Macro Poverty Outlook Country-by-country Analysis and Projections for the Developing World Annual Meetings 2024 © 2024 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. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. 5 41 87 East Asia Europe and Latin America and the Pacific Central Asia and the Caribbean 6 Cambodia 42 Albania 88 Argentina 8 Central Pacific Islands 44 Armenia 90 Barbados 10 China 46 Azerbaijan 92 Belize 12 Fiji 48 Belarus 94 Bolivia 14 Indonesia 50 Bosnia and Herzegovina 96 Brazil 16 Lao PDR 52 Bulgaria 98 Chile 18 Malaysia 54 Croatia 100 Colombia 20 Mongolia 56 Georgia 102 Costa Rica 22 Myanmar 58 Kazakhstan 104 Dominica 24 North Pacific Islands 60 Kosovo 106 Dominican Rep. 26 Papua New Guinea 62 Kyrgyz Rep. 108 Ecuador 28 Philippines 64 Moldova 110 El Salvador 30 Solomon Islands 66 Montenegro 112 Grenada 32 South Pacific Islands 68 North Macedonia 114 Guatemala 34 Thailand 70 Poland 116 Guyana 36 Timor-Leste 72 Romania 118 Haiti 38 Viet Nam 74 Russian Federation 120 Honduras 76 Serbia 122 Jamaica 78 Tajikistan 124 Mexico 80 Türkiye 126 Nicaragua 82 Ukraine 128 Panama 84 Uzbekistan 130 Paraguay 132 Peru 134 St. Lucia 136 St. Vincent and the Grenadines 138 Suriname 140 Trinidad and Tobago 142 Uruguay MACRO POVERTY MPO 2 Oct 24 145 185 203 Middle East Sub-Saharan and North Africa South Asia Africa 146 Algeria 186 Afghanistan 204 Angola 148 Bahrain 188 Bangladesh 206 Benin 150 Djibouti 190 Bhutan 208 Botswana 152 Egypt, Arab Rep. 192 India 210 Burkina Faso 154 Iran, Islamic Rep. 194 Maldives 212 Burundi 156 Iraq, Rep. 196 Nepal 214 Cabo Verde 158 Jordan 198 Pakistan 216 Cameroon 160 Kuwait 200 Sri Lanka 218 Central African Rep. 162 Lebanon 220 Chad 164 Libya 222 Comoros 166 Morocco 224 Congo, Dem. Rep. 168 Oman 226 Congo, Rep. 170 Palestinian territories 228 Côte d'Ivoire 172 Qatar 230 Equatorial Guinea 174 Saudi Arabia 232 Eritrea 176 Syrian Arab Rep. 234 Eswatini 178 Tunisia 236 Ethiopia 180 United Arab Emirates 238 Gabon 182 Yemen, Rep. 240 Gambia, The 242 Ghana 244 Guinea 246 Guinea-Bissau 248 Kenya 250 Lesotho 252 Liberia 254 Madagascar 256 Malawi 258 Mali 260 Mauritania 262 Mauritius 264 Mozambique 266 Namibia Annual Meetings 2024 268 270 Niger Nigeria 272 Rwanda 274 São Tomé and Príncipe OUTLOOK 276 Seychelles 278 Sierra Leone 280 Somalia 282 South Africa 284 South Sudan 286 Sudan 288 Tanzania 290 Togo 292 Uganda 294 Zambia 296 Zimbabwe MPO 3 Oct 24 The Macro Poverty Outlook is jointly produced by the Poverty and Equity and the Macroeconomics, Trade and Investment Global Practices of the World Bank. The cutoff date for information for most countries was October 2, 2024. East Asia and the Pacific Cambodia Malaysia Solomon Islands Central Pacific Islands Mongolia South Pacific Islands China Myanmar Thailand Fiji North Pacific Islands Timor-Leste Indonesia Papua New Guinea Viet Nam Lao PDR Philippines MPO 5 Oct 24 half of 2024, goods exports expanded by 8.4 percent y/y, driven largely by garment, trav- CAMBODIA Key conditions and el goods, and footwear products. Mean- while, international tourist arrivals also con- challenges tinued to rise, expanding at 22.7 percent y/y, reaching 3.6 million tourists. Tourist spend- Table 1 2023 Economic activity continued to expand dur- ing also continued to recover, indicated by Population, million 16.9 ing the first half of 2024, largely driven by a Angkor Temple revenue collection growing GDP, current US$ billion 42.8 revival of services and goods exports. Mean- at 33.7 percent y/y. Despite the recovery, GDP per capita, current US$ 2524.6 while, rising remittances and tourism re- both arrivals and especially tourist spend- a 110.0 School enrollment, primary (% gross) ceipts helped to offset a sizable merchandise ing remain below pre-pandemic levels, a 69.9 trade deficit with the current account bal- standing at 94.8 percent and 43.4 percent of Life expectancy at birth, years Total GHG emissions (mtCO2e) 76.3 ance projected to remain positive this year. the 2019 level, respectively. Source: WDI, Macro Poverty Outlook, and official data. This helped ease pressures on the exchange While remaining subdued, caused mainly a/ Most recent WDI value (2022). rate. Gross international reserves rose to by the marked slowdown in domestic US$20.0 billion, an 8.5 percent year-on-year credit growth, private consumption has (y/y) increase from June 2023, covering partly recovered. During the first seven about 7 months of prospective imports. months of 2024, top ticket items of import- High global interest rates and decelerating ed nondurable consumer goods, which in- credit growth continue to affect Cambodia’s clude diesel, electronic equipment, gaso- financial sector. Nonperforming loan ratios line, foodstuff, garments, and soft drinks Cambodia’s real GDP growth is projected rose to 6.8 percent and 8.3 percent for the initially expanded by 16.8 percent, 30.3 to reach 5.3 percent in 2024, compared to banking and microfinance sectors, respec- percent, 25.1 percent, 13.5 percent, 20.1 5.0 percent in 2023, driven mainly by tively by mid-2024, indicating a further de- percent, and 15.3 percent, respectively, terioration of asset quality amid the ongoing while imports of all kinds of motor vehi- services and goods exports. Amid the eco- downturn in the property sector. The eco- cles combined, representing a key durable nomic expansion, household income nomic expansion is expected to support the consumer goods item grew at 14.6 percent growth is expected to improve, partially recovery of household incomes, partially re- year-over-year. reversing the pandemic-related increase versing the pandemic-related increase in Although privately financed real estate and poverty. Over the medium term, reforms to property construction activities remain sub- in poverty. Downside risks include weak- improve the investment climate and the skill dued, private and public investments in er-than-expected global growth, especially levels of its labor force would boost Cambo- large physical infrastructure projects such in China. Domestically, a faster-than-ex- dia’s potential growth. as roads, bridges, and ports including a pected increase in non-performing loans US$1.7 billion canal have boosted construc- tion services. During the first seven months could affect macro-financial stability as of 2024, imports of construction equipment the housing market correction continues. Recent developments and steel grew at 17.0 percent and 63.4 per- cent, respectively. Meanwhile, imports of Cambodia has benefited from a rebound in cement contracted by 11.7 percent likely due external demand and trade. During the first to rising domestic production. FIGURE 1 Cambodia / Real GDP growth and sectoral FIGURE 2 Cambodia / Merchandise exports, levels and contributions to real GDP growth growth rate Percent, percentage points Percent change, US$ million 10 40 Projections 8 30 6 5.3 5.5 5.5 20 4 2 10 0 0 -2 -10 -4 2012 2014 2016 2018 2020 2022 2024p 2026p -20 Agriculture Industry Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Services Net taxes on production Real growth GTF Non-GTF 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. MPO 6 Oct 24 Since 2023, domestic credit growth has ex- households hard – consumption per capita reversing part of the projected increase in perienced a significant slowdown. First, declined by almost 20 percent in 2021 from poverty caused by the pandemic. owing to stalled property construction ac- the level recorded in 2019/20 when the Cambodia’s real GDP growth is projected tivity, the demand for domestic credit by poverty rate was 17.8 percent. A compre- to marginally improve, reaching 5.5 per- the real estate and property construction hensive social protection program, the cent in 2025 and 2026. The country’s eco- sector has plummeted. Second, higher in- Family Package, was launched in April nomic growth remains slower than during terest rates and lower real disposable in- 2024 to support poor and vulnerable the pre-COVID-19 period, owing to contin- come have contributed to the sluggish households. The program has benefited ued external headwinds, emerging struc- credit demand by households and firms. nearly 2.2 million people or 559,000 house- tural bottlenecks, and lasting scars of the As a result, credit sharply decelerated to holds. Of which 269,000, 33,400, 10,400, COVID-19 pandemic. While foreign direct 3.8 percent y/y, a 15-year low in June 2024. and 1,400 are elderly aged over 60, preg- investment inflows are expected to pick up During the first six months of 2024, do- nant women and children under 2 years with newly ratified free trade agreements mestic fiscal revenue collection stagnated, old, people with disabilities, and people and a substantial increase in private and growing at 0.8 percent y/y, while govern- living with HIV/AIDS, respectively. As of public investment in key physical infra- ment expenditure expanded at 3.7 percent. July 2024, the Family Package program structure, daunting challenges facing the Government deposits (fiscal reserves) re- had disbursed US$20.1 million since its business environment, investment climate, mained relatively healthy at 10.8 percent launch on April 30, 2024. energy, logistics, trade facilitation, skilled of GDP in June 2024 and public debt re- labor force, and learning outcomes remain. mained low, estimated at 27.5 percent of Downside risks include weaker-than-ex- GDP by end-2023. pected global growth, especially in China The export recovery has led to improved Outlook which is Cambodia’s main source of for- labor market conditions, in turn partly re- eign direct investment and tourism re- versing pandemic-related increases in Using the newly rebased national accounts ceipts, could dampen growth prospects. poverty. In June 2024, jobs in the formal data, this year’s economic growth is pro- Given the country’s relatively high level manufacturing sector which accounted for jected to reach 5.3 percent, compared to of private debt, a faster-than-expected in- 19.0 percent of nonfarm employment grew 5.0 percent in 2023, driven mainly by ser- crease in non-performing loans could af- at 7.0 percent y/y, marginally supporting vices and goods exports. Economic growth fect macro-financial stability while weigh- household consumption. The pandemic hit should translate into a decline in poverty, ing on private investment and growth. TABLE 2 Cambodia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 3.1 5.1 5.0 5.3 5.5 5.5 Private consumption -2.4 5.2 -0.2 0.7 3.3 3.4 Government consumption 12.3 -1.2 35.1 5.3 7.5 8.5 Gross fixed capital investment 4.7 5.4 -26.7 12.3 -3.4 -0.2 Exports, goods and services 6.1 21.3 6.9 8.8 10.4 8.7 Imports, goods and services 1.9 18.6 -12.4 7.3 4.9 5.1 Real GDP growth, at constant factor prices 3.0 5.1 5.0 5.3 5.5 5.5 Agriculture 1.5 0.6 1.6 1.6 1.4 1.5 Industry 8.4 8.2 7.6 7.2 7.1 6.9 Services -1.8 3.6 3.4 4.5 5.2 5.4 Inflation (consumer price index) 2.8 5.5 2.1 2.2 2.2 2.2 Current account balance (% of GDP) -29.1 -18.8 1.3 1.7 0.6 -0.7 Net foreign direct investment inflow (% of GDP) 9.2 8.7 8.5 8.8 8.7 8.6 Fiscal balance (% of GDP) -5.1 -3.2 -5.1 -3.0 -3.3 -3.2 Revenues (% of GDP) 16.2 17.2 15.9 15.4 15.4 15.3 Debt (% of GDP) 26.5 27.0 27.5 26.9 27.4 27.4 Primary balance (% of GDP) -4.8 -2.9 -4.8 -2.6 -2.9 -2.8 GHG emissions growth (mtCO2e) 0.5 -0.6 -0.1 -1.4 -0.7 -1.9 Energy related GHG emissions (% of total) 18.4 17.4 16.6 14.7 13.4 11.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 7 Oct 24 deposits are heavily depleted and fish- ing revenues are volatile. The RPC was CENTRAL Key conditions and to be placed on standby in 2023, but was renewed in 2024 and now has ap- challenges PACIFIC ISLANDS proximately 100 refugees. In FY24, in- come from the RPC and associated ac- The Central Pacific faces major exogenous tivities constituted 67 percent of fiscal challenges like climate change, small size, revenues and 90 percent of GDP. With Table 1 KIR NRU TUV and remoteness; and endogenous chal- RPC earnings uncertain, Nauru must Population, million 0.13 0.01 0.01 lenges like concentrated, import-reliant, find sustainable sources of growth. The GDP, current US$ billion 0.22 0.15 0.06 and volatile economies. All three coun- latest assessment from the IMF’s DSA GDP per capita, current US$ 1702 11914 4908 tries have sizeable trust funds to stabilize in September 2023 found Nauru’s public LMIC poverty rate ($3.65) 19.5 a b 20.9 19.6 c volatile fiscal revenues and provide long- debt, accounting for 20.2 percent of Gini index a b c term development financing. However, GDP, to be sustainable. In recent years 27.8 32.4 39.1 they all must diversify their fiscal rev- there have been significant reductions in Source: WDI, World Bank, and official data. Notes: The actual year for the table data is 2022. enues to reduce volatility and effectively domestic and external liabilities. Nauru Abbreviations: LMIC = Lower middle-income; fund high recurrent spending. grapples with environmental challenges KIR = Kiribati; NRU = Nauru; TUV = Tuvalu. Kiribati has a highly centralized econo- from climate change and the legacy of a/ Most recent value (2019), 2017 PPPs. b/ Most recent value (2012), 2017 PPPs. my, with public expenditure at 102 per- phosphate mining. Rehabilitating exten- c/ Most recent value (2010), 2017 PPPs. cent of GDP in 2023. Recurrent spending sive former mine sites at the center of has recently expanded on public wages, the island remains a priority. social protection, and the copra subsidy. Tuvalu is one of the smallest and most This spending has benefited the coun- climate-exposed countries in the world. try’s poor but is distorting goods and la- The public sector dominates the econ- bor markets, and creating fiscal vulner- omy and private sector development is In Kiribati a large pre-election increase in abilities as volatile fishing revenues ac- limited by