged as the on- terest payments increased the fiscal deficit to an estimated 3.0 per- going mining boom and the associated appreciation of the real ef- cent of GDP in 2024 from 1.8 percent in 2023, and debt increased fective exchange rate hamper the competitiveness of non-mining to an estimated 42.1 percent of GDP from 41.4 percent in 2023. sectors and diversification. Annual inflation rose to 8.1 percent in 2024 from 7.8 percent in To maximize the impact of growth on job creation and poverty 2023 due to the temporary effects of the December 2023 fuel de- reduction, Guinea must address large infrastructure gaps, an pot explosion, resulting in a 0.2 percentage point rise in poverty. FIGURE 1 / Public debt, fiscal deficit, and inflation FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent Poverty rate (%) Real GDP per capita (constant million LCU) 45 14 100 8 40 90 7 12 35 80 6 10 70 30 60 5 25 8 50 4 20 6 40 3 15 30 4 2 10 20 5 2 10 1 0 0 0 0 2021 2022 2023e 2024e 2025f 2026f 2027f 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 International poverty rate Lower middle-income pov. rate Debt (lhs) Fiscal deficit (rhs) Inflation (CPI, rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. Notes: The inflation data in Figure 1 and the table on the next page refer to Conakry, Guinea's capital. Up until June 2023, Guinea's CPI was based solely on Conakry prices. 246 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. However, as year-on-year inflation gradually declined from 9.3 The fiscal deficit is expected to decrease to 2.4 percent percent in January 2024 to 6.1 percent in December 2024, the of GDP in 2025 and then gradually decline, averaging 1.8 central bank lowered the key policy rate and reserve requirement percent in 2026-27, in line with continued prudent fiscal ratio by 25 basis points to 10.75 percent and 12.75 percent, re- policies and additional revenues. Tax revenues are pro- spectively in December 2024. jected to increase gradually to 13.8 percent of GDP by 2027 from 13.0 percent in 2024, supported by new revenue The current account deficit (CAD) is estimated to widen to 17.7 from Simandou and tax administration reforms. Government percent of GDP in 2024 due to a significant decline in the trade spending is expected to exceed recent levels (except 2024), surplus, linked to FDI-related imports. The sharp increase in FDI- averaging 17.3 percent of GDP in 2025-27 to support infra- related imports and a higher fuel import bill contributed to re- structure investments, while electricity subsidies are expect- ducing gross reserves to only 1.1 months of the following year's ed to gradually decline, driven by tariff adjustments and util- imports in December 2024. ity reforms. The debt-to-GDP ratio is projected to decline to 37.6 percent by 2027. Outlook The CAD is projected to decrease to 2.7 percent of GDP by 2027 as import growth slows and Simandou exports begin, supporting Despite global uncertainties, growth is expected to reach 6.5 per- an increase in reserves to cover 1.8 months of next year’s im- cent in 2025 (3.9 percent per capita) and average 10.0 percent in ports by end-2026. 2026-27, driven mainly by a 19.4 percent average annual growth in the mining sector, largely due to the start of a new iron ore oper- The full economic impacts of recent global trade policy un- ation in 2026. Non-mining sector growth is expected to accelerate certainty are dynamic and difficult to gauge. However, with to 5.4 percent in 2025-27 bolstered by strong internal demand and gold representing 45 percent of Guinea’s exports, and oil higher public investment. and agriculture representing about a third of total imports, the combined effect of commodity price changes, especially Inflation is projected to decline to an average of 7.0 percent in gold prices increases will be more significant than the direct 2025-27, aided by lower transport and food inflation and prudent trade impacts in 2025. monetary policy. The poverty rate is projected to fall by an average of 3.5 percentage points per year over the same period. However, Downside risks include uncertainties in the timing of the political this significant projected poverty reduction is linked to the strong transition, which could lead to social instability and slow reform projected growth of mining, a sector that offers limited employ- implementation. Uncertainties related to global trade, demand ment opportunities for the poor. As such, without ensuring that and commodity prices represent additional risks.Furthermore, ad- the mining boom translates to high growth of agriculture and other verse weather conditions could affect infrastructure and slow pro- non-mining sectors, the expected substantial poverty reduction duction. On the upside, a more rapid implementation of reforms may not materialize. could accelerate growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.0 5.5 5.7 6.5 8.8 11.3 Private consumption 3.9 4.0 4.3 4.7 4.8 5.0 Government consumption -5.7 0.8 3.4 6.8 4.4 4.5 Gross fixed capital investment 1.9 63.6 45.6 30.0 -19.1 4.3 Exports, goods and services -5.3 8.8 7.6 8.4 12.1 18.4 Imports, goods and services -13.3 25.0 23.0 19.0 -7.0 8.5 Real GDP growth, at constant factor prices 4.3 5.5 5.7 6.5 8.8 11.3 Agriculture 6.0 5.7 5.6 6.1 6.3 6.7 Industry 5.7 7.8 7.1 8.7 14.7 20.4 Services 2.5 3.7 4.5 4.7 4.7 4.8 Inflation (consumer price index) 10.5 7.8 8.1 7.0 7.0 6.9 Current account balance (% of GDP) -0.6 -11.3 -17.7 -14.3 -4.9 -2.7 Net foreign direct investment inflow (% of GDP) 12.6 16.2 16.7 15.8 7.9 6.0 Fiscal balance (% of GDP) -0.9 -1.8 -3.0 -2.4 -2.0 -1.6 Revenues (% of GDP) 13.7 14.5 15.0 15.1 15.2 15.5 Debt (% of GDP) 40.1 41.4 42.1 41.3 39.5 37.6 Primary balance (% of GDP) 0.0 -1.3 -1.8 -1.3 -1.0 -0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 14.7 15.1 15.3 13.7 11.7 9.5 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 50.5 51.7 51.9 49.4 46.0 41.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 89.1 89.7 89.5 88.7 87.4 85.3 GHG emissions growth (mtCO2e) 3.0 3.1 3.1 3.2 3.7 4.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 247 This outlook reflects information available as of April 10, 2025. 1 2 GUINEA-BISSAU Population Poverty million millions living on less than $2.15/day 2.2 0.5 3 4 Life expectancy at birth School enrollment Despite a disappointing cashew campaign, stronger services years primary (% gross) activity and higher private demand supported growth of 4.6 percent in 2024. Lower-than-expected revenue collection and 59.9 113.3 5 6 grants accentuated fiscal pressures, increasing public debt. GDP GDP per capita The weak cashew campaign in 2024 and high food prices led to current US$, billion current US$ a marginal increase of poverty to 27.8 percent. Risks to the out- look include the upcoming elections, climate and external 2.2 1014.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. shocks, including high global trade and growth uncertainty. 4/ 2010. 5/ 2024. 6/ 2024. earlier projections (5 percent) due to poorer-than-expected Key conditions and challenges cashew performance. Guinea-Bissau’s economy is heavily reliant on cashew production The service sector, especially hospitality and trade, and higher pro- and exports, making it highly vulnerable to external and climate duction of subsistence crops supported growth in 2024, while high- shocks. Cashew production is dispersed among smallholder farm- er farmgate prices boosted private consumption. Private invest- ers whose income supports overall economic activity. Poverty re- ment increased due to the construction sector, compensating for mains widespread—particularly in rural areas—and changes in lower cashew exports. While headline inflation averaged 3.8 per- household welfare are driven by agricultural incomes and food cent in 2024 (down from 7.2 percent in 2023), price pressures have prices. Political uncertainty remains a perennial challenge. picked up since June 2024 due to increasing domestic food prices. Extreme poverty incidence (measured at the international poverty Growth is mainly driven by private consumption and agriculture. line of US$2.15/day PPP 2017) is estimated at 27.8 percent in 2024, a The enabling environment for private sector-led growth is weak marginal increase from 27.5 percent in 2023 due to a weak cashew due to poor infrastructure, low levels of human capital, and lim- campaign and high prices for staple food items—including rice. ited public services. Spending on health, education and infra- structure have increased but are largely donor financed given The current account deficit (CAD) widened to 8.5 percent of GDP the limited fiscal space. in 2024 (from 8.3 in 2023) reflecting lower international cashew prices and a reduction in export volumes. Despite lower interna- tional food prices, import value increased moderately reflecting Recent developments higher domestic demand. Output expanded by 4.6 percent in 2024 (2.3 percent per Better spending controls contributed to improve the fiscal capita)—an increase from 2023 (4.4 percent) but lower than deficit to 7.3 percent of GDP in 2024 (8.2 in 2023). However, FIGURE 1 / Evolution of fiscal and debt indicators FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 0 85 100 600000 90 -2 80 500000 80 70 400000 -4 75 60 50 300000 -6 70 40 200000 30 -8 65 20 100000 10 -10 60 0 0 2021 2022 2023 2024e 2025p 2026p 2027p 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Public debt (rhs) Overall fiscal balance (lhs) Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 248 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. this was higher than expected as tax collection fell significantly be- cashew prices on exports, supporting the narrowing of the current low target due to lower-than-expected revenue from cashew ex- account deficit to 6.5 percent of GDP in 2025 and 4.6 percent by ports, lower tax revenues on income and imports. The higher fis- 2027. Concessional loans and grants will remain the main financing cal deficit, lower budget support, and higher interest expenses con- sources for the CAD. tributed to significantly increase public debt to an estimated 82.3 percent of GDP at end-2024. Higher revenue collection and continued spending discipline could lower the fiscal deficit and public debt to 3.3 percent and 74.6 percent The West African Economic and Monetary Union (WAEMU) inflation of GDP, respectively, by 2027. The fiscal adjustment is highly depen- rate declined further in 2024 to 3.5 percent but remained above dent on effective implementation of revenue-enhancing reforms, the 1–3 percent WAEMU target band. Regional foreign reserves in- strengthened expenditure controls, and increased grant financing. creased from 3.5 months of imports in 2023 to 4.7 months in 2024, reflecting the resumption of international bond issuances, IMF, and The regional inflation rate is expected to align with the WAEMU tar- World Bank disbursements. The Central Bank of West African get band from 2025 onwards, while regional reserves are projected States kept its policy interest rates unchanged throughout 2024 to rise to 5.4 months of imports in 2025, supported by recovering at 3.5 percent for liquidity calls and 5.5 percent for the marginal exports, and lower Euro Area interest rates. lending facility. Higher cashew producer prices and lower food prices are expected to contribute to reducing poverty to 25.9 percent in 2025. Poverty Outlook reduction is anticipated to continue declining after 2025, with poverty reaching 24.6 percent in 2026 and 23. percent in 2027, Growth is projected to reach 5.1 percent in 2025 (2.8 percent per equivalent to approximately 40,000 people leaving extreme capita), reflecting a good cashew campaign and increased producer poverty since 2024. prices, boosting private demand and activity in the service sector, while lower commodity prices will support the ongoing momentum Downside risks to the outlook stem from the political instability in construction activity. Sustained activity in services – especially re- and uncertainty around the elections, fiscal slippages, the materi- lated to cashew trade – will keep growth at an average of 5.2 per- alization of contingent liabilities, and climate and terms of trade cent over the medium-term. shocks. Sustained implementation of recent trade policy shifts and accompanying weakening in global economic activity could trans- Lower oil and commodity import prices combined with increased late into lower exports and decreasing remittances inflows, which exports in volume will compensate for the negative impact of lower would dampen the outlook. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.6 4.4 4.6 5.1 5.2 5.2 Private consumption 9.1 5.1 5.9 6.4 6.0 6.0 Government consumption 0.6 -0.9 6.1 0.6 0.5 0.5 Gross fixed capital investment 2.7 6.6 13.9 1.1 1.5 1.9 Exports, goods and services -12.5 -3.0 -3.0 5.6 4.8 4.0 Imports, goods and services 10.6 -4.2 2.0 5.5 4.0 4.0 Real GDP growth, at constant factor prices 5.5 4.3 4.5 5.1 5.2 5.2 Agriculture 1.4 4.7 4.5 6.0 5.2 5.0 Industry 2.4 12.7 5.9 6.0 6.7 6.8 Services 9.8 1.4 4.1 4.0 4.6 4.7 Employment rate (% of working-age population, 15 years+) 54.1 54.2 54.2 54.2 54.1 54.1 Inflation (consumer price index) 7.9 7.2 3.8 3.0 2.8 2.5 Current account balance (% of GDP) -8.0 -8.3 -8.5 -6.5 -5.7 -4.6 Fiscal balance (% of GDP) -6.2 -8.2 -7.3 -4.8 -4.0 -3.3 Revenues (% of GDP) 14.3 13.1 13.6 15.1 15.3 15.5 Debt (% of GDP) 75.5 76.5 82.3 80.5 77.6 74.6 Primary balance (% of GDP) -4.9 -5.9 -4.0 -1.8 -1.3 -0.8 1,2 International poverty rate ($2.15 in 2017 PPP) 25.7 27.5 27.8 25.9 24.6 23.3 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 59.7 60.4 61.1 60.1 59.0 58.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 89.2 88.9 89.1 89.2 89.0 88.7 GHG emissions growth (mtCO2e) 0.9 1.8 1.4 1.1 1.0 1.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 249 This outlook reflects information available as of April 10, 2025. 1 2 KENYA Population Poverty million millions living on less than $2.15/day 56.4 19.2 3 4 Life expectancy at birth School enrollment Despite improving macroeconomic indicators, Kenya’s years primary (% gross) economy has slowed: real GDP growth is estimated at 4.5 percent in 2024, down from 5.6 percent in 2023 with 62.1 78.8 5 6 poverty reducing slowly. A wide fiscal deficit and high levels GDP GDP per capita of debt remain Kenya’s main macroeconomic vulnerability, current US$, billion current US$ requiring urgent action. Medium-term priorities to create jobs and reduce poverty involve boosting productivity, 124.5 2206.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. exports, and climate resilience. 4/ 2019. 5/ 2024. 6/ 2024. To accelerate sustained and inclusive growth that creates more Key conditions and challenges and better jobs, it is critical for Kenya to ensure that past public in- vestments, a key contributor to the high debt levels, yield a growth Kenya overcame a severe liquidity crunch in 2024: tighter monetary dividend, while removing distortions in the economy. This will help and fiscal commitments allowed the country to access internation- accelerate Kenya’s productivity growth, estimated to be stagnant. al markets to roll over a US$2 billion Eurobond payment. Subse- quently, economic conditions improved as the exchange rate sta- bilized and reserves increased. Coupled with global tailwinds, infla- Recent developments tion came down. However, Kenya struggled to deliver on its fiscal policy commitments. The 2024 Finance Bill resulted in widespread Kenya’s GDP is estimated to have grown by 4.5 percent in 2024. protests, slowing fiscal consolidation. In addition, growth is slow- The industry sector contracted by 0.2 percent in Q3-24, as con- ing, a consequence of high real interest rates, floods in April 2024, struction fell by 2.0 percent. Manufacturing, however, helped the and government crowding out the private sector through domestic sector avoid a deeper slump, easing slightly compared to its Q3-23 borrowing and pending bills of ~3 percent of GDP. rate (2.3 and 2.8 percent, respectively). Despite floods in April 2024, agriculture and services remain resilient. Favorable weather condi- Economic growth is not sufficiently inclusive, and its link to tions have kept crop production strong, while lower inflation sup- poverty reduction has weakened. While GDP per capita expand- ported private consumption (Figure 1). The international poverty ed by 43 percent during 2005-2022, the national poverty rate rate (US$2.15 a day) is expected to have dropped by half a percent- declined by only 7 percentage points over the same period to age point from 35.1 percent in 2023 to 34.6 percent in 2024. 40 percent. Climate shocks reduce agricultural productivity, while skilled workers have better jobs opportunities than less-skilled Tighter monetary policy helped tame inflation and limit capital out- ones. Moreover, rural and particularly arid areas continue to lag flows. Headline inflation stood at 3.5 percent in February 2025, in human capital development. down from 6.3 percent in February 2024 and below the Central FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real private GDP growth consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 12 100 180000 10 90 160000 80 140000 8 70 6 120000 60 100000 4 50 80000 2 40 60000 30 0 40000 20 -2 10 20000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 0 0 2021 2022 2023 2024 2015 2017 2019 2021 2023 2025 2027 Agriculture Industry Services International poverty rate Lower middle-income pov. rate Taxes GDP growth Upper middle-income pov. rate Real priv. cons. pc Sources: World Bank and Kenya National Bureau of Statistics. Source: World Bank. Notes: See footnotes in table on the next page. 250 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Bank of Kenya’s (CBK) target mid-point of 5±2.5. Real credit growth is expected to remain at 4.0 percent of GDP in the medium term, to the private sector slowed to 3.3 percent year-on-year in Decem- helped by a gradual recovery of exports as trade agreements, ber (from 8.3 percent in December 2023). With inflation easing, the especially the AfCFTA, move forward. Currently, it is difficult to CBK lowered its policy rate to 10.75 percent in February 2025, from gauge the full impact of recent global trade measures as policy a high of 13 percent in July 2024. Foreign exchange reserves rose shifts may continue to unfold, with limited impacts through the to US$9,057 million (4.6 months of imports) by end-February, ver- export’s channel to growth. The fiscal deficit is projected at 4.3 sus US$6,962 (3.7 months of imports) in February 2024 and above percent of GDP in FY 2025/26, lower than in the previous year, the CBK’s statutory requirement. Exports of goods grew by 15.4 with a primary surplus of 1.6 percent. Without significant fiscal percent in 2024, mainly from agriculture and re-exports, while im- reforms, the target of achieving a present value of debt to GDP ports also recovered and grew by 9.9 percent. Moreover, remit- of 55 percent by 2029 could be missed. tances grew by 18 percent y/y in 2024. The current account deficit (CAD) reached 3.7 percent of GDP in the year. Unless growth translates more efficiently to higher incomes for the poor, poverty is unlikely to decline rapidly. At current trends, the Fiscal consolidation efforts continued during the first half of FY international poverty rate is projected to decline by half a percent- 2024/25; however, these were not enough to meet initial targets, age point to 34.0 percent in 2025. and the fiscal deficit was revised upwards to 4.9 percent of GDP. As a share of GDP, public debt is estimated lower at 65.5 percent in There are significant risks to the outlook. Missing fiscal targets FY2024/25 from 66.7 percent in 2023/24. and delays in implementing reforms would further worsen Kenya’s debt vulnerabilities, threaten macroeconomic stability, and slow private investment and jobs growth. Extreme weather Outlook events could harm agriculture and infrastructure, and increasing global geopolitical and trade policy risks could impact investment Kenya’s real GDP is expected to pick up gradually, reaching about and growth. For the monetary authority, this could trigger a 4.8 percent in 2025–27. Lower inflation and easing monetary con- more delicate balance between easing inflation pressures and ditions should support household and business incomes, driving the risk of capital flight. On the upside, faster implementation private consumption and investment. Credit growth is set to ac- of reforms and a better global environment could boost growth celerate under a more accommodative monetary policy. The CAD above expectations. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.9 5.6 4.5 4.5 4.9 5.0 Private consumption 3.3 6.2 5.2 5.3 5.3 5.5 Government consumption 8.1 3.5 2.0 1.5 1.9 3.4 Gross fixed capital investment -0.8 1.9 2.1 3.9 5.8 6.0 Exports, goods and services 11.9 -4.5 5.5 6.2 8.4 8.6 Imports, goods and services 4.6 -3.1 2.5 4.7 5.8 7.2 Real GDP growth, at constant factor prices 4.5 5.4 4.5 4.5 4.9 5.0 Agriculture -1.5 6.5 5.0 4.1 4.5 4.8 Industry 3.9 1.9 0.2 2.9 3.6 3.9 Services 6.6 6.2 5.6 5.1 5.4 5.4 Employment rate (% of working-age population, 15 years+) 63.4 63.2 63.4 63.6 63.6 63.7 Inflation (consumer price index) 7.6 7.7 4.5 5.0 5.0 5.0 Current account balance (% of GDP) -5.2 -4.0 -3.7 -4.0 -4.0 -4.0 Net foreign direct investment inflow (% of GDP) 0.2 0.2 0.3 0.4 0.7 1.2 1,2 Fiscal balance (% of GDP) -5.7 -5.4 -5.1 -4.5 -3.6 -3.3 Revenues (% of GDP) 17.7 18.0 18.5 18.4 18.5 18.6 Debt (% of GDP) 76.2 69.9 68.1 65.8 62.9 59.9 Primary balance (% of GDP) -0.6 0.1 0.8 1.6 1.9 1.8 3,4 International poverty rate ($2.15 in 2017 PPP) 35.9 35.2 34.6 34.0 33.4 32.9 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 69.9 69.2 68.7 68.2 67.7 67.1 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.0 90.1 89.5 88.8 88.1 87.4 GHG emissions growth (mtCO2e) -1.9 3.5 5.7 6.6 6.1 6.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Fiscal data are in fiscal years 2022= FY2022/23. 2/ Fiscal data from Kenya's National Treasury, revised per GFS 2014. Numbers may vary from official estimates due to GDP projection differences. 3/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on private consumption per capita in constant LCU. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 4/ Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. Macro Poverty Outlook / April 2025 251 This outlook reflects information available as of April 10, 2025. 1 2 LESOTHO Population Poverty million millions living on less than $3.65/day 2.3 1.2 3 4 Life expectancy at birth School enrollment Growth is projected at 1.5 percent in 2025, due to uncertainty years primary (% gross) in trade policy that could impact exports and investment. High- lands Water Project, higher water royalties and Southern 53.0 86.4 5 6 African Customs Union revenues will moderate the slowdown. GDP GDP per capita Without reforms and with weak private sector investment, the current US$, billion current US$ economy is expected to revert to its low growth and high unem- ployment trend. Consequently, the poverty rate will remain 2.6 1102.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. high at around 36 percent, using the international poverty line. 4/ 2023. 5/ 2024. 6/ 2024. revenues could be managed by implementing fiscal rules and es- Key conditions and challenges tablishing a stabilization fund. To increase the effectiveness of the use of public resources, Lesotho could contain the buildup in ar- Growth has been low over the past decade, owing to structural rears and public sector wage growth. This would make room for weaknesses and external shocks. Expanding employment opportu- higher capital spending to improve connectivity and reduce region- nities is key to reduce Lesotho’s high unemployment rate, estimat- al disparities. Better targeting in social programs and agriculture ed at 22.5 percent in 2019, and to alleviate widespread poverty, as subsidies could improve the programs’ effectiveness in reducing an estimated 36.3 percent of the population was living on less than economic disparities and improving agriculture productivity. Enact- $2.15 per day (2017 PPP) in 2024. Poverty is particularly severe in ing the Public Financial Management Act would upgrade public fi- the rural highlands, where limited access to essential services and nancial management and enhance macroeconomic coordination, market opportunities exacerbates economic hardship. budgeting processes, and execution rates. Improving public invest- ment management is a priority for growth. Limited dynamism of the private sector coupled with heightened uncertainty in trade policy have limited potential growth. Efficiency gains and private investment have remained low because of the Recent developments dominant role of the public sector in the economy, complex and unclear business regulations, limited competition, and challenges Growth increased by an estimated 2.3 percent in 2024, owing to in accessing credit and skilled labor. Despite substantial investment public investment that also generated positive spillover effects in in education, learning performance is among the lowest in Southern the local services industry. By contrast, export-oriented sectors Africa, with significant disparities across economic groups. like textiles, clothing, and mining underperformed due to weaker foreign demand and lower commodity prices. Inflation dropped Weaknesses in fiscal policy management limit its effectiveness in to 4.1 percent in February 2025 from 5.2 percent in September spurring growth. Volatile Southern Africa Customs Union (SACU) 2023, owing to lower fuel and food prices and a stronger Rand, FIGURE 1 / Fiscal surpluses in the medium-term FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percentage of GDP Percentage of GDP Poverty rate (%) Real GDP per capita (constant LCU) 70 12 90 10500 10 80 60 10000 8 70 50 6 60 9500 40 4 50 2 9000 40 30 0 30 8500 20 -2 20 -4 8000 10 10 -6 0 7500 0 -8 2017 2019 2021 2023 2025 2027 2022 2023 2024e 2025f 2026f 2027f International poverty rate Lower middle-income pov. rate Expenditures (lhs) Revenues (lhs) Balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: WDI and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 252 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. which reduced imported inflation. The Central Bank cut the policy policies and external conditions. Exports and private investment rate by a cumulative 50 basis points from 7.75 percent in Novem- are expected to remain subdued and, consequently, employment ber 2024 to 7.25 percent in February 2025. It left the policy rate growth is expected to insufficient to reduce the poverty rate that unchanged at its March seating. will remain high at 36 percent, using the international poverty line of US$2.15 per day. In 2024, Lesotho reported a high fiscal surplus of 8.8 percent of GDP driven by increased Southern African Customs Union (SACU) Inflation is projected to rise but remain below 6 percent in the revenues (from 14.4 percent in 2022 to 27.8 percent of GDP in medium-term as the costs of imported goods and services are ex- 2024) and higher water royalties (from 3.7 percent in 2022 to 7.2 pected in response to trade policies shifts. Monetary policy will percent of GDP in 2024). Meanwhile, existing rigidities in capital continue to align closely with regional market rates. spending and some restraint in recurrent spending public expen- ditures limited the increase in expenditure. Authorities used part The current account balance is expected to return to a deficit over of the budget surplus to clear 1.8 percent of GDP in arrears, the medium term due to lower exports, particularly of textiles, low- bringing outstanding arrears to about 0.6 percent of GDP. De- er remittances and lower SACU revenues. Completion of LHWP-II spite fiscal surpluses, public debt rose to 59 percent of GDP in and increased water royalties are expected to contain the widening 2024 as the government continued to borrow from both domes- of the current account deficit in the medium-term. tic and external markets. Lower SACU revenues and higher US tariffs are expected to in- The current account balance shifted from a deficit of 6.4 percent of crease fiscal pressures in the medium-term. GDP in 2023 to a surplus of 4.3 percent of GDP in 2024, support- ed by higher remittances, increased interest income and SACU rev- Downside risks have intensified given recent developments in the enue. The trade deficit also improved, driven by water exports. global environment. Uncertainty in trade policy globally and bilat- eral aid flows could increase social tensions and increase spending pressures. Delays in the implementation of MCC Compact II would Outlook hinder growth, job creation and exports prospects. Failure to ex- tend the African Growth and Opportunity Act could impact nega- After declining to 1.5 percent in 2025, growth is projected to aver- tively textile exports, leading to an increase in unemployment. Do- age 0.8 percent between 2026 and 2027. Uncertainty in trade poli- mestic risks include political instability and fiscal mismanagement cy, following the imposition of higher tariffs is expected to weigh on that could reduce fiscal buffers. Conversely, a bold reform program growth. Trade policy shifts affect Lesotho’s exports, remittances, to improve fiscal policy management (including through the adop- investment and growth. Phase II of the Lesotho Highlands Water tion of fiscal rules), ease business conditions, and facilitate trade Project (LHWP-II) is expected to provide some impetus to growth, and international investment could spur private investment, higher albeit, with limited prospects beyond its timeframe under current exports and job creation. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.4 1.8 2.3 1.5 0.9 0.6 Private consumption 9.1 3.8 3.8 3.9 3.9 3.7 Government consumption 2.4 2.2 13.5 21.2 7.8 7.1 Gross fixed capital investment 18.9 49.4 17.4 4.2 23.3 20.8 Exports, goods and services 36.7 2.2 2.2 -0.3 -0.6 -1.0 Imports, goods and services 22.5 10.3 10.8 11.2 9.8 9.3 Real GDP growth, at constant factor prices 2.3 1.8 2.3 1.5 0.9 0.6 Agriculture 12.5 2.4 1.5 1.5 1.7 1.8 Industry 5.0 5.0 5.3 3.2 2.8 2.0 Services 0.9 0.8 1.3 0.9 0.2 0.0 Employment rate (% of working-age population, 15 years+) 54.1 54.5 54.5 54.5 54.5 54.5 Inflation (consumer price index) 8.3 6.4 6.1 5.6 5.7 5.8 Current account balance (% of GDP) -11.7 -6.4 4.4 -1.6 -4.8 -11.1 Net foreign direct investment inflow (% of GDP) 1.2 1.4 1.8 1.0 1.0 1.0 Fiscal balance (% of GDP) -5.5 7.1 8.8 0.1 -0.3 -2.4 Revenues (% of GDP) 50.8 58.0 61.6 58.4 57.1 55.0 Debt (% of GDP) 57.3 55.1 59.2 58.9 57.1 53.9 Primary balance (% of GDP) -4.2 8.2 10.0 1.3 1.0 -1.4 1,2 International poverty rate ($2.15 in 2017 PPP) 36.7 36.6 36.3 36.1 36.2 36.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 59.3 59.1 58.7 58.6 58.6 58.9 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 84.5 84.3 84.1 83.8 83.8 84.1 GHG emissions growth (mtCO2e) 1.7 2.2 2.3 2.3 1.8 2.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2017-CMSHBS. Actual data: 2017. Nowcast: 2018-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2017) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 253 This outlook reflects information available as of April 10, 2025. 1 2 LIBERIA Population Poverty million millions living on less than $2.15/day 5.6 1.3 3 4 Life expectancy at birth School enrollment Liberia's economy expanded by 4.8 percent in 2024, driven by years primary (% gross) mining, services, and agricultural recovery. Inflation remained controlled, and fiscal conditions improved. Uncertainties in 61.1 67.2 5 6 global economy and aid landscape are expected to affect GDP GDP per capita Liberia’s economy. Structural constraints continue to hinder current US$, billion current US$ diversification, making better resource mobilization vital for investments and poverty reduction. Extreme poverty fell to 4.8 846.3 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2016 (2017 PPPs). 3/ 2022. 26.4 percent in 2024 and is projected to continue declining. 4/ 2022. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Liberia’s commodity-driven growth model has failed to en- Liberia’s economy grew by 4.8 percent in 2024, fueled by mining, sure sustained progress. Real per capita income rose 34 services, and agricultural recovery. The industrial sector expanded percent from 2004 to 2013 but declined 6.6 percent to by 6.0 percent, driven by iron ore, gold mining, and construction, US$716 by 2024. Structural constraints, poor infrastructure, while services grew by 4.2 percent, boosted by finance, hospitality, and limited fiscal space hinder economic potential, while trade, and transport. Agricultural output rose by 3.5 percent, up informal, low-productivity jobs dominate the labor market. from 1.4 percent, reflecting higher rubber production. On the de- Institutional weaknesses place Liberia in the bottom 25 mand side, growth was driven by private consumption and in- percentile of governance rankings, and service delivery re- creased gold and iron ore exports. mains inadequate. Declining aid poses short-term challenges but strengthens incentives for reforms. Achieving inclusive Headline inflation eased to 8.4 percent in 2024, down from 10.1 growth requires maintaining macroeconomic stability, diver- percent in 2023, driven by the Central Bank of Liberia’s tight sifying beyond mining towards activities better aligned with monetary policy, stable exchange rates, and lower food and fuel the labor demands, empowering the private sector, and prices. The policy rate remained above inflation, holding at 20 implementing deep policy and institutional reforms. Long- percent for most of the year before dropping to 17 percent in term shifts in the aid landscape, coupled with a less fa- the last quarter. The exchange rate depreciated by 8 percent vorable global environment, are likely to impact small open on average, an improvement from 12 percent in 2023. Food in- economies like Liberia, which are heavily reliant on global flation fell to 9.7 percent by December 2024, down from 26.9 demand and favorable financial conditions. percent a year earlier, while imported fuel saw disinflation of FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 100 900 90 800 5 80 700 4 70 600 60 500 3 50 400 40 2 300 30 20 200 1 10 100 0 0 0 2022 2023 2024e 2025f 2026f 2027f 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Agriculture Industry Services Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: Liberian authorities and World Bank staff estimates and projections. Source: World Bank. Notes: See footnotes in table on the next page. 254 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 10.4 percent from a previous inflation of 13 percent. However, in- comprising 10 percent from foreign direct investment, 8.7 per- flationary pressures started building at the end of 2024 and infla- cent from multilateral and private financing, and 3 percent from tion reached 13.1 percent in February 2025, driven by rising costs capital account inflows. in food, healthcare, and the restaurant sector. Persistent economic challenges—slow growth, high inflation, lim- Outlook ited job opportunities, and inadequate social protection—have significantly increased poverty. By 2022, the extreme poverty Real GDP is expected to grow around 5 percent in 2025, driven by rate had climbed to 40.9 percent, up from 24.8 percent in 2019. continued expansion in mining, especially gold, and improvements However, more favorable economic conditions, particularly eas- in agriculture and services. Medium-term growth will be support- ing inflation have helped reverse this trend, with poverty de- ed by key reforms in energy, increased foreign direct investment in clining to 26.4 percent in 2024. These estimates—based on the mining, and infrastructure development. Tightened monetary pol- international poverty line of US$2.15 per person per day (2017 icy and a conservative fiscal stance are projected to curb inflation. PPP)—use a new methodology that incorporates both economic Fiscal sustainability depends on successful implementation of con- growth and inflation. solidation measures, with fiscal deficit expected to average 2.6 per- cent of GDP from 2025 to 2027. Public debt is projected to decline Fiscal conditions improved, with the overall deficit shrinking to 2.7 to 54 percent of GDP by 2027. While external balances will remain percent of GDP from 7.1 percent in 2023, while the primary deficit high, they are expected to improve to 18 percent of GDP by 2027. declined to 1.5 percent from 6.1 percent. This improvement was Gross international reserves are projected to strengthen, covering largely due to a 4 percent of GDP reduction in public spending on three months of imports by 2027, up from two months in 2024. goods and services and a modest 0.8 percent of GDP increase in domestic revenue. Public debt stood at 57 percent of GDP in 2024, Poverty is projected to decline, reaching 20.9 percent by 2027, dri- slightly lower than 58.8 percent in 2023. ven by sustained economic growth and easing inflation. However, structural reforms remain crucial to foster inclusive growth and ac- Liberia's current account deficit (CAD) remained high at 22.1 per- celerate poverty reduction. cent of GDP in 2024, though lower than 26.4 percent in 2023, reflecting a persistent gap between savings and investment. The Significant risks could threaten this outlook. Weak governance, fis- trade deficit narrowed to 13.7 percent of GDP, down from 19 cal and monetary slippages, a sharper-than-expected decline in percent in 2023, thanks to a 4 percentage points increased in ex- aid, volatility in commodity prices, ongoing shifts and heightened ports driven by gold and iron ore. The CAD is financed by capital uncertainty in global trade policy could undermine macroeconomic and financial account inflows equivalent to 21.6 percent of GDP, stability, growth and poverty reduction. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.8 4.7 4.8 5.1 5.5 5.7 Private consumption 3.3 3.5 3.7 3.6 3.8 3.9 Government consumption -5.7 0.0 -19.0 2.4 3.0 5.7 Gross fixed capital investment 9.4 36.2 3.4 2.5 8.1 7.8 Exports, goods and services 7.7 23.6 21.1 10.4 6.1 6.1 Imports, goods and services 3.1 25.1 6.9 4.5 4.0 4.0 Real GDP growth, at constant factor prices 4.8 4.7 4.3 4.8 5.4 5.8 Agriculture 5.9 1.4 3.5 5.8 5.9 5.8 Industry 6.7 13.9 6.0 6.3 6.0 5.6 Services 2.8 3.7 4.2 3.1 4.5 5.8 Employment rate (% of working-age population, 15 years+) 74.3 74.7 74.7 74.7 74.7 74.7 Inflation (consumer price index) 7.6 10.1 8.4 7.2 5.6 5.1 Current account balance (% of GDP) -17.7 -26.4 -22.1 -19.9 -19.5 -18.0 Fiscal balance (% of GDP) -5.3 -7.1 -2.7 -3.5 -2.3 -2.2 Revenues (% of GDP) 21.4 20.1 19.2 20.3 21.2 21.6 Debt (% of GDP) 53.9 58.8 57.2 57.0 56.1 54.7 Primary balance (% of GDP) -4.4 -6.1 -1.5 -2.2 -0.9 -0.7 1,2 International poverty rate ($2.15 in 2017 PPP) 40.9 27.5 26.4 25.2 23.2 20.9 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 76.0 61.4 61.4 58.9 56.7 53.7 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 95.5 90.0 90.0 89.3 88.0 86.7 GHG emissions growth (mtCO2e) 3.2 3.2 3.1 3.1 3.2 3.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2016-HIES. Actual data: 2016. Nowcast: 2017-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 255 This outlook reflects information available as of April 10, 2025. 1 2 MADAGASCAR Population Poverty million millions living on less than $2.15/day 32.0 18.9 3 4 Life expectancy at birth School enrollment Economic growth remained at 4.2 percent in 2024 sup- years primary (% gross) ported by tourism-related activities and telecommunications. Fiscal balance improved at the cost of limited social and cap- 65.2 135.8 5 6 ital spending. Growth is projected to average 4 percent in GDP GDP per capita the medium term. The poverty rate is expected to slightly current US$, billion current US$ decline but remain high at around 79 percent. Global trade policy uncertainty, underperforming state-owned enterprises, 17.4 545.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2012 (2017 PPPs). 3/ 2022. and external shocks pose risks to investment and growth. 4/ 2023. 5/ 2024. 6/ 2024. Reducing persistent poverty and promoting high and resilient Key conditions and challenges growth requires improved governance, a conducive business environment, structural reforms in key sectors (particularly en- Average real incomes have declined over time, with GDP per ergy, mining, and telecommunications) and faster human and capita falling from US$812 to US$456 between 1960 and 2024 physical capital accumulation. (in constant 2015 US dollars). The poverty rate is amongst the highest worldwide. In 2024, 80 percent of the population lived below the new international poverty line of US$2.15 per day at Recent developments 2017 PPP. While rural poverty remains a serious challenge, ur- ban areas have experienced a significant deterioration over the Economic growth is estimated at 4.2 percent in 2024 (1.7 past decade. percent in per capita terms). On the supply side, growth was driven by the services sector, especially tourism-re- Despite an increase since the 2010s, when growth averaged 3 lated activities and telecommunications. Increased air traf- percent per year, current growth remains insufficient to support fic and the entry of new airlines boosted tourist arrivals, job creation and sustain poverty reduction, especially with a pop- surpassing pre-pandemic levels for the first time in 2024. ulation growth of 2.4 percent per year. Growth is constrained The introduction of a new telecom licensing regime fos- by the predominance of low-productivity sectors (such as sub- tered competition and growth. Meanwhile, labor-intensive sistence agriculture), poor infrastructure, and slow human capi- sectors (such as agriculture, agrobusiness, and textiles) tal accumulation. The situation is aggravated by low tax-to-GDP have struggled, due to lower global demand. On the de- ratio (under 11 percent) limiting the provision of public goods. mand side, growth was driven by private investment and Commodity price volatility combined with the lack of export and private consumption. Inflation eased slightly in 2024 but market diversification, climate shocks, and elite capture have all remained high at 7.6 percent, driven by energy, housing, hindered a faster and inclusive growth. and apparels costs. To curtail inflation, the central bank FIGURE 1 / Real GDP growth and demand-side contributions to FIGURE 2 / Actual and projected poverty rates and real GDP per real GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 100 820000 8 90 800000 6 80 780000 4 70 760000 60 2 740000 50 0 720000 40 -2 700000 30 -4 20 680000 -6 10 660000 2023 2024e 2025e 2026f 2027f 0 640000 Gov. cons. Exports GFCF 2010 2012 2014 2016 2018 2020 2022 2024 2026 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Ministry of Economy and Finances and World Bank estimate. Source: World Bank. Notes: See footnotes in table on the next page. 256 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. increased the policy rates (deposit facility and marginal lending rates) by 50 basis points (bps) in August 2024, Outlook in addition to the cumulative increase of 90 bps since October 2022. Growth is projected to average 4 percent over 2025–27, driven by mining and tourism-related services. Over the medium term, in- The external position remained resilient, despite mounting flation is projected to average 8.1 percent due to the high cost of pressures on the current account. The current account deficit food. The monetary policy stance is expected to remain restrictive (CAD) widened from 4.7 to 5 percent in 2024, due primarily to amid persistent inflation. Global trade policy uncertainties are ex- deteriorated merchandise trade driven by lower global demand pected to negatively affect the trade balance and contribute to a and falling prices for major exports (such as vanilla, cloves, widening in the CAD to 6.4 percent of GDP in 2025 before declin- cobalt, and nickel). Goods imports also declined, though to a ing over the medium term. The CAD is expected to be financed by lesser extent. Meanwhile services trade improved. The CAD was increased FDI inflows related to mining. The international poverty mainly financed by foreign direct investment (FDI) and project rate is projected to slightly decrease to 78.7 percent by 2027. grants, which helped bolster international reserves (equivalent of 6.3 months of imports at the end of 2024). After a slight The fiscal deficit is projected to stay around 4 percent of GDP. Un- appreciation against the US dollar in early 2024 (y/y), owing to certain global trade conditions and lower economic growth are ex- external financing inflows, the ariary depreciated by 2.7 percent pected to weigh on tax collection. However, the negative impact by end 2024. on revenue performance is expected to be mitigated by further re- forms in rationalizing tax expenditures and improved tax adminis- The fiscal deficit narrowed to 3.3 percent of GDP in 2024, re- tration. Ongoing reforms of the state-owned utility JIRAMA are like- flecting spending cuts rather than improved revenue. Total rev- ly to improve its financial performance and thus result in a gradual enue and grants were estimated at 13.6 percent of GDP in 2024, decline in fiscal transfers. Reforms supported by the IMF program with the tax-to-GDP ratio declining slightly to 10.8 percent due to are expected to help reduce the fiscal deficit, which is projected to weakened international trade, in a context of generous tax ex- be mainly financed by external borrowing. The public debt stock is emptions. Total expenditure declined to 16.9 percent of GDP in expected to remain below 55 percent of GDP. 2024. Transfers and subsidies remained high, crowding out in- vestment and social spending, and risking further undermining The outlook faces downside risks stemming from heightened productivity and medium-term growth. The debt-to-GDP ratio is trade policy uncertainty, underperforming state-owned enterpris- estimated to slightly decline to 51.3 percent, while the risk of es, and external shocks, notably, commodity price volatility and debt distress remains moderate. adverse weather conditions. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.2 4.2 4.2 3.7 3.9 4.4 Private consumption 0.1 4.5 2.6 2.5 2.5 2.5 Government consumption 5.7 -1.1 -4.1 0.2 5.7 6.2 Gross fixed capital investment 4.4 3.3 17.5 18.4 10.9 7.4 Exports, goods and services 26.5 2.4 0.8 -1.9 6.6 5.7 Imports, goods and services 21.2 -4.7 0.9 6.0 8.9 5.3 Real GDP growth, at constant factor prices 3.9 4.2 4.2 3.7 3.9 4.4 Agriculture 2.0 5.3 4.8 2.5 2.8 3.4 Industry 9.3 1.8 3.2 1.0 1.5 2.5 Services 3.4 4.4 4.2 4.9 5.1 5.2 Employment rate (% of working-age population, 15 years+) 83.5 83.6 83.6 83.6 83.6 83.6 Inflation (consumer price index) 8.2 9.9 7.6 8.5 8.1 7.7 Current account balance (% of GDP) -5.4 -4.7 -5.0 -6.4 -6.1 -5.8 Net foreign direct investment inflow (% of GDP) 2.1 2.2 2.8 3.5 2.3 2.4 Fiscal balance (% of GDP) -5.5 -4.2 -3.3 -3.9 -4.2 -3.9 Revenues (% of GDP) 10.8 13.7 13.6 12.1 12.6 13.5 Debt (% of GDP) 50.0 52.7 51.3 53.3 54.2 54.6 Primary balance (% of GDP) -4.9 -3.5 -2.6 -2.9 -3.2 -3.0 1,2 International poverty rate ($2.15 in 2017 PPP) 81.0 80.5 80.0 79.7 79.4 78.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 92.6 92.3 92.1 91.9 91.8 91.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 98.2 98.1 98.1 98.0 98.0 97.9 GHG emissions growth (mtCO2e) 0.7 1.6 1.3 1.1 1.0 1.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2012-ENSOMD. Actual data: 2012. Nowcast: 2013-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 257 This outlook reflects information available as of April 10, 2025. 1 2 MALAWI Population Poverty million millions living on less than $2.15/day 21.7 13.3 3 4 Life expectancy at birth School enrollment Growth slowed to 1.8 percent in 2024 due to a severe years primary (% gross) drought and is projected at 2.0 percent for 2025 amid a weak recovery and continued foreign currency shortages. 62.9 135.4 5 6 High inflation, driven by deficit financing and escalating food GDP GDP per capita and utility costs, exacerbates poverty and food insecurity. current US$, billion current US$ 71.3 percent of Malawians are expected to be below the $2.15 per day poverty line in 2025. 11.0 508.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. remain critically low, as inflows from official exports, foreign in- Key conditions and challenges vestment, remittances and grants have not kept pace with im- port demand. Consequently, foreign exchange is tightly rationed, In the past three years, per capita income has declined as Malawi's and there is a growing spread between the official exchange rate economic growth lagged population growth. The period has seen and the parallel market rate. widening fiscal and current account deficits, an unsustainable debt burden, increasing capital and price controls, and severe foreign Despite significant progress in reducing child mortality and exchange shortages, hindering economic stabilization efforts. Fre- fertility rates, hunger remains a critical concern due to suc- quent climatic disasters and other exogenous shocks have exacer- cessive weak harvests since 2022. This has hindered human bated these challenges, making it difficult for poor households to capital development, with the rate of stunted children under build resilience. five stagnant at 38.0 percent since 2015. Foreign exchange constraints have also limited imports to compensate for the Despite attempts at stabilization, efforts to address rising fiscal food supply deficit. and external imbalances have stalled, deepening macroeconomic challenges. Structural challenges are compounded by fiscal slip- pages financed by high-cost domestic debt, with debt service Recent developments consuming over 56.0 percent of domestic revenue in 2024. The country remains in external debt distress and the debt-to-GDP In 2024, Malawi’s economy faced significant challenges, with real ratio has reached 90.2 percent. While agreements to restructure GDP growth slowing to 1.8 percent due to a severe drought and official bilateral debt have been reached, progress on restruc- acute foreign exchange shortages. The poverty rate rose to 71.2 turing external commercial debt is advancing slowly. Quasi-fiscal percent. The interplay of external sector imbalances, inflationary activities, such as below-market sales of foreign exchange, have pressures, and fiscal constraints has deepened economic vulnera- increased, posing fiscal risks. Official foreign-exchange reserves bilities, impeding recovery prospects. FIGURE 1 / Actual and projected revenues, expenditures, and FIGURE 2 / Actual and projected poverty rates and real GDP per budget deficit capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 35 2 100 390000 0 90 380000 30 -2 80 25 370000 -4 70 60 360000 20 -6 50 350000 15 -8 40 340000 -10 30 10 330000 -12 20 5 10 320000 -14 0 -16 0 310000 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Budget deficit (rhs) Revenues Expenditures Upper middle-income pov. rate Real GDP pc Source: World Bank staff estimates and projections. Source: World Bank. Notes: See footnotes in table on the next page. 258 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The external sector deteriorated sharply, with the current ac- due to El Niño-induced drought conditions. Additionally, modest count deficit widening to 22.0 percent of GDP in 2024. Imports growth is anticipated in the industrial and services sectors. However, surged to 28.4 percent of GDP, far outpacing exports (10.1 per- these sectors remain subdued due to the continued unavailability of cent of GDP). This imbalance severely strained official foreign ex- foreign exchange, which is constraining the importation of produc- change reserves, which have remained below one month of im- tion inputs. Real GDP growth is projected at 2.4 percent in 2026. This port cover for the past two years, exacerbating the country’s vul- stagnation impedes efforts to reduce poverty. nerability to shocks. Implementation of exchange rate reforms announced in November 2023 has stalled, leading to a widening The budget deficit is expected to widen to 8.7 percent of GDP in spread between official and parallel rates and increasing distor- 2025, driven by election year spending and the need to absorb tions in the foreign exchange market. some critical expenditures previously financed by the United States government. Inflation is expected to remain above 30 percent due Following a period of moderation in late 2024, inflationary pres- to a weaker agricultural recovery, the imposition of new import sures have reemerged, primarily driven by escalating food and bans constraining supply, as well as continued high money supply utility costs, as well as depreciation of the parallel exchange rate, growth. The real appreciation of the official exchange rate will con- with the poorest households and those in urban areas hit hard- tinue to incentivize imports and discourage export growth, deep- est. Headline inflation remains high at 30.7 percent in February ening external imbalances. 2025, largely due to a sharp rise in food prices, disproportional- ly affecting the poorest households. The Reserve Bank of Malawi The number of people living in poverty is expected to increase has maintained the monetary policy rate at 26.0 percent since in 2025 amidst this challenging economic environment and rising February 2024. Concurrently, money supply growth remains ele- food insecurity, with an additional 417,000 people falling below the vated, reaching 37.8 percent in February 2025, driven in part by $2.15 per day threshold, bringing the total number of people living high deficit financing. in poverty to 15.8 million. The fiscal deficit in 2024 remained high at 8.4 percent, driven by The outlook is subject to significant downside risks, including po- overly optimistic revenue projections and expenditure slippages. tential fiscal slippages that could entrench macroeconomic insta- The primary deficit remains high at 1.4 percent of GDP. bility. While direct and indirect effects of recent trade policy shifts have caused a downward shift in growth projections, continued un- certainty and weaker than expected global demand may further Outlook adversely affect Malawi’s growth prospects. Failure to address ex- ternal imbalances may further perpetuate input shortages. Upside Real GDP is projected to grow modestly by 2.0 percent in 2025, which risks include the potential unfreezing of US aid to Malawi, easing would not be sufficient to prevent a fourth consecutive contraction in of trade restrictions, faster-than-expected development of mining per capita income. GDP growth will be driven by a modest recovery mega-projects, and the rapid conclusion of debt-restructuring ne- in the agricultural sector, which experienced negative growth in 2024 gotiations with commercial external creditors. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 0.9 1.9 1.8 2.0 2.4 3.2 Private consumption 0.6 3.8 4.7 4.8 5.6 5.6 Government consumption -5.8 14.8 15.5 0.4 -1.9 2.5 Gross fixed capital investment 12.4 -14.3 -14.2 -11.6 -25.1 -33.8 Exports, goods and services 3.1 3.5 8.8 6.7 6.0 6.0 Imports, goods and services 3.9 3.9 9.6 6.3 3.9 3.9 Real GDP growth, at constant factor prices 1.1 1.7 1.8 2.0 2.4 3.2 Agriculture 0.9 0.7 -0.2 2.2 3.0 3.9 Industry -0.7 2.5 2.1 2.2 2.2 2.7 Services 1.9 1.8 2.6 1.8 2.2 3.1 Inflation (consumer price index) 20.9 28.7 32.3 34.7 27.8 19.4 Current account balance (% of GDP) -17.8 -17.8 -22.0 -21.9 -17.7 -17.1 Net foreign direct investment inflow (% of GDP) 1.7 1.6 1.1 1.0 1.3 1.2 Fiscal balance (% of GDP) -10.8 -13.4 -8.4 -8.7 -7.1 -7.3 Revenues (% of GDP) 17.2 18.7 20.1 21.2 21.7 23.2 Debt (% of GDP) 76.7 90.3 90.2 81.9 78.8 64.9 Primary balance (% of GDP) -6.1 -8.3 -1.4 -0.6 -1.2 -1.6 1,2 International poverty rate ($2.15 in 2017 PPP) 70.6 70.9 71.2 71.3 71.2 70.9 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 89.3 89.4 89.5 89.5 89.5 89.4 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 97.4 97.4 97.4 97.5 97.4 97.4 GHG emissions growth (mtCO2e) 1.5 1.6 1.5 1.5 1.5 1.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2019-IHS-V. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2019) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 259 This outlook reflects information available as of April 10, 2025. 1 2 MALI Population Poverty million millions living on less than $2.15/day 24.5 4.7 3 4 Life expectancy at birth School enrollment In 2024, GDP growth is estimated at 4.0 percent (1.0 percent years primary (% gross) per capita), driven by agriculture and services, while elec- tricity shortages continued to hinder industrial production. 59.4 74.4 5 6 Inflation averaged 3.2 percent. Growth is projected to slightly GDP GDP per capita increase in 2025, supported by new lithium production and current US$, billion current US$ telecommunication investments. Poverty remains largely unchanged. The outlook is subject to downside risks from 22.0 898.0 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. security concerns, climate shocks and debt roll-over. 4/ 2023. 5/ 2024. 