inadequate infrastructure and public sector wages will support growth. count for over two-thirds of revenues. small economies of scale. The size of In Tuvalu, development priorities are be- The most recent IMF-World Bank LIC- the economy, extreme remoteness, high ing shaped by the 2024 Falepili Union DSA report from April 2024 ranks Kiri- import dependence, and vulnerability to bati’s external debt, which stands at 12 external shocks pose significant chal- Treaty, which allows Tuvaluans to emi- percent of GDP, as sustainable but at lenges to development poverty reduc- grate to Australia. In Nauru, the Region- high risk of debt distress. To address tion. Recent data on poverty is unavail- al Processing Centre renewal will delay a these challenges, Kiribati must curtail re- able, but in 2010 an estimated 26 per- fiscal cliff. In the longer term, each coun- current spending, foster private enter- cent of the population lived below the prise, and stabilize fiscal revenues using national poverty line. Structural reforms try will need to address a narrow econom- their sovereign wealth fund. are essential to promote resilience, sus- ic base and climate vulnerability to pro- Nauru’s economy has historically relied on tain growth, and encourage diversifica- mote growth and reduce poverty. phosphate mining, fishing, and operating tion. The 2023 IMF-World Bank DSA as- Australia’s Regional Processing Centre sesses Tuvalu at high risk of debt dis- (RPC) for refugees. However, phosphate tress, but debt is deemed sustainable. FIGURE 1 Central Pacific Islands / Selected fiscal FIGURE 2 Central Pacific Islands / Sovereign wealth revenues, 2017-2023 funds, 2016-2023 Percent of GDP Fund balance, % of GDP (lines) Per capita value, A$ (bars) 160 400 30000 140 350 120 25000 100 300 80 20000 250 60 40 200 15000 20 150 10000 0 100 5000 50 Kiribati Nauru Tuvalu 0 0 Fishing license fees Regional Processing Centre 2016 2017 2018 2019 2020 2021 2022 2023 .TV domain Other revenue Grants Kiribati Nauru Tuvalu Sources: Country authorities; World Bank and IMF staff estimates and projections. Sources: Country authorities; 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. MPO 8 Oct 24 remained elevated at 7.2 percent from a funded from reserves accumulated in peak of 12.1 percent in 2022. A current FY24. This means weakening one of Nau- Recent developments account surplus of 11.1 percent of GDP ru’s three fiscal responsibility rules from and fiscal surplus of 6 percent of GDP in requiring a surplus every year to requiring In Kiribati, strong fishing revenues from 2023 were due to high grants and sus- a surplus across a 3-year rolling average. favorable weather conditions and the tained fishing revenue. Public debt con- Spending is being directed to healthcare, Phoenix Islands Protected Area reopening tinued to decline in 2023 to 5.4 percent education, and a broad ex-gratia payment. lifted growth to 4.2 percent in 2023. How- of GDP. The sovereign wealth funds de- Nauru’s only banking service is scheduled ever, El Niño conditions are likely to re- creased from 314 percent of GDP in 2021 to depart in mid-2025. Negotiations for a duce fishing revenues by at least 10 per- to 271 percent at end-2023. replacement are ongoing. They may be cent below the US$160 million projected jeopardized by a new plan to sell citizen- for FY24. Average inflation in 2023 was 9.3 ship from FY25 which could increase mon- percent, due to higher food, beverage, and ey-laundering risks. The installation of the transportation prices in the first half of the Outlook East Micronesian Internet Cable in 2026 year. We estimate growth reduced poverty could allow Nauru to provide online ser- to 13.9 percent in 2023 (US$3.65 lower- In Kiribati, growth is expected to in- vices that exploit its favorable time zone middle-income line), below 19.5 percent in crease to 5.8 percent in 2024 due to a 38 between Asia and the Americas, the Eng- 2019. Domestic demand continues to be percent increase in public sector wages lish language, and widespread literacy. A supported by high recurrent spending, before the election. This is forecast to in- new port will provide opportunities for which led to a fiscal deficit of 1 percent crease the budget deficit to 22 percent in transshipment and local value-addition to of GDP after budget support in 2023. The 2024 and make Kiribati a regional outlier fishing products. RERF was worth 340 percent of GDP in in the share of GDP spent on public em- Tuvalu’s economic growth is projected to June 2024, down from 370 percent in 2019 ployment. It will be funded by loosening gradually subside to 2.5 percent by 2026 due to volatile investment returns and the RERF withdrawal policy, which has and is expected to be driven by construc- GDP growth. compromised the fund’s institutional in- tion, hotels, finance, and public adminis- Nauru’s economy is estimated to have tegrity and will deplete its balance over tration. The 2023 Australia-Tuvalu Falepili grown by 1.8 percent in FY24 (ending time. A rule that withdraws up to 3 per- Union Treaty is anticipated to impact mi- June 2024). Inflation was 4.7 percent, lift- cent of the fund each year would allow gration, remittances, and development ed by global factors. Budget support in- annual withdrawals, make budgeting eas- over the medium term. Inflation is project- creased from 3.7 percent of GDP in FY23 ier, and grow the real value of the fund ed to moderate to 3.2 percent by 2026 as to 22 percent in FY24, including new sup- over time. The RERF could also be used global inflation pressures dissipate. Cur- port from the People’s Republic of Chi- to smooth volatile fishing revenues. To rent account deficits and fiscal deficits are na. This led to a surplus worth 17 per- boost shared prosperity and remove bar- expected over the medium term as major cent of GDP in FY24. The Government al- riers to private sector growth, Kiribati revenue streams gradually decline. Public so made prepayments into the Intergener- should rationalize public wages and redi- debt is sustainable, but the risk of debt dis- ational Trust Fund which was 152 percent rect copra subsidies to targeted social tress is high. The sovereign wealth funds of GDP in March 2024, up from 111 per- protection and human capital investment. to GDP are projected to decline over the cent in June 2022. Any further increases in recurrent spend- medium term. In Tuvalu, the economy rebounded by 3.9 ing could jeopardize the Government’s Risks to the Central Pacific outlook are sub- percent in 2023 due to gains realized from fiscal responsibility rules. stantial and include high global inflation the border reopening in December 2022, In FY25, Nauru’s GDP growth is projected and slowing global growth; faster than ex- the full resumption in infrastructure pro- to recover to 2.0 percent due to govern- pected outwards migration; volatile rev- jects, increased government consumption, ment spending financed by budget sup- enues, including grants from development and support from development partners. port and RPC revenues. The FY25 budget partners; and the ever-present threat of cli- Annual inflation has slowed in 2023 but forecasts a deficit worth 16 percent of GDP, mate-related natural disasters. TABLE 2 Central Pacific Islands / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices Kiribati 8.5 3.9 4.2 5.8 4.1 3.3 Nauru 7.2 2.8 0.6 1.8 2.0 1.9 Tuvalu 1.8 0.7 3.9 3.5 3.0 2.5 Poverty rates of Kiribati a,b International poverty rate ($2.15 in 2017 PPP) 1.3 1.2 1.1 0.9 0.8 0.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 16.6 15.5 13.9 12.5 11.6 10.6 a,b Upper-middle income poverty rate ($6.85 in 2017 PPP) 66.6 65.3 63.2 59.3 58.3 56.9 Sources: Country authorities, World Bank and IMF staff estimates. Notes: e = estimate; f = forecast. Nauru data are based on the fiscal year ended June. Kiribati and Tuvalu are calendar years. a/ Calculations based on EAPPOV harmonization, using 2019-HIES. b/ Projection using neutral distribution (2019) with pass-through = 1 (High) based on GDP per capita in constant LCU. MPO 9 Oct 24 scope to rebalance investment toward green investments to progress toward its CHINA Key conditions and dual carbon goals—achieving peak carbon emissions before 2030 and carbon neutral- challenges ity by 2060—while boosting domestic de- mand for green technology products. Table 1 2023 Despite a severe downturn in the property Population, million 1409.7 sector, China's economy grew at a robust GDP, current US$ billion 17767.5 rate of 5.0 percent in the first half of 2024. GDP per capita, current US$ 12604.0 However, economic growth remains un- Recent developments a 0.0 International poverty rate ($2.15) even and below its pre-pandemic rate, re- a 0.0 flecting both cyclical fluctuations and The economy's growth momentum has Lower middle-income poverty rate ($3.65) a 17.0 structural challenges. Growth has been slowed after a strong start to the year. In Upper middle-income poverty rate ($6.85) Gini index a 35.7 supported by strong consumer spending seasonally-adjusted terms, GDP growth School enrollment, primary (% gross) b 100.2 on services and by exports, as well as in- decelerated to 0.7 percent quarter on quar- b 78.6 vestment in manufacturing and public in- ter in Q2 from 1.5 percent in Q1. The prop- Life expectancy at birth, years frastructure. While resilient, manufactur- erty sector remains the largest drag on in- Total GHG emissions (mtCO2e) 13387.7 ing investment in some sectors faces head- vestment. The contraction in real estate in- Source: WDI, Macro Poverty Outlook, and official data. winds from lower profit margins, weak vestment was only partially offset by re- a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). consumer demand at home, and increasing silient manufacturing and infrastructure in- export restrictions abroad. The property vestments, both bolstered by policy sup- sector, now in its fourth year of a down- port. However, the proportion of loss-mak- turn, has yet to show signs of stabilization ing industrial firms has risen as profit mar- despite additional stimulus measures. In- gins remain compressed. Meanwhile, con- China’s economy had a strong start to the flation remains subdued as supply contin- sumption has weakened due to slower year, but a deeper contraction of the prop- ues to outpace demand. household income growth, the negative erty sector and weaker consumption Over the medium term, China is expected wealth effect of declining property prices, weighed on growth in the second quarter. to experience a structural deceleration and subdued consumer confidence with fi- due to slowing productivity growth, an nal consumption only contributing 3.0 per- Growth is projected at 4.8 percent in aging population, high debt levels, and centage points to growth during H1 2024, 2024, with policy support and robust ex- diminishing returns to capital. A chal- compared to 4.3 percentage points last year. ports offsetting the weakness in private lenging external environment, character- In response to the growth slowdown, the au- domestic demand. The pace of poverty re- ized by geoeconomic fragmentation could thorities have signaled further policy eas- duction, measured by the World Bank pose substantial headwinds to exports ing, with additional stimulus measures an- growth. While rebalancing away from in- nounced in September. Lower policy rates poverty line for upper-middle income vestment and exports is part of the nec- and reserve requirement ratios will ease fi- countries, is expected to slow in line with essary adjustment of China’s economy, a nancial conditions, but the impact of these more moderate growth. key challenge is to accelerate consump- measures is limited by weak credit demand. tion growth to support aggregate de- Credit growth slowed from 9.5 percent in mand. Meanwhile, China also has some the first seven months of 2023 to 8.6 percent FIGURE 1 China / Real GDP growth and contributions to real FIGURE 2 China / Actual and projected poverty rates and GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 9 40 100000 8 35 90000 7 80000 6 30 70000 5 25 60000 4 20 50000 3 15 40000 2 1 30000 10 0 20000 5 10000 -1 2013 2015 2017 2019 2021 2023e 2025f 0 0 Private consumption Government consumption 2016 2018 2020 2022 2024 2026 Gross capital formation Net Exports International poverty rate Lower middle-income pov. rate Statistical discrepancy GDP Upper middle-income pov. rate Real GDP pc Sources: China National Bureau of Statistics and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 10 Oct 24 in the same period this year. Lower mini- years when GDP growth was stronger. in 2024 as the drag from falling food mum downpayment ratios and mortgage Continued macroeconomic uncertainty is prices fades, but it will likely remain interest rates, and measures to reduce hous- reflected in observed volatility of income very low amid weak consumer demand ing inventories and provide liquidity to de- growth, which likely represents an impor- for goods. Economic growth is projected velopers are also expected to provide some tant drag on household consumption to slow further, averaging 4.2 percent in boost to the property sector. Similarly, addi- growth. The volatility of income growth the medium term, reflecting slower pro- tional fiscal support, especially if financed (as measured by its coefficient-of-varia- ductivity growth, a declining population, by the central government, could help ease tion) over the 2022-2023 period increased and high debt. local government budget constraints 3.7 times for business income and 4.6 times With the announcement of additional pol- caused by the contraction in fiscal revenues, for wage income in comparison to the two icy stimulus, the risks to the outlook have increasing public spending in the short years preceding the pandemic. become broadly balanced. Downside risks term. But a sustained improvement in con- stem from a more persistent downturn in sumer sentiment and domestic demand re- the property sector, under-execution of fis- quires structural measures such as reforms cal policies, further softening of labor mar- of the social safety net. Outlook ket conditions due to lower enterprise Poverty reduction has continued to keep profitability and reduced hiring, and the pace with aggregate growth. In 2023, Growth is projected at 4.8 percent in 2024, possibility of worsening trade tensions. On around 27 million people are estimated to down from 5.2 percent in 2023. Weaker the upside, larger and more effective pol- have climbed above the consumption household income growth and a softening icy support to the property sector and to threshold of US$6.85/day, a standard labor market are likely to constrain con- households could boost confidence and lift benchmark often used as a reference by sumption. Investment will be tempered by growth above the baseline expectations. the World Bank to compare progress on the persistent contraction in the property Lower growth rates in the outer years will poverty reduction across middle-income sector and reduced profitability in some also weigh on the pace of poverty reduc- countries. Though this is higher than the manufacturing sectors. Exports will likely tion which is expected to slow in 2024 and estimated 16 million people who crossed hold up, supported by a rebound in global 2025. The poverty rate at the higher pover- the same threshold in 2022, the overall goods demand as inventory restocking re- ty line of $6.85/day is projected to continue pace of poverty reduction at this higher sumes in the US and Euro area. Consumer to fall to 12.5 percent and 11.1 percent, re- line is still slower than in the pre-pandemic price inflation is expected to rise slightly spectively, in 2024 and 2025. TABLE 2 China / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 8.4 3.0 5.2 4.8 4.3 4.0 Private consumption 11.7 1.1 8.6 5.8 5.6 5.4 Government consumption 3.3 4.6 6.7 3.3 3.2 2.9 Gross fixed capital investment 3.1 3.2 4.9 3.7 3.8 3.6 Exports, goods and services 18.4 -2.5 1.6 4.2 2.2 2.0 Imports, goods and services 10.3 -5.6 6.1 2.5 2.5 2.4 Real GDP growth, at constant factor prices 8.4 3.0 5.2 4.8 4.3 4.0 Agriculture 7.1 4.2 4.0 3.0 3.0 3.0 Industry 8.7 2.6 4.7 4.9 3.9 3.2 Services 8.5 3.0 5.8 5.1 4.8 4.7 Inflation (consumer price index) 0.9 2.0 0.2 0.4 1.0 1.5 Current account balance (% of GDP) 2.0 2.5 1.4 1.0 0.5 0.2 Net foreign direct investment inflow (% of GDP) 0.9 -0.1 -0.8 -0.6 -0.3 0.1 a Fiscal balance (% of GDP) -4.0 -6.3 -5.8 -6.2 -5.7 -5.3 Revenues (% of GDP) 35.5 32.5 32.5 32.9 32.2 32.1 Debt (% of GDP) 46.9 50.6 54.1 57.9 60.7 58.6 Primary balance (% of GDP) -3.0 -5.2 -4.8 -5.2 -4.7 -4.3 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 17.0 15.9 14.1 12.5 11.1 9.9 GHG emissions growth (mtCO2e) 5.5 1.9 2.7 2.1 2.2 2.3 Energy related GHG emissions (% of total) 84.1 84.4 84.4 84.4 84.5 84.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ The adjusted fiscal balance adds up the public finance budget, the government fund budget, the state capital management fund budget and the social security fund budget. b/ Last grouped data available to calculate poverty is for 2021 provided by NBS. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2021) with pass-through = 0.85 based on GDP per capita in constant LCU. MPO 11 Oct 24 The 2019-20 Household Income and Ex- penditure Survey (HIES) estimated the in- FIJI Key conditions and cidence of extreme poverty at 1.3 percent, which is in line with other UMICs. Howev- challenges er, the upper middle-income poverty rate was 52.6 percent in 2019, nearly double the Table 1 2023 Fiji’s past policies enabled its transition to UMICs’ average of 23.5 percent. Population, million 0.9 an upper middle-income country (UMIC) GDP, current US$ billion 5.6 in 2014. Although current growth rates GDP per capita, current US$ 5964.0 are improving incomes, they are not International poverty rate ($2.15) a 1.3 bringing the country up to the living Recent developments a 12.4 standards of upper middle-income coun- Lower middle-income poverty rate ($3.65) a 52.6 tries fast enough. Tourism is the engine The economy is estimated to have Upper middle-income poverty rate ($6.85) Gini index a 30.7 for growth and key source of foreign ex- grown by 8 percent in 2023 largely due School enrollment, primary (% gross) b 108.0 change, representing 80 percent of total to a continued uptick in tourist arrivals b 68.3 output. Development is constrained by that was 4 percent above pre-pandem- Life expectancy at birth, years the small scale of the economy, remote- ic levels. Main drivers of growth in- Total GHG emissions (mtCO2e) 2.4 ness from markets, dependence on im- clude tourism-related sectors such as ac- Source: WDI, Macro Poverty Outlook, and official data. ports, and high vulnerability to climate commodation, transport, financial, and a/ Most recent value (2019), 2017 PPPs. b/ Most recent WDI value (2022). change. An average of one tropical cy- wholesale and retail sectors. This quick clone passes through the Fijian waters an- recovery is estimated to have reduced nually. Reforms boosting investment and poverty by UMIC standards (US$6.85 in raising productivity are essential to ele- 2017 PPP) from 67.2 percent in 2021 to vating Fiji to a high-income status over 52.1 percent in 2023. Inflation in 2023 Growth is expected to normalize in 2024 the next two decades. These could in- was 5.1 percent (y/y), the highest in and revert to its long-term average of clude enabling business, unleashing com- the last decade. This was due to merg- 3.3 percent over the medium term, an- petition, promoting foreign direct invest- ing the 9 percent VAT with the 15 per- chored on continued tourist arrivals. ment, skilling healthy workers, and facil- cent band in August 2023, coupled with itating women into jobs along with main- higher import prices and tariff rates. Fiscal consolidation is expected to con- taining macroeconomic stability. Monetary policy remains accommoda- tinue over the medium term and will While the economy has fully recovered in tive with the overnight policy rate main- support debt reduction. Risks to the out- 2023 from the pandemic-induced contrac- tained at 0.25 percent since 2020. look include tropical cyclones, outmigra- tion, the legacies of the pandemic (e.g., The current account deficit decreased to tion, and commodity price shocks. Struc- high debt and rising inflation) continue to 7.6 percent of GDP in 2023 as tourism re- limit the macroeconomic policy space to ceipts and inflow of remittances rise, par- tural reforms boosting investment and respond to shocks. Although strong tourist tially from Fijians in various labor mobility raising productivity are crucial for higher inflows continue to support growth, Fiji’s schemes in Australia/New Zealand. For- growth and sustained poverty reduction. growth outlook is likely to slow down pri- eign reserves remained at a comfortable marily due to hotel capacity constraints, la- level of 5.7 months of retained imports as bor shortages, and red tape. of end-2023. FIGURE 1 Fiji / Real GDP growth and sectoral contributions FIGURE 2 Fiji / Actual and projected poverty rates and real to real GDP growth GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 80 14000 Agriculture 20 70 Industry 12000 15 Services 60 10000 10 Real GDP 50 5 8000 40 0 6000 30 -5 4000 20 -10 10 2000 -15 0 0 -20 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 International poverty rate Lower middle-income pov. rate Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance, IMF, and World Bank staff estimates. Source: World Bank. Notes: see Table 2. Note: 2023(p) - p stands for provisional. MPO 12 Oct 24 The fiscal deficit declined to 4.5 percent around pre-pandemic average in 2025-26, and expenditure consolidation measures. of GDP in 2023 from an average of 11.6 supported by manufacturing, wholesale These include improving compliance, percent in 2020-22 due to high tax buoy- and retail trade, and finance sectors. The streamlining tax exemptions, and counter- ancy and lower capital transfers. Revenue growth outlook is expected to reduce pover- ing tax evasion and avoidance on the rev- gains from measures introduced in 2023 ty by UMIC standards to 49.9 percent in 2024 enue front. The Government also plans to were over 3 percent of GDP but were part- and 47.1 percent by 2026. Headline inflation adopt a zero-based budgeting approach, ly offset by higher spending. The deficit is projected to decrease to 4.1 percent in reassess funding for extra budgetary units, was financed through external concession- 2024 but will remain above 3 percent over and focus on high-impact capital projects al and domestic borrowing. Public debt fell the medium term due to increase in na- over the medium term to ensure effective to 80.6 percent of GDP in 2023 owing to tional minimum wage rate. expenditure management. Public debt is lower primary balance and high growth. The current account deficit is expected to projected to decline to around 77.7 per- narrow to 3.2 percent of GDP by 2026 cent of GDP by 2026. The World Bank due to a lower trade deficit and steady Debt Sustainability Analysis 2024 assesses tourism receipts and remittances. Remit- public debt as sustainable but subject to Outlook tances are expected to be more than a tenth considerable risks. of GDP. The current account deficit will be Risks to the outlook are tilted on the down- The economy is expected to normalize in largely financed by official borrowing. For- side. These include continued outmigra- 2024 and will grow by 3.1 percent. Tourist eign reserves are projected to remain ad- tion and skilled labor shortages, interna- arrivals are already about 10 percent above equate over the medium term at above 4 tional price shocks, and natural disasters. pre-pandemic levels in the first half of months of imports. Structural reforms and fiscal consolidation 2024. However, outmigration and labor The fiscal deficit is expected to narrow to are critical to bolster resilience and growth, mobility continue to rise resulting in labor below 3.7 percent by 2026 due to ongoing maintain macroeconomic stability, and shortages. Growth is expected to return to and planned revenue-generating reforms support poverty reduction. TABLE 2 Fiji / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -4.9 20.0 8.0 3.1 3.3 3.2 Real GDP growth, at constant factor prices -3.4 15.7 8.5 3.1 3.3 3.2 Agriculture 0.8 4.1 4.6 3.3 3.2 3.3 Industry -6.7 5.7 -0.4 3.7 4.9 4.3 Services -3.1 21.1 11.6 2.9 2.9 2.8 Inflation (consumer price index) 3.0 3.1 5.1 4.1 3.4 3.2 Current account balance (% of GDP) -15.9 -17.3 -7.6 -4.2 -3.2 -3.2 Net foreign direct investment inflow (% of GDP) 8.7 1.8 1.1 4.2 4.7 5.0 Fiscal balance (% of GDP) -11.7 -10.3 -4.5 -4.3 -5.0 -4.4 Revenues (% of GDP) 25.6 21.6 25.0 28.0 28.3 28.0 Debt (% of GDP) 86.0 84.0 78.8 79.4 78.7 77.7 Primary balance (% of GDP) -7.7 -6.6 -0.5 -0.3 -0.4 0.2 a,b International poverty rate ($2.15 in 2017 PPP) 3.7 1.8 1.2 1.1 0.9 0.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 21.9 14.6 12.2 11.5 10.9 10.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 67.2 57.1 52.1 50.3 48.5 47.1 GHG emissions growth (mtCO2e) -4.9 20.0 8.0 3.1 3.3 3.2 Energy related GHG emissions (% of total) 91.5 91.5 91.5 91.5 91.5 91.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Notes: e = estimate, f = forecast. a/ Calculations based on EAPPOV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 13 Oct 24 reverse declining productivity growth. Prudent macro policies have helped ef- INDONESIA Key conditions and fectively manage inflation, contain debt, and absorb global shocks. On structural challenges reforms, Indonesia has taken recent steps to improving the investment climate, Table 1 2023 Indonesia has a strong record of economic modernizing the financial sector, and Population, million 282.1 growth (5.4 percent per year in the decade strengthening the fiscal framework. GDP, current US$ billion 1371.2 preceding 2020, and 4.7 percent per year However, it maintains policies that pro- GDP per capita, current US$ 4859.8 since 2021). Long-term growth has been sta- tect big parts of the economy (e.g., ser- a 1.8 International poverty rate ($2.15) ble and inclusive. Extreme poverty (share of vice sector policies to protect local pro- a 17.5 population on less than US$ 1.90 2011 PPP fessionals, and trade policies to protect Lower middle-income poverty rate ($3.65) a 61.8 per day) has effectively been eliminated, local industries). A new wave of reforms Upper middle-income poverty rate ($6.85) Gini index a 36.1 falling from 19 to 1.5 percent between may be needed to tackle these micro-con- School enrollment, primary (% gross) b 100.6 2002-24. Indonesia became an Upper Mid- straints to productivity growth. b 68.2 dle-Income country in 2023 with ambitions Life expectancy at birth, years of reaching High-Income status by 2045. Total GHG emissions (mtCO2e) 1588.2 Simultaneously, the economy has followed Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2023), 2017 PPPs. commodity cycles that have concentrated Recent developments b/ Most recent WDI value (2022). resources in low-productivity industries and services. Though this has driven GDP growth rose to 5.1 percent in the first growth and job creation, it has also led to half of 2024 (H1-2024), from 5.0 percent Indonesia is growing at 5 percent amid falling productivity growth over the past in H2-2023, following improved consumer 15 years, aggravated by the scarring effects confidence and strong performance in the stable macro conditions. Poverty fell from of COVID. Most jobs are low-skilled and services and mining sectors. Election-relat- 17.5 in 2023 to 15.8 percent in 2024, but