6/ 2024. forming the Confederation of Sahel States (AES), have replaced Key conditions and challenges the ECOWAS passport with their own unified passport. However, Malian citizens and businesses retain access to key ECOWAS Mali’s economy remains undiversified and exposed to climate and membership benefits, including the free movement of people commodity shocks. The economic landscape is dominated by low and goods, pending further decisions. The authorities have reit- productivity services and rain-fed agriculture, while manufacturing erated Mali’s intention to remain in the West African Economic is limited to agro-industries and cotton ginning. Gold and cotton and Monetary Union (WAEMU). dominate exports, with the mining sector receiving over half of in- ward foreign direct investment (FDI). Export diversification is con- strained by Mali’s landlocked position, low human capital, and Recent developments weak productivity. GDP growth increased to 4.0 percent in 2024 (estimate), equivalent The security and energy crises continue to affect economic growth. to 1 percent per capita, driven by services and agriculture. Services Insecurity has limited access to rural areas and hindered economic growth accelerated mainly due to investments in transport and activity. The secondary sector has been affected by electricity communication network expansion and modernization. Agricul- shortages since August 2023, caused by challenges in sector man- ture benefited from productivity gains in cereal production as a re- agement and mounting debts to suppliers. Uncertainty around re- sult of agricultural intensification and the application of adapted gional dynamics adds to these challenges. cultivation techniques. On January 29, 2025, Mali formally exited Economic Community A drop in gold production from about 74,300 to 57,800 met- of West African States (ECOWAS) along with Burkina Faso and ric tons, caused by mine closures related to tax disputes, Niger, following a joint withdrawal announcement of January led the secondary sector to contract in 2024. Nevertheless, 2024 and unsuccessful mediation efforts. The three countries, the current account deficit as a share of GDP narrowed from FIGURE 1 / Budget balance and changes in tax revenue and debt FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 4 100 270000 90 260000 2 80 70 250000 0 60 240000 50 -2 40 230000 30 220000 -4 20 210000 10 -6 0 200000 2022 2023 2024e 2025p 2026p 2027p 2022 2023 2024 2025 2026 2027 Change in debt Change in tax revenue International poverty rate Lower middle-income pov. rate Fiscal balance WAEMU fiscal balance floor Upper middle-income pov. rate Real GDP pc Sources: Government of Mali and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 260 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 7.2 to 6.3 percent, due to sustained cotton exports and a no changes in the security situation, some improvement in electric- decline of oil and food imports. ity supply and a stable policy environment. Headline inflation rose to 3.2 percent in 2024, driven by floods, The current account deficit is projected to improve in 2025, driven pests, and security challenges. Agricultural growth barely exceed- by lithium and cotton production and higher gold prices. The fiscal ing the rate of population growth led to poverty at the international deficit is forecast to return slightly below the WAEMU ceiling of 3 poverty line remaining largely unchanged at 21 percent. percent of GDP in 2025 due to increased tax revenue from the ex- tractive sector. The ECOWAS exit is not expected to have significant The WAEMU inflation rate fell to 3.5 percent in 2024 but remained impacts on the economy or prices. above the 1–3 percent WAEMU target band. Regional foreign re- serves increased from 3.5 months of imports in 2023 to 4.7 months The regional inflation rate is expected to align with the WAEMU in 2024, reflecting the resumption of international bond issuances, target band from 2025 onwards (including for Mali), while re- IMF, and World Bank disbursements. The Central Bank of West gional reserves are projected to rise to 5.4 months of imports African States kept its policy interest rates at 3.5 percent for liquid- in 2025, supported by recovering exports, and lower Euro Area ity calls and 5.5 percent for the marginal lending facility. interest rates. The fiscal deficit narrowed to 2.9 percent of GDP in 2024, mainly Consistent with past trends, poverty in 2025 is projected to re- due to delays in government recruitment programs, leading to a main broadly unchanged, as gains from per capita GDP and agri- temporary fall in the public wage bill. Tax digitalization and cus- cultural growth are offset by rising food prices. In Menaka, Kidal, toms measures supported the fiscal consolidation. The fiscal deficit and Mopti, poverty is expected to rise sharply, driven by severe is predominantly financed through domestic borrowing from the food price spikes linked to 2024 flood-related crop losses and re- regional market, where Mali has faced a surge in interest rates, ex- stricted access due to insecurity. In some areas, famine condi- ceeding 9 percent for 12-month bills. Debt roll-over is high, which tions are likely to emerge. poses some risk, but current conditions support a moderate rating for debt distress. Downside risks to the outlook include a persisting electricity crisis, rising insecurity and climatic shocks. Substantial financing needs and elevated borrowing costs could lead to reductions in growth- Outlook enhancing investments amid demands for security spending. Con- tinued disputes with international mining firms and additional tax Real GDP growth is projected to average 4.8 percent over exemptions could affect tax revenues. On the upside, the sustain- 2025–2026, supported by new lithium production, higher gold able resolution of the electricity crisis and improved regional re- prices, agriculture, and telecommunication services. This assumes lations could ease market uncertainty and support investment. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.5 3.5 4.0 4.8 4.8 4.7 Private consumption 4.0 3.9 4.0 4.0 4.1 4.1 Government consumption 7.6 16.7 -2.2 6.6 5.0 4.7 Gross fixed capital investment 1.0 -3.6 10.1 1.2 7.3 6.2 Exports, goods and services 18.1 -3.9 2.7 10.3 4.8 4.1 Imports, goods and services 0.7 2.3 3.9 5.0 5.1 4.1 Real GDP growth, at constant factor prices 4.3 3.4 4.0 4.8 4.8 4.7 Agriculture 2.4 2.3 4.5 4.7 4.7 4.8 Industry 3.7 2.0 -1.0 2.0 2.5 3.5 Services 5.8 4.9 5.6 5.9 5.7 5.0 Employment rate (% of working-age population, 15 years+) 64.6 64.8 64.8 64.8 64.8 64.8 Inflation (consumer price index) 9.7 2.1 3.2 2.6 2.3 1.9 Current account balance (% of GDP) -7.0 -7.2 -6.3 -4.6 -4.0 -3.0 Net foreign direct investment inflow (% of GDP) 2.6 2.5 2.7 2.7 2.8 2.8 Fiscal balance (% of GDP) -4.8 -3.9 -2.9 -2.7 -2.5 -2.6 Revenues (% of GDP) 19.8 23.6 23.8 24.3 24.0 24.0 Debt (% of GDP) 51.8 53.3 52.6 52.6 51.9 51.3 Primary balance (% of GDP) -3.4 -2.2 -0.9 -1.0 -0.9 -1.0 1,2 International poverty rate ($2.15 in 2017 PPP) 20.7 21.5 21.1 20.7 19.8 18.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 55.9 58.3 57.2 56.3 55.3 53.8 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 85.5 87.2 86.4 86.0 85.4 84.5 GHG emissions growth (mtCO2e) 4.6 3.0 4.0 4.9 5.4 5.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 261 This outlook reflects information available as of April 10, 2025. 1 2 MAURITANIA Population Poverty million millions living on less than $3.65/day 5.2 1.2 3 4 Life expectancy at birth School enrollment Growth slowed to 5.2 percent in 2024 due to weaker public years primary (% gross) consumption and extractives production. Inflation eased and the fiscal deficit narrowed. Poverty incidence remained at 28.4 64.7 111.8 5 6 percent. Gas production should boost exports and revenues, GDP GDP per capita but outlook risks include regional instability, climate shocks current US$, billion current US$ and weaker global demand due to trade policy uncertainty. Resilience-enhancing reforms and prudent fiscal policies are 10.6 2053.7 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. required to sustain growth and accelerate poverty reduction. 4/ 2023. 5/ 2024. 6/ 2024. long-term sustainability. Crucial reforms to enable this transition Key conditions and challenges should focus on improving productivity, fostering economic di- versification and promoting inclusive job creation at scale. With- Despite an unfavorable global economic and geopolitical envi- out addressing these challenges, Mauritania risks entrenching its ronment and recurrent climate shocks, Mauritania has main- overreliance on extractives, hindering its broader development. tained robust economic performance. Growth averaged 3.4 per- cent in 2020-2023, the fiscal deficit and the current account Food price instability and low agricultural productivity affect deficit (CAD) narrowed, while the risk of debt distress improved mostly the poor, as food represents 58 percent of their consump- from high to moderate. However, structural weaknesses persist tion and over half of them rely on income from low-productivity due to Mauritania’s dependence on extractives, low investment agriculture activities. implementation capacity, business environment challenges, cli- mate vulnerability and repercussions of regional conflicts, includ- ing refugee inflows. Recent developments If well managed, Mauritania's natural resource wealth, including Economic growth moderated to 5.2 percent in 2024 (2.2 percent iron ore, gold, crude oil and copper, combined with the beginning per capita), down from 6.5 percent in 2023 (3.4 percent per capita), of gas exports from the Greater Tortue Ahmeyim (GTA) project in as weaker public consumption and slower gold and iron ore pro- late 2024, could accelerate growth, improving public finances and duction offset robust export performance and resilient private con- enabling investment that would support the transition to a higher, sumption. Inflation eased to 1.5 percent (y/y) in December 2024 diversified growth path. compared to 1.6 percent (y/y) in 2023, driven by declining food and oil prices and supported by the Central Bank of Mauritania’s (BCM) This momentum should catalyze a transition toward higher- tight monetary policy stance. Throughout 2024, inflation remained value-added sectors, away from extractive-led growth to ensure within a 1.5-3 percent range, enabling the BCM to implement a FIGURE 1 / Evolution of main macroeconomic indicators FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 54 80 90000 52 70 80000 6 50 60 70000 4 60000 48 50 2 46 50000 40 40000 44 30 0 30000 42 20 20000 -2 40 10 10000 -4 38 0 0 2021 2022 2023 2024 2025 2026 2027 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 GDP growth (lhs) Primary balance (lhs) International poverty rate Lower middle-income pov. rate General government debt (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 262 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 50-basis-point reduction in the policy rate to 7.25 percent in Octo- 2027, gas production from GTA and rebounding iron ore produc- ber 2024, the first cut since 2022. With lower food inflation but lim- tion from new sites should support a growth recovery to 5.4 per- ited growth in agriculture, poverty decreased slightly from 28.6 in cent. Weak agricultural sector performance and rising inflation may 2023 to 28.4 in 2024 (measured at US$3.65 per day in PPP 2017). result in a slight increase in poverty incidence to 28.6 percent by 2027, pushing an additional 137,000 people into poverty. Fiscal consolidation efforts yielded a narrowing of the fiscal deficit to 0.1 percent of GDP in 2024, compared to 2.4 percent in 2023, The fiscal deficit should grow to 1.4 percent of GDP in 2025, driven by higher revenue collection, reflecting tax measures in the driven by increased capital spending, before resuming the fiscal telecommunications sector and increased withholding taxes from consolidation path from 2026 onwards, supported by higher rev- extractives, alongside controlled recurrent expenditures. enues. Public debt is projected to stabilize at 44.6 percent of GDP by 2027, creating fiscal space for priority investments in in- The debt-to-GDP ratio declined to 44.0 percent in 2024, supported frastructure and social programs. Inflation should decline slightly by fiscal prudence, exchange rate stability, declining nominal exter- to 2.0 percent (y/y) in 2025, reflecting lower commodity prices, nal debt, and stronger nominal GDP growth, as Mauritania remains and average 3.5 percent in 2026-2027, driven by a more accom- at moderate risk of debt distress according to the December 2024 modative monetary policy. WB-IMF Debt Sustainability Analysis. The CAD should widen to 6.1 percent of GDP in 2025 due to lower The CAD narrowed in 2024 reaching 5.8 percent, driven by higher iron ore and gold exports, as trade policy uncertainty may reduce exports and lower hydrocarbons, capital goods and food imports. global demand and lower prices. The CAD is expected to improve Foreign exchange reserves rose slightly, covering 6.4 months of im- slightly in 2026-27 to an average of 5.8 percent of GDP, as global ports. The BCM effectively managed excess liquidity through a new conditions stabilize and iron ore production resumes. overnight deposit facility. The Ouguiya depreciated modestly by 0.8 percent against the US dollar, with reduced volatility, supported by Downside risks to the outlook remain significant. Deteriorating se- the launch of a foreign exchange platform in late 2023. curity in the Sahel could trigger refugee inflows and deter foreign direct investment (FDI). Climate-related shocks threaten agricultur- al productivity and infrastructure, exacerbating poverty and bal- Outlook ance-of-payments pressures. Escalating trade policy uncertainty could induce a sharper-than-expected global economic slowdown, The medium-term outlook is dampened by uncertainty in the glob- which would slow exports, investment, and aid. However, lower al economic environment. GDP growth should slow to 4.9 percent food and oil prices can reduce inflation and stimulate consump- in 2025 due to declining gold and iron ore production and lower tion, while GTA gas production and structural reforms could crowd commodity prices, as reserves deplete in major mining sites. By in FDI and stimulate growth. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.8 6.5 5.2 4.9 4.5 5.4 Private consumption 3.9 4.2 4.6 4.9 5.0 5.0 Government consumption 14.3 10.6 1.5 3.7 -2.0 4.1 Gross fixed capital investment 3.4 -15.3 6.4 2.6 9.3 1.8 Exports, goods and services 16.8 3.5 9.7 9.0 7.2 9.2 Imports, goods and services 15.3 -1.5 5.0 6.5 7.0 6.0 Real GDP growth, at constant factor prices 9.8 4.3 5.2 4.9 4.5 5.4 Agriculture 8.7 -1.0 1.5 1.6 1.6 1.6 Industry 12.5 5.8 3.0 6.3 5.7 6.4 Services 8.6 5.8 8.2 5.4 4.9 6.1 Inflation (consumer price index) 9.5 5.1 2.5 2.0 3.5 3.5 Current account balance (% of GDP) -14.9 -9.1 -5.8 -6.1 -6.0 -5.5 Net foreign direct investment inflow (% of GDP) -14.7 8.0 5.1 4.9 4.5 4.2 Fiscal balance (% of GDP) -3.8 -2.4 -0.1 -1.4 -1.3 -1.0 Revenues (% of GDP) 24.7 22.5 24.0 24.7 25.2 26.2 Debt (% of GDP) 48.5 46.4 44.0 44.8 45.2 44.6 Primary balance (% of GDP) -3.0 -1.4 0.9 -0.4 -0.2 0.1 1,2 International poverty rate ($2.15 in 2017 PPP) 6.2 6.4 6.5 6.6 6.8 7.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 28.1 28.6 28.4 27.6 28.1 28.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 69.7 70.1 69.4 67.7 67.7 67.8 GHG emissions growth (mtCO2e) 2.2 2.6 2.4 2.5 2.6 2.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2019-EPCV. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 263 This outlook reflects information available as of April 10, 2025. 1 2 MAURITIUS Population Poverty million millions living on less than $6.85/day 1.3 0.2 3 4 Life expectancy at birth School enrollment Economic growth is estimated at 4.7 percent in 2024, dri- years primary (% gross) ven by the services sector, while inflation declined to 3.6 percent. Growth is forecasted to moderate to 3.2 percent 73.5 110.9 5 6 in 2025, amidst higher US trade tariffs and modest public GDP GDP per capita investment spending. The fiscal deficit is expected to ease current US$, billion current US$ to 5.4 percent of GDP, with public debt remaining elevat- ed at 87.5 percent of GDP. Poverty is projected to decline 14.8 11776.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. to 7.2 percent by 2027. 4/ 2023. 5/ 2024. 6/ 2024. on public pensions and tax allowances are draining fiscal re- Key conditions and challenges sources, limiting the fiscal space. Mauritius, an archipelagic country with a population of 1.3 million, has transformed from a low-income mono-crop producer of sugar Recent developments cane to an upper-middle-income diversified economy – driven by tourism, fisheries, manufacturing, and financial services. Poverty The new government revised the 2022 and 2023 GDP in response is projected to have fallen to around 8 percent by 2025 (at the to heightened concern over past growth exaggerations. It also re- $6.85-a-day poverty line), after a considerable increase from 11 to vised 2024 real GDP growth from 6.5 percent to 4.7 percent based 16 percent during COVID-19 in 2020. on less optimistic public investment realizations. While these growth rates remain respectable, sectoral breakdown suggests fur- After the November 2024 general election, a new govern- ther weakening of Mauritius’ traditional growth drivers, agriculture ment introduced a plan to accelerate economic development and manufacturing. Meanwhile, thanks to a sustained tourism in- through diversifying growth sources, improving public sector flux and real estate investments, retail, transport, hospitality, and governance, and promoting climate sustainability. Mauritius financial services have become key in sustaining growth. faces structural challenges related to being an island state and its geographical position. This includes remoteness and Labor market conditions have improved, with the national unem- vulnerability to climate shocks, such as tropical cyclones and ployment rate declining to 5.9 percent by Q3 of 2024, 0.4 percent- prolonged periods of drought. Moreover, the rapidly aging age points lower than last year. Youth unemployment remained population and the mismatch between job aspirations and relatively unchanged at 17.6 percent, down 0.2 percentage points the skills available versus the labor market demands con- relative to the third quarter of 2023. Meanwhile, higher labor de- tribute to labor and skills shortages. The government also mand raised female labor participation by one percentage point to faces immediate macro-fiscal challenges. The commitments 48.6 percent in the same period. FIGURE 1 / Fiscal revenues, expenditure, and financing needs FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 40 12 25 600000 10 500000 30 20 8 400000 15 20 6 300000 4 10 10 200000 2 5 100000 0 0 2019 2020 2021 2022 2023 2024 0 0 Total revenues and grants (lhs) 2012 2014 2016 2018 2020 2022 2024 2026 Total expenditure (lhs) International poverty rate Lower middle-income pov. rate Total borrowing requirement (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 264 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Stagnant export performance and strong import demand wors- remained elevated, reaching 87 percent of GDP by the end of 2024. ened the current account deficit to 4.9 percent of GDP. Mauritius’ Thus, an effective and gradual fiscal consolidation is needed. export performance has been declining, and renewal uncertainties of the US African Growth Opportunity Act further depressed orders of Mauritius garments and textiles. With international shipping lo- Outlook gistics performing behind the average upper-middle income coun- tries, Mauritius needs a more productive port sector to attract for- Real GDP growth is expected to moderate to 3.2 percent in 2025, eign investments and become more export competitive. Neverthe- reflecting a moderation in public investment and exports – the lat- less, external buffers remain adequate, with the Bank of Mauri- ter stemming from higher US import tariffs and its spillovers to tius’ (BOM) international reserves at USD 8.5 billion in January 2025, global economic growth. The reliance on imports is expected to equivalent to 13.3 months of import cover. sustain the current account deficit at an average of 4.0 percent of GDP in the medium term. Headline inflation is expected to mod- The BOM has taken a more independent policy stance to manage erate to 3.0 percent, backed by lower international commodity inflation and macroeconomic resilience. prices. A fiscal deficit of 5.4 percent of GDP is expected for 2025, with public debt remaining elevated at 87.5 percent of GDP. De- Headline inflation declined to 3.6 percent by the end of 2024, com- spite these challenges, the poverty rate is projected to fall to pared to 7.0 percent a year ago, mostly due to moderation in glob- around 7.2 percent by 2027, supported by public transfers averag- al commodity prices. However, rising service prices and additional ing 7.0 percent of GDP. wage bonuses have kept core inflation relatively sticky at 4.1 per- cent by the end of 2024. As such, BOM increased its key policy rate Risks are tilted to the downside. A further slowdown in global by 50 basis points to 4.5 percent in January 2025. BOM also reined economic activity can be detrimental to Mauritius’ tourism and fi- in disbursements by its investment vehicle, the Mauritius Invest- nancial services. Fiscal slippages can downgrade sovereign credit ment Corporation, to align with its monetary policy stance. ratings, negatively impacting public and private sector borrowing costs. Therefore, aside from fiscal consolidation, Mauritius needs Shortfalls in tax collection and sustained spending have stalled to generate growth by addressing bottlenecks in port logistics and fiscal consolidation, resulting in a primary deficit of 3.3 percent air connectivity, promoting deeper regional economic integration, of GDP and an overall fiscal deficit of 5.8 percent. As growth while attracting private investments in renewable energy and inno- weakened more than expected, income tax and VAT fell short of vative activities. Strengthening the integrity and standards in finan- budget plans by 10.3 percent and 6.8 percent. Also, additional cial services can further boost Mauritius’ reputation as an interna- public sector wage bonuses contributed to higher expenditure in tional financial center. Improving disaster preparedness and fiscal 2024, about 3.3 percent of the target. Consequently, public debt buffers will help cushion the impact of climate shocks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f 1 Real GDP growth, at constant market prices 8.7 5.0 4.7 3.2 3.0 2.9 Private consumption 3.7 3.4 3.1 2.8 2.6 2.7 Government consumption 6.4 -3.2 6.3 8.3 2.6 4.0 Gross fixed capital investment 6.2 12.5 12.9 8.6 6.3 4.5 Exports, goods and services 41.6 -1.9 2.8 1.4 1.6 1.7 Imports, goods and services 10.4 4.2 5.4 5.0 2.5 2.6 Real GDP growth, at constant factor prices 9.7 4.9 4.6 3.2 3.0 2.9 Agriculture 5.5 13.9 5.9 3.2 2.3 2.4 Industry 6.8 6.7 8.1 3.8 2.8 2.8 Services 10.7 4.0 3.6 3.0 3.0 3.0 Employment rate (% of working-age population, 15 years+) 51.7 52.8 52.8 52.8 52.9 53.0 Inflation (consumer price index) 10.8 7.0 3.6 3.0 2.9 2.9 Current account balance (% of GDP) -11.1 -4.6 -4.9 -4.1 -4.1 -3.8 Net foreign direct investment inflow (% of GDP) -72.4 -3.0 -2.0 -1.5 -1.5 -1.4 2 Fiscal balance (% of GDP) -5.7 -5.7 -5.9 -5.4 -5.5 -5.4 Revenues (% of GDP) 25.4 24.5 24.7 26.9 26.3 26.6 2 Debt (% of GDP) 83.3 87.8 88.3 87.5 87.6 87.7 2 Primary balance (% of GDP) -3.2 -3.1 -3.4 -2.8 -3.1 -3.0 3,4 International poverty rate ($2.15 in 2017 PPP) 0.1 0.1 0.1 0.1 0.0 0.0 3,4 Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.7 1.4 1.2 1.0 0.8 0.7 3,4 Upper middle-income poverty rate ($6.85 in 2017 PPP) 12.7 10.9 9.5 8.8 7.9 7.2 GHG emissions growth (mtCO2e) 4.7 2.8 2.8 0.5 2.0 2.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Historical demand-side data is being revised due to a consistency problem. 2/ Fiscal balances are reported in fiscal years (July 1st - June 30th). For the purpose of this report, the fiscal year data has been converted to calendar year data. 3/ Calculations based on 2017-HBS. Actual data: 2017. Nowcast: 2018-2024. Forecasts are from 2025 to 2027. 4/ Projection using neutral distribution (2017) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 265 This outlook reflects information available as of April 10, 2025. 1 2 MOZAMBIQUE Population Poverty million millions living on less than $2.15/day 34.6 22.3 3 4 Life expectancy at birth School enrollment years primary (% gross) Economic growth slowed to 1.8 percent in 2024, partly due to the post-electoral unrest. Liquidity pressures worsened, 59.6 120.0 5 6 driven by a large wage bill and high domestic debt service. GDP GDP per capita GDP growth in 2025 is projected at 3 percent, with the inter- current US$, billion current US$ national poverty rate remaining around 75 percent. Risks to the outlook include further social unrest, limited fiscal con- 22.4 646.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. solidation, global market volatility, and natural hazards. 4/ 2023. 5/ 2024. 6/ 2024. Poverty is estimated to affect about 75 percent of the total popu- Key conditions and challenges lation in 2025 (at the $2.15-a-day poverty line). Inequality is wide- spread, particularly between urban and rural areas, where access The economy has faced persistent challenges since 2015, in- to basic services is limited. The rural population is vulnerable to cluding the hidden debt crisis, cyclones, COVID-19, an ongo- environmental shocks and structural barriers, that hinder poverty ing conflict in the north, and the recent post-electoral unrest. reduction and inclusive growth. Growth remains fragile, heavily reliant on extractives. Real gross national income (GNI) per capita declined by 9 percent between 2016 and 2023. Recent developments Agriculture employs over 70 percent of the population but GDP growth decelerated to 1.8 percent in 2024, down from 5.4 per- struggles with low productivity, climate change-related vulner- cent in 2023, mainly due to post-election disruptions in Q4 2024. abilities, and insufficient investment in infrastructure and in- Heavy rains affected agricultural output, while a slowdown in the puts. Rural poverty remains entrenched, and the informal sec- extractive sector further dampened economic activity. The Coral tor dominates the labor market, accounting for over 80 per- South LNG project reached full capacity in 2023, contributing less cent of employment. Widespread informality, week infrastruc- to growth in 2024. The poverty rate has remained stagnant at ture, and business constraints limits productivity growth and about 75 percent since 2020 due to weak labor-intensive growth. domestic revenue mobilization. Inflation further eased to 3.2 percent in 2024, from 7.1 percent Fiscal pressures have intensified, placing Mozambique at a critical in 2023 and 10.3 percent in 2022 supported by lower global oil juncture. The wage bill and interest payments absorbed 92 percent and food prices, a stable exchange rate, and the Central Bank's of tax revenues in 2024, leaving limited resources for critical public tight monetary policy. The Central Bank started loosening mon- investments in education, healthcare, and infrastructure. etary policy in 2024, reducing the benchmark interest rate from FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 100 35000 5 90 30000 80 4 70 25000 3 60 20000 2 50 40 15000 1 30 10000 0 20 5000 -1 10 2021 2022 2023 2024f 2025f 2026f 2027f 0 0 Agriculture Extractive industry 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Non-extractive industry Services International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Bureau of Statistics and World Bank estimates Source: World Bank. Notes: See footnotes in table on the next page. 266 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 17.25 percent in January 2024 to 12.25 percent in February 2025, While no change in poverty is expected in 2025, the number of and lowering reserve requirement rates for local currency from people living in poverty is projected to rise by 0.8 million this 39 percent to 29 percent in January 2025. year alone due to rapid population growth. The current account deficit decreased marginally from 13 per- The current account deficit is expected to stabilize at 12 percent of cent to 12 percent of GDP between 2023 and 2024. The trade GDP between 2025–2027, with higher exports of coal and gas offset balance improved, with reductions in both exports and imports. by a recovery of imports of capital goods linked to megaprojects, Foreign Reserves recovered to US$ 3.7 billion (equivalent to five as the construction of the TotalEnergies LNG project is expected to months of imports, excluding mega projects), bolstered by a sta- resume. It is expected to be financed primarily through a combi- ble exchange rate and higher reserve requirements in foreign nation of FDI inflows related to these megaprojects and potential currency in 2024. drawdowns on foreign exchange reserves. The fiscal deficit rose from 2.8 percent of GDP in 2023 to 5.5 per- The fiscal deficit is expected to narrow to 3.6 percent of GDP in cent in 2024. Public debt increased slightly to 94.2 percent of GDP 2025, and it could decline further contingent on the successful im- by year-end. Revenues fell due to reduced economic activity, while plementation of fiscal consolidation measures. Potential reforms expenditures grew during presidential elections, leading to higher include containing the wage bill (through a nominal freeze on domestic borrowing and increased liquidity pressures. salaries, stricter hiring ceilings, overtime, and allowance controls), and enhancing domestic revenue mobilization by eliminating costly tax expenditures and improving tax compliance. Public Outlook debt is projected to gradually increase over the medium term dri- ven by domestic debt. Real GDP growth is projected to reach 3.0 percent in 2025 and to gradually increase to 3.5 percent by 2027 driven by the The outlook faces risks from social unrest, extreme climate events, recovery of agriculture production and a rebound of services, delays in LNG projects, a deteriorating security situation in the the sector most affected by the post-election disruptions. In- North, fiscal consolidation challenges, and heightened global un- flation is expected to increase to 5.5 percent in 2025, amid certainty. US reciprocal tariffs and a subsequent global slowdown higher food prices, and to stabilize at around 4.5 percent dur- could affect Mozambique's exports and foreign investment, partic- ing 2026–2027, supported by favorable global price conditions. ularly in agriculture and extractives. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.4 5.4 1.8 3.0 3.5 3.5 Private consumption 7.2 9.1 -6.0 3.9 5.4 3.0 Government consumption 5.1 6.7 -5.4 -4.7 -5.5 -3.9 Gross fixed capital investment 23.8 -43.0 26.7 6.3 7.4 10.5 Exports, goods and services 26.5 -5.3 -3.0 2.0 3.0 3.0 Imports, goods and services 30.9 -25.2 -1.5 3.0 5.0 5.0 Real GDP growth, at constant factor prices 4.5 6.0 1.8 3.0 3.5 3.5 Agriculture 5.5 3.8 1.9 2.4 4.2 4.3 Industry 4.6 13.8 3.0 2.7 4.1 4.1 Services 3.7 3.1 0.9 3.6 2.7 2.6 Employment rate (% of working-age population, 15 years+) 75.9 76.1 76.2 76.4 76.5 76.7 Inflation (consumer price index) 10.3 7.1 3.2 5.5 4.5 4.5 Current account balance (% of GDP) -36.4 -11.6 -11.3 -12.0 -11.9 -12.3 Net foreign direct investment inflow (% of GDP) 13.0 12.0 15.9 11.6 14.0 11.0 1 Fiscal balance (% of GDP) -4.0 -2.8 -5.5 -3.6 -2.6 -2.4 Revenues (% of GDP) 27.8 28.5 27.4 27.4 28.0 28.3 Debt (% of GDP) 96.8 93.9 94.2 96.8 99.4 101.8 1 Primary balance (% of GDP) -1.0 1.1 -1.5 0.8 2.0 2.6 2,3 International poverty rate ($2.15 in 2017 PPP) 75.7 75.0 75.3 75.3 75.1 74.9 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 89.1 88.8 89.0 89.0 88.9 88.8 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 96.4 96.2 96.3 96.3 96.2 96.2 GHG emissions growth (mtCO2e) 1.6 0.9 1.0 1.0 1.1 1.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Figure includes once-off capital gains revenues in 2017, estimated at 2.7 percent of GDP. 2/ Calculations based on 2019-IOF. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 267 This outlook reflects information available as of April 10, 2025. 1 2 NAMIBIA Population Poverty million millions living on less than $2.15/day 3.0 0.4 3 4 Life expectancy at birth School enrollment GDP growth is projected to weaken to 2.9 percent in 2025, years primary (% gross) reflecting deterioration in the global outlook and heightened uncertainty weighing on FDI prospects. Lower SACU receipts 58.1 133.5 5 6 are expected to negatively affect both fiscal and external ac- GDP GDP per capita counts in 2025, but financing is expected to remain ade- current US$, billion current US$ quate. With lower growth and high unemployment, poverty is expected to remain high at 19.7 percent in 2025, based on 13.4 4414.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2015 (2017 PPPs). 3/ 2022. the international poverty line. 4/ 2022. 5/ 2024. 6/ 2024. Recently published census data highlights that despite some Key conditions and challenges progress since independence, socio-economic challenges remain significant. Growth is insufficient to generate significant job gains Since gaining independence in 1990, Namibia experienced and reduce poverty. Only 547,000 people are employed (excluding steady GDP growth, averaging 4.3 percent up to 2015. This own-use production work) out of a working-age population of 1.87 growth was driven by structural and cyclical factors, including million. Unemployment, at 36.9 percent, exacerbated by skills sound macroeconomic management, capital deepening, and shortages, and inequality (Gini index at 59.1) are among the highest spillovers from the commodity super cycle. Resource wealth in the world. The 2023 census found Namibia's population to be was utilized to enhance access to public services, such as about 15 percent larger, with negative implications for income per health and education, and expand social protection, contribut- capita (Figure 1). The evolving trade policy changes and related ing to poverty reduction. Based on the international poverty uncertainty add to preexisting domestic challenges. This backdrop line of $2.15 per day (in 2017 purchasing power parity [PPP] underscores the need for policies that promote faster and more prices), the poverty rate decreased from 35.9 percent in 2003/ inclusive growth, supported by an agenda to improve skills, boost 04 to 15.6 percent in 2015/16. productivity, and encourage more private sector investment. Since 2016, Namibia's economic performance has been uneven, characterized by recession up to 2020 due to recurrent drought, Recent developments the pandemic shock, and declining investment. The rebound from the COVID-19 pandemic was weak and primarily led by the mineral GDP growth is estimated to have slowed to 3.7 percent in 2024, sector that benefited from renewed foreign direct investment (FDI) due to a decline in mining activities, severe drought and weak and favorable commodity prices. GDP is now above pre-COVID lev- demand for diamonds. As diamond production decreased and els, but output in some sectors is still lower. Real per capita income oil exploration activities slowed, non-mining sectors underpinned remains below its 2015 peak. economic growth, especially financial services, transport, and retail FIGURE 1 / Higher population data have reduced measures of per FIGURE 2 / Actual and projected poverty rates and real GDP per capita income capita Real GDP per capita, N$ Poverty rate (%) Real GDP per capita (constant LCU) 70000 80 70000 65000 70 60000 60 60000 50000 50 55000 40000 40 50000 30000 30 45000 20000 20 10 10000 40000 0 0 35000 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 1992 1996 2000 2004 2008 2012 2016 2020 2024 e International poverty rate Lower middle-income pov. rate Based on old population estimate Based on new population Upper middle-income pov. rate Real GDP pc Sources: WDI and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 268 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. trade. Private consumption was firm, supported by a decline in in- environment could negatively affect planned large energy invest- flation to an average of 4.2 percent. Investment contracted from a ment projects, still at feasibility stage. Moderate food prices and high base in 2023 while net exports remained negative. lower fuel prices are expected to keep headline inflation contained at 4.2 percent in 2025. Given weaker growth prospects and elevat- Namibia's twin external and fiscal deficits deteriorated in 2024 but ed unemployment, poverty is expected to remain high at 19.7 per- remained adequately financed. The current account deficit (CAD) cent (around 609,000 people) in 2025 under the $2.15 per day in- increased to about 15.3 percent of GDP mainly driven by higher ternational poverty line (2017 PPP). consumer goods and FDI-related imports. The fiscal balance widened to 3.9 percent of GDP partly due to a larger wage bill, Southern African Customs Union (SACU) revenues are set to de- spending on drought relief measures, and transfers to state-owned cline in 2025,impacting fiscal and external accounts. The fiscal entities (SOE). The public debt ratio (including SOE guarantees) in- deficit is expected to worsen to 5.0 percent of GDP, owing also creased slightly to 70.3 percent of GDP. to lower nontax receipts, not fully compensated by spending re- trenchment after one-off expenditures in 2024/25, including on The Bank of Namibia reduced rates by a cumulative 100 basis points, SOE tax liabilities. High debt service payments and a large public broadly aligning with the stance of the South African Reserve Bank wage bill further limit fiscal space. With the projected GDP growth (SARB). However, the BoN’s policy rate is 75-basis points lower. and use of savings to retire part of the $750 million Eurobond due in October 2025, the debt ratio is expected to decline over the medium term. The large CAD will likely be mainly funded by FDI. Outlook Risks to the outlook are significant. Escalation in trade tensions With a deteriorated global outlook, Namibia's GDP growth is ex- could further diminish growth prospects, put additional downward pected to decline to 2.9 percent in 2025 and average 3.5 percent in pressure on commodity prices and worsen socio-economic chal- the medium term. Uncertainties have increased given potential di- lenges. Uncertainties regarding oil development persist despite re- rect and indirect effects from a weaker global environment. While cent discoveries while climate shocks remain an ongoing risk. Fiscal higher tariffs in US market are expected to have limited direct im- policy is expected to focus on curbing expenditure to support re- pacts as exports to the US account for 3 percent of Namibia’s total duction of the debt ratio in the medium term. Strengthening pri- exports, indirect impacts could be higher as commodity prices de- vate sector investment and closing gaps in education remain cru- cline and global demand wanes. Furthermore, the uncertain global cial for the country’s prosperity. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.4 4.4 3.7 2.9 3.4 3.5 Private consumption 9.5 4.7 13.3 4.8 5.2 5.2 Government consumption 0.6 1.3 3.2 1.2 0.7 0.6 Gross fixed capital investment 9.9 68.9 -7.9 3.6 7.9 8.5 Exports, goods and services 23.2 13.3 0.1 -1.6 4.0 4.7 Imports, goods and services 23.0 22.5 7.9 2.5 6.0 6.5 Real GDP growth, at constant factor prices 4.6 4.3 3.2 2.9 3.4 3.5 Agriculture 1.7 -3.2 -2.7 2.8 1.5 1.5 Industry 11.3 9.6 1.0 0.4 3.6 4.0 Services 2.2 3.0 5.0 4.0 3.6 3.6 Employment rate (% of working-age population, 15 years+) 46.6 46.5 46.6 46.1 46.1 46.1 Inflation (consumer price index) 6.1 5.9 4.2 4.2 4.6 4.6 Current account balance (% of GDP) -12.7 -15.3 -15.3 -14.9 -15.4 -15.6 Net foreign direct investment inflow (% of GDP) 8.4 21.1 15.1 8.1 10.2 12.7 Fiscal balance (% of GDP) -5.1 -2.4 -3.9 -5.0 -4.3 -4.2 Revenues (% of GDP) 30.4 35.0 36.5 33.9 33.9 33.7 1 Debt (% of GDP) 71.7 69.4 70.3 68.5 68.1 67.5 Primary balance (% of GDP) -0.7 3.0 1.3 0.2 0.6 0.6 2,3 International poverty rate ($2.15 in 2017 PPP) 20.7 20.3 19.9 19.7 19.2 18.8 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 39.4 38.8 38.3 38.0 37.4 36.9 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 63.3 62.8 62.5 62.3 61.8 61.4 GHG emissions growth (mtCO2e) 2.7 1.1 2.8 4.2 3.6 3.6 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Refers to Public and Publicly Guaranteed debt. 2/ Calculations based on 2015-NHIES. Actual data: 2015. Nowcast: 2016-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2015) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 269 This outlook reflects information available as of April 10, 2025. 1 2 NIGER Population Poverty million millions living on less than $2.15/day 27.0 12.4 3 4 Life expectancy at birth School enrollment In 2024, GDP growth is estimated at 8.4 percent (4.9 per- years primary (% gross) cent per capita) driven by oil exports and agriculture. Despite 9.1 percent inflation, extreme poverty rate was 62.1 68.5 5 6 reduced by 2.5 points due to robust agricultural growth. GDP GDP per capita Debt sustainability was downgraded to high risk due to current US$, billion current US$ weak revenue mobilization and arrears. In 2025 growth is projected at 7.1 percent, with oil production reaching 28 19.7 727.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. million barrels, but risks remain. 4/ 2023. 5/ 2024. 6/ 2024. Following the completion of the Niger-Benin pipeline, large-scale oil Key conditions and challenges export began in May 2024. Total crude oil production is projected to increase from about 15,000 to 107,000 barrels per day by 2025, Niger’s economy relies heavily on agriculture, making it vulnerable significantly boosting oil exports, revenues, and GDP. However, as to climate shocks. With low productivity and high population of March 2025, Niger’s land border with Benin remains closed, with growth, around half of the population lives in extreme poverty. Nigerien authorities citing security concerns. Niger’s relative stability in the Sahel changed with the military coup The humanitarian situation has remained precarious, with heavy on July 26, 2023. It triggered economic and financial sanctions by rains in July and August 2024 causing floods in parts of the country, the Economic Community of West African States (ECOWAS) and the affecting over 160,000 households (1.2 million people). An estimat- West African Economic and Monetary Union (WAEMU) for nearly ed 1.5 million people (5.6 percent of population) were facing food seven months and a pause in development assistance. insecurity in December 2024. On January 29, 2025, Niger formally exited ECOWAS along with Burkina Faso and Mali, following a joint withdrawal announce- Recent developments ment in January 2024 and unsuccessful mediation efforts. The three countries, forming the Confederation of Sahel States GDP growth increased from 2.0 percent in 2023 to 8.4 percent (AES), have replaced the ECOWAS passport with their own in 2024 (4.9 percent per capita), following the lifting of sanctions unified passport. However, Nigerien citizens and businesses and driven by a 48.5 percent rise in (mainly oil) exports. As a retain access to key ECOWAS membership benefits, including result, the current account deficit as a share of GDP declined the free movement of people and goods, pending further from 9.3 to 6.2 percent. Agriculture was the main growth driver decisions. The authorities have reiterated Niger’s intention on the supply side (+11.1 percent) due to a good season follow- to remain in WAEMU. ing a year of inadequate rainfall, pests, and insecurity. Industrial FIGURE 1 / Real GDP growth and demand-side contributions to FIGURE 2 / Actual and projected poverty rates and real GDP per real GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 100 400000 90 350000 10 80 300000 70 5 250000 60 50 200000 0 40 150000 -5 30 100000 20 -10 10 50000 2022 2023 2024 2025 2026 2027 0 0 Gov. cons. Exports Investments 2022 2023 2024 2025 2026 2027 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate GDP Upper middle-income pov. rate Real GDP pc Source: World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 270 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. output grew by 12.1 percent due to oil production. Bank cus- tomers' reluctance to keep deposits due to sanctions, combined Outlook with government arrears on debts to bank-financed local suppli- ers, has heightened risks, with non-performing loans reaching 24 GDP growth is projected at 7.1 percent in 2025, assuming total percent and the solvency ratio falling from 20.5 percent to 9.8 domestic oil production reaches 28 million barrels. Inflationary percent by September 2024. pressures are expected to ease due to increased food supply fol- lowing a strong 2024 harvest. The fiscal deficit is expected to Headline inflation rose from 3.7 percent in 2023 to 9.1 percent in near the WAEMU target of 3 percent by 2027, as oil-driven rev- 2024, driven by higher food prices due to import disruptions and enues rise gradually despite lower prices stemming from global shortages caused by a deficit in cereal production in 2023. Despite trade uncertainty and expenditures remain contained. Growth is inflation, strong economic growth, particularly in agriculture, led to expected to slow in 2026-27 as oil production reaches full capac- a 2.5 percentage point decrease in the extreme poverty rate (at ity. The ECOWAS exit is not expected to have significant impacts $2.15 in 2017 PPP a day) in 2024, lifting over 270,000 people out of on the economy or prices. extreme poverty. The regional inflation rate is expected to align with the WAEMU target The WAEMU inflation rate declined further to 3.5 percent but re- band from 2025 onwards (for Niger from 2027), while regional re- mained above the 1–3 percent WAEMU target band. Regional for- serves are projected to rise to 5.4 months of imports in 2025, sup- eign reserves increased from 3.5 months of imports in 2023 to 4.7 ported by recovering exports, and lower Euro Area interest rates. months in 2024, reflecting the resumption of international bond issuances, IMF, and World Bank disbursements. The Central Bank Strong growth prospects are expected to gradually reduce the ex- of West African States kept its policy interest rates unchanged treme poverty rate to 36.2 percent by 2027, a 9.1 percentage point throughout 2024 at 3.5 percent for liquidity calls and 5.5 percent drop from 2024. This will decrease the number of people living in for the marginal lending facility. extreme poverty by nearly 1.5 million. However, 2.2 million people (8.1 percent of the population) are projected to face severe food in- The fiscal deficit narrowed to 4.3 percent of GDP due to drastic security between June and August 2025, particularly in the regions cuts in expenditures in response to lower grants and custom-relat- of Maradi and Dosso. ed revenues, and the spike of nominal GDP. Debt service reached over 34 percent of domestic revenues and nearly 20 percent of to- Downside risks to the outlook include climate, insecurity and oil tal expenditure by the end of December 2024. As a result, the joint price shocks. A materialization of banking sector risks could under- Bank-Fund Debt Sustainability Analysis in January 2025 assessed mine private investment. Upside risks include higher oil production the overall risk of debt distress to be high, primarily due to external for exports and an earlier than expected re-opening of the Niger- debt service-to-revenue ratio projections breaching the threshold. Benin border. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 11.5 2.0 8.4 7.1 5.1 4.5 Private consumption 7.0 3.5 3.1 3.3 4.1 4.5 Government consumption -1.2 -7.0 -0.3 7.0 7.0 3.0 Gross fixed capital investment 21.1 -10.4 -0.9 -3.5 2.7 2.3 Exports, goods and services 14.4 -8.1 48.5 42.5 11.2 8.5 Imports, goods and services 6.5 -12.0 -2.0 4.2 5.3 4.1 Real GDP growth, at constant factor prices 11.6 2.1 8.4 7.1 5.1 4.5 Agriculture 27.0 3.1 11.1 5.7 9.2 4.8 Industry -0.9 3.9 12.1 8.5 3.3 3.4 Services 4.9 0.1 3.3 8.0 1.3 4.9 Employment rate (% of working-age population, 15 years+) 72.9 73.1 73.1 73.1 73.1 73.1 Inflation (consumer price index) 3.9 3.7 9.1 5.3 4.7 3.0 Current account balance (% of GDP) -9.8 -9.3 -6.2 -3.9 -4.2 -4.5 Net foreign direct investment inflow (% of GDP) 3.9 3.2 1.5 1.7 1.7 1.6 Fiscal balance (% of GDP) -6.8 -4.4 -4.3 -3.9 -3.4 -3.2 Revenues (% of GDP) 14.9 11.6 9.3 10.5 11.2 10.8 Debt (% of GDP) 51.7 54.7 47.6 44.5 43.0 41.9 Primary balance (% of GDP) -5.8 -3.2 -2.6 -2.7 -2.3 -2.3 1,2 International poverty rate ($2.15 in 2017 PPP) 48.1 47.8 45.3 40.6 38.2 35.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 81.7 81.5 80.4 77.4 76.2 74.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 95.5 95.4 95.3 94.0 93.8 93.4 GHG emissions growth (mtCO2e) 5.0 4.0 4.9 4.9 4.8 4.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 271 This outlook reflects information available as of April 10, 2025. 1 2 NIGERIA Population Poverty million millions living on less than $3.65/day 232.7 130.1 3 4 Life expectancy at birth School enrollment Macroeconomic reforms started stabilizing the economy. years primary (% gross) Inflation remains elevated with tight monetary policy sup- porting a gradual easing. The fiscal position improved due to 53.6 86.7 5 6 a revenue surge largely from the implicit FX subsidy removal. GDP GDP per capita Global economic uncertainty poses a major risk, potentially current US$, billion current US$ impacting fiscal and external balances through lower oil prices and tighter financial conditions. Double-digit inflation 186.2 800.4 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. continues to affect poverty, which begins stabilizing in 2026. 4/ 2021. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments The economy has become more resilient as the government con- Nigeria's economic growth has remained moderate, but re- tinues to stay the course on a broadly appropriate macroeconomic silient. Real GDP grew by 3.4 percent in 2024, up from 2.7 policy mix, amid pressing social and humanitarian challenges. percent in 2023, primarily driven by financial and telecommu- Macroeconomic reforms have helped eliminate unsustainable dis- nication services, a continued rebound in oil production, and a tortions and correct course. A unified and market-reflective ex- recovery in transportation. change rate has made the naira competitive, orthodox monetary policy has improved FX liquidity and reduced volatility, and remov- Inflation, especially food, remained high in 2024 but monetary pol- ing FX and Premium Motor Spirit (PMS) subsidies has started to re- icy remained tight supporting a gradual easing. The policy rate was open fiscal space for increased social and capital spending. retained at 27.5 percent in February 2025, a rise of 875 basis points since January 2024. Although headline inflation peaked in 2024, it is The recent bold reforms have enabled Nigeria to avoid a macro- expected to go down in 2025. Labor incomes have not kept up with fiscal crisis. Sustaining the macroeconomic reforms and pursuing inflation, pushing another 10 million Nigerians into poverty such structural reforms are essential to unlock Nigeria’s growth poten- that nearly half of all Nigerians (46 percent measured at the inter- tial. To accelerate and sustain progress, addressing structural bot- national poverty line of US$ 2.15 based on the 2017 PPPs) lived in tlenecks is crucial. Key priorities include strengthening governance, poverty in 2024. improving infrastructure, expanding access to electricity and digital connectivity, enhancing security, reducing trade barriers, and in- A surge in revenues improved the fiscal position at both the Fed- vesting in human capital development. This should be accompa- eral and State levels. In 2024, the consolidated government fiscal nied by robust social protection measures to protect the popula- deficit narrowed to 3.5 percent of GDP, down from 5.4 percent in tion—especially the poorest—against shocks. 2023. This largely reflected the removal of the implicit FX subsidy, FIGURE 1 / Revenues, expenditures, and deficit FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 18 0 100 380000 16 90 370000 -1 14 80 360000 -2 70 12 60 350000 10 -3 50 340000 8 -4 40 330000 6 30 -5 320000 4 20 -6 10 310000 2 0 -7 0 300000 2011 2013 2015 2017 2019 2021 2023 2025 2027 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Budget deficit Revenues Expenditures Upper middle-income pov. rate Real GDP pc Sources: Nigerian National Bureau of Statistics, WDI, and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 272 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. improved tax administration, increased remittances from govern- expected in 2025 before starting to stabilize in 2026. Reforms to ment-owned enterprises and higher internally generated revenues protect the poorest against inflation and to boost livelihoods of all at the state level. Deficit monetization stopped. Public and publicly Nigerians through more productive work are key to reverse high guaranteed debt stood at 53.3 percent in 2024, compared to 45 levels of poverty. With inflation remaining elevated, a tight mon- percent in 2023, mainly due to FX valuation effects. etary policy stance must persist while avoiding any recourse to deficit monetization. The current account surplus experienced a significant increase in 2024 following the depreciation of the naira. Imports of both oil The fiscal outlook remains positive, with rising nominal revenues and non-oil goods declined, while worker remittances increased and supported by ongoing reforms such as domestic revenue mo- due to the FX unification. Financial inflows were supported by for- bilization. The fiscal gains from the PMS subsidy removal can fur- eign portfolio investment, whilst foreign direct investment re- ther generate fiscal space allowing the government to scale up so- mained low. Gross external reserves remain on an overall upward cial and capital spending while keeping debt on a sustainable path. trend standing at US$ 38.4 billion in February 2025 from US$ 32.9 The fiscal deficit is estimated to narrow to 3.4 percent of GDP by billion in December 2023. 2027. Despite Nigeria’s rising debt to GDP ratio, the overall debt burden remains at moderate levels thanks to the lower debt ser- vice to revenue ratio. Outlook The external balance is expected to maintain a surplus in the medi- Economic activity is expected to grow moderately in the medium um term, standing at 8.9 percent in 2027. The surplus on the bal- term, driven by the services sector. GDP growth is projected to av- ance of payments is expected to be supported by a pick-up in non- erage 3.6 percent between 2025 and 2027, with per capita growth oil agriculture exports and a slowdown in PMS imports, as remit- expected to be around 1.1 percent. Agricultural output is estimated tance inflows are expected to grow modestly. to increase modestly, while the industrial sector is projected to re- main constrained by sluggish crude oil production and structural Risks to the outlook are largely tilted to the downside. Do- bottlenecks such as energy constraints. The services sector, espe- mestically, these include social risks that could impede reform cially financial, and information and communication technology, progress, adverse weather, insecurity in farming areas, higher im- services, will continue to drive growth. port costs for inputs, naira depreciation, and declining oil pro- duction. Globally, heightened uncertainty could sharply lower oil Inflation is expected to moderate but remain high from an average prices and accordingly oil exports and revenues as well as tighten of around 22.1 percent in 2025 tapering to about 15.9 percent in financial conditions. However, a flexible naira could help offset 2027. Consequently, a further increase in poverty to 50 percent is some of these impacts. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.3 2.9 3.4 3.6 3.7 3.8 Real GDP growth, at constant factor prices 3.1 2.7 3.4 3.5 3.6 3.7 Agriculture 1.9 1.1 1.2 1.6 1.8 2.1 Industry -4.6 0.7 2.4 2.4 1.9 1.8 Services 6.7 4.2 4.7 4.7 4.9 4.9 1 Inflation (consumer price index) 12.2 17.9 26.6 22.1 18.5 15.9 Current account balance (% of GDP) 0.7 1.6 9.2 7.3 9.4 8.9 Net foreign direct investment inflow (% of GDP) 0.2 -0.6 -0.8 -0.8 -0.6 -0.7 2 Fiscal balance (% of GDP) -4.4 -5.4 -3.5 -4.8 -3.7 -3.4 3 Debt (% of GDP) 35.0 45.0 53.3 55.5 54.7 53.5 Primary balance (% of GDP) -1.4 -2.0 -0.2 -1.1 -0.1 -0.4 4,5 International poverty rate ($2.15 in 2017 PPP) 39.6 41.6 45.8 49.9 52.2 52.7 4,5 Lower middle-income poverty rate ($3.65 in 2017 PPP) 71.2 72.1 74.8 77.2 78.0 78.0 4,5 Upper middle-income poverty rate ($6.85 in 2017 PPP) 92.7 92.7 93.3 93.8 93.6 93.2 GHG emissions growth (mtCO2e) 2.1 2.2 3.3 2.3 2.8 3.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The Consumer Price Index (CPI) series reflects World Bank calculations on the back-casted series following CPI rebasing by the National Bureau of Statistics (NBS). 2/ The fiscal balance is reported in cash basis. 3/ This includes remaining ways and means stock but excludes electricity subsidy arrears, AMCON liabilities and explicit guarantees. 4/ Calculations based on 2018-LSS. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 5/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 273 This outlook reflects information available as of April 10, 2025. 1 2 RWANDA Population Poverty million millions living on less than $2.15/day 13.9 6.2 3 4 Life expectancy at birth School enrollment Rwanda’s strong economic momentum continued in 2024, years primary (% gross) led by services, manufacturing, and food production. Infla- tionary pressures have eased due to food production im- 67.1 151.9 5 6 provements, lower commodity prices, and tight monetary GDP GDP per capita policy stance. Growth is projected to slowdown in current US$, billion current US$ 2025–2027, as the fiscal consolidation is being fully imple- mented. Poverty is projected to decrease by 1.3pp between 13.6 984.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2016 (2017 PPPs). 3/ 2022. 2024-26 driven by solid growth in private consumption. 4/ 2023. 5/ 2024. 6/ 2024. as access to health care, under-five mortality, maternal mortality Key conditions and challenges ratio and fertility rate. In 2014-2023, Rwanda’s GDP per capita increased at a rate of 4.3 percent per year, surpassed only by Ethiopia among SSA Recent developments economies. Rwanda has also achieved substantial gains in edu- cational attainment, health services delivery, and access to ba- Averaging 8.2 percent in 2022-2023, the economy grew by 8.9 per- sic services. However, growth has relied heavily on public invest- cent in 2024, driven by robust private consumption—reflecting the ment—boosted by external aid—that has neither generated suf- creation of close to half a million jobs, especially in rural ar- ficient jobs nor resulted in rapid gains in productivity and rapid eas—and strong investment. On the supply side, growth was dri- poverty reduction. Moving Rwanda to the next stage of develop- ven by continued expansion in services and industry and recovery ment will require greater reliance on private sector investment to in food production. enhance economic activity, raise incomes, and provide the financ- ing needed. Increased market orientation of agricultural support The National Bank of Rwanda (NBR) eased the monetary stance policies and higher efficiency of agricultural markets will also be amidst a gradual decline of inflation. Headline inflation dropped to required to make growth more inclusive. Critical areas to enable 2.5 percent in September 2024—the lowest since January 2022, be- rapid private sector development, include enhancing competition, fore edging up to 6.5 percent in March 2025—but remains within building firms’ capabilities, increasing access to finance, foster- its target bands (5±3 percent). Disinflation was primarily driven by ing development and diffusion of information and communica- lower food prices, reflecting improved supplies of fresh food items, tion technologies, and innovation. An abrupt disruption to access- lower imported inflation and monetary policy tightening. Lower ing concessional development financing could jeopardize Rwan- food inflation eased the pressure on household budgets, especially da’s growth aspirations and human capital developments, such the poor. This has allowed the NBR to lower the policy rate—by FIGURE 1 / Headline and core inflation and central bank rate FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent Poverty rate (%) Real private consumption per capita (constant LCU) 25 100 800000 90 700000 20 80 600000 70 15 60 500000 50 400000 10 40 300000 30 5 200000 20 10 100000 0 0 0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan 2010 2012 2014 2016 2018 2020 2022 2024 2026 2023 2024 2025 International poverty rate Lower middle-income pov. rate Headline inflation Core inflation Central bank rate Upper middle-income pov. rate Real priv. cons. pc Sources: National Institute of Statistics of Rwanda and National Bank of Rwanda. Source: World Bank. Notes: See footnotes in table on the next page. 274 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. 100 basis points cumulatively—from 7.5 percent in April 2024to 6.5 the next three years, reflecting continued reliance on imports and percent in August 2024. Since then, it was maintained at 6.5 per- gradual export growth. Strong FDI inflows and concessional financ- cent. The franc depreciation against the dollar has also eased to ing are expected to continue supporting external financing needs. 9.8 percent in 2024, down from 18 percent in 2023. By December Inflation is projected to remain near the NBR’s medium-term target 2024, official foreign reserves were about 30 percent higher than of 5 percent. Driven by average growth in private consumption of in December 2023 due to the disbursements under World Bank’s 4.3 percent a year in 2025-2026, poverty is projected to decline to development policy financing (US$255 million) and IMF programs 46.3 percent in 2026. (US$170 million). International reserves remained adequate at about 5.4 months of imports at end-2024, despite the widening The government remains committed to fiscal consolidation, current account deficit. focusing on rationalizing spending and improving revenue administration. Efforts include temporary savings by reducing The FY24/25 budget envisages reducing the fiscal deficit in line costs related to official travel and conferences by increasing with fiscal consolidation to preserve fiscal sustainability. The fiscal reliance on virtual meetings and expanding public services deficit is projected to slightly decline, supported with the ongoing digitalization. Additionally, the government is enhancing man- expenditure rationalization—while safeguarding essential spend- agement, oversight, and monitoring of public investments to ing, in particular on investment and social assistance—as well as improve efficiency and ensure that priority projects deliver the recently adopted tax policy measures. Relying largely on con- their intended impact. Revenue administration reforms will fo- cessional loans to finance the deficit, Rwandan’s public debt is sus- cus on broadening the tax base. Public debt is expected to tainable despite recent increases in the stock (Table 1). Using the peak at 86.4 percent of GDP in 2026 before gradually declining international poverty line of $2.15/day in 2017 PPPs, poverty is es- over the medium term. timated at 47.6 percent in 2024. The outlook is subject to substantial downside risks. Volatility in the global and regional economies could reduce demand Outlook for exports. Disruptions to concessional external financing could dampen growth and human capital development. Domestically, GDP growth is projected to ease, averaging 7.2 percent in 2025-27. main risks stem from climate-related shocks to Rwanda’s dom- Services are expected to continue driving growth. Under the sec- inantly rain-fed agriculture sector, which could negatively affect ond National Strategy for Transformation, Rwanda aims to scale up incomes and food security for rural households, and reigniting manufacturing and high-value production, reducing import depen- inflationary food pressures. Slower progress on domestic re- dence while strengthening its position as a global hub for Meetings, source mobilization and the external adjustment could under- incentives, conferences and exhibition (MICE). This will take time, mine the debt path and raise debt service pressures amidst de- and the current account deficit is expected to remain high over clining concessional financing. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 8.2 8.2 8.9 7.0 7.3 7.3 Private consumption 12.1 9.9 4.2 6.2 5.5 5.6 Government consumption 10.6 6.0 12.9 7.8 7.1 11.4 Gross fixed capital investment -12.6 -4.1 19.0 16.5 18.3 13.0 Exports, goods and services 29.4 25.8 16.0 10.0 9.7 8.7 Imports, goods and services 17.9 14.4 11.5 13.0 11.7 10.1 Real GDP growth, at constant factor prices 5.2 16.0 6.2 7.0 7.3 7.3 Agriculture 1.6 1.7 5.3 5.2 5.3 5.3 Industry 4.9 10.2 10.0 9.1 9.2 9.3 Services 7.3 25.3 5.2 6.9 7.4 7.4 Employment rate (% of working-age population, 15 years+) 51.6 52.2 52.4 52.7 52.9 53.2 Inflation (consumer price index) 12.1 15.4 4.8 5.0 5.0 5.0 Current account balance (% of GDP) -9.1 -11.5 -12.7 -13.8 -16.0 -13.5 Net foreign direct investment inflow (% of GDP) 2.6 3.6 4.2 5.4 8.1 7.0 Fiscal balance (% of GDP) -6.2 -4.6 -5.5 -4.8 -3.7 -3.4 Revenues (% of GDP) 24.1 22.5 21.6 22.1 22.6 22.8 Debt (% of GDP) 68.7 73.8 78.8 84.8 86.4 86.4 Primary balance (% of GDP) -4.1 -2.4 -3.2 -2.5 -1.7 -1.6 1,2 International poverty rate ($2.15 in 2017 PPP) 49.2 48.0 47.6 46.9 46.3 45.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 76.3 75.5 75.3 74.8 74.4 74.1 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.7 91.4 91.4 91.2 91.1 91.0 GHG emissions growth (mtCO2e) 1.6 0.9 2.5 2.3 2.8 2.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2010-EICV-III and 2016-EICV-V. Actual data: 2016. Nowcast: 2017-2024. Forecasts are from 2025 to 2027. 2/ Projection using average elasticity (2010-2016) with pass-through = 0.25 based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 275 This outlook reflects information available as of April 10, 2025. SÃO TOMÉ AND 1 2 Population Poverty thousand thousands living on less than $3.65/ day 235.5 93.2 PRÍNCIPE Life expectancy at birth 3 School enrollment 4 years primary (% gross) Economic growth is hindered by structural challenges. In 68.8 105.9 2024, the economy grew by 0.9 percent, supported by 5 6 GDP GDP per capita tourism and improved electricity supply, while facing infla- current US$, billion current US$ tion, weak job creation, and rising emigration. Growth is expected to rebound due to energy reforms and macro- 0.8 3244.8 economic stabilization. Risks from delayed reforms, weak Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2017 (2017 PPPs). 3/ 2022. 4/ 2021. 5/ 2024. 6/ 2024. donor support, commodity price volatility, global trade policy shifts, and vulnerability to natural disasters are high. are not in employment, education, or training, prompting youth, Key conditions and challenges including skilled ones, to emigrate. São Tomé and Príncipe (STP), a small-two island state in the Gulf of Recent economic growth has been hindered by unreliable and Guinea, boasts untapped natural wealth like beaches, rainforests, costly electricity. The electricity sector is dominated by EMAE (Em- and rich biodiversity, offering growth opportunities through the presa de Água e Electricidade), a state-owned enterprise, which re- blue economy. These opportunities, however, are hampered by lies on fuel imports and outdated and poorly maintained diesel structural challenges like limited institutional capacity, low eco- generators. In 2023, STP lost a preferential agreement to purchase nomic diversification, high import dependence, low economies of oil on credit with its main supplier, which caused a balance of pay- scale, and climate change vulnerability. ment shock, severe power outages, and fiscal stress. EMAE’s ac- cumulated debt to ENCO (Empresa Nacional de Combustíveis e Economic growth has been driven by externally financed Óleos), the country’s fuel importer, is estimated at 28.2 percent of public investment, dependent on official development assis- GDP in 2024. tance, which declined from 24 percent of GDP in 2004-08 to 14 percent in 2019-23, challenging the country’s growth mod- el. In addition, spending cuts to restore fiscal sustainability Recent developments have put necessary development spending at risk. Weak GDP per capita growth and limited job opportunities have hin- Real GDP growth recovered from 0.4 percent in 2023 to 0.9 dered poverty reduction and increased vulnerability among percent in 2024, supported by increased electricity generation the poorest, exacerbated by limited access to education, ba- and tourism, with arrivals surpassing pre-pandemic levels. How- sic services, and social protection. Nearly half of the youth ever, limited foreign currency and fiscal consolidation constrained FIGURE 1 / Fuel imports and international reserves FIGURE 2 / Actual and projected poverty rates and real GDP per capita Millions, US$ Poverty rate (%) Real GDP per capita (constant LCU) 80 100 19500 70 90 19000 60 80 18500 70 18000 50 17500 60 40 17000 50 30 16500 40 20 16000 30 15500 10 20 15000 0 10 14500 Jan-24 Mar-24 May-24 Jul-24 Sep-24 Nov-24 0 14000 Foreign bonds Deposits 2010 2012 2014 2016 2018 2020 2022 2024 2026 Special Drawing Rights Others International poverty rate Lower middle-income pov. rate Fuel imports* Upper middle-income pov. rate Real GDP pc Source: Central Bank of São Tomé and Príncipe. Source: World Bank. Notes: See footnotes in table on the next page. Note: *Fuel imports (12-month rolling sum). 276 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. economic activity. Real GDP growth remains below population access to inputs, the resumption of delayed infrastructure invest- growth, leading to lower real income per capita. ments, tourism arrivals and energy sector reforms. Annual inflation averaged 14.5 percent in 2024, down from 21.4 Annual inflation is projected to average 9.6 percent in 2025 and percent in 2023, but stagnated towards the year’s end. It fell from then stabilize around 5 percent, as reforms alleviate supply bottle- 19.2 to 11.4 percent between April and October, mostly due to necks and monetary policy remains tight. With tight macroeconom- smaller contribution from food prices. However, overall inflation ic policies and weak job creation, progress in poverty reduction is has increased since November, driven by imported food prices. expected to be limited. The poverty rate is projected at 15.5 per- cent over 2025-27, based on the international poverty line. The external sector strengthened in 2024, with the current ac- count deficit estimated at 7.1 percent of GDP, down from 12.6 Supported by the IMF program, the primary balance (commitment percent in 2023. Tourism exports nearly doubled, which along basis) is expected to increase from 1.8 percent of GDP in 2024 to higher cocoa prices and lower fuel imports, supported a reduc- 3.9 percent by 2027. Revenues, including grants, are projected to tion in the trade deficit. International reserves strengthened to- remain close to 24 percent of GDP over 2024-27; expenditures are wards the end of 2024 thanks to disbursements from the IMF, planned to drop from 23 to 20.4 percent of GDP, while preserving the World Bank and Portugal. social spending. Central government debt, excluding EMAE’s debt to ENCO, is expected to decline from 45.7 to 31.6 percent of GDP in The private sector remains weak and underdeveloped, with an 2024-27. However, contingent liabilities from EMAE’s debt are ex- employment rate of 21.7 percent. Sluggish growth and high in- pected to stay high, projected at 24 percent of GDP by 2027. flation continued to strain households’ purchasing power, leav- ing 15.8 percent of the population on less than US$2.15/day. Despite declining foreign official transfers, a reduced trade-in- About 18 percent of the population lives abroad, and depar- goods deficit, mostly from lower fuel imports, is expected to de- tures from STP increased by more than 70 percent in 2022-23 crease the current account deficit to 5.7 percent of GDP by 2027. compared to 2019. Lower fuel imports and temporary capital flow management mea- sures should help strengthen international reserves. Outlook Downside risks include delayed energy sector reforms, changes in donor support, commodity price volatility, and vulnerability to Growth is expected to accelerate as reforms bolster macroeco- natural disasters. Although the direct impacts of the recent glob- nomic stability and drive structural change. Real GDP growth is pro- al trade policy shifts are expected to be limited, STP is vulnerable jected to reach 3.1 percent in 2025 and average 4 percent in the to adverse indirect growth outcome in the European Union, its medium term, driven by agricultural exports facilitated by better main trade partner. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 0.2 0.4 0.9 3.1 4.8 4.1 Real GDP growth, at constant factor prices 1.2 -1.1 0.9 3.1 4.8 4.1 Agriculture -13.6 -12.4 -6.2 1.0 2.0 3.0 Industry 6.4 -2.1 3.3 9.5 4.9 5.0 Services 1.5 0.0 0.9 1.9 5.0 4.0 Employment rate (% of working-age population, 15 years+) 21.5 21.5 21.7 21.6 21.4 21.3 Inflation (consumer price index) 18.0 21.1 14.4 9.6 6.3 5.0 Current account balance (% of GDP) -14.7 -12.6 -7.1 -6.0 -6.0 -5.7 Net foreign direct investment inflow (% of GDP) 23.9 3.0 7.8 6.0 5.5 5.6 Fiscal balance (% of GDP) -1.2 -0.1 0.7 3.9 2.1 3.3 Revenues (% of GDP) 27.4 22.2 23.9 27.3 23.5 23.8 Debt (% of GDP) 68.8 50.7 45.7 40.3 36.6 31.6 Primary balance (% of GDP) -0.7 0.6 1.8 4.5 2.7 3.9 1,2 International poverty rate ($2.15 in 2017 PPP) 15.6 15.7 15.8 15.7 15.5 15.3 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 44.8 45.0 45.1 45.0 44.7 44.5 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 79.3 79.6 79.8 79.6 79.1 78.7 GHG emissions growth (mtCO2e) 0.6 0.4 0.5 1.6 2.2 1.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU. 2/ Actual data: 2017. Nowcast: 2018-2024. Forecasts are from 2025 to 2027. Macro Poverty Outlook / April 2025 277 This outlook reflects information available as of April 10, 2025. 1 2 SENEGAL Population Poverty million millions living on less than $2.15/day 18.5 1.7 3 4 Life expectancy at birth School enrollment GDP growth is estimated at 5.8 percent in 2024, up from 4.3 years primary (% gross) percent in 2023, driven by hydrocarbon production, while solid agricultural growth and lower inflation—averaging 0.8 per- 67.9 82.6 5 6 cent—reduced extreme poverty incidence to 8.4 percent. An GDP GDP per capita audit confirmed significant under-reporting of fiscal deficits current US$, billion current US$ and public debt between 2019–2023. Emerging macro-fiscal management complexities, trade policy shifts and rising global 34.3 1856.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. uncertainties pose challenges to Senegal’s economic outlook. 4/ 2023. 5/ 2024. 6/ 2024. surge in crude oil extraction. Senegal’s non-oil GDP growth Key conditions and challenges slowed to 3.5 percent in 2024, down from 4.3 percent in 2023, largely due to political turmoil surrounding the 2024 presiden- Despite healthy economic growth driven by new hydrocarbon tial election which disrupted economic activity, particularly in production, fiscal management challenges now dominate Sene- the tertiary sector. The agricultural sector performed well, sup- gal’s development path. On 12th February, a Court of Auditors’ ported by adequate rainfall, though affected by severe flooding report requested by the incoming government in a push for in the north and northeast. The start of hydrocarbon produc- transparency showed higher historical deficit and debt levels. tion significantly boosted growth, offsetting much of the non-oil Costly energy subsidies add strain to public finances. Meanwhile, sector's weak performance. structural issues, including human capital deficits, weak formal employment, low labor productivity, and high youth emigration, Inflation pressures eased significantly, dropping to 0.8 per- persist alongside external shocks like climate change and region- cent from 5.9 percent in 2023, driven by moderating global al instability, impeding growth and poverty reduction. To ensure commodity and domestic food prices. The West African Eco- sustained and inclusive development, assertive fiscal consolida- nomic and Monetary Union (WAEMU) inflation rate declined tion is needed alongside government’s commitment to trans- further in 2024 to 3.5 percent but remained above the 1–3 parency, improving the investment climate and managing natural percent WAEMU target band. Regional foreign reserves in- resources effectively. creased from 3.5 months of imports in 2023 to 4.7 months in 2024, reflecting the resumption of international bond is- suances, IMF, and World Bank disbursements. The Central Recent developments Bank of West African States (BCEAO) kept its policy interest rates unchanged throughout 2024 at 3.5 percent for liquidity Overall, real GDP growth is estimated at 5.8 percent (3.4 per- calls and 5.5 percent for the marginal lending facility. With cent in per capita terms) in 2024 driven by a +15.5 percent higher labor incomes driven by stable agricultural growth FIGURE 1 / Evolution of main macroeconomic indicators FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 9 0 100 1200000 6 90 -5 1000000 80 3 70 800000 0 -10 60 50 600000 -3 -15 40 -6 400000 30 -20 20 -9 200000 10 -12 -25 0 0 2019 2020 2021 2022 2023 2024e 2025p 2026p 2027p 2011 2013 2015 2017 2019 2021 2023 2025 2027 GDP growth (lhs) Primary fiscal balance (lhs) International poverty rate Lower middle-income pov. rate Current account balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: National Bureau of Statistics and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 278 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. and lower (food) inflation, extreme poverty is expected to have declined to 8.4 percent (measured at the international Outlook poverty line of $2.15 per day PPP 2017) in 2024, compared to 9.8 percent in 2023. Economic growth is projected to average 6.8 percent in 2025–2027, driven by increased hydrocarbon production, while inflation re- Senegal’s fiscal position has deteriorated following significant un- mains below 3 percent amid declining food and energy prices. der-reporting of fiscal deficits and public debt over 2019–2023. The CAD is projected to narrow to 8.4 percent over 2025–2027, al- The Court of Auditors’ report assessed Central Government debt beit higher than previously projected due to the impacts of global at 99.7 percent of GDP at end-2023, over 20 percentage points trade policy shifts and commodity price uncertainties. Weak non- more than previously reported official figures driven by both ex- hydrocarbon exports add pressure on regional foreign exchange ternal and domestic debt. Official data reports that the fiscal reserves. Regional currency reserves are expected to rise gradually, deficit reached 11.5 percent of GDP in 2024, driven by domestic supported by the resumption of international bond issuances, re- revenue shortfalls, increased interest payments, additional covering exports and monetary policy easing in the Euro Area. The spending related to energy subsidies, the legislative elections, regional inflation rate is expected to align with the WAEMU tar- and responses to floods. The deficit was financed by new borrow- get band from 2025 onwards, while regional reserves are project- ing on regional and international markets, pushing up general gov- ed to rise to 5.4 months of imports in 2025, supported by recov- ernment debt to 105.9 percent of GDP at end-2024. The deteriora- ering exports, and lower Eurozone interest rates. Stable agricultur- tion of the fiscal position stemming from the 2019–23 misreporting al growth, and rising output in the services sector are expected to and 2024 pressures led to downgrades in creditworthiness and the decrease poverty to 7.5 percent in 2025, and 6.2 percent in 2027. rise of sovereign debt yields. Nonetheless, structural impediments to poverty reduction persist, requiring investments in health, education and private sector-led The current account deficit (CAD) is projected to narrow sig- job creation. Growing economic uncertainty will persist with high nificantly to 12.0 percent of GDP, down from 18.9 percent in fiscal deficit and debt levels. Fiscal consolidation measures, in- 2023, following the start of hydrocarbon production, which has cluding the elimination of energy subsidies, lower capital spend- begun to reshape the country’s external trade dynamics by bol- ing, and increased tax revenues, should enable the fiscal deficit to stering export revenues. The CAD has been financed by foreign decline towards the regional convergence criteria of 3 percent of direct investments and portfolio investments, remittances, and a GDP in the medium term and reduce debt levels, while protecting mix of external credits and regional borrowing. The BCEAO has growth and the poor. Risks to debt sustainability and macro sta- kept its policy interest rates unchanged since December 2023 at bility will persist as financing conditions remain tight and escalat- 3.5 percent for liquidity calls and 5.5 percent for the marginal ing trade policy uncertainty could hamper export and growth more lending facility. than currently anticipated. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 3.9 4.3 5.8 7.9 5.9 6.7 Private consumption 3.8 5.0 4.6 4.1 4.7 5.2 Government consumption 1.7 5.0 -4.8 -1.5 -0.7 2.9 Gross fixed capital investment 11.0 9.3 7.5 5.9 10.7 11.3 Exports, goods and services 3.7 -6.0 18.1 25.8 5.0 3.2 Imports, goods and services 14.4 -0.4 7.0 6.5 5.3 5.1 Real GDP growth, at constant factor prices 3.6 4.5 5.8 7.8 5.9 6.7 Agriculture 0.2 5.9 6.0 6.2 6.3 6.4 Industry 2.5 5.2 13.0 23.4 4.9 4.7 Services 5.1 3.8 2.6 0.8 6.4 8.0 Inflation (consumer price index) 9.7 5.9 0.8 2.0 2.0 2.0 Current account balance (% of GDP) -19.9 -18.9 -12.0 -10.0 -8.4 -7.0 Fiscal balance (% of GDP) -12.6 -12.3 -11.5 -7.6 -5.8 -4.2 Revenues (% of GDP) 20.0 20.7 19.3 20.0 20.2 20.6 Debt (% of GDP) 86.6 99.7 105.9 99.9 93.4 88.2 Primary balance (% of GDP) -10.2 -9.0 -7.5 -2.9 -1.9 -0.4 1,2 International poverty rate ($2.15 in 2017 PPP) 9.8 9.8 8.4 7.5 6.7 6.2 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 36.3 36.7 34.2 32.1 30.3 29.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 76.0 76.6 74.5 73.2 71.4 71.1 GHG emissions growth (mtCO2e) 1.2 1.0 3.5 6.3 3.1 3.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 279 This outlook reflects information available as of April 10, 2025. 1 2 SEYCHELLES Population Poverty thousand thousands living on less than $6.85/ day 121.4 6.5 3 4 The economy grew by 2.4 percent in 2024, driven by the ser- Life expectancy at birth School enrollment years primary (% gross) vices sector despite a moderation in tourism. Growth is pro- jected to increase to 3.1 percent in 2025, supported by high- 73.8 97.1 er consumption and public investment linked to the hosting 5 6 of sporting events, along with expansions in telecommunica- GDP GDP per capita current US$, billion current US$ tions and construction. Poverty is expected to decrease from 6.2 percent in 2024 to 5.9 percent in 2025, based on the 2.2 17878.6 $6.85-per-day poverty line. Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. at 3.2 percent and extreme poverty has nearly been eliminated, Key conditions and challenges socioeconomic vulnerabilities persist. Substance abuse, teenage pregnancy, declining education outcomes, and high unemploy- Seychelles, an archipelago of 115 islands with a population of ment among youth and single female parents threaten human cap- 121,354, has the highest Gross National Income (GNI) per capita ital development, long-term economic sustainability, and house- in Africa. Its economy relies primarily on tourism and fisheries, hold welfare. Unemployment among youth was 12.2 percent in the and on related activities that support these sectors. Since 2008, second quarter of 2024, compared to 10.2 percent in the second key macroeconomic and structural reforms to liberalize the ex- quarter of 2023. change rate and factor markets have contributed to the country’s economic development. However, Seychelles’ geography—charac- terized by its small size, geographic dispersion, remoteness, and Recent developments vulnerability to climate shocks—presents inherent structural chal- lenges. A high dependence on a few sectors and imports exposes The economy grew by an estimated 2.4 percent in 2024, supported the economy to external shocks, including fluctuations in interna- by the service sectors, despite a moderation in tourism. New sea- tional travel demand and volatility in food, fuel, and freight prices. sonal scheduling by key airlines reduced the number of flights to Additionally, geographic constraints drive up production costs, hin- the islands, resulting in a 0.5 percent increase in visitor arrivals der export competitiveness, and limit economic diversification, in- which was 1.5 percent below the government’s target. Despite creasing reliance on the public sector and state-owned enterprises weak tourism growth, the telecommunications sector played a key for essential services. role in supporting overall economic performance, with increased mobile subscriptions and data traffic contributing a cumulative 5.6 Seychelles faces growing climate risks, including more intense and percentage points to GDP growth by the third quarter of 2024, frequent monsoon rains and rising sea levels, which lead to floods, compared to the same period in 2023. Furthermore, the services landslides, and coastal erosion. While unemployment remains low sector experienced growth, primarily driven by administrative and FIGURE 1 / Public debt and primary balance FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 100 5 12 300000 80 10 250000 0 8 200000 60 -5 6 150000 40 4 100000 -10 20 2 50000 0 0 0 -15 2013 2015 2017 2019 2021 2023 2025 2027 2019 2020 2021 2022 2023 2024 International poverty rate Lower middle-income pov. rate Debt (lhs) Primary balance (rhs) Upper middle-income pov. rate Real GDP pc Source: Ministry of Finance, National Planning and Trade. Source: World Bank. Notes: See footnotes in table on the next page. 280 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. support services, along with the financial and insurance sectors, events, including the FIFA Beach Soccer World Cup, the Indian contributing 2.1 and 1.0 percentage points to GDP growth, respec- Ocean Youth and Sport Commission Games, and infrastructure tively, over the same period. However, a continued reliance on im- projects ahead of the September elections. However, weaker eco- ports widened the current account deficit to 8.7 percent of GDP in nomic growth in Seychelles’ key tourism markets is expected to 2024 from 8.4 percent in 2023. dampen growth prospects in the wake of US imposed tariffs. Con- currently, lower global commodity prices are projected to ease im- In January 2024, the Public Utilities Corporation raised tariffs for port costs, contributing to modest improvements in the current ac- water and sewerage by 9.2 percent and gradually increased elec- count deficit, estimated at 8.6 percent of GDP in 2025. Lower com- tricity tariffs cumulatively to 8.4 percent by year-end. These adjust- modity prices are expected to moderate domestic inflation, which ments contributed to a rise in headline inflation to 0.3 percent. is projected at 1.0 percent for the year. As a result, the Central Bank However, core inflation remained negative at -0.6 percent. Conse- is likely to maintain an accommodative monetary policy stance. quently, the Central Bank maintained the monetary policy rate at 1.75 percent following a 25-basis-point reduction in April 2024. While the government plans to increase capital investments (in- cluding for climate adaptation), continued efforts to strengthen On the fiscal side, under execution of primary and capital expen- revenue mobilization are expected to support fiscal consolidation, diture resulted in a primary budget surplus of 3.2 percent of GDP with a projected primary surplus of 1.0 percent of GDP in 2025. No- in 2024, up from 1.7 percent in 2023. Social assistance remained tably, the digital modernization of tax and customs administration steady at 4.6 percent of GDP, continuing to support the most vul- is expected to enhance revenue collection. Additionally, amend- nerable members of society. Meanwhile, tax collection remained ments to transfer pricing legislation will further support revenue strong, with VAT and business tax performing in line with budget efforts. Due to public transfers and social programs, the poverty expectations. In parallel, sound debt management practices result- rate is projected to decline from 6.2 percent in 2024 to 5.9 percent ed in a stable public debt-to-GDP ratio of 60 percent by the third in 2025, based on the $6.85-per-day poverty line. quarter of 2024, whereby domestic and external debt were evenly distributed, each accounting for 29 percent of GDP. However, risks to the outlook remain, reflecting the uncertain glob- al environment. Key factors include geopolitical tensions, evolving trade policies—particularly the indirect impact of US tariffs—and Outlook climate-related risks. Weaker economic growth in key tourism mar- kets, coupled with increased global financial market volatility, could Economic growth is projected at 3.1 percent in 2025, supported weigh on tourism arrivals. Domestically, political developments by higher consumption and public investment tied to major ahead of the September 2025 elections may exacerbate risks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 12.7 2.3 2.4 3.1 3.0 2.9 Private consumption -0.3 -0.1 4.4 4.7 4.5 4.5 Government consumption -12.8 26.1 4.1 9.1 -5.3 -2.3 Gross fixed capital investment 23.7 17.6 -5.6 -9.4 10.2 4.2 Exports, goods and services 26.6 -4.1 2.8 3.1 3.0 3.0 Imports, goods and services 8.6 2.4 2.9 3.3 3.1 3.1 Real GDP growth, at constant factor prices 12.8 2.2 2.4 3.1 3.2 2.9 Agriculture 14.1 9.1 0.7 0.9 0.8 0.8 Industry 7.9 14.4 1.6 2.0 1.8 1.8 Services 13.6 -0.2 2.6 3.4 3.6 3.2 Inflation (consumer price index) 2.6 -1.0 0.3 1.0 1.4 1.9 Current account balance (% of GDP) -9.1 -8.4 -8.7 -8.6 -8.5 -8.5 Net foreign direct investment inflow (% of GDP) 11.2 12.8 11.8 12.1 9.7 9.7 Fiscal balance (% of GDP) -1.4 -1.1 -0.4 -1.6 -1.0 -0.4 Revenues (% of GDP) 30.5 31.8 33.8 37.0 34.2 33.5 Debt (% of GDP) 62.6 57.0 59.9 58.5 56.4 55.7 Primary balance (% of GDP) 0.6 1.7 3.2 1.0 1.7 2.4 1,2 International poverty rate ($2.15 in 2017 PPP) 0.5 0.5 0.5 0.5 0.4 0.4 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.2 1.2 1.1 1.1 1.0 1.