informal, resulting in over 30 percent of ed surge in public consumption has offset quality job creation has lagged due to the population being economically inse- weaker contribution to growth from net COVID scarring. External financing and cure (vulnerable to poverty in case of exports amid normalizing commodity shocks). Since 2019, yearly real consump- prices. Inflation accelerated early in 2024 currency pressures moderated mid-year tion among the bottom 40 has risen by 2-3 driven as El Niño affected domestic har- with an acceleration in portfolio inflows. percent. Consumption among the richest vest last year. This prompted the govern- Growth is projected to average 5.1 per- 10 percent grew by 3.5 percent annually. ment to address supply-chain constraints cent through 2026. Faster growth re- But the middle has not kept pace, with the and introduce food, cash, and fertilizer as- quires structural reforms that further 40th-90th percentile only managing 1 per- sistance programs. Coupled with a re- cent growth per year. Inequality measured bound in agriculture production, this led open the economy to new investment. The by the Gini index has also climbed from to a gradual disinflation in food prices, upcoming administration aims to imple- 35.4 in 2019 to 36.1 in 2023. bringing inflation down to 2.1 percent by ment new social programs whilst main- Indonesia has a record of prudent macro- August. However, these interventions taining fiscal prudence. economic management and has pursued came at a fiscal cost. Core inflation picked structural reforms, but more is needed to up, suggesting a closing of the output gap. FIGURE 1 Indonesia / Real GDP growth and contributions FIGURE 2 Indonesia / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 8 100 60.0 90 6 50.0 80 4 70 40.0 60 2 50 30.0 0 40 20.0 30 -2 20 10.0 -4 10 2019 2020 2021 2022 2023 2024 2025 2026 0 0.0 Statistical discrepancy Net exports 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 14 Oct 24 Growth in private consumption and mod- windfalls led revenues down by 6.2 per- and average 2.6 percent of GDP over erating inflation have brought the poverty cent. Hence, the 0.7 percent of GDP fiscal the medium term despite the introduc- rate from 17.5 in 2023 to 15.8 percent in surplus in H1-2023 turned into a 0.3 per- tion of new development programs. But, 2024 using the international lower-middle- cent of GDP deficit in H1-2024. Public debt government debt amortization and in- income countries (LMIC) line. Unemploy- rose to 39.1 percent of GDP, mostly held in terest payment will peak in 2025. Ele- ment also dropped below pre-pandemic local currency (71 percent). vated debt service requires accelerating levels to 4.8 percent in February 2024. revenue mobilization reforms to avoid There are signs though of limited quality a narrowing fiscal space and crowding job creation as the recovery came mostly out growth-oriented expenditures. from informal and part-time employment. Outlook The poverty rate, measured at the LMIC Services imports and profit repatriations line, is projected to drop to 12.7 percent have widened the current account deficit Growth is projected to average 5.1 percent by 2026, driven by robust growth and low (CAD) to 0.9 percent of GDP in H1-2024. in 2024-26, supported by a pick-up in pub- inflation. Extending social protection cov- Responding to capital outflows and cur- lic consumption and investment as the in- erage for part-time and informal workers rency pressures, due to a bearish Fed, Bank coming administration programs take ef- will substantially advance poverty reduc- Indonesia (BI) raised its policy rate in April fect. Demand will also benefit from private tion and provide greater security for vul- to 6.25 percent, a peak since 2016. BI's mea- sector credit growth following expected nerable households. Improving social as- sures, including the introduction of high- easing in global monetary policy. Inflation sistance targeting through database up- yield securities, reversed outflows, shored will remain stable, averaging 2.7 percent, dates remains crucial to improve its effec- up foreign exchange reserves to cover 6.5 firmly within BI’s target band (2.5±1 per- tiveness and efficiency. months of imports, and strengthened the cent), but will face pressure from volatile The outlook is subject to downside Rupiah. Such outcome enabled a subse- food and energy prices. risks. Elevated interest rates could quent 25-bps easing in September. BI also The external position will remain challeng- weigh on borrowing costs, tighten ac- used macroprudential incentives for tar- ing due to a sluggish recovery in global cess to financing, and expand public geted sectors, spurring a 6.0 percent rise in trade and continued financing pressures. debt service costs. Geopolitical shocks private credit year-to-August. The CAD is projected to gradually widen might precipitate a steeper decline in The fiscal stance slightly expanded. Expen- and reach 1.6 percent of GDP by 2026. Ro- terms of trade, causing inflation and po- ditures rose by 11.3 percent in H1-2024 due bust domestic demand will boost imports tentially constricting fiscal space due to to rising spending on various assistance while moderating terms of trade hamper lower revenues. Domestically, the pace programs, energy subsidies, elections, and exports growth. of fiscal and structural reform will in- interest payments. Meanwhile, tax compli- The fiscal deficit is expected to adhere fluence macroeconomic stability and ance constraints and subsiding commodity to its legal limit (3 percent of GDP) growth prospects. TABLE 2 Indonesia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.7 5.3 5.0 5.0 5.1 5.1 Private consumption 2.0 5.0 4.9 4.9 5.0 4.9 Government consumption 4.3 -4.5 2.9 5.3 4.2 3.9 Gross fixed capital investment 3.8 3.9 4.4 4.5 5.4 6.3 Exports, goods and services 18.0 16.2 1.3 4.1 3.9 3.4 Imports, goods and services 24.9 15.0 -1.6 2.1 2.9 3.5 Real GDP growth, at constant factor prices 3.3 4.9 5.1 5.0 5.1 5.1 Agriculture 1.9 2.3 1.3 3.7 3.0 3.0 Industry 3.4 4.1 5.0 4.1 4.1 4.1 Services 3.5 6.5 6.1 6.1 6.4 6.3 Inflation (consumer price index) 1.6 4.1 3.7 2.5 2.7 2.7 Current account balance (% of GDP) 0.3 1.0 -0.2 -0.9 -1.4 -1.6 Net foreign direct investment inflow (% of GDP) 1.5 1.4 1.1 1.3 1.4 1.5 Fiscal balance (% of GDP) -4.6 -2.4 -1.6 -2.7 -2.5 -2.5 Revenues (% of GDP) 11.8 13.5 13.3 12.6 12.5 12.7 Debt (% of GDP) 40.7 39.5 39.0 39.3 39.6 39.5 Primary balance (% of GDP) -2.5 -0.4 0.5 -0.5 -0.3 -0.3 a,b International poverty rate ($2.15 in 2017 PPP) 2.9 2.2 1.8 1.5 1.2 1.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 21.3 19.1 17.5 15.8 14.2 12.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.7 62.6 61.8 60.0 58.3 56.6 GHG emissions growth (mtCO2e) 0.2 4.4 2.5 0.3 -0.9 0.3 Energy related GHG emissions (% of total) 38.3 40.1 41.1 41.1 40.6 40.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on EAPPOV harmonization, using 2011-SUSENAS and 2023-SUSENAS. Actual data: 2023. Forecasts are from 2024 to 2026. b/ Projection using annualized elasticity (2011-2023) with pass-through = 1 based on GDP per capita in constant LCU. MPO 15 Oct 24 with neighboring countries. The wide- spread and prolonged impact of infla- LAO PDR Key conditions and tion has caused more than one-third of households to reduce food consumption challenges and human capital spending. Table 1 2023 Laos continues to face acute macroeco- Population, million 7.6 nomic instability. The kip depreciated GDP, current US$ billion 14.9 by 20 percent year-on-year against ma- Recent developments GDP per capita, current US$ 1956.0 jor currencies on average since January. a 7.1 International poverty rate ($2.15) This in turn fueled inflation which ac- Economic activity in the first half of a 32.5 celerated to 25 percent during this pe- 2024 benefited from continued growth Lower middle-income poverty rate ($3.65) a 70.5 riod. Limited foreign exchange liquid- in tourism, transport, logistics, mining, Upper middle-income poverty rate ($6.85) Gini index a 38.8 ity and the weaker kip have also in- agriculture, and some electronics man- School enrollment, primary (% gross) b 97.2 creased pressure on external public debt ufacturing. Additionally, electricity b 69.0 servicing, constraining fiscal space and generation experienced a slight recov- Life expectancy at birth, years exacerbating vulnerabilities in the finan- ery from the previous year, while for- Total GHG emissions (mtCO2e) 49.3 cial sector. Significant debt service de- eign investment, primarily in the re- Source: WDI, Macro Poverty Outlook, and official data. ferrals from 2020 to 2023 provided tem- source sector, expanded. a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). porary relief, but the prospects for de- Despite a modest growth recovery, exter- ferrals in 2024 are unclear. Public and nal pressures persisted. The kip depreci- publicly guaranteed debt (PPG) exceed- ated by 20 percent year-on-year during ed 110 percent of GDP in 2023 when January to August 2024, with the par- accounting for a currency swap and ex- allel market premium reaching 10 per- Economic growth continues to be un- penditure arrears. Accumulated external cent in August. In response, the central dermined by persistent macroeconomic debt service deferrals amounted to 16 bank tightened monetary policy, enforced instability. Despite tighter monetary percent of GDP at the end of 2023, and repatriation and conversion of some ex- and fiscal policies, the kip depreciated the average annual external debt repay- port receipts, and promoted formal for- ment obligations remain at $1.3 billion eign currency trade on the banking sys- by 20 percent on average since the be- in the medium term. tem and the use of the Lao kip. Given ginning of the year, in turn fueling in- Macroeconomic instability has affected high import dependence and high pass- flation which averaged 25 percent in the the labor market, eroded household liv- through, inflation remained high at 24 first eight months of the year. Real ing standards, and hindered human percent in August 2024. GDP is expected to grow by 4.1 percent capital development. High inflation, The fiscal balance improved in the first quar- coupled with currency depreciation and ter of 2024 due to stronger revenue collec- in 2024, but rising living costs and slow wage growth, has shifted employ- tion, which offset increased expenditures. slow wage increases will continue to ment away from service and wage jobs Improved domestic revenue was largely undermine efforts to reduce poverty. to agriculture and self-employment. driven by higher profit and VAT contribu- Outmigration has increased, driven by tions—supported by tax base expansion as the weak kip and widening wage gap well as price and exchange rate effects. The FIGURE 1 Lao PDR / Real GDP growth and contributions to FIGURE 2 Lao PDR / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (millions constant LCU) 8 100 25 6 80 20 4 60 15 2 40 10 0 20 5 -2 2016 2017 2018 2019 2020 2021 2022 2023 2024 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Agriculture Industry 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 Table 2. MPO 16 Oct 24 Ministry of Finance restored the VAT rate human capital spending. Extreme weath- to 10 percent in May. On the other hand, er events, such as floods during the public spending rose significantly, driven Outlook 2024 cropping season, could exacerbate by increased interest payments (resulting food price increases while reducing farm from higher payments and exchange rate Real GDP is projected to grow by 4.1 per- income. Despite growth recovery, the effects) and public investments. cent in 2024. This outlook assumes the poverty rate is projected to remain The current account surplus declined in continued suspension of debt service due steady in 2024 and 2025. In the medium Q1 2024 due to a lower trade surplus de- from 2020-2023 and a partial suspension term, a contraction in human capital spite robust service exports. Foreign in- in 2024. Inflation is expected to remain spending could undermine prospects for vestment notably increased, bolstered by above 20 percent, reflecting ongoing de- poverty reduction. investment in the resource sectors. Howev- preciation pressures as a result of high This outlook is subject to significant do- er, actual settlements indicated lower net external debt service and import needs. mestic and external uncertainties. Domes- foreign exchange inflows compared to an Despite recent improvements in revenue tic risks include tight foreign exchange official record. Gross foreign reserves were collection and debt repayment deferrals, liquidity to meet external debt obligations reported at $1.8 billion in June 2024, and high debt service levels will continue to with high debt service needs against lim- net reserves, excluding a $900 million constrain fiscal space. Revenue is expected ited access to international capital market swap arrangement, cover less than two to benefit from improvements in tax policy (which could be exacerbated in the ab- months of imports. and administration, but if high interest sence of deferrals), slow progress with Employment remained robust in the obligations are fully paid, they could structural reforms, and deteriorating bal- first half of 2024 but the shift from crowd out other expenditures. The outlook ance sheets in major banks. Outmigration non-tradable service sectors to agricul- anticipates a primary surplus in the com- and labor shortages could threaten labor- ture and manufacturing continued. The ing years. However, the overall fiscal intensive sector growth. Subdued global number of registered migrants in Thai- deficit is expected to increase, assuming and regional economic growth could land reached 313,000 in June 2024, sur- full interest payments for 2025 onward. Ex- weaken external demand. On an upside, passing the pre-COVID-19 level. Nomi- ternal debt service obligations will average a weakening US dollar might contribute nal wages and household income grew $1.3 billion annually from 2024 to 2028, to a slower the kip depreciation. at a modest pace of 8 percent and 14 keeping total public financing needs ele- Addressing macroeconomic instability ne- percent, respectively and these increases vated. Uncertainty regarding access to in- cessitates five critical reforms: (i) fully im- were more than offset by mounting in- ternational capital markets and non-debt plement the restored VAT rate of 10 per- flation. Progress in poverty reduction is financing sources may continue to pres- cent, curbing tax exemptions and reform- expected to have stalled, with the pover- sure domestic financing sources. ing health taxes; (ii) improve governance ty rate (calculated at the lower-middle- Ongoing macroeconomic instability is ex- of public and public-private investments; income poverty line of $3.65 per day pected to weigh negatively on the pover- (iii) finalize debt negotiations; (iv) in 2017 PPP) estimated to stagnate at ty outlook. High inflation will continue strengthen financial sector stability; and around 31 percent in 2024. to pressure real household incomes and (v) enhance the business environment. TABLE 2 Lao PDR / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.5 2.7 3.7 4.1 3.7 3.7 Real GDP growth, at constant factor prices 2.5 2.7 3.7 4.1 3.7 3.7 Agriculture 2.3 1.6 2.4 3.0 3.0 3.0 Industry 7.6 3.3 2.6 3.7 3.1 3.1 Services -2.2 2.5 5.5 5.0 4.5 4.5 Inflation (consumer price index) 3.8 22.7 31.2 24.2 15.7 9.0 Current account balance (% of GDP) -2.9 -1.7 -1.6 -3.0 -3.6 -3.9 Fiscal balance (% of GDP) -1.3 -0.2 0.7 -0.9 -1.1 -1.3 Revenues (% of GDP) 14.9 14.7 16.5 16.6 16.7 16.7 Debt (% of GDP) 91.9 130.9 115.9 108.3 118.3 122.7 Primary balance (% of GDP) 0.0 1.5 2.8 2.2 2.0 1.8 a,b International poverty rate ($2.15 in 2017 PPP) 7.0 6.9 6.8 6.7 6.6 6.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 32.0 31.9 31.7 31.4 31.2 30.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 70.0 69.9 69.6 69.3 69.1 68.8 GHG emissions growth (mtCO2e) 2.3 4.2 5.2 5.4 5.7 5.9 Energy related GHG emissions (% of total) 41.3 42.4 43.2 43.7 44.1 44.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on EAPPOV harmonization, using 2012-LECS and 2018-LECS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. b/ Projection using annualized elasticity (2012-2018) with pass-through = 0.5 based on GDP per capita in constant LCU. MPO 17 Oct 24 MALAYSIA Key conditions and Recent developments challenges Malaysia experienced a stronger year-on- year growth of 5.9 percent in 2Q 2024 from Table 1 2023 Malaysia’s economy experienced a 4.2 percent in 1Q 2024, driven by better- Population, million 34.3 strong rebound beginning 2024 follow- than-expected private consumption, in- GDP, current US$ billion 399.7 ing weaker-than-expected growth last vestment, and export performance. Pri- GDP per capita, current US$ 11650.3 year. Growth was driven by stronger vate consumption grew by 6.0 percent a 2.3 Upper middle-income poverty rate ($6.85) expansion in private consumption and in 2Q 2024 from 4.7 percent in 1Q a 40.7 investment and improving exports. 2024, supported by further improvement Gini index b 97.8 However, the narrowing fiscal space in labor market conditions and contin- School enrollment, primary (% gross) Life expectancy at birth, years b 76.3 remains a key challenge for ued policy support. Gross fixed capi- Total GHG emissions (mtCO2e) 376.8 Malaysia. While Malaysia is on the tal formation (GFCF) growth accelerat- consolidation path, outstanding fed- ed to 11.5 percent and 9.6 percent in Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2021), 2017 PPPs. eral government debt rose to 64.3 the first two quarters of 2024, driven by b/ Most recent WDI value (2022). percent in 2023 from 60.2 percent in higher private capital spending in the 2022, as deficits continue to add to manufacturing and services sector and debt stock. Rigid spending, including increased public spending on fixed as- salaries, pensions, and debt service sets. On the supply side, the construc- charges, has been growing as a share tion and agriculture sector recorded the of total operating expenditures. The highest growth, expanding at 17.3 per- Following weaker-than-expected growth government has implemented diesel cent and 7.2 percent respectively in 2Q in 2023, Malaysia is projected to grow at subsidy rationalization which is es- 2024, from 11.9 percent and 1.7 percent a higher rate of 4.9 percent in 2024. timated to generate 0.2 percent of in the previous quarter. Stronger private consumption, invest- GDP in annual savings. While opti- Exports recovered strongly in the first mizing public spending can free up half of the year, growing by 5.2 percent ment, and exports will continue to sup- budgetary resources, enhancing rev- and 8.4 in 1Q and 2Q 2024, respectively, port growth. The narrowing fiscal space enue mobilization remains vital to on the back of the technology upcycle remains a key challenge. Poverty is ex- restore fiscal space and meet future which lifted exports of E&E products, pected to decline further. The government fiscal needs. stronger external demand for non-E&E Moreover, despite the moderating in- exports, and a turnaround in commodity could enhance the fiscal system to be more flation, there are concerns about rising exports supported by improving com- pro-poor with reforms that do not neces- living costs, particularly among low- modity prices. Imports also experienced sarily increase spending, but by reallocat- income households. Higher housing strong growth of 12.5 percent and 15.0 ing subsidies into targeted transfers. and utilities inflation has dispropor- percent in the first two quarters of 2024, tionately impacted this group due to reflecting higher intermediate imports a higher share of their expenditure in and robust domestic demand for capital this category. and consumption goods. FIGURE 1 Malaysia / Real GDP growth and contributions to FIGURE 2 Malaysia / Actual and projected poverty rate and real GDP growth real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 20 25 35000 15 30000 20 10 25000 15 20000 5 0 10 15000 10000 -5 5 5000 -10 Q1 2021 Q3 2021 Q1 2022 Q3 2022 Q1 2023 Q3 2023 Q1 2024 0 0 Private consumption Public consumption 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 GFCF Change in inventories Upper middle-income pov. rate Real priv. cons. pc Net exports Real GDP growth Sources: Bank Negara Malaysia and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 18 Oct 24 Headline inflation edged higher in 1Q income stood at 40.7 in 2021, compared to -8.1 percent in 2023, driven by improved and 2Q of 2024 at 1.7 percent and 1.9 41.2 in 2018. global trade, increased demand for E&E percent respectively from 1.6 percent in exports, and continued rise in tourist ar- 4Q 2023 due to policy adjustments. Mean- rivals driving services exports. Inflation while, core inflation moderated to 1.8 per- is projected to moderate to around 2.1 cent in 1Q 2024 from 2.0 percent in 4Q Outlook percent in 2024 from 2.6 percent in 2023, 2023 with easing food and beverages reflecting softer global commodity prices prices, before edging higher to 1.9 percent Following weaker-than-expected growth and weaker-than-anticipated passthrough in 2Q 2024 due to inflation in the food- in 2023, Malaysia’s economy is forecast effects of recent policy changes on infla- away-from-home segment. On the labour to expand to 4.9 percent in 2024 from tion. Growth is expected to expand at market front, the national unemployment 3.7 percent in 2023, an increase of 0.6 a more moderate rate of 4.5 percent in rate remained similar to pre-pandemic percentage points compared to the pre- 2025, with more modest growth in trade levels at 3.3 percent in 2Q 2024, while vious forecast in April 2024. This re- and investment. nominal wage growth increased slightly assessment reflects stronger-than-expect- Weaker-than-expected activity in ad- to 2.7 percent in 2Q 2024 from 2.6 percent ed household consumption as well as vanced economies, escalating geopolitical in the last quarter. improved investment and trade perfor- tensions, and potential underperformance Despite progress, Malaysia still faces chal- mance in 1H 2024. Recent data also point of China's growth could pose risks to lenges in reducing poverty and inequali- to continued strength in domestic de- Malaysia’s growth outlook. On the domes- ty. The latest official estimates show that mand and export activities in 2H 2024. tic front, slower growth in real disposable the absolute poverty rate of 6.2 percent in Private consumption is projected to ex- income and the lingering effects of post- 2022 remained higher than the pre-pan- pand to 5.5 percent in 2024 from 4.7 in pandemic monetary policy normalization demic level of 5.6 percent in 2019. How- 2023, supported by further improvement may pose downside risks to private con- ever, using the international poverty line, in labor market conditions and wage sumption. Supply-side disruptions in com- at the upper-middle income line of $6.85 growth, as well as continued government modity production, potentially due to un- 2017 PPP dollars a day, poverty fell to household income support. GFCF is ex- favorable weather conditions, could also 2.3 percent in 2021, from 3.4 percent in pected to grow faster at 7.4 percent in impede growth. 2018. The continued growth in private 2024 from 5.5 percent in 2023, with pri- Poverty is expected to decline further. The consumption, combined with the moder- vate investment being supported by on- government could strengthen its pro-poor ation of inflation to mid-2024 has reduced going multi-year projects and the realiza- fiscal system through reforms without nec- the poverty rate forecast to 1.4 percent in tion of recently approved investments in essarily increasing additional spending, 2024 from 1.5 percent in 2023. Meanwhile, the manufacturing and services sectors. for instance, through the reallocation of income inequality, measured by the Gini Meanwhile, exports are expected to re- subsidy funds towards a targeted social as- index based on household per capita net cover to 5.9 percent growth in 2024 from sistance for vulnerable households. TABLE 2 Malaysia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.3 8.9 3.6 4.9 4.5 4.3 Private consumption 1.8 11.3 4.7 5.5 5.4 5.4 Government consumption 5.8 5.1 3.3 3.9 4.4 4.5 Gross fixed capital investment -0.7 6.8 5.5 7.4 4.1 3.2 Exports, goods and services 18.5 14.5 -8.1 5.9 4.5 4.3 Imports, goods and services 21.2 16.0 -7.4 6.7 5.1 4.8 Real GDP growth, at constant factor prices 3.3 8.9 3.5 4.9 4.5 4.3 Agriculture -0.3 1.3 0.7 3.2 2.0 1.8 Industry 5.7 6.7 1.3 4.3 3.6 3.4 Services 2.2 11.4 5.2 5.4 5.4 5.2 Inflation (consumer price index) 2.5 3.4 2.5 2.1 2.8 2.5 Current account balance (% of GDP) 3.9 3.2 1.5 1.8 1.6 0.6 Net foreign direct investment inflow (% of GDP) 2.0 0.7 0.0 1.6 1.5 1.5 Fiscal balance (% of GDP) -6.4 -5.5 -5.0 -4.2 -3.7 -3.3 Revenues (% of GDP) 15.1 16.4 17.3 16.6 16.6 16.6 Debt (% of GDP) 63.3 60.2 64.3 64.5 64.8 64.6 Primary balance (% of GDP) -3.9 -3.2 -2.5 -1.8 -1.0 -0.6 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 2.3 1.7 1.5 1.4 1.2 1.1 GHG emissions growth (mtCO2e) 0.5 3.6 -0.7 1.1 1.3 1.3 Energy related GHG emissions (% of total) 62.2 63.1 62.7 62.9 63.2 63.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on EAPPOV harmonization, using 2014-HIS and 2022-HIS. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using annualized elasticity (2013-2021) with pass-through = 0.7 based on private consumption per capita in constant LCU. MPO 19 Oct 24 increased import demand, fiscal ineffi- ciencies, and the reemergence of fiscal MONGOLIA Key conditions and and external imbalances. challenges Table 1 2023 The ongoing mineral export boom in Mon- Recent developments Population, million 3.4 golia is delivering positive macro-fiscal GDP, current US$ billion 20.5 outcomes for the second consecutive year. Economic growth slightly declined to 5.7 GDP per capita, current US$ 5956.9 However, it also underscores Mongolia's percent in the first half of 2024 (down a 2.4 Lower middle-income poverty rate ($3.65) increasing dependence on the volatile min- from 7.2 percent in 2023) mainly due to a 22.1 ing sector and the pressing need for eco- a 26.7 percent contraction in agriculture Upper middle-income poverty rate ($6.85) a 31.4 nomic diversification. The focus on coal- production amid harsh weather condi- Gini index School enrollment, primary (% gross) b 95.6 driven growth exacerbates both climate tions (dzud phenomenon), stymying rur- Life expectancy at birth, years b 72.7 and development challenges, emphasizing al household income growth. Meanwhile, Total GHG emissions (mtCO2e) 83.4 the critical need for structural reforms. more than half of the growth was ex- Robust economic growth post-COVID has plained by mining and transportation ser- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2022), 2017 PPPs. elevated Mongolia to upper-middle-in- vices—reflecting greater coal exports and b/ Most recent WDI value (2022). come status in 2024. Using the World Bank rising imports, driven by the recovery of poverty rate for upper-middle-income domestic demand. On the demand side, countries, the poverty rate is projected to robust growth in public and private con- fall to 20.1 percent in 2024 from 20.9 in sumption were the main drivers of eco- 2023. While strong wage growth and de- nomic growth. Despite a robust momen- clining inflation have led to increased real tum in coal exports, growth was damp- Mongolia's GDP growth is forecasted to household incomes and consumption ened by increased demand for imported remain