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 6.7 6.3 6.2 5.9 5.6 5.6 GHG emissions growth (mtCO2e) 2.7 2.9 3.0 2.9 3.1 3.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2018-HBS. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2018) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 281 This outlook reflects information available as of April 10, 2025. 1 2 SIERRA LEONE Population Poverty million millions living on less than $2.15/day 8.6 2.0 3 4 Life expectancy at birth School enrollment The economy has been set back with recurrent policy slip- years primary (% gross) pages exacerbating macroeconomic conditions and damp- ening policy credibility. Poverty is expected to peak in 2025, 60.4 153.1 5 6 slowly reducing as inflation declines. Stronger macroeco- GDP GDP per capita nomic management, improved governance and increased current US$, billion current US$ productivity are needed to accelerate inclusive growth and restore macroeconomic stability and policy credibility. 7.6 878.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Sierra Leone continues to grapple with heightened macroeco- Growth is estimated to have slowed to 4.0 percent in 2024, down nomic challenges, including weak fiscal discipline, persistent (al- from 5.7 percent in 2023, largely due to falling global iron ore beit easing) inflationary pressures and unbalanced growth dri- prices which contributed to slower mining production. Despite ac- vers. The economy has recovered post-pandemic, but growth counting for 7 percent of the economy’s output, the mining sector remains concentrated in the extractives sectors, while agricul- had the highest contribution to growth among all sectors. Services ture and services remain subdued. A less benign global en- recovered modestly but agricultural output was affected by flash vironment will have a bearing on small open economies like floods. On the demand side, slower mineral export growth, cou- Sierra Leone that heavily depend on global demand and favor- pled with high import growth driven by mineral oil and lubricants able financial conditions. contributed to the slowdown. Private consumption growth picked up a bit, while investments, particularly through the expansion of Chronic expenditure overruns have eroded budget credibility and production in two major iron ore mines and the lifting of mining ex- increased borrowing costs, while the energy sector poses a fiscal ploration ban, supported growth. risk. The country remains at high risk of debt distress, with debt service to revenue exceeding 100 percent, and high rollover risks. The overall fiscal deficit reached 4.8 percent of GDP in 2024, Fiscal dominance continues to hinder monetary policy transmis- exceeding the budgeted target by a wide margin. Weaknesses sion and constrain private sector credit growth. Sierra Leone faces in commitment control and oversight institutions, including high poverty due to low agricultural productivity, limited jobs, low supreme audit institutions and parliament, coupled with legisla- human capital and weak social protection. Approximately 32.7 per- tive deficiencies in public finance management, contributed to in- cent of the population lived on less than US$2.15 per person per efficiencies in budget execution. Revenues improved sharply to day (2017 PPP) in 2024. 8.8 percent of GDP (from 7.4 percent in the previous year) due to FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 50 100 9 40 90 8 30 80 7 20 70 6 10 60 5 0 50 4 -10 40 -20 3 30 -30 20 2 -40 10 1 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 0 0 Gov. cons. Exports GFCF 2011 2013 2015 2017 2019 2021 2023 2025 2027 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Statistics Sierra Leone and World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 282 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. tax policy reforms—a trend that must continue to finance Sierra global trade policy. The modest projected growth is expected to Leone’s vast financing needs. The deficit was primarily financed be driven by resilience of the services sector, improvements in through domestic short-term securities. Debt distress risks re- agricultural productivity and continued growth in mining. Lower mained high, with the cost of domestic debt rising to an average inflation is likely to help household spending and retail trade, of 40 percent annual interest rate. while agricultural value chain development and initiatives under the ‘Feed Salone’ will bolster productivity. Additionally, invest- Monetary policy was tightened by 250 bps during 2024 to address ments in the mining sector, including expansion of production inflation, which progressively decelerated throughout the year, capacities and explorations of new mines, are expected to boost from 52.2 percent in December 2023 to 13.8 percent by December production and export performance. 2024. The inflation slowdown was further supported by a stable ex- change rate, alongside a decline in international food and energy The fiscal deficit is expected to remain elevated, though gradually prices. Fiscal dominance limited private sector credit, while Bank of narrowing. Debt remains at high risk of distress, underscoring the Sierra Leone’s (BSL) purchases of government securities hindered need for credible fiscal consolidation and tighter expenditure con- the effectiveness of monetary policy operations. trols. Priorities include curbing subsidies, streamlining tax expendi- tures, avoiding recurrent budget overruns, and improving budget Despite improvements in the current accounts, gross international planning and execution with stronger oversight. The current ac- reserves declined to cover only 2 months of imports in 2024, com- count deficit is projected to narrow only in the medium term, dri- pared to 2.6 months of imports in 2023. Foreign direct investment ven by slower import growth and a potential rise in mining-related (FDI) remained low and concentrated in the mining sector. FDI as global uncertainties ease. Persistent economic challenges, including high inflation, and Poverty is projected to gradually decline to 33.8 percent by 2027. limited job opportunities and social protection coverage have Sierra Leone must curb inflation through sound fiscal and mone- increased poverty substantially from its pre-COVID-19 level of tary policies to protect households from a further erosion of pur- 24.0 percent, measured at the US$2.15 per person per day chasing power. Additionally, reforms are needed to foster inclu- (2017 PPP) international poverty line. In 2024, approximately sive growth, strengthen social protection through targeted inter- 32.7 percent of the population lives in poverty, based on pro- ventions, and ensure investments into human capital to improve jections that use a robust methodology that accounts for both long-term livelihoods. growth and inflation. This outlook is subject to several downside risks. Persistent fiscal overruns could undermine both fiscal and debt sustainability, ulti- Outlook mately jeopardizing macroeconomic stability. External risks include global commodity prices fluctuations, weaker global demand, and Growth is projected to remain subdued at around 4 percent in 2025, higher imported inflation. Additionally, weather shocks may hinder held back in part by ongoing shifts and heightened uncertainty in agricultural growth and poverty reduction. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.3 5.7 4.0 4.1 4.2 4.2 Private consumption 7.4 1.8 2.8 3.7 3.9 3.9 Government consumption -0.7 0.5 0.8 1.1 2.7 5.9 Gross fixed capital investment 22.2 12.8 21.8 11.0 11.4 8.3 Exports, goods and services 9.0 7.0 6.5 5.1 7.0 7.0 Imports, goods and services 15.8 9.3 12.0 7.6 9.5 8.0 Real GDP growth, at constant factor prices 5.3 5.7 4.0 4.1 4.2 4.2 Agriculture 3.0 2.4 2.4 3.0 3.0 3.1 Industry 9.9 14.4 4.7 4.3 5.0 5.1 Services 5.4 4.7 4.9 4.8 4.7 4.6 Inflation (consumer price index) 24.9 47.2 29.1 18.0 15.5 12.0 Current account balance (% of GDP) -4.8 -5.0 -3.9 -3.7 -3.1 -2.7 Net foreign direct investment inflow (% of GDP) 4.7 3.1 3.0 2.8 2.9 2.9 Fiscal balance (% of GDP) -5.4 -4.8 -4.8 -4.5 -4.1 -3.9 Revenues (% of GDP) 10.7 10.4 11.7 11.9 12.0 12.0 Debt (% of GDP) 53.5 46.2 41.8 37.9 36.0 33.3 Primary balance (% of GDP) -3.6 -2.5 -2.2 -1.2 -0.9 -1.2 1,2 International poverty rate ($2.15 in 2017 PPP) 22.6 28.2 32.7 34.5 34.4 33.8 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 59.8 62.5 63.6 64.1 61.8 60.0 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 87.8 87.9 87.6 87.5 86.0 84.3 GHG emissions growth (mtCO2e) 3.8 -0.2 -0.2 0.3 0.8 0.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2018-SLIHS. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 283 This outlook reflects information available as of April 10, 2025. 1 2 SOMALIA Population Poverty million millions living under natl. poverty line 16.2 9.7 3 4 Life expectancy at birth School enrollment The Somali economy continued overall strong performance years primary (% gross) in 2024. Growth remained near 4 percent, supported by im- proved agriculture. Inflation fell below 6 percent, and a slight 56.1 25.0 5 6 fiscal surplus was driven by improvements in revenue collec- GDP GDP per capita tion. Reliance on external financing continues. Poverty re- current US$, billion current US$ mains high and widespread, with high vulnerability to climat- ic shocks. Similar economic performance is expected over 12.1 745.9 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022. 3/ 2022. 4/ 2023. 5/ 2024. the medium term, barring major climate or security shocks. 6/ 2024. The latter includes accelerating domestic revenue mobilization re- Key conditions and challenges forms, improving the effectiveness of spending in social sectors, containing the wage bill, efficient security spending, advancing The economy continued to rebound from the severe 2018-22 Public Finance Management reforms, and further strengthening drought seasons. Progress on state and institution building has of debt management. Macroeconomic stability and development further strengthened the growth environment. Further progress in Somalia are expected to continue requiring a sustained and hinges on continued economic reform progress, an improving substantial flow of concessional finance over the medium term. security situation (including international support following the end of the African Union Transition Mission in Somalia (ATMIS) Poverty is high and widespread. The national poverty rate was 54 and building buffers against shocks to which Somalia is currently percent in 2022, ranging from 46 percent for the urban population highly exposed. Multiple and overlapping climate-related and ex- to 78 percent among the nomadic population. In addition, there ternal shocks have interrupted the country’s growth trajectory was very little progress in poverty reduction between 2017 and and slowed the transition from fragility. Real GDP growth av- 2022, coinciding with a lack of per capita economic growth due to eraged only 2.4 percent annually in 2019–24 with an average inconsistent economic growth and high exposure to shocks. negative real GDP per capita growth of 0.4 percent. Given the high rates of economic inactivity and unemployment, current growth does not generate sufficient jobs, which is fundamental Recent developments for poverty reduction. Economic growth remains strong, standing at 4.0 percent in 2024 Now that Somalia has graduated from the Heavily Indebted Poor compared to 4.2 percent in 2023, driven by agriculture produc- Countries (HIPC) Initiative, it will be essential for the authorities to tion, livestock exports and household consumption. Improved cli- maintain macroeconomic stability, support a resilient private sec- matic conditions boosted export recovery, with exports of goods tor and continue prudent public finance policy implementation. and services increasing by 15 percent in 2024, mostly on account FIGURE 1 / Total revenue and wage bill FIGURE 2 / Real GDP growth and contributions to real GDP growth Percent of GDP Percent, percentage points 8 15 7 10 6 5 5 0 4 3 -5 2 -10 1 -15 2020 2021 2022 2023 2024 2025e 2026f 2027f 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 Imports, goods and services Exports, goods and services Private consumption Government consumption Domestic revenue Grants Wage bill Gross fixed investment GDP at market prices Sources: Somalia Authorities and World Bank staff estimates. Sources: Somalia National Bureau of Statistics and World Bank staff estimates. 284 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. of livestock. Imports of goods and services grew at a slower remain strong supported by a favorable growth outlook in several pace, supported by high demand for construction materials and host countries. lower food and oil imports. Thus, trade deficit grew up slightly as imports consistently exceed exports; nevertheless, the current However, Somalia is highly exposed to climate risks, which can account deficit narrowed to 8.9 percent of GDP in 2024 on the quickly worsen food insecurity and dampen economic activity. back of strong growth in livestock exports. However, food secu- Despite improved climatic conditions in recent years, seasonal rity remains a major concern, with nearly 4.6 million people in rainfall is forecast to be below normal in the first half of 2025. Somalia likely to experience high levels of acute food insecurity These worsening climatic conditions may expose existing vulner- in April-June 2025. abilities to climatic shocks, especially among the poor. Risks also emanate from lower global growth, higher commodity prices, the Inflationary pressures have eased but despite falling food prices, ATMIS transition, and political risks linked to federalism. As So- annual inflation remained sticky. Inflation averaged 5.5 percent in malia is highly dependent on external aid, planned reduction in 2024 compared to 6.1 in 2023. This inflation is for Mogadishu only donor support from US and other development partners would and Somaliland and other State continue to face higher inflation. negatively impact growth, poverty reduction, and fiscal accounts. Recent global trade policy uncertainty drives additional downside The Federal Government of Somalia (FGS) budget ended in a risks to growth and inflation. small surplus of 0.1 percent of GDP in 2024 on account of con- tinued improvements in revenue collection and prudent spend- The current account deficit is forecast at 8.7 percent of GDP in ing. Measures to expand the tax base and digitalize tax collec- 2025, due to increased livestock exports and mainly financed tion have resulted in significant improvement in collection of in- through a combination of foreign direct investment and grants. come and sales taxes. The wage bill and security costs account- Inflation is projected at 4.2 percent in 2025, as commodity ed for the bulk of FGS spending, but social spending increased prices soften. at a faster pace. Government’s ability to deliver basic services to the population, however, remains limited and dependent on A fiscal deficit of 0.1 percent of GDP is expected in 2025, as the external funding. FGS is planning to expand provision of public services. New in- come tax legislation, continuing modernization and harmoniza- tion of customs, implementation of the revenue administration Outlook information system, and other reforms are expected to boost do- mestic revenue collection. Growth is projected to remain near 4 percent over the medium term, though with significant downside risks such as climate Poverty, measured using the national poverty line, is forecast to shocks, insecurity, and slow domestic revenue growth. Macroeco- decrease throughout 2025 to 2027 by roughly a percentage point nomic and structural reforms implemented in the context of HIPC each year. However, potential shocks, including the scaling back Completion Point are expected to start paying off and support sus- of humanitarian aid and climatic shocks, may slow this projected tained growth, albeit modestly due to continuing fragility. The re- poverty reduction. Accelerating poverty reduction will require covery of agricultural production and exports is expected to con- strengthening climate resilience, especially for the rural and no- tinue in 2025. The agriculture sector, however, is likely to remain madic population, and promoting inclusive growth through job cre- vulnerable to climate-related shocks. Remittances are projected to ation and increased human capital. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 2.7 4.2 4.0 4.0 4.1 4.1 Private consumption 4.7 4.5 6.0 4.6 4.4 3.5 Government consumption 12.2 5.0 10.2 3.1 0.5 1.0 Gross fixed capital investment 31.5 8.7 9.8 10.2 10.4 10.0 Exports, goods and services 13.7 17.5 10.7 8.2 8.0 8.0 Imports, goods and services 18.8 9.5 11.4 7.8 7.3 6.0 Inflation (consumer price index) 6.8 6.2 5.5 4.2 3.6 3.4 Current account balance (% of GDP) -8.6 -9.3 -8.9 -8.7 -9.8 -10.0 Fiscal balance (% of GDP) 0.0 0.1 0.1 -0.1 -0.5 0.6 Revenues (% of GDP) 7.1 6.7 7.6 7.9 6.6 7.5 Debt (% of GDP) 38.2 7.0 6.4 6.2 6.0 5.8 Primary balance (% of GDP) 0.1 0.2 0.2 0.0 -0.4 0.7 1 National poverty line 54.4 53.2 51.1 50.3 49.2 48.2 GHG emissions growth (mtCO2e) -0.8 -0.2 0.2 0.2 0.1 0.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Projections are based on applying private consumption growth to household consumption, with a neutral distribution. Macro Poverty Outlook / April 2025 285 This outlook reflects information available as of April 10, 2025. 1 2 SOUTH AFRICA Population Poverty million millions living on less than $6.85/day 63.9 34.3 3 4 Life expectancy at birth School enrollment In a fragile and more unpredictable global environment, South years primary (% gross) Africa’s GDP growth is expected to remain subdued at 0.7 per- cent in 2025, notwithstanding some supportive cyclical factors 61.5 96.1 5 6 and easing structural constraints. Growth is insufficient to im- GDP GDP per capita prove socio-economic outcomes, with job creation expected to current US$, billion current US$ remain slow and poverty projected to remain around 63.5 per- cent based on the upper-middle-income line. A large public 400.3 6266.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2014 (2017 PPPs). 3/ 2022. debt burden necessitates continued fiscal consolidation. 4/ 2022. 5/ 2024. 6/ 2024. of $6.85. This suggests an increase of roughly 3.9 million more Key conditions and challenges poor people compared to pre-Covid times. Weak job creation has hindered poverty reduction. South Africa's economy has been experiencing prolonged low growth, with GDP increasing by an average of only 0.7 percent over To move away from a path of low growth, high poverty, and the past decade. The population has grown faster than the econo- high unemployment, greater urgency is needed to foster an envi- my, resulting in a decline in real income per capita to 2007 levels. ronment of faster and more inclusive economic growth. Reforms Several structural constraints, such as infrastructure bottlenecks, to address binding structural constraints to growth, strengthen a weak business environment, and low productivity, along with a market competition, and make institutions more efficient are cru- decline in the efficiency of fiscal policy, have impeded economic cial to improving economic performance and the welfare of citi- growth. Increased public spending has contributed to a rapid rise zens. Those reforms require building consensus under a complex in public debt. political context. Socio-economic challenges have intensified over the past decade due to the weak economy, erosion of state capacity exacerbated Recent developments by governance failures, fiscal deterioration, and heightened in- frastructure bottlenecks. Approximately 8 million people in the Despite a substantial improvement in electricity supply, South labor force are unemployed (32.6 percent). Inequality (Gini index Africa’s economy expanded only 0.6 percent in 2024. Growth was of 63) remains among the highest in the world. The bottom 40 mainly underpinned by financial services while output in six of the percent of the population accounts for 11.5 percent of total in- ten sectors contracted. From the spending side, growth was dri- come, while the top 20 percent accounts for 59.9 percent. In ven by stronger consumption and net exports. Leading indicators 2025, it is projected that 63.5 percent of the population will be suggest growth remained subdued in 2025Q1, while recent global living in poverty, based on the upper-middle-income poverty line trade policy shifts have increased uncertainty. FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 70 80000 4 60 78000 2 50 76000 0 40 74000 -2 30 72000 -4 20 70000 -6 10 68000 -8 0 66000 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Agriculture Other sectors International poverty rate Lower middle-income pov. rate Financial services Real GDP Upper middle-income pov. rate Real GDP pc Sources: WDI and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 286 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The economy continued to struggle to create jobs at a sufficient moderation in the depreciation rate of the rand. GDP growth re- pace, keeping the unemployment rate high. The labor force ex- mains insufficient to substantially boost employment, and socio- panded by 450,000 individuals while 355,000 jobs were created. economic indicators are expected to remain weak. Consequently, With rising interest payments, weak revenue growth and persisting the poverty rate, based on the UMIC poverty line, is expected to re- expenditure rigidities, the fiscal balance widened to 5.9 percent of main around 63.5 percent between 2025 and 2027, with the pover- GDP from 5.5 percent in 2023. In concert, the public debt ratio in- ty headcount increasing to 41.8 million in 2027. creased to 76.3 percent of GDP. Weaker import demand drove the current account deficit to narrow from 1.6 percent of GDP in 2023 Notwithstanding high gold prices and a decline in international oil to 0.6 percent. On a subdued inflation environment, the central prices, sharply lower metal prices could translate to less favorable bank (SARB) reduced its policy rate by a cumulative 75 basis points terms of trade, leading the current account deficit to widen to 1.1 since September. Headline inflation averaged 4.4 percent in 2024, percent of GDP in 2025. within the midpoint of the 3-6 percent target. The fiscal balance is projected to widen to 6.5 percent of GDP, amid added wage pressures and a higher interest bill, before narrowing Outlook from 2026 onwards as the Eskom debt relief ends. The public debt is projected to rise to 78.8 percent of GDP, exacerbated by weak- Reflecting a weak outlook for major trading partners and low po- er growth. Strengthening efficiency of public spending, limiting in- tential growth, the economy is expected to expand by 0.7 percent crease of the wage bill and improving monitoring mechanisms, re- in 2025, before growing on average by 1 percent in the medium mains critical to support fiscal consolidation. term. The outlook is highly uncertain due to the unfolding trade policy changes. Although only 7 percent of exports go to the US, of Risks to the outlook are significant. Escalating global trade tensions which about 36 percent are exempted from the new tariff regime, and a worse global outlook could weaken growth prospects fur- indirect effects are expected to compound the impact on growth. ther. Domestic risks may arise from factors that may affect the Progress on structural reforms remains crucial for sustaining private sector’s expansion and the government’s ability to ensure growth. However, the impasse on the 2025 budget highlights diffi- fiscal sustainability, such as the pace of structural reforms and culties in reaching consensus within the ruling Government of Na- unbudgeted expenditure pressures. Climate shocks, geopolitical tional Unity. Inflation is projected to be around 4 percent in 2025, risks, and vulnerabilities in global financial markets could also neg- influenced by lower global oil prices and stable food costs, and a atively impact the baseline outlook. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 1.9 0.7 0.6 0.7 1.1 1.3 Private consumption 2.5 0.7 1.0 1.3 1.2 1.2 Government consumption 0.6 1.9 0.4 1.2 0.2 0.2 Gross fixed capital investment 4.8 3.9 -3.7 -1.4 3.6 4.2 Exports, goods and services 6.8 3.7 -2.0 -1.1 2.8 3.1 Imports, goods and services 15.0 3.9 -6.3 0.3 3.7 3.8 Real GDP growth, at constant factor prices 1.9 0.7 0.6 0.7 1.1 1.3 Agriculture 2.0 -4.8 -8.0 7.4 2.0 2.0 Industry -2.6 -0.4 -0.4 -1.0 0.9 1.3 Services 3.4 1.2 1.2 0.9 1.1 1.2 Employment rate (% of working-age population, 15 years+) 39.0 40.8 41.2 40.8 40.9 41.0 Inflation (consumer price index) 6.9 6.0 4.4 4.1 4.6 4.6 Current account balance (% of GDP) -0.5 -1.6 -0.6 -1.1 -1.7 -2.0 Net foreign direct investment inflow (% of GDP) 1.7 1.7 0.9 0.3 1.2 1.5 1 Fiscal balance (% of GDP) -3.6 -5.5 -5.9 -6.5 -5.5 -5.3 Revenues (% of GDP) 28.1 27.5 27.2 27.6 27.6 27.7 Debt (% of GDP) 70.5 74.1 76.3 78.8 80.5 81.7 Primary balance (% of GDP) 0.9 -0.4 -0.7 -1.0 0.1 0.3 2,3 International poverty rate ($2.15 in 2017 PPP) 22.1 22.3 22.4 22.5 22.5 22.4 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 41.9 42.1 42.3 42.4 42.4 42.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 63.1 63.3 63.4 63.5 63.5 63.4 GHG emissions growth (mtCO2e) 0.2 -2.1 -2.0 1.7 0.9 0.9 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ The Eskom debt-relief arrangement is reported above the line, in expenditures. 2/ Calculations based on 2014-LCS. Actual data: 2014. Nowcast: 2015-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2014) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 287 This outlook reflects information available as of April 10, 2025. 1 2 SOUTH SUDAN Population Poverty million millions living under natl. poverty line 11.9 8.4 3 4 Life expectancy at birth School enrollment An acute macroeconomic and fiscal crisis triggered by the years primary (% gross) closure of a key oil route through conflict-affected Sudan is being further exacerbated by lower global oil prices, with 55.6 81.9 5 6 GDP projected to contract by more than 30 percent in GDP GDP per capita 2025. High inflation, cuts in aid, and public sector salary current US$, billion current US$ arrears, amid severe fiscal strains, exacerbate extreme poverty and food insecurity. Elevated political tensions also 6.5 543.9 Sources: WDI, MFMod, and official data. 1/ 2022. 2/ 2022. 3/ 2022. 4/ 2022. 5/ 2024. present risks to the 2018 peace agreement. 6/ 2024. a decline in GDP and exacerbated the humanitarian crisis in the Key conditions and challenges country. Food insecurity affects nearly half the population, with over two million children at risk of malnutrition (IPC, 2024). Poverty As the world’s youngest nation, South Sudan faces numerous so- is widespread and remains among the highest in the world. cio-economic challenges due to nascent institutions, weak gover- nance, systemic fragility, and high dependence on external support for basic services. These issues are further exacerbated by recur- Recent developments rent conflict and climate shocks. Amid macroeconomic instabili- ty, political uncertainty has increased with the repeated postpone- Oil production dropped from nearly 160,000 barrels per day (bpd) ment of elections resulting in a delayed political transition, contrary prior to the oil pipeline shutdown to an average of 60,000 bpd the to the expectations of the 2018 peace agreement (R-ARCSS). year after, leading to a 7.2 percent drop in GDP in FY24. The con- flict in Sudan has disrupted trade routes and triggered the influx South Sudan's dependency on oil -which accounts for over 60 per- of over 1 million refugees and returnees. Nonetheless, returnee cent of its GDP, 99 percent of exports and 90 percent of gov- households have engaged in farming, which boosted agriculture ernment revenues- makes it vulnerable to price and production output and prevented an even more severe contraction. The coun- shocks. The shutdown of the Dar Blend oil export pipeline in Febru- try is in the grip of high inflation, driven by currency depreciation, ary 2024, which transported 60 percent of the country’s oil through supply disruptions, and monetization of the fiscal deficit. Poverty war-torn Sudan, led to a collapse in domestic oil production, deep- has increased to 92 percent in FY24, representing close to an addi- ening the macroeconomic crisis. tional 2.6 million people falling into poverty. Even prior to the oil shutdown, multiple, overlapping shocks such Domestic demand declined amid high inflation and growing strain as the COVID-19 pandemic and catastrophic flooding - which dis- on public finances. The fiscal balance shifted from surplus in FY23 placed 330,000 people in 2024 alone - had already contributed to to deficit in FY24, despite the accumulation of nearly 13 months of FIGURE 1 / Exchange rate developments FIGURE 2 / Actual and projected poverty rate and real GDP per capita SSP/US$ Percent Poverty rate (%) Real GDP per capita (constant LCU) 6000 300 100 1400 90 5000 250 1200 80 4000 200 70 1000 60 800 3000 150 50 40 600 2000 100 30 400 1000 50 20 200 10 0 0 0 0 2022 2023 2024 2025 2026 2027 National poverty rate Real GDP pc Premium (rhs) Official EXR (lhs) Parallel EXR (lhs) Source: Ministry of Petroleum. Source: World Bank. Notes: See footnotes in table on the next page. 288 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. public salary arrears that weighed on household consumption. The recovery in oil production is expected to support a The sharp drop in oil revenues led to the resumption of mone- growth rebound in FY26 (41.0 percent) and reduce the cur- tary financing of the deficit and put pressure on already inade- rent account deficit, although recovery would be slower than quate spending on essential public services like health and ed- previously expected due to the delays in DPOC resumption. ucation. To conserve resources, financing for the opaque oil-for- Longer-term growth is expected to be modest as oil pro- roads scheme has been curtailed, leading to a 4.3 percent of GDP duction stabilizes at lower than pre-shutdown levels, amid drop in capital expenditure. maturing oil fields and inadequate maintenance and invest- ment. Inflation should average 180 percent in FY25 and re- Lower oil production coupled with a decline in oil prices associated main high in FY26 as deficit monetization continues, but with currently heightened global economic uncertainty is expected gradually ease in FY27 as foreign exchange inflows improve to push the current account into an 9.2 percent of GDP deficit and monetary policy tightens. in FY25, and worsen fiscal strains. Market-based foreign exchange auctions, which had facilitated currency unification in 2021, were Lower oil revenues, alongside the anticipated clearance of salary suspended between October 2024 and January 2025. As a result, arrears, would keep the fiscal deficit high in FY26. Given limited fi- the official currency has depreciated by around 260 percent since nancing sources and amid slower pace of deficit monetization, the the DPOC shutdown, and a sizable and persistent parallel market deficit is expected to narrow to 1.7 percent in FY27. Declining glob- premium has emerged. al aid is expected to continue to impact social spending which is largely financed by external donors. Outlook Key downside risks include lower-than-expected revenues due to long-running practices of pre-selling oil, slower pace of oil ex- The economy is projected to contract for the fifth consecutive port resumption, and further weakness in global oil prices due year, but with a steep drop of over 30 percent in FY25. Although to global trade shocks. Major risks are also presented by cli- neighboring Sudan lifted the force majeure on oil transportation mate shocks. The non-fulfillment of the peace agreement would in January 2025, full resumption of oil exports through the re- worsen domestic tensions, heighten risks of conflict and add to stored DPOC pipeline from Port Sudan is expected to take time. already acute governance, macroeconomic and service delivery Real GDP per capita in FY25 is expected to decline to half its val- challenges. This highlights the urgency for bold reforms to ad- ue in FY20, with poverty and vulnerability being near universal at dress fiscal pressures, reduce inflation, and implement the 2018 national standards. peace agreement. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -2.3 -1.3 -7.2 -34.7 41.1 21.2 Agriculture -1.8 -1.7 8.0 0.5 1.0 2.0 Industry -4.8 -4.3 -11.6 -50.0 77.6 31.1 Services 1.7 3.6 2.3 -2.9 1.1 2.0 Inflation (consumer price index) 22.0 18.0 35.0 179.8 66.4 16.8 Current account balance (% of GDP) 4.7 6.1 4.0 -9.2 -4.6 0.0 Net foreign direct investment inflow (% of GDP) 1.0 0.6 1.7 4.7 3.3 3.2 Fiscal balance (% of GDP) -5.9 3.3 -6.6 -7.8 -7.2 -1.7 Revenues (% of GDP) 28.8 32.7 26.7 18.1 24.3 27.8 Debt (% of GDP) 56.9 39.5 46.0 55.6 56.4 56.2 Primary balance (% of GDP) -3.8 3.7 -6.6 -5.7 -5.7 -0.5 1,2 National poverty line 75.9 83.9 92.1 99.8 100.0 99.9 GHG emissions growth (mtCO2e) 0.2 0.9 0.9 0.0 1.7 1.4 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2022 HBS. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using microsimulation. Macro Poverty Outlook / April 2025 289 This outlook reflects information available as of April 10, 2025. 1 2 SUDAN Population Poverty million millions living on less than $3.65/day 49.4 19.3 3 4 Life expectancy at birth School enrollment Two years since the conflict started, Sudan continues to face years primary (% gross) a worsening economic, social, and humanitarian crisis. The ongoing violence has resulted in the world’s largest displace- 65.6 77.8 5 6 ment crisis, severe food insecurity and famine, and a col- GDP GDP per capita lapse of economic activity, state capacity, and critical infra- current US$, billion current US$ structure. Without swift conflict resolution and better aid ac- cess, the country faces generational human capital losses, 49.9 1011.2 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2014 (2017 PPPs). 3/ 2022. perpetuating poverty and undermining any future recovery. 4/ 2018. 5/ 2024. 6/ 2024. disease outbreaks—including cholera, dengue fever, and malar- Key conditions and challenges ia—severely impact the most vulnerable populations, further exacerbated by the destruction of health, water, sanitation, and Prior to the outbreak of the conflict in April 2023, Sudan faced a se- hygiene infrastructure. vere macroeconomic crisis, driven by a 75 percent revenue loss af- ter South Sudan’s separation and further exacerbated by limited in- The collapse of public institutions has disrupted spending, while vestment in physical and human capital, stalled structural reforms displacement and reduced economic activity have shrunk the tax and high vulnerability to climate related shocks. base, sharply lowering revenues. The conflict also disrupted offi- cial data production by key government institutions, such as the The conflict has worsened existing challenges, resulting in signifi- Central Bank, Ministry of Finance and Economic Planning, and the cant human losses, economic damage, and a decline in state ca- Central Bureau of Statistics. pacity. This has led to the collapse of local markets, essential infra- structure, and key public services like health and education. Conse- quently, the services and industrial sectors in Khartoum have been Recent developments severely impacted. GDP is estimated to have contracted by 13.5 percent in 2024 fol- Sudan is experiencing the world’s worst displacement crisis, with lowing a 29 percent contraction in 2023. Critical shortages of seeds, 12.9 million people forcibly displaced—seeking refuge both inter- fertilizers, and fuel, along with disrupted trade routes, have signif- nally and across borders since the conflict erupted in April 2023, icantly hindered food production and distribution causing an esti- heightening the risk of instability in a fragile region. Famine is mated 7.6 percent contraction in the agriculture sector in 2024. The widespread affecting 10 areas, with approximately 24.6 million industrial sector has declined by 13 percent, reflecting damage to people acutely food insecure, and 638,000 people—the highest infrastructure, factories and disruptions in supply chains. Services, number globally—facing catastrophic levels of hunger. Multiple heavily concentrated in Khartoum, declined by 22 percent. Private FIGURE 1 / Real GDP growth and sectoral contributions to real FIGURE 2 / Actual and projected poverty rates and real GDP per GDP growth capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 100 800 10 90 700 5 80 600 0 70 -5 60 500 -10 50 400 -15 40 300 -20 30 200 -25 20 10 100 -30 0 0 -35 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026f 2027f International poverty rate Lower middle-income pov. rate Agriculture Industry Services Real GDP Upper middle-income pov. rate Real GDP pc Sources: Central Bureau of Statistics and World Bank staff estimates. Source: World Bank. Notes: See footnotes in table on the next page. 290 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. consumption is estimated to have dropped by 16 percent due to is expected to recover by 5 percent in 2025, with a stronger income losses and mass displacement. rebound in 2026, as security improves, and services recover. Due to the household survey being over a decade old, and The shrinking tax base and decline in fiscal revenues (to 4.1 percent the recent conflict, there is significant uncertainty in forecasting of GDP in 2024) resulted in reduced government spending, includ- poverty. Nevertheless, extreme poverty is anticipated to remain ing substantial cuts to salaries and current transfers. The current high in the medium term. account deficit is estimated to have widened to 12 percent of GDP in 2024, as bank collapses impacted remittances, which reported- Inflation is expected to remain in double digits due to continued ly declined by $4 to $6 billion since the conflict started. Exports in- budget deficit monetization in the near term but is expected to creased to 10 percent of GDP in 2024, primarily as the government gradually ease as supply capacity improves and monetization is regained control over mining areas. Imports, however, declined in phased out. The current account deficit is projected to narrow, with line with domestic demand. stronger exports and remittances. The country continues to experience hyperinflation, with prices ris- Should the conflict be resolved, the fiscal outlook is expected to im- ing by 188 percent (year-on-year) in December 2024, indicating the prove, as revenue collection recovers, although revenues will likely severe depreciation of the Sudanese Pound (which devalued by remain below pre-conflict levels. Public debt is projected to decline 233 percent in official markets and 355 percent in the parallel mar- but stay elevated, with longer term fiscal sustainability depending ket since April 2023), and conflict-related disruptions to food, hous- on structural reforms and debt relief. ing, transport, and trade. Extreme poverty, defined as the share of the population living with less US$2.15 a day has more than dou- Recovery to pre-conflict GDP levels will take years to ma- bled from 33 percent in 2022 to 71 percent in 2024. To restore terialize due to economic scarring and capital losses, with banking functionality, the central bank established a joint portfolio the pace hinging on reconstruction and reforms. Delays in with commercial banks to fund essential imports and issued a new conflict resolution and rising tensions, including the RSF's 1000-pound note to combat counterfeiting and limit cash outside declaration of a parallel government, pose significant risks the banking system, though this has led to liquidity constraints, to the outlook. negatively impacting donor activities. Although direct effects from global trade policy shifts are likely limited due to minimal trade ties, broader spillovers Outlook remain uncertain. Sudan would benefit from lower oil prices and higher gold prices, however tighter fiscal space Sudan’s economic outlook remains highly uncertain and faces in key partners could hinder availability of support for major risks. Assuming the conflict is resolved in 2025, GDP post-conflict reconstruction. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices -1.0 -29.4 -13.5 5.0 9.3 4.1 Private consumption -0.8 -28.4 -16.2 3.7 6.8 2.5 Government consumption 1.9 -27.1 -0.6 4.8 23.2 13.9 Gross fixed capital investment 1.2 -20.0 -15.0 2.0 4.0 2.0 Exports, goods and services 12.0 -37.1 16.4 18.8 8.0 10.0 Imports, goods and services 8.7 -12.7 -21.5 -8.0 4.0 6.0 Real GDP growth, at constant factor prices -1.0 -28.5 -13.5 5.0 9.3 4.1 Agriculture 1.0 -14.9 -7.6 4.7 8.5 4.4 Industry -0.7 -25.8 -13.1 2.0 7.5 3.7 Services -3.0 -43.2 -22.0 8.9 12.4 4.2 Employment rate (% of working-age population, 15 years+) 40.0 37.7 37.7 37.7 37.7 37.7 Inflation (consumer price index) 164.2 65.8 170.0 89.4 33.1 20.0 Current account balance (% of GDP) -6.0 -6.2 -12.0 -4.8 -1.5 3.6 Net foreign direct investment inflow (% of GDP) -1.3 -0.7 -1.4 -1.1 -0.9 -1.0 Fiscal balance (% of GDP) -1.7 -3.8 -4.1 -3.7 -3.7 -3.4 Revenues (% of GDP) 10.0 4.8 4.7 5.6 6.2 6.8 1 Debt (% of GDP) 183.6 167.3 147.4 142.7 124.2 106.4 Primary balance (% of GDP) -1.6 -3.7 -4.0 -3.6 -3.6 -3.3 2,3 International poverty rate ($2.15 in 2017 PPP) 33.3 59.1 71.0 69.2 65.1 63.8 2,3 Lower middle-income poverty rate ($3.65 in 2017 PPP) 69.9 87.5 91.9 91.3 89.8 89.4 2,3 Upper middle-income poverty rate ($6.85 in 2017 PPP) 93.6 97.8 98.5 98.4 98.2 98.1 GHG emissions growth (mtCO2e) -0.3 -1.8 -2.2 1.0 3.2 0.8 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Debt projections do not include any restructuring achieved during the HIPC process. 2/ Calculations based on 2014-NBHS. Actual data: 2014. Nowcast: 2015-2024. Forecasts are from 2025 to 2027. 3/ Projection using neutral distribution (2014) with pass-through = 1 (High (1)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 291 This outlook reflects information available as of April 10, 2025. 1 2 TANZANIA Population Poverty million millions living on less than $2.15/day 68.6 25.8 3 4 Life expectancy at birth School enrollment Tanzania maintained macroeconomic stability supported years primary (% gross) by prudent macroeconomic management, natural endow- ments, and favorable demographics. Growth accelerated 66.8 93.1 5 6 to 5.5 percent in 2024 due to increased exports, favorable GDP GDP per capita weather, and improved access to electricity. Growth is current US$, billion current US$ expected to accelerate further, but uncertainty to this outlook increased with global policy risks. Poverty at the 78.8 1149.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2018 (2017 PPPs). 3/ 2022. International Poverty Line was estimated at 42.9 percent. 4/ 2023. 5/ 2024. 6/ 2024. workers in the low-productivity agriculture sector. While poverty Key conditions and challenges remains predominantly rural, poverty rose relatively faster in ur- ban areas post-Covid. Although Tanzania has urbanized faster than Tanzania has built a track record of macroeconomic stability even its neighbors, migration to towns and cities has not been an engine amid serious economic shocks. Growth remained robust, fiscal bal- for poverty reduction. ances manageable, and inflation below targets despite the interna- tional disruptions that characterized the early 2020s. High natur- al endowments and favourable demographics support high invest- Recent developments ment levels that strongly contributed to growth. Growth accelerated in 2024 promoted by expanding exports, a Tanzania nevertheless contends with structural and policy barriers good agricultural season, and increased electricity supply. Higher to accelerating inclusive growth. High government investment in global demand for Tanzanian goods like gold, tourism, and agricul- infrastructure, combined with below-potential domestic resource tural commodities improved terms of trade. Tanzanian production mobilization limits fiscal space for expanding crucial public ser- was able to meet additional demand as an enhanced business en- vices. Strengthening the business environment is a policy priority vironment had led to investments increasing productive capacity. for growth acceleration. Supporting the country’s external re- Tanzania’s current account deficit likely narrowed to 2.3 percent of silience through a more flexible exchange rate regime, which is cur- GDP in 2024, a long-term sustainable level given the increased lev- rently characterized by a preference for asymmetric exchange rate els of FDI and highly concessional finance Tanzania attracts. flexibility, is a macroeconomic policy area that can be improved. Electricity supply grew rapidly in 2024 with the Julius Nyerere Economic growth has been concentrated in few sectors with lim- Hydropower Plant adding capacity to the growing grid. The first ited workforce absorption and scant wage employment creation. phase of Tanzania’s largest investment project—the Standard- Slow structural transformation has kept two-thirds of Tanzanian gauge Railway (SGR) across the country and into neighbouring FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 10 100 2.5 8 90 6 80 2.0 70 4 60 1.5 2 50 0 40 1.0 -2 30 20 0.5 -4 10 -6 0 0.0 2022 2023 2024 2025 2026 2027 2011 2013 2015 2017 2019 2021 2023 2025 2027 GFCF Imports Exports International poverty rate Lower middle-income pov. rate Private cons. Gov. cons. GDP Upper middle-income pov. rate Real GDP pc Source: World Bank staff estimates and projections (2020-2026). Source: World Bank. Notes: See footnotes in table on the next page. 292 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Burundi —also started operating passenger services between Dar disruptions in development assistance, and increased uncertainty es Salaam, the commercial hub, and the capital Dodoma. Cargo on global trade policy. The conflict in DRC affects Tanzania's export services are yet to commence highlighting the need for an inte- and transport sectors since traffic to the DRC has historically ac- grated transport policy approach. counted for 14 percent of volumes at Tanzania’s largest port. The disruption of development assistance will negatively impact Tanza- While El Niño led to droughts in many neighbouring countries, Tan- nia’s economy, especially the health sector. While direct and indi- zania enjoyed above-average rains, record harvests, and a boost to rect effects of recent trade policy shifts have caused a downward downstream sectors. Large harvests also depressed domestic food shift in growth projections, continued uncertainty and weaker than prices, leading to significant welfare gains for the poorest and en- expected global demand may further adversely affect Tanzania’s hanced food security. Overall inflation also remained low amidst growth prospects. moderate monetary tightening. Additionally, the economy closing in on its potential tightened the labour market. Poverty at the Interna- Policy risks include Tanzania’s increased spending ambitions tional Poverty Line of US$2.15 2017 PPP/day (about 2,080 nominal against the background of still weak domestic revenue mobiliza- TSH in 2024) is estimated to have decreased to 42.9 percent in 2024. tion. While double digit increases in planned expenditures in the next two years are an opportunity to enhance service delivery and avoid underinvestment in human capital in the face of uncertain Outlook donor support, they also necessitate careful prioritisation, partic- ularly in public investment, and improvements in revenues to en- Secular effects are expected to drive continued economic expan- sure fiscal and macroeconomic sustainability. sion and macroeconomic stability. Abundant opportunities, includ- ing in the extractives sector, improvements to the business envi- Real per capita growth of 2 to 3 percent is expected to reduce the ronment, and the increasing use of public-private partnerships will poverty rate to 41.0 percent by 2027, though there is a downside risk drive investment and thus spur economic growth. Simultaneously, to global economic growth due to the U.S. tariffs. This is driven more macroeconomic risks are expected to be contained through pru- by growth in the service and industry sectors, and less by agriculture. dent macroeconomic decision making. In addition to mitigating risks to the overall economy negatively im- pacting vulnerable populations, it is important to improve the re- However, three prominent external risks emerged in early 2025: silience of Tanzanian households through the creation of better- renewed conflict in eastern Democratic Republic of Congo (DRC), quality jobs and strengthening the social safety net system. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.6 5.1 5.5 5.7 5.9 6.1 Private consumption 4.6 2.2 3.1 3.4 4.5 6.3 Government consumption 8.4 10.7 9.5 15.1 8.3 4.3 Gross fixed capital investment 9.6 5.7 5.3 6.3 6.6 6.3 Exports, goods and services 10.2 13.2 16.4 5.2 5.7 7.4 Imports, goods and services 23.7 7.5 9.2 6.2 5.7 7.4 Real GDP growth, at constant factor prices 4.6 5.1 5.5 5.7 5.9 6.1 Agriculture 3.3 3.6 4.1 3.5 3.6 3.7 Industry 4.3 4.8 5.2 5.9 7.4 7.5 Services 5.6 6.2 6.7 6.8 6.1 6.5 Employment rate (% of working-age population, 15 years+) 81.5 81.6 82.2 82.6 82.7 82.8 Inflation (consumer price index) 4.4 3.8 3.1 3.6 4.0 4.0 Current account balance (% of GDP) -7.3 -3.8 -2.3 -3.5 -3.3 -3.1 Net foreign direct investment inflow (% of GDP) 1.9 2.1 2.0 1.9 2.1 2.2 Fiscal balance (% of GDP) -3.7 -4.1 -2.8 -3.4 -3.5 -3.1 Revenues (% of GDP) 15.2 14.9 16.1 16.8 16.8 16.9 Debt (% of GDP) 44.2 46.0 50.3 51.2 50.1 49.1 Primary balance (% of GDP) -1.9 -2.0 -0.3 -0.5 -0.8 -0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 43.9 43.5 42.9 42.3 41.7 41.0 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 73.6 73.2 72.8 72.3 71.8 71.3 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.3 90.9 90.3 89.8 89.2 88.5 GHG emissions growth (mtCO2e) 0.4 0.7 0.9 1.1 1.1 1.2 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2009-, 2024-, and 2018-HBS. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2025 to 2027. 2/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 293 This outlook reflects information available as of April 10, 2025. 1 2 TOGO Population Poverty million millions living on less than $2.15/day 9.5 2.4 3 4 Life expectancy at birth School enrollment Fiscal consolidation efforts and a decelerating external de- years primary (% gross) mand amid rising trade uncertainty are expected to result in growth moderating to 4.9 percent in 2025, from 5.3 percent 61.6 120.2 5 6 in 2024, before recovering gradually in 2026-27. Extreme GDP GDP per capita poverty is projected to decrease by 1.4 percentage points current US$, billion current US$ over the same period. Escalating geopolitical and trade poli- cy uncertainty, debt refinancing pressures, and climate 10.0 1049.6 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2021 (2017 PPPs). 3/ 2022. shocks are key downside risks to this outlook. 4/ 2023. 5/ 2024. 6/ 2024. Key conditions and challenges Recent developments Togo’s economy has been resilient, with annual growth av- GDP growth is estimated to have slowed to 5.3 percent in 2024 (3 eraging 6.1 percent between 2021 and 2023, thanks to fis- percent in per capita terms). On the demand side the government cal stimulus measures implemented in the post-COVID pe- focused on rapid fiscal deficit reduction and external demand de- riod and robust private investment. However, high inflation celerated, while private investment and consumer spending were and disparities in access to basic services between rural and the main drivers of growth, aided by a drop in inflation to 2.9 per- urban areas have hindered poverty reduction, while fiscal cent in 2024 (from 5.3 percent in 2023). On the supply side, indus- space has been strained by growing transfers and high lev- trial activity moderated while the services and agriculture sectors els of capital spending. helped maintain growth close to its decade-average (5.1 percent). The international extreme poverty rate, measured at $2.15, 2017 The medium-term outlook remains positive in Togo, but in- PPP threshold for low-income countries, is estimated to have de- creased global headwinds and fiscal consolidation efforts are ex- clined to 24.8 percent in 2024 from 26.0 percent in 2023. pected to result in a temporary slowdown. Boosting the coun- try’s growth potential and tackling global trade policy uncertain- Expenditure cutbacks and revenues-boosting efforts reduced the ty would require strengthening Togo’s attractiveness as a trade budget deficit from 6.6 percent of GDP in 2023 to 4.5 (6.1 percent and investment hub, improving agriculture productivity, enhanc- including recapitalization of the state-owned bank UTB - Union To- ing access to energy, and strengthening resilience to climate and golaise de Banque) although security spending to address northern economic shocks. border instability with Burkina Faso remained high. The budget FIGURE 1 / Revenues, expenditures, and deficit FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 30 4 100 700000 2 90 25 600000 80 0 70 500000 20 60 400000 -2 15 50 -4 40 300000 10 30 200000 -6 20 5 100000 -8 10 0 0 0 -10 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Budget deficit (rhs) Revenues (lhs) Expenditures (lhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: See footnotes in table on the next page. 294 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. deficit was financed primarily through issuances on the WAEMU re- the current account deficit broadly stable around 3 percent of gional debt market, with a shift to shorter-dated securities and ris- GDP in 2026-27 amidst trade policy uncertainties. The regional ing yields. The current account deficit (CAD) stabilized at 3.2 per- inflation rate is expected to align with the WAEMU target band cent of GDP in 2024, as slower export growth was offset by im- from 2025 onwards, while regional reserves are projected to rise proved terms of trade and rising remittances. to 5.4 months of imports in 2025, supported by recovering ex- ports, and lower Euro Area interest rates. The WAEMU inflation rate declined further in 2024 to 3.5 percent, above the 1-3 percent WAEMU target band. Regional foreign re- The 2025 budget aims to reduce the deficit to 3 percent of GDP serves increased from 3.5 months of imports in 2023 to 4.7 months and maintain it at that level in subsequent years, aligning with in 2024, reflecting the resumption of international bond issuances, WAEMU and IMF program targets. Total revenue is projected to and IMF and World Bank disbursements. The Central Bank of West increase by 0.5 percent of GDP per year with the implementation African States maintained its policy interest rates throughout 2024 of tax and customs reforms as well as reduced tax exemptions. at 3.5 percent for liquidity calls and 5.5 percent for the marginal Combined with cuts in public investment and transfers, these lending facility. measures will help lower public debt to 66.7 percent of GDP in 2026 and 65.2 percent in 2027. Despite these efforts, high refi- nancing needs and domestic debt service costs will continue to Outlook represent a source of fiscal vulnerability. Economic growth is expected to moderate further to 4.9 percent The outlook is subject to growing downside risks. In particular, fur- in 2025, as fiscal consolidation efforts and trade policy uncer- ther global trade policy uncertainty and regional insecurity could tainty will tend to dampen both domestic and external demand. have more severe effects on the growth prospects than currently Ongoing private investment projects and a continued recovery envisaged, while potentially slowing the pace of budget deficit and in consumer spending will support aggregate demand. Assuming public debt reduction in coming years. Moreover, climate shocks global policy uncertainty dissipates, growth will strengthen to 5.4 represent an ongoing threat that could impact food security and percent in 2026 and 5.5 percent in 2027. In this context, the ex- amplify fragility risks in more exposed rural areas. In contrast, a treme poverty rate is projected to decline further to 20.5 percent faster-than-expected easing of financing conditions and reform im- by 2027. Import demand and exports should moderate, leaving plementation could stimulate private investment. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.8 6.4 5.3 4.9 5.4 5.5 Private consumption 4.7 4.3 5.4 5.4 5.0 4.8 Government consumption 7.2 6.3 5.7 1.4 6.8 6.0 Gross fixed capital investment 11.3 12.0 4.4 5.1 6.4 8.0 Exports, goods and services 2.8 6.8 5.8 5.4 5.8 7.0 Imports, goods and services 5.3 5.8 5.4 5.2 6.0 7.0 Real GDP growth, at constant factor prices 6.3 6.6 5.3 4.9 5.4 5.5 Agriculture 5.1 4.2 4.1 4.5 4.5 4.9 Industry 6.4 6.7 4.2 3.9 6.2 7.0 Services 6.8 7.6 6.2 5.4 5.4 5.1 Employment rate (% of working-age population, 15 years+) 57.0 57.0 56.7 56.7 56.7 56.8 Inflation (consumer price index) 7.5 5.3 2.9 2.6 2.7 2.4 Current account balance (% of GDP) -3.0 -3.3 -3.2 -3.2 -3.1 -3.0 Net foreign direct investment inflow (% of GDP) 0.3 0.4 0.4 0.5 0.5 0.5 Fiscal balance (% of GDP) -8.3 -6.6 -6.1 -3.0 -3.0 -3.0 Revenues (% of GDP) 17.8 18.2 19.0 19.4 19.2 19.4 Debt (% of GDP) 67.1 67.2 69.7 68.4 66.7 65.2 Primary balance (% of GDP) -5.8 -4.4 -3.4 -0.5 -0.5 -0.5 1,2 International poverty rate ($2.15 in 2017 PPP) 26.2 26.0 24.8 23.4 21.9 20.5 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 58.2 57.1 55.9 54.1 52.5 50.4 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 86.8 86.1 85.6 84.7 83.8 82.4 GHG emissions growth (mtCO2e) 2.6 2.5 5.0 5.2 5.3 5.0 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2024. Forecasts are from 2025 to 2027. 2/ Projections using microsimulation methodology. Macro Poverty Outlook / April 2025 295 This outlook reflects information available as of April 10, 2025. 1 2 UGANDA Population Poverty million millions living on less than $2.15/day 50.0 18.1 3 4 Life expectancy at birth School enrollment Uganda’s economy remained resilient, supported by years primary (% gross) broad-based growth in services, industrial, and agricultural sectors. Headline inflation declined, driven by declining 63.6 105.5 5 6 food prices, tight monetary policy, and a stable exchange GDP GDP per capita rate. However, both fiscal deficit and external sector ba- current US$, billion current US$ lance remain high, posing a key challenge in case oil pro- duction stands delayed. Poverty is high but could decline 46.6 931.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. if oil revenues are invested in human capital. 4/ 2017. 5/ 2024. 6/ 2024. more in human capital, alongside measures to reduce inequal- Key conditions and challenges ity and strengthen resilience, can reduce poverty. Maintaining prudent macroeconomic management, adhering to the fiscal In recent years, the speed of reforms slowed down hindering rules in the Charter of Fiscal Responsibility, enhancing revenue Uganda's economic growth and poverty reduction efforts. mobilization, and avoiding “Dutch disease” are crucial in antici- Poverty estimates show that 42 percent of Ugandans were be- pation of oil revenues. low the poverty line (US$2.15 2017PPP) in 2019/2020. Persis- tent human capital deficit and a significant productive jobs agenda given a growing working-age population, remain key Recent developments challenges. The services sector, despite its significant GDP share, has low job intensity compared to the agricultural sec- Growth accelerated to 6.1 percent in FY24 up from 5.3 percent in tor, which employs two-thirds of the workforce and faces low FY23. Net exports have been the key driver along with stronger productivity, limited modernization, and climate vulnerability public sector investment, particularly in the oil sector. Robust glob- with minimal adaptation efforts. al demand and easing supply chain disruptions provided further impetus to growth. To promote economic growth and reduce poverty, Uganda should focus on structural transformation, shifting labor to Headline and core inflation declined to 3.2 and 3.0 percent, respec- more productive employment, and increasing agricultural pro- tively, in FY24, from 8.8 and 7.4 percent in FY23, remaining below ductivity where the poor are concentrated. Reforms should the Central Bank target of 5 percent. This decline was supported stimulate private sector investment by lowering business costs, by favorable weather conditions leading to lower food crop prices, improving access to finance, and promoting digital and innov- which grew by 3.3 percent in FY24 compared to 22.7 percent in ative technologies. The government must rebalance fiscal con- FY23, easing global economic conditions, exchange rate stability solidation by shifting spending into social sectors. Investing and tight monetary policy. FIGURE 1 / Real GDP growth and contributions to real GDP growth FIGURE 2 / Actual and projected poverty rates and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant million LCU) 15 100 3.0 12 Annual average growth 90 9 2.5 80 6 70 2.0 3 60 0 50 1.5 -3 40 1.0 -6 30 20 0.5 -9 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 10 0 0.0 FY18 '19 '20 '21 '22 '23 '24 '25 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 Agriculture Industry Services International poverty rate Lower middle-income pov. rate Net taxes Real GDP Upper middle-income pov. rate Real priv. cons. pc Source: Bureau of Statistics (UBOS). Source: World Bank. Notes: See footnotes in table on the next page. 296 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The current account deficit (CAD) remained elevated at 7.7 percent surplus in FY27. Continued implementation of the domestic rev- in FY24, up from 7.4 percent in FY23. Further worsening of the CAD enue mobilization strategy is projected to generate additional tax was driven by increased import demand for infrastructure pro- revenue, estimated at 0.5 and 1.3 percent of GDP in FY25 and FY26, jects, oil-related investments and higher freight costs. Even though, respectively. With limited scope to alter tax rates, the focus will be the growth in merchandise exports remained strong, supported by on improving tax administration efficiency through enhanced use higher exports of coffee and gold, trade deficit remained elevated. of technology and improving the fairness of the tax system. Public debt to GDP is projected to moderately rise to 52.7 percent of GDP The fiscal deficit of CG marginally narrowed to 5.1 percent of GDP in FY25 before decreasing to 51 percent in FY27. in FY24 from 5.2 percent in FY23, driven by continued fiscal consoli- dation efforts. The primary deficit decreased by 0.1pp of GDP to 1.6 The CAD as a percent of GDP is expected to remain elevated in percent in FY24, as tax revenues continued to underperform due the near term, reflecting capital imports for oil production. In the to laxed enforcement on the use of the electronic fiscal receipting medium term, the CAD is expected to improve as oil exports com- and invoicing system. Fiscal consolidation has primarily focused on mence, and the oil refinery becomes operational. Export growth is expenditure cuts, mainly capital spending, impacting essential so- further expected to benefit from a recovery in global demand and cial programs. There is an urgent need to improve the quality of increased regional trade, public infrastructure developments are fiscal consolidation by improving spending efficiency and enhanc- likely to drive import growth. Foreign direct investment flows are ing domestic revenue mobilization. Moreover, the fiscal deficit was projected to remain strong in the near term. financed mostly by domestic financing. Poverty projections show that 41 percent of Ugandans were poor in 2024. Poverty is projected to marginally decline in FY25, with the pace of reduction expected to improve as growth accelerates in the medi- um term. If oil revenues are invested in social services, infrastruc- Outlook ture, and human capital, poverty could fall to 38 percent by 2027. Growth is projected to modestly increase to 6.2 percent in FY25, Downside risks for Uganda include a timing mismatch between driven by agriculture and services. Over the medium term, growth oil production and pipeline completion, threatening revenue gen- is projected to accelerate significantly to 10.4 percent in FY27 as oil eration. Reliance on rain-fed agriculture increases vulnerability production begins, before returning to around 6 percent as the oil to climate shocks, potentially derailing poverty reduction without production plateaus. Developments in the oil sector are expected sufficient climate adaptation investment. Export earnings could to drive growth in the medium term, however, uncertainty in glob- be affected by the EU deforestation-related import ban and trade al trade policy could impact investment, and commodity price de- policy uncertainty. Geopolitical tensions in the region and the clines may compound the potential effects of trade uncertainty. Middle East could disrupt global demand and impact economic growth. The 2026 elections pose a risk to budget credibility, po- The primary balance is expected to deteriorate to -2.3 percent in tentially leading to fiscal slippages if spending is not aligned with FY25, improve slightly in FY26, and eventually post a 0.1 percent the approved budget. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 4.7 5.3 6.1 6.2 6.2 10.4 Private consumption 3.4 4.4 4.5 5.5 5.7 6.7 Government consumption -17.4 5.1 12.9 5.0 5.2 6.2 Gross fixed capital investment 20.1 5.5 -6.7 8.9 7.9 17.7 Exports, goods and services -18.6 7.0 38.0 8.4 8.5 14.4 Imports, goods and services -8.9 3.2 4.7 9.0 8.5 8.0 Real GDP growth, at constant factor prices 4.7 5.3 6.1 6.2 6.2 10.4 Agriculture 4.4 5.0 5.4 5.5 5.6 5.8 Industry 5.4 3.9 5.3 5.6 5.6 12.0 Services 4.4 6.3 6.9 6.9 6.8 11.8 Inflation (consumer price index) 3.7 8.8 3.2 3.7 5.0 5.0 Current account balance (% of GDP) -7.9 -7.4 -7.7 -7.1 -6.9 -4.2 Net foreign direct investment inflow (% of GDP) 3.1 5.9 5.7 6.3 6.0 4.6 Fiscal balance (% of GDP) -8.4 -5.2 -5.1 -6.4 -6.5 -5.5 Revenues (% of GDP) 16.4 17.0 15.2 16.6 16.9 18.0 Debt (% of GDP) 56.2 55.4 50.1 52.7 53.7 51.0 Primary balance (% of GDP) -5.0 -1.7 -1.6 -2.3 -1.6 0.1 1,2 International poverty rate ($2.15 in 2017 PPP) 42.1 41.8 41.3 40.7 39.5 38.3 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 71.8 72.0 72.4 72.8 73.7 74.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.0 91.5 92.3 93.3 95.1 97.0 GHG emissions growth (mtCO2e) 2.3 2.7 2.8 3.0 3.4 4.7 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2016-UNHS and 2019-UNHS. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 2/ Projection using annualized elasticity (2016-2019) with pass-through = 0.7 based on private consumption per capita in constant LCU. Macro Poverty Outlook / April 2025 297 This outlook reflects information available as of April 10, 2025. 1 2 ZAMBIA Population Poverty million millions living on less than $2.15/day 21.3 13.0 3 4 Life expectancy at birth School enrollment Following a severe drought, Zambia’s economy showed re- years primary (% gross) silience in 2024. It grew at 4.0 percent, driven by mining recov- ery and acceleration in services despite electricity shortages 61.8 94.8 5 6 and low food supply that fueled inflation. Despite the uncertain GDP GDP per capita global environment, growth is expected to average 6.6 per- current US$, billion current US$ cent in 2025-27 due to agricultural recovery, improved min- ing, and services momentum. However, extreme poverty will 26.0 1219.1 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2022 (2017 PPPs). 3/ 2022. remain high due to insufficient per capita income growth. 4/ 2020. 5/ 2024. 6/ 2024. energy sector improvements, should help Zambia achieve long- Key conditions and challenges term fiscal sustainability. At the same time, Zambia has tremen- dous natural resources, and its rich green mineral deposits are Zambia's economy, predominantly reliant on mining and sub- in demand due to the global energy transition. With effective sistence agriculture, faced significant challenges due to cholera fiscal management, Zambia can capitalize on its vast renewable and a severe drought. The ineffectiveness of growth in reduc- and non-renewable natural resources, generating substantial fis- ing poverty contributes to high inequality. Debt restructuring is cal revenues to support growth and pro-poor policies. Howev- nearing completion after four years. However, the protracted er, the country must continue strengthening fiscal management debt restructuring has heightened sovereign risks and dimin- by expanding its narrow tax base and enhancing its natural re- ished foreign direct investment, depreciating the local curren- source management framework. cy and fueling inflation during the drought. This situation has placed Zambia below its growth potential and limited its fi- nancing options. The lack of access to international commercial Recent developments lending has reduced the fiscal capacity needed to implement countercyclical fiscal policies and public investments vital for Despite gloomy predictions for 2024 following the historic growth and poverty reduction. drought, Zambia’s economic activity proved more resilient than expected. Mining production grew for the first time in three Debt restructuring agreements with official bilateral creditors years, rising by 12 percent following resumed operations at in October 2023, international bondholders in June 2024, and Konkola Copper Mine, improvements at Mopani, and increased recent in-principle agreements with two major Chinese private output from several mines. Coupled with growth in construction creditors have resulted in agreements on over 90 percent of and services, this expansion supported real GDP growth, pre- debt expected to be treated. Completing debt restructuring and liminary estimated at 4.0 percent in 2024 (subject to revision). implementing policy reforms, including debt management and Business confidence improved, as evidenced by the Purchasing FIGURE 1 / Inflation, exchange rate, and monetary policy rates FIGURE 2 / Actual and projected poverty rates and real GDP per capita Percent, ZMW/USD Poverty rate (%) Real GDP per capita (constant LCU) 35 100 10000 30 90 9000 80 8000 25 70 7000 20 60 6000 15 50 5000 40 4000 10 30 3000 5 20 2000 0 10 1000 Aug'21 Feb'22 Aug'22 Feb'23 Aug'23 Feb'24 Aug'24 Feb'25 0 0 6-8% target band Headline inflation 2010 2012 2014 2016 2018 2020 2022 2024 2026 Food inflation Non-food inflation International poverty rate Lower middle-income pov. rate Exchange rate (zmw/$) BOZ policy rate Upper middle-income pov. rate Real GDP pc Source: World Bank estimates. Source: World Bank. Notes: See footnotes in table on the next page. 298 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. Managers' Index returning to the expansion zone from Decem- ber 2024, recovering from its lowest point in September. The Outlook rekindling in copper exports, driven by the recovery in produc- tion, helped to reduce the current account deficit despite high Annual real GDP growth is projected at 6.2 percent in 2025 and av- imports of intermediate and capital goods for the mining sector, erage 6.6 percent in 2026-27. This reflects anticipated record agri- as well as maize and electricity due to the drought. cultural harvests on the back of good rainfall in 2025, supporting crop performance, improved reservoir levels, and enhanced elec- Still, the impact of the drought continues, with about 5.8 mil- tricity generation. Over the medium term, growth will benefit from lion individuals estimated to face high acute food insecurity broad-based momentum across agriculture, industry (particularly (the Integrated Food Security Phase Classification, Phase 3 or mining and agrifood processing), and services related to mining, above) between October 2024 and March 2025. Inflation con- agriculture, and tourism. Poverty is expected to resume a down- tinues to edge upward, reaching 16.8 percent in February, ward trajectory, but from a high base and at a slow pace, reaching driven by higher food prices and exchange rate depreciation 62 percent in 2025. Inflation is anticipated to decrease as the food (over 30 percent in 2024)—denting households’ real incomes. supply improves. The Bank of Zambia (BoZ) raised the monetary policy rate by 350 basis points since February 2024, reaching 14.5 percent Key growth drivers include net foreign direct investment inflows in in February 2025. The increase in the statutory reserve ratio the mining sector, restoring debt sustainability, and completing re- by BoZ and the Government consolidating deposits into a forms to support private sector competitiveness and regain macro- single treasury account constrained market liquidity in early economic stability. Investments in mining have reached US$9.3 bil- 2024, reducing government securities subscriptions. Howev- lion since 2023, with additional pledges of US$1.0 billion, aiming to er, liquidity improved in the second half due to the resump- boost copper production to the government's 3 million metric tons tion of open market operations, government payments, and annual target. The shift towards low-carbon energy and the updated higher export earnings. mining fiscal regime also contribute to a positive mining outlook. Private sector credit growth slowed to 20.7 percent year-on- The outlook faces significant risks due to lower global growth amid year by December 2024 from 29.7 percent in September, mainly emerging uncertainty in trade policies. Zambia's direct impacts are due to a sluggish manufacturing industry. Gross international expected to be small. However, indirect effects like volatile commod- reserves increased from 3.4 months of imports in 2023 to 4.1 ity prices, higher business costs, and supply chain disruptions cloud in 2024, supported by mining receipts and external financing the medium term. There are some mitigating factors. Lower oil from multilateral organizations. Preliminary figures show that prices, reflecting the combined effects of global growth concerns the fiscal position improved in 2024 due to revenue recovery and a large increase announced in OPEC production, bode well for from mining expansion and resilient growth despite constrained Zambia’s significant fuel imports and inflation. Copper, the coun- spending on goods, services, and capital amid subdued domes- try’s main export, is currently exempted from reciprocal tariffs, and tic financing. Higher domestic interest payments and resumed prices are expected to remain elevated. Still, adverse climate condi- Eurobonds debt service raised interest payments, further crowd- tions, a sharp reduction in commodity prices, and associated fiscal ing out productive spending. challenges could swiftly worsen fiscal and external balances. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 5.2 5.4 4.0 6.2 6.8 6.4 Private consumption 5.6 5.7 4.3 7.0 7.5 7.0 Government consumption 6.7 7.3 6.6 8.6 9.0 7.7 Gross fixed capital investment 4.5 5.3 3.3 4.9 5.6 5.5 Exports, goods and services 4.6 3.3 3.7 5.0 5.4 5.5 Imports, goods and services 4.0 4.5 3.1 4.0 4.4 4.5 Real GDP growth, at constant factor prices 5.4 5.7 3.8 6.4 6.7 6.3 Agriculture -11.0 -15.9 -9.2 27.4 13.3 13.3 Industry -2.2 1.7 3.5 4.1 6.0 6.8 Services 12.0 10.0 5.0 5.9 6.4 5.5 Employment rate (% of working-age population, 15 years+) 57.1 57.1 57.1 57.1 57.1 57.1 Inflation (consumer price index) 11.0 10.9 15.0 14.2 9.2 8.0 Current account balance (% of GDP) 3.8 -2.9 -1.2 1.3 1.4 3.9 Net foreign direct investment inflow (% of GDP) 0.7 1.1 3.6 3.9 4.6 3.7 Revenues (% of GDP) 20.4 21.6 22.3 22.4 22.3 22.2 1,2 International poverty rate ($2.15 in 2017 PPP) 64.3 63.5 63.1 62.1 60.8 59.7 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 81.0 80.4 80.2 79.4 78.4 77.6 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 93.2 92.9 92.8 92.4 91.9 91.5 GHG emissions growth (mtCO2e) 0.5 0.8 1.2 1.3 1.4 1.5 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2022-LCMS-VIII. Actual data: 2022. Nowcast: 2023-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 299 This outlook reflects information available as of April 10, 2025. 1 2 ZIMBABWE Population Poverty million millions living on less than $3.65/day 16.6 9.9 3 4 Life expectancy at birth School enrollment Growth slowed to 2 percent in 2024, primarily driven by the years primary (% gross) El Niño-induced drought, which led to steep decline in agricultural output and rising food prices, while hydro- 59.4 95.8 5 6 electric power shortages constrained manufacturing. Fiscal GDP GDP per capita challenges exerted pressure on the newly introduced ZiG current US$, billion current US$ currency. A recovery to 6 percent growth is expected in 2025, driven by agricultural recovery, investments in 35.2 2117.8 Sources: WDI, MFMod, and official data. 1/ 2024. 2/ 2019 (2017 PPPs). 3/ 2022. mining and steel production, and moderated inflation. 4/ 2022. 5/ 2024. 6/ 2024. management, growth-enhancing structural reforms, and resolu- Key conditions and challenges tion of external arrears. Macroeconomic vulnerabilities and a business environment raise Poverty reduction has been constrained by structural factors in- the cost of doing business in Zimbabwe, increasing informality cluding macroeconomic volatility, dependence on low-productiv- and limiting the pace of structural transformation. In 2024, El ity agriculture combined with high correlation between weather Niño-induced drought triggered a state of National Disaster sig- shocks and agricultural production, low coverage of social as- nificantly affecting agriculture, an important sector of Zimbab- sistance programs, and high inequality in income and human we’s economy which largely depends on rainfed crops. The in- capital endowment. vestment climate is further hampered by inadequate electricity supply, as the drought has resulted in power shortages at the Kariba hydro-power station. Recent developments Public debt remains high, unsustainable, and in distress, limiting In 2024, Zimbabwe’s economy was undermined by the El access to international financing. Due to accumulation of exter- Niño-induced drought, which led to a steep decline in agri- nal arrears and legacy debts, total public debt reached US$21.2 cultural output. The drought also affected hydroelectric pow- billion in 2023 (96.6 percent of GDP). Fiscal risks remain ele- er generation at Lake Kariba, worsening electricity shortages vated due to wage bill pressures and borrowing on non-con- and constraining growth in the manufacturing sector. Macro- cessional terms. Persistent challenges in deficit financing have economic instability continued to undermine formal sector exerted pressure on the newly introduced ZiG currency. To re- businesses operating in local currency, while risks related to store debt sustainability, there is need for increased domestic price stability, exchange rates, and climate change-induced resource mobilization, fiscal consolidation, improved public debt disasters persisted. FIGURE 1 / Official and parallel market exchange rate, parallel FIGURE 2 / Actual and projected poverty rates and real GDP per premium capita ZiG/US$ Percent Poverty rate (%) Real GDP per capita (constant LCU) 45 150 100 7 40 90 125 6 35 80 70 5 30 100 60 4 25 75 50 20 3 40 15 50 30 2 10 20 25 1 5 10 0 0 0 0 4/8/24 6/8/24 8/8/24 10/8/24 12/8/24 2/8/25 2017 2019 2021 2023 2025 2027 International poverty rate Lower middle-income pov. rate Parallel rate Interbank rate Parallel premium (rhs) Upper middle-income pov. rate Real GDP pc Sources: Reserve Bank of Zimbabwe and World Bank estimates. Sources: World Bank. Notes: See footnotes in table on the next page. 300 Macro Poverty Outlook / April 2025 This outlook reflects information available as of April 10, 2025. The fiscal deficit declined from 6.4 percent in 2023 to 2.5 percent in 2024, as capital spending returned to historical Outlook average levels. Revenue increased, rising from 14.6 to 17 percent of GDP between 2023 and 2024, due to macroeco- Zimbabwe's economy is projected to grow by 6 percent in 2025, dri- nomic stabilization and tax policy measures. Fiscal risks re- ven by a post-drought recovery in agriculture, while investments in main elevated due to a growing wage bill, and challenges to gold, lithium, iron, and steel manufacturing are expected to boost finance the deficit persist. industrial output. Yet current global uncertainties could affect Zim- babwe’s exports directly and indirectly (as lower global demand In April 2024, the Reserve Bank of Zimbabwe (RBZ) introduced could depress global mineral prices). Greater uncertainty may also the ZiG currency, initially stabilizing the exchange rate and raise gold prices, positively affecting exports, while a depreciat- keeping inflation in single digits between May and August 2024. ing USD could benefit Zimbabwe’s largely dollarized manufacturing Yet, fiscal pressures led Treasury to borrow RBZ funds, resulting sector’s trade. in a sharp depreciation of the ZiG on the parallel market and a spiking parallel premium (Figure 1). In response, RBZ devalued Monetary policy conditions are expected to improve in 2025. Tight the currency in late September, bringing the parallel premium monetary policy since October 2024 has contributed to improved in- back down. A tighter monetary policy stance eventually result- flation dynamics, and ZiG inflation is expected to decline from 736 ed in a more stable formal and parallel market rate in Novem- percent in 2024, down to 84 percent in 2025, and to 8 percent in the ber and December. medium term. Yet, Zimbabwe is significantly dollarized (as reflect- ed by Foreign Currency Accounts making up 83 percent of broad The current account remained positive, at 0.4 percent of money supply in December 2024). USD inflation in 2025 is expect- GDP in 2024. While exports grew, driven by higher com- ed to be in single digits, and so the weighted USD-ZiG inflation rate modity prices (particularly gold), imports grew more from is improving even more rapidly. The parallel market premium has drought-related maize, rising fuel and electricity imports. Yet, also decreased in recent months, easing currency pressures. the current account remained in surplus, as a widening trade deficit is outweighed by growing household remittance in- Poverty is expected to decrease in 2025 due to higher growth, but it flows, which increased from 5 to 7 percent of GDP between is subject to the downside risk of current global uncertainties. Zim- 2023 and 2024. babwe’s weak 2024 growth, combined with a low growth elastici- ty of poverty reduction hampered poverty reduction. Despite rel- Due to the low GDP growth in 2024, the poverty rate at atively high human capital, creation of good jobs has been ane- the international poverty line of $2.15 per person per day mic, while informality remains high. The El Nino-drought highlights (PPP) declined marginally to 37.7 percentage points. The poor households’ vulnerability to changes in temperature and rain- contraction of the agriculture sector due to drought is ex- fall patterns. Strengthening the social protection system through pected to have affected rural and agricultural households broader and targeted coverage of safety sets can improve house- the most. hold ability to cope with shocks. Recent history and projections 2022 2023 2024e 2025f 2026f 2027f Real GDP growth, at constant market prices 6.1 5.3 2.0 6.0 4.6 3.6 Private consumption 5.1 -0.1 3.0 6.0 4.6 3.6 Government consumption 70.1 13.9 45.6 4.8 -5.2 2.6 Gross fixed capital investment 21.8 14.4 -25.7 11.0 16.9 8.3 Exports, goods and services 43.4 -8.4 -1.3 5.7 5.7 4.5 Imports, goods and services 54.0 -11.0 2.0 6.0 5.0 5.1 Real GDP growth, at constant factor prices 6.2 5.5 2.0 6.0 4.6 3.6 Agriculture 6.2 6.3 -15.0 12.8 7.1 6.9 Industry 5.2 3.2 2.7 5.1 4.4 4.5 Services 6.9 6.7 5.6 5.2 4.2 2.4 Inflation (consumer price index) 160.2 667.4 736.1 84.9 16.9 8.0 Current account balance (% of GDP) 0.9 0.4 0.7 0.9 0.7 0.8 Net foreign direct investment inflow (% of GDP) 1.0 1.6 1.3 1.4 1.4 1.4 Fiscal balance (% of GDP) 0.1 -6.4 -2.5 -2.7 -2.4 -2.3 Revenues (% of GDP) 16.6 14.6 16.4 17.2 17.3 17.7 Debt (% of GDP) 1229.2 96.6 93.3 64.6 59.0 57.7 Primary balance (% of GDP) 0.2 -6.3 -2.5 -2.7 -2.2 -2.2 1,2 International poverty rate ($2.15 in 2017 PPP) 39.3 37.8 37.7 36.0 34.9 34.1 1,2 Lower middle-income poverty rate ($3.65 in 2017 PPP) 64.0 62.8 62.7 60.8 60.0 59.4 1,2 Upper middle-income poverty rate ($6.85 in 2017 PPP) 84.9 84.3 84.2 83.5 82.8 82.4 GHG emissions growth (mtCO2e) 1.0 0.2 -0.6 -1.0 0.5 0.1 Source: World Bank, Poverty and Economic Policy Global Departments. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Data in annual percent change unless indicated otherwise. 1/ Calculations based on 2019-PICES. Actual data: 2019. Nowcast: 2020-2024. Forecasts are from 2025 to 2027. 2/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. Macro Poverty Outlook / April 2025 301 MPO