robust at 5.3 percent in 2024, de- since 2023, income growth has been un- goods including both consumer durable spite adverse weather affecting the agri- evenly distributed between Ulaanbaatar goods and investment inputs. cultural sector. With rising real wages, (7.4 percent) and other areas (-3.5 percent Consumer price pressures eased in the first in the countryside). half of 2024, staying within the central the poverty rate, measured at the upper- To boost growth, the newly formed coali- bank's target range of 6±2 percent. Infla- middle-income poverty line, is projected tion government seeks to accelerate major tion for both domestic food and imported to decrease to 20.1 percent by the end of projects under its four-year action plan. goods continued to decline throughout H1 2024 from 20.9 percent in 2023. Signifi- While the plan to leverage public-private 2024, accentuated by nominal exchange partnerships and the newly established rate appreciation. By July 2024, headline cant risks and challenges persist, includ- development fund—drawing resources inflation had decreased to 5.5 percent, ing the potential for renewed fiscal and from the intergenerational savings down from 7.9 percent at the end of 2023, balance of payment pressures. fund—intends to ensure fiscal affordabili- and coupled with wage increases, support- ty, a rapid scale up of investment and fis- ed real household income and consump- cal expansion poses significant risks, in- tion growth. Declining inflation enabled cluding renewed inflationary pressures, the central bank to reduce the policy rate FIGURE 1 Mongolia / Real GDP growth and contributions to FIGURE 2 Mongolia / Actual and projected poverty rates real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 25 60 12.0 20 50 10.0 15 10 40 8.0 5 30 6.0 0 -5 20 4.0 -10 10 2.0 -15 -20 0 0.0 2019 2020 2021 2022 2023 2024 f 2025 f 2026 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 Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Statistics Office and World Bank. Source: World Bank. Notes: see Table 2. MPO 20 Oct 24 by 200 basis points in H1 2024, bringing it government spending, and increasing de- to 11 percent. mand for imports. Despite continued high spending levels, Outlook In the medium term, growth is expected the government maintained a budget sur- to reach an average of 6.3 percent over plus of 2.6 percent of GDP as of June In 2024, economic growth is expected to re- 2025-2026, driven by a substantial increase 2024, contributing to a further reduction main robust but moderate to 5.3 percent, in mineral production of the Oyu Tolgoi in the public debt-to-GDP ratio. This pos- largely due to a significant downturn in mine. Poverty is also projected to decline itive fiscal outcome was driven by robust the agriculture sector caused by the dzud further over this time period, but the lin- revenues from mineral exports and in- weather phenomenon. While the services gering impacts of the recent dzud may creased economic activities, particularly and mining sectors are projected to contin- mean heightened vulnerabilities among from taxes on imports of goods and ser- ue growing, the pace is anticipated to slow rural households. vices. Public debt, including obligations from the peak levels seen in 2023, partic- A greater-than-expected fiscal expansion from the Development Bank of Mongolia, ularly in mining. On the demand side, and borrowing, linked to a relaxation of was estimated at 38.2 percent of GDP by growth is expected to be driven by strong fiscal rules and the advancement of major the end of H1 2024, with no major ex- private consumption and fiscal expansion, projects under the government’s proposed ternal repayments to commercial lenders including increases in real public wages action plan, could bolster economic due until Q2 2026. and investments. Additionally, improve- growth but also lead to larger fiscal and Despite strong export revenues, the cur- ments in business lending, spurred by de- current account deficits while exacerbating rent account balance shifted to a deficit clining interest rates, are anticipated to inflationary pressures. Externally, Mongo- of US$309 million (1.4 percent of GDP) support private investment. lia could face significant negative by the end of H1 2024. This shift was Fiscal expansion, as outlined in the re- spillovers from slower-than-expected primarily due to elevated import demand cent budget amendment, along with ris- growth in China, with weaker external de- and declining mineral prices. However, ing household incomes, is expected to re- mand and prices of key commodities. An increased foreign direct investment helped vive inflationary pressures in H2 2024, escalation of geopolitical tensions and sup- sustain the accumulation of gross interna- leading to a slight uptick in headline in- ply issues with fuel imports from Russia tional reserves, enabling the central bank flation. Despite the strong momentum in could drive up fuel prices. Protracted de- to repay US$830 million—nearly half of its coal exports, fiscal and current account lays in railway transportation of imported currency swap line with the People’s Bank deficits are anticipated to reemerge in merchandise through the Chinese Tianjin of China—thereby reducing pressures on 2024, driven by declining export com- seaport could lead to increased transporta- external debt. modity prices, sustained high levels of tion costs and delays. TABLE 2 Mongolia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.6 5.0 7.2 5.3 6.5 6.1 Private consumption -5.9 8.1 9.7 8.4 5.0 6.8 Government consumption 9.2 6.9 3.2 22.0 4.6 6.8 Gross fixed capital investment 17.7 13.2 5.3 18.0 7.9 6.2 Exports, goods and services -14.6 32.3 33.2 5.1 23.9 2.4 Imports, goods and services 13.6 29.1 18.9 10.2 15.9 3.9 Real GDP growth, at constant factor prices 0.4 4.2 7.5 5.3 6.5 6.1 Agriculture -5.5 12.0 -8.9 -23.0 5.0 6.5 Industry -2.2 -4.5 12.9 8.3 11.5 6.1 Services 3.9 6.9 9.9 11.0 4.1 6.1 Inflation (consumer price index) 7.3 15.2 10.4 7.0 8.0 8.5 Current account balance (% of GDP) -13.4 -13.2 0.6 -7.8 -6.2 -7.1 Net foreign direct investment inflow (% of GDP) 13.1 13.9 7.3 8.7 6.7 6.2 Fiscal balance (% of GDP) -3.0 0.7 2.6 -0.9 -0.7 -1.0 Revenues (% of GDP) 32.0 33.8 34.1 35.7 35.8 35.1 a Debt (% of GDP) 64.5 62.1 44.4 43.3 42.2 42.0 Primary balance (% of GDP) -1.1 2.1 4.2 0.6 0.8 0.6 b,c International poverty rate ($2.15 in 2017 PPP) .. 0.2 0.2 0.2 0.2 0.2 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 2.4 2.1 1.9 1.7 1.5 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 22.1 20.9 20.1 19.0 18.1 GHG emissions growth (mtCO2e) 3.3 4.4 1.3 0.9 3.4 4.1 Energy related GHG emissions (% of total) 29.1 30.0 31.9 34.1 35.7 37.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Debt excludes the BoM's liability under the PBOC swap line (3.5% of GDP as of mid-2024). b/ Calculations based on EAPPOV harmonization, using 2016-HSES, 2018-HSES, and 2022-HSES. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. c/ Projection using annualized elasticity (2016-2018) with pass-through = 1 based on GDP per capita in constant LCU. MPO 21 Oct 24 supply disruptions. The authorities have responded to price pressures by enforc- MYANMAR Key conditions and ing price ceilings on essential commodi- ties such as rice, edible oil, and pe- challenges troleum products and maintaining strict controls over foreign exchange trans- Table 1 2023 Myanmar’s economic situation has be- actions. However, these measures have Population, million 54.6 come more challenging over the past six been largely counterproductive, trigger- GDP, current US$ billion 62.3 months due to heightened conflict ing further shortages and exacerbating GDP per capita, current US$ 1140.6 around the country and recent severe market distortions. a 2.0 International poverty rate ($2.15) flooding. More than half of the country's The combined effects of subdued eco- a 19.6 330 townships were embroiled in active nomic activity, high inflation, and weak Lower middle-income poverty rate ($3.65) a 68.2 conflict as of mid-August, disrupting labor markets have led to a significant Upper middle-income poverty rate ($6.85) School enrollment, primary (% gross) b 118.9 livelihoods, trade, and major public in- increase in poverty. The 2023-24 Myan- Life expectancy at birth, years b 67.3 vestment projects. The UN estimates that mar Subnational Phone Survey (MSPS) Total GHG emissions (mtCO2e) 246.2 around 1.4 million people have been dis- estimated poverty to be 32.1 percent in placed between October 2023 and early 2023-24, a reversion to levels last seen Source: WDI, Macro Poverty Outlook, and official data. a/ Last official estimate based on 2017 Myanmar Living September 2024, increasing the total in 2015. Internally displaced populations Conditions Survey, 2017 PPPs. number of internally displaced people to (IDPs) are particularly vulnerable, with b/ WDI for School enrollment (2018); Life expectancy 3.4 million (about 6 percent of the popu- estimated poverty rates as high as 48 per- (2022). lation). Conflict has disrupted the trans- cent. Rural poverty increased to an es- port of goods within Myanmar and cre- timated 35.7 percent from 30.2 percent ated obstacles to land border trade with in 2017, while urban poverty rose faster, Thailand, China, and India. In Septem- more than doubling from 11 percent in ber, heavy rains associated with Typhoon 2017 to an estimated 23 percent. This was The economy continues to face challenges Yagi triggered major flooding in large due mainly to a significant decline in job from increased conflict and economic in- parts of the country, with devastating im- quality, with the share of wage earners pacts on lives and livelihoods. in overall employment falling by 9.3 per- stability. Rapid kyat depreciation and The kyat has depreciated rapidly, fueling centage points since 2017. high inflation have reduced household inflation and straining real household in- consumption. In 2023/24, 32 percent of comes and consumption. The kyat lost 40 the population is estimated to live in percent of its value against the US dollar poverty. Trade, foreign exchange restric- on parallel markets over the first eight Recent developments months of 2024. While the latest official tions, and price controls on food and fuel data show that consumer prices rose by Economic activity has remained sub- distorted markets, leading to shortages. 30.2 percent over the year to September dued, with GDP estimated to have risen The outlook remains bleak, with little to 2023, food and fuel prices have contin- by just 1 percent in the fiscal year ended ued to increase rapidly in more recent March 2024, remaining around 10 per- no growth projected in 2024/25. months driven by pass-through from ex- cent below pre-pandemic levels. In the change rate depreciation and domestic April 2024 round of the World Bank FIGURE 1 Myanmar / Real GDP growth and contributions to FIGURE 2 Myanmar / Exchange rates real GDP growth by sector Percent, percentage points Kyat/USD 10 8,000 Official reference rate 7,000 5 Parallel market rate 6,000 Online platform rate 0 5,000 -5 4,000 -10 3,000 2,000 -15 2020 2021e 2022e 2023e 2024f 2025f 1,000 Agriculture Industry Services Real GDP growth Sep-21 Feb-22 Jul-22 Dec-22 May-23 Oct-23 Mar-24 Aug-24 Sources: Ministry of Planning and Finance and World Bank staff estimates. Sources: Central Bank and foreign exchange market sources. MPO 22 Oct 24 Firm Survey, firms reported operating at (excluding natural gas) and imports 65 percent of their capacity on average, through land borders fell by 27 and 61 a pick up from September 2023 but still percent, respectively. Manufacturing ex- Outlook 10 percentage points below levels a year port values declined by 12 percent due earlier. The services sector, particularly mainly to weak external demand and do- The economic outlook is bleak with GDP retail and tourism, has been adversely af- mestic constraints, including conflict and growth projected to remain very weak in fected by high inflation and diminished power outages, while agricultural export the year ended March 2025. Economic ac- consumer purchasing power, as well as values increased by 31 percent reflecting tivity will remain constrained by conflict, significant stock shortages due to import higher prices for key crops. trade and logistics disruptions, exchange restrictions and the enforcement of price Inflationary pressures have remained rate volatility, and power outages. Ongo- controls. After showing signs of recov- acute, due to increases in both food and ing regulatory uncertainty and the imposi- ery earlier in the year, the manufactur- non-food prices. The WFP food price index tion of trade and foreign exchange restric- ing purchasing managers' index (PMI) rose by 27 percent between April and July tions and price controls will continue to returned to contractionary territory in Ju- 2024, driven by conflict-related supply dis- adversely affect businesses across all sec- ly and August, with firms reporting de- ruptions and exchange rate pressures. Fuel tors. High inflation will exert downward clines in output and new orders amid prices increased by 12 percent between pressure on household consumption, with weaker domestic demand, material short- April and August, driven by shortages and particularly large impacts on services in- ages, and higher input prices. In contrast, exchange rate depreciation. dustries such as retail trade. Weakness in agriculture has shown resilience reflect- The budget deficit increased to 6.1 per- employment and real incomes is likely to ing favorable international prices for rice, cent of GDP in the year to March 2024, up persist, potentially pushing more house- beans, and pulses. from 3.3 percent of GDP in the previous holds into poverty. External trade has declined due mainly year, driven mainly by a substantial drop The risks to this already weak baseline out- to disruptions at major land borders. In in revenues. Total revenue fell to 19.8 per- look are predominantly to the downside, the five months to May 2024, the US dol- cent of GDP from 23 percent in the pre- with the potential for further escalation in lar value of imports fell by 12 percent vious year as both tax and non-tax rev- conflict and additional damaging volatility (compared with a year earlier) while the enues declined, with a large drop in re- in the exchange rate and other key prices. value of exports increased by 2 percent, ceipts from State-owned Economic Enter- At the same time, shifts in employment resulting in a narrowing of the trade prises (SEEs), especially those in the oil patterns and reductions in human capital deficit to about US$440 million (0.6 per- and gas sector. Public debt has risen to 66 threaten Myanmar's longer-term develop- cent of GDP). In the same period, exports percent of GDP. ment and poverty reduction efforts. TABLE 2 Myanmar / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021e 2022e 2023e 2024e 2025f Real GDP growth, at constant factor prices 6.6 -9.0 -12.0 4.0 1.0 1.0 Agriculture 2.2 -5.7 -12.8 -2.2 2.0 2.4 Industry 8.0 -11.8 -8.2 8.0 0.0 1.4 Services 7.8 -8.4 -14.7 3.9 1.4 -0.1 Inflation (consumer price index) 9.1 2.3 9.6 27.2 26.5 23.0 Current account balance (% of GDP) -1.8 -0.4 -2.4 -3.1 -3.9 -3.9 Fiscal balance (% of GDP) -6.2 -7.9 -1.5 -3.3 -6.1 -6.7 Revenues (% of GDP) 20.6 14.8 10.9 23.0 19.8 16.8 Public sector debt (% of GDP) 42.3 53.9 59.8 60.1 66.2 69.1 Primary balance (% of GDP) -4.5 -5.6 0.0 -1.0 -3.7 -3.6 GHG emissions growth (mtCO2e) 1.5 -2.4 1.8 0.4 -4.4 0.3 Energy related GHG emissions (% of total) 17.0 15.1 15.6 15.3 11.5 10.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Estimates and projections are for years ended March. MPO 23 Oct 24 reforms are needed to ensure a sustain- able economic recovery that supports the NORTH PACIFIC Key conditions and livelihood of households and poverty re- duction. Based on the lower middle-in- challenges ISLANDS come class poverty line of $3.65 (2017 PPP USD per person per day), FSM has Following contraction in FY22, economic a poverty rate of 40.8 percent (2013 data) activity gained momentum in the North and RMI has a poverty rate of 6.1 percent Table 1 FSM MHL PLW Pacific in FY23 with a pick-up in capital (2019 data). The lack of recent household Population, million 0.11 0.04 0.02 projects, fisheries output, and tourism. data for Palau and FSM presents a chal- GDP, current US$ billion 0.42 0.23 0.22 However, output levels for the region re- lenge in monitoring development GDP per capita, current US$ 3835 5663 11022 mained below pre-pandemic levels at the progress. In Palau, the 2023-2024 house- LMIC poverty rate ($3.65) 40.8 a 6.1 b end of FY23. Economic activity is expected hold income expenditure survey is cur- Gini index a b to further expand in FY24 but downside rently concluding fieldwork and could be 40.1 35.5 risks to the outlook remain pronounced. used for poverty measurement. Source: WDI, World Bank, and official data. Notes: The actual year for the table data is 2023. In the short term, the key challenges in- Abbreviations: LMIC = Lower middle-income; clude (1) slower than expected recovery of FSM = Federated States of Micronesia; PLW = Palau; tourist arrivals (particularly in Palau); and MHL = Republic of the Marshall Islands; Estimates for poverty rates and Gini index do not exist for Palau. (2) higher than expected global food and Recent developments a/ Most recent value (2013), 2017 PPPs. fuel prices due to an escalation of geopolit- b/ Most recent value (2019), 2017 PPPs. ical tensions and conflict. After a period of volatility, growth in the The Compact of Free Association (COFA) Federated States of Micronesia (FSM) re- agreements approved by the United States bounded to 0.4 percent in FY23, supported Despite a rebound in activity in FY23 on March 9, 2024, will deliver a total of by the resumption of infrastructure pro- in the North Pacific, output remained US$6.5 billion in assistance to the three jects and an increase in national govern- below pre-pandemic levels. Inflation sub- North Pacific countries over the next 20 ment wages. Inflation reached a decade years starting in FY24. FSM will receive high of 6 percent reflecting the lagged ef- sided in FY23 in RMI but remained US$3.3 billion, RMI US$2.3 billion, and fects of elevated global commodity prices high in FSM and Palau. Poverty rates Palau $889 million. The renewed agree- and domestic supply constraints. FSM reg- are expected to decline in the coming ments mark a significant increase in finan- istered fiscal surpluses of 1.6 percent of years, contingent on continued growth. cial assistance for FY24, to normalize over GDP in FY23. Government debt declined the medium term as share of GDP. to 12.4 percent in FSM in FY23 and the risk The newly approved Compact of Free Even with the approval of the new Com- rating of overall debt distress improved Association (COFA) agreement with the pact, implementing reform-based fiscal ad- from high to moderate. United States will deliver US$6.5 bil- justments, such as domestic revenue mo- In the Republic of the Marshall Islands lion in assistance to the region over the bilization and expenditure rationalization, (RMI), output expanded by 3 percent due next 20 years. Structural reforms are remain crucial to enhancing fiscal sustain- to a revival in fisheries activity as well ability. Natural disasters and climate as strong demand for services. Inflation needed to boost long-term growth and change continue to pose a threat to eco- moderated to 3 percent from 5 percent in achieve fiscal sustainability. nomic activity and livelihoods. Structural FY22 as supply chain disruptions eased FIGURE 1 North Pacific Islands / Real GDP, relative to FIGURE 2 North Pacific Islands / Fiscal balance 2019 GDP Percent of GDP Percent of GDP 130 2 North Pacific 125 South Pacific 1.5 120 Central Pacific 1 115 110 0.5 105 0 100 95 -0.5 2023 2024 2025 90 Federated States of Micronesia Palau 2019 2020 2021 2022 2023 2024 2025 2026 2027 Republic of the Marshall Islands Sources: National sources, IMF WEO, and World Bank projections. Sources: National sources, EconMap, IMF WEO, and World Bank projections. Notes: 2019 GDP level is 100. South Pacific includes Tonga, Samoa, and Vanuatu. Central Pacific includes Kiribati, Nauru, and Tuvalu. MPO 24 Oct 24 leading to a reduction in food and fuel by the continued pick-up in public invest- 12 percent in FY24. GDP is projected to re- prices. A balanced budget was achieved ment and the increase in public sector main on a lower trajectory until tourist as COVID-19 related grants were with- wages. Inflation is expected to stabilize at arrivals reach pre-pandemic levels in drawn. At 21.6 percent of GDP debt re- 2.9 percent over the 2024-27 period. De- FY26. Inflation in Palau is expected to de- mains sustainable, but the overall risk of spite increased Compact funds, in the ab- crease to 3.1 percent in FY24 and decline debt distress is high. sence of structural reforms, the fiscal bal- further from FY25 onwards. A large fiscal In Palau, economic growth recorded 0.3 ance is projected to turn into a deficit in surplus of 1.9 percent of GDP is projected percent in FY23, as tourism activity picked FY25 and deteriorate thereafter. Further, for FY24, as tourism activity leads to an up due to arrivals from Macau. While in- the new revenue-sharing agreement, with increase in revenues. Modest fiscal sur- flation reduced from a peak of 13.2 percent an increased share of fishing revenues pluses are expected from FY25 onwards in FY22, it remained high at 10.8 percent and Compact funds allocated to States, is due to continued increases in tourism re- in FY23 due to high food and fuel import expected to put pressure on the Nation- ceipts and full implementation of the tax prices. A modest fiscal surplus of 0.3 per- al Government’s budget going forward. reform bill. cent of GDP was driven by increased con- The projected low growth trajectory re- Poverty is projected to decline in RMI and sumption tax collections. Debt remains flects low efficiency of public investment Palau from FY23 onwards as these sustainable but debt levels are high, at 75.7 and increasing outmigration. economies recover. A decline in poverty is percent of GDP at the end of FY23. In RMI, output is expected to grow by 3.4 also expected in FSM from FY23, though Poverty in FSM and Palau is expected to percent in FY24 mainly driven by contin- the real incomes of the poor have been sub- have risen between 2020-2022 relative to ued expansion of the fishery sector and ject to inflationary pressures. pre-crisis levels. However, in RMI, poverty strong construction activity financed by The outlook is subject to significant down- is estimated to have fallen marginally from Compact transfers. Economic activity is ex- side risks. High interest rates globally, al- 31 percent in 2020 (measured using the up- pected to reach pre-pandemic levels in beit declining, may create adverse per middle-income poverty rate ($6.85 in FY24. In line with easing global food and spillover effects. If growth in advanced 2017 PP)) to 30 percent in 2022 due to a fall energy prices, inflation in FY24 is expected economies is slower than anticipated, the in population driven by out-migration. to subside to 2.5 percent before further de- projected recovery in tourism may fail to clining to 2 percent from FY25 onwards. A materialize and weaken growth prospects fiscal surplus of 1.7 percent of GDP is pro- in Palau. Higher than expected global food jected for FY24 in RMI, with modest sur- and fuel prices could reignite inflationary Outlook pluses expected from FY25 onwards due to pressures. The region’s vulnerability to new Compact funding. natural disasters and climate change re- In FSM, the economy is projected to ac- In Palau, the recovery in tourism is project- mains an important underlying adverse celerate to 1.1 percent in FY24, supported ed to lead to a double-digit expansion of risk to economic growth. TABLE 2 North Pacific Islands / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2022 2023e 2024f 2025f 2026f 2027f Real GDP growth, at constant market prices Federated States of Micronesia -1.4 0.4 1.1 1.7 1.1 0.8 Republic of the Marshall Islands -0.6 3.0 3.4 4.0 3.2 2.4 Palau 0.0 0.2 12.0 11.0 3.5 2.0 Poverty rates of the Republic of the Marshall Islands a,b,c International poverty rate ($2.15 in 2017 PPP) 0.8 0.8 0.8 0.6 0.5 0.4 a,b,c Lower-middle income poverty rate ($3.65 in 2017 PPP) 5.6 4.9 4.6 3.8 3.6 3.5 a,b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 30.0 27.7 25.5 23.0 21.0 19.8 Sources: ECONMAP, IMF, and World Bank. Note: e = estimate; f = forecast. Values for each country correspond to their fiscal years ending September 30. a/ Calculations based on EAPPOV harmonization, using 2019-HIES. b/ Projection using neutral distribution (2019) with pass-through = 1 (High) based on GDP per capita in constant LCU. c/ For 2022-2025 projections, no change in population is assumed due to a lack of updated population projections. MPO 25 Oct 24 to be multidimensionally poor. Access to basic services remains limited, with only PAPUA NEW Key conditions and 19 percent of the population having ac- cess to safe drinking water, and a mere challenges GUINEA 15 percent of households having access to electricity, according to the 2022 Socio- Since gaining independence in 1975, the Demographic and Economic Survey. economy has more than tripled. However, Table 1 2023 real GDP per capita has only seen an annu- Population, million 10.3 al increase of 0.9 percent—a sluggish rate GDP, current US$ billion 30.4 compared to other lower middle-income Recent developments GDP per capita, current US$ 2942.7 resource-exporting nations. The growth International poverty rate ($2.15) a 39.7 trajectory has been marked by pronounced The post-COVID recovery was driven by a 67.7 fluctuations, reflecting high susceptibility significant improvement in international Lower middle-income poverty rate ($3.65) a to shifts in international commodity prices. prices of key export commodities, al- Upper middle-income poverty rate ($6.85) 90.2 a The inclusiveness of growth has been lim- though the shutdown of the Porgera gold Gini index 41.9 ited by the heavy reliance on capital in the mine limited the rebound of the extrac- b 109.5 School enrollment, primary (% gross) resource sector and the underperformance tive sector. The economy has recovered b 66.0 Life expectancy at birth, years of the non-resource sector. to pre-COVID output level but remains Total GHG emissions (mtCO2e) 53.4 Weak human development outcomes pre- below the pre-COVID growth trajectory. Source: WDI, Macro Poverty Outlook, and official data. sent missed opportunities for faster and Growth is estimated to have slowed to 2.7 a/ Most recent value (2009), 2017 PPPs. more inclusive economic growth. Papua percent in 2023, primarily due to mainte- b/ WDI for School enrollment (2018); Life expectancy (2022). New Guinea (PNG) has one of the highest nance in some extractive facilities. Mean- stunting rates in the world, affecting al- while, the non-extractive activity growth most half of all children under the age of is estimated to have exceeded 4 percent. five. Furthermore, 26 percent of youth (10 The reopening of the Porgera gold mine The growth momentum increased in 2024 to 29 year-olds) find themselves outside of in 2024 contributes to the above-average with the reopening of a major gold mine training, education, and employment. growth in 2024. (Porgera). The government has continued Weak governance compounds the difficul- The pandemic exacerbated underlying fis- implementing its fiscal consolidation plan ties in effectively addressing these chal- cal weaknesses, and the government has to safeguard macroeconomic stability. In- lenges, with external shocks exacerbating embarked on a gradual fiscal consolidation fragility-related risks. to safeguard debt sustainability. As the flation bottomed, while the Bank of PNG Large segments of the population con- economy recovered to pre-pandemic level, moved to greater exchange rate flexibility. tinue to lag in socio-economic develop- the government reduced the fiscal deficit To make the growth model more inclusive ment. The most recent Household Income from 8.8 percent of GDP in 2020 to 4.3 per- and reduce persistent high poverty, pru- and Expenditure Survey, from 2009, re- cent of GDP in 2023. Most of the improve- vealed that around 40 percent of the pop- ment came from resource revenue. In 2023, dent macroeconomic management, better ulation lived below the poverty line of total revenue increased by 1.4 percentage services, enabling business environment, US$2.15 per day (2017 PPP terms), and points of GDP relative to 2022, mostly dri- and stronger resilience are needed. a staggering 74.2 percent are considered ven by tax revenue and partly offset by FIGURE 1 Papua New Guinea / Real GDP growth and FIGURE 2 Papua New Guinea / Key fiscal and debt contributions to real GDP growth indicators Percent, percentage points Percent of GDP 6 60 5 50 4 40 3 2 30 1 20 0 10 -1 0 -2 -3 -10 -4 -20 2018 2019 2020 2021 2022 2023e 2024f 2025f 2026f 2017 2018 2019 2020 2021 2022 2023e 2024f 2025f 2026f Extractive sector Non-extractive economy Revenue Expenditure Real GDP growth Overall balance Public debt, net Source: World Bank staff estimates and forecast. Source: World Bank staff estimates and forecast. MPO 26 Oct 24 lower-than-expected dividend payments before rebounding to pre-pandemic levels settle at 3 percent. This projection does not from state-owned enterprises and entities by 2022. High-frequency mobile phone account for potential new resource mega- (foremost by Kumul Petroleum Holding). surveys conducted at the beginning of the projects, like Papua LNG. Thus, the final Meanwhile, the non-resource primary bal- pandemic found that food insecurity was investment decision and the initiation of ance(a better measure of the underlying higher than measured during the construction present an upside risk to the fiscal position unaffected by the volatile re- 2016-2018 Demographic and Health Sur- outlook. Meanwhile, slower-than-expected source revenue) did not improve between vey (DHS). By 2022, food insecurity and economic growth could materialize 2021 and 2023. employment had both rebounded in these through lower export demand, a more pro- Headline inflation decelerated from 6.3 surveys, and food insecurity rates were in- nounced decline in commodity prices, an percent in 2022Q3 to 0.1 percent in distinguishable from estimates in the impact on business confidence from politi- 2024Q2, year-on-year, mostly driven by 2016-2018 DHS. Nevertheless, phone sur- cal instability, and the impact of droughts lower prices for locally produced food veys conducted in 2023-2024, confirm that and other climate-related events. item (betelnut). Meanwhile, core inflation high levels of food insecurity remain a The growth model has not been suffi- stayed at 4 percent at end-2023, below the widespread issue. ciently inclusive and needs an adjust- historic average. Supported by an IMF- ment. There is evidence that the poverty funded program, the Bank of Papua New rate at the International Poverty Line Guinea (BPNG) allowed, since May 2023, of $2.15 (2017 PPP) hasn’t declined, im- gradual and moderate depreciation of ki- Outlook puted to be 39.3 percent based on the na to USD. From January 2024, BPNG 2016-2018 DHS, and is about four times implemented a crawl-like exchange rate Growth is projected to accelerate in higher than in countries with a similar arrangement. To ensure consistency with 2024-2025, mostly due to the reopening of per capita GDP. To change the situation, the new arrangement and keep inflation the Porgera gold mine. The mine restarted the country needs to focus on (1) ensur- expectations in check, the BPNG has operations in early 2024 and reached nor- ing prudent macroeconomic policy man- started to tighten its monetary policy. mal levels of production by mid-year, so it agement, (2) deepening and widening ac- Since February 2024, BPNG increased the is expected to boost growth dynamics for cess to quality services to build human policy rate by a cumulative 100 basis both years. Brief violence and looting in capital; (3) enabling private sector de- points, to 3 percent. January 2024 are likely to have had only a velopment for job creation and inclusive Monetary poverty likely increased during limited and temporary impact on the econ- growth; and (4) promoting resilience and theinitialphasesoftheCOVID-19pandemic omy. Medium-term growth is expected to environmental sustainability. TABLE 2 Papua New Guinea / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -0.8 5.2 2.7 4.6 3.7 3.4 Real GDP growth, at constant factor prices -1.0 5.8 2.7 4.6 3.7 3.4 Agriculture 1.1 3.1 4.2 3.8 3.5 3.4 Industry -7.8 5.6 -1.5 5.6 4.3 2.8 Services 4.4 7.1 5.5 4.2 3.3 3.9 Inflation (consumer price index) 4.5 5.3 2.3 4.1 4.8 4.8 Current account balance (% of GDP) 22.2 33.0 23.0 23.5 22.9 22.0 Net foreign direct investment inflow (% of GDP) -1.5 -1.2 -1.1 -1.3 -1.3 -1.3 Fiscal balance (% of GDP) -6.9 -5.3 -4.3 -3.7 -2.5 -1.3 Revenues (% of GDP) 15.2 16.7 17.7 18.3 18.5 18.8 Debt (% of GDP) 52.8 48.4 52.4 52.3 51.9 50.2 Primary balance (% of GDP) -4.4 -3.0 -1.8 -0.8 0.5 1.5 GHG emissions growth (mtCO2e) -1.0 0.1 0.1 0.1 0.0 0.0 Energy related GHG emissions (% of total) 13.0 12.9 12.8 12.6 12.4 12.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 27 Oct 24 execution will be crucial as the pace of public spending slows in line with the PHILIPPINES Key conditions and medium-term fiscal consolidation pro- gram. Sustained infrastructure and social challenges spending will hinge on the government’s ability to raise new revenues. Further Table 1 2023 Macroeconomic policies have become structural reforms, particularly in the com- Population, million 117.3 more supportive of growth amid mod- petition and regulatory space, will also be GDP, current US$ billion 437.1 erating household consumption and in- necessary to increase private investment GDP per capita, current US$ 3725.6 creasing external uncertainty. Higher and productivity. a 3.0 International poverty rate ($2.15) public consumption and investment a 17.8 spending have buoyed domestic demand Lower middle-income poverty rate ($3.65) a 55.3 as the government expedited programs Upper middle-income poverty rate ($6.85) Gini index a 40.7 and projects. The return of inflation to Recent developments School enrollment, primary (% gross) b 91.9 the target range has allowed the central b 72.2 bank to reduce the policy rate. Managing The economy expanded by 6.0 percent Life expectancy at birth, years price pressures will remain crucial to year-on-year in the first half of 2024 as Total GHG emissions (mtCO2e) 260.2 the shift toward a more accommodative a robust labor market and steady remit- Source: WDI, Macro Poverty Outlook, and official data. monetary policy. Facilitating commodity tance inflows underpinned household a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). imports plays an important role in con- consumption growth despite the higher taining food inflation as extreme weather cost of living. Private investment growth events continue to pose downside risks slowed, impacted by global uncertainty to domestic supply. External trade has re- and elevated interest rates, which damp- covered but remains weak given slowing ened lending for production activities. The growth momentum was sustained in growth in major economies along with Services remained the primary growth the first half of 2024 despite moderating increased macroeconomic and geopoliti- driver, led by wholesale and retail trade household consumption. Domestic de- cal uncertainty. Monetary policy easing and financial activities. Growth was mand was buoyed by higher public con- in major economies, including the US, buoyed further by the industry sector, could help stabilize global growth and supported by public construction, a mod- sumption and investment. Medium-term provide more space for monetary policy est recovery in manufacturing, and an in- growth is expected to average 6.0 percent normalization domestically. crease in goods exports. per year in 2024-2026, driven by robust In the longer term, strengthening disaster Headline inflation declined to 3.6 percent domestic demand, benefitting from ac- management and preparedness efforts will in the first eight months of 2024 (6.6 per- commodative monetary policy and an im- be key to increasing agricultural produc- cent in the same period in 2023) due to tivity and resilience to climate-related slower increases in the prices of energy, proving external environment. Poverty risks. Mitigating vulnerability to supply housing, and most food items. Howev- incidence decreased in 2023 and is pro- shocks will help keep inflation and interest er, rice price inflation remains elevated, jected to fall to 11.3 percent by 2026. rates low, supporting consumption and in- prompting the government to augment vestment spending. To maximize the im- domestic supply by lowering tariffs on pact of public spending, efficient budget rice imports. Underlying price pressures FIGURE 1 Philippines / Real GDP growth and contributions FIGURE 2 Philippines / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 16 70 250000 12 60 200000 8 50 4 150000 40 0 30 100000 -4 20 -8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 50000 10 2022 2023 2024 0 0 Household final cons. exp. Capital formation Government consumption Discrepancy 2009 2011 2013 2015 2017 2019 2021 2023 2025 Exports Imports International poverty rate Lower middle-income pov. rate Growth Upper middle-income pov. rate Real GDP pc Source: Philippines Statistics Authority. Source: World Bank. Notes: see Table 2. MPO 28 Oct 24 continued to ease as core inflation de- June 2023 to 3.1 percent in June 2024. How- spending. Meanwhile, the passage of sev- clined to 3.2 percent in January-August ever, underemployment has remained eral priority tax laws, improvements in tax 2024 (7.4 percent in the same period in steady at 12.1 percent in June 2024. administration, and an increase in divi- 2023). The BSP cut its key policy rate dend remittances by government-owned by 25 bps in August, as inflation has re- and controlled corporations is expected to mained on a target-consistent path and strengthen revenue collection. well-anchored inflation expectations. Outlook The continuous improvement in the labor The fiscal deficit stood at 4.9 percent of market and the easing of inflation will like- GDP in H1 2024, below the target of 5.3 The medium-term outlook remains favor- ly boost growth in household incomes. percent. The narrower deficit was driven able, averaging 6.0 percent in 2024-26. Poverty is expected to continue to decline by higher non-tax revenues from divi- Strong growth will be driven by robust do- but extreme climatic events pose risks. dend remittances by government-owned mestic demand, benefitting from more ac- Poverty incidence is projected to decrease and controlled corporations and steady commodative monetary policy, and sus- from 17.8 percent in 2021 to 13.6 percent in tax revenue growth. As a result, the na- tained public investment. Private con- 2024 and further decrease to 11.3 percent tional government debt remained largely sumption will remain as the main growth in 2026, using the World Bank’s poverty the same compared to the same period engine, supported by steady remittance in- line for lower-middle-income countries of last year. flows, a healthy labor market, and lower $3.65/day, 2017 PPP. Poverty incidence declined from 18.1 per- inflation. Improving investment activity Risks to the outlook remain tilted to the cent in 2021 to 15.5 percent in 2023. Despite will also support growth, as public invest- downside. On the external front, a slow- the overall decline, there were provinces ment will remain above 5.0 percent of GDP down in the global economy could weigh on with rising poverty, most of which were af- despite fiscal consolidation. Declining real growth through softer external demand. fected by extreme weather events like El interest rates will benefit both private in- Weaker-than-expected growth in China Nino and typhoons. The labor market is vestment and household consumption. would dampen growth, given significant consistently improving, suggesting that Meanwhile, external demand will continue trade linkages. On the domestic front, food household incomes may continue to rise to firm up over the forecast horizon, as security may be challenged given persis- and poverty levels to decrease. Robust do- global growth gradually improves over the tent weakness in agriculture output, espe- mestic activity led to the creation of 1.4 forecast horizon. cially in the presence of a stronger-than- million jobs in June 2024 compared to June The fiscal deficit is projected to fall to 4.6 expected episode of La Niña. Future com- 2023, primarily driven by increased em- percent of GDP by 2026. The lower deficit modity price shocks caused by geopolitical ployment in the construction, hospitality, will be driven by a reduction in public conflicts, an increase in trade restrictions, and transportation sectors. The unemploy- spending through improvements in and climate-related disasters remain the ment rate decreased from 4.5 percent in spending efficiency and cuts to current main downside risks. TABLE 2 Philippines / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.7 7.6 5.5 6.0 6.1 6.0 Private consumption 4.2 8.3 5.6 5.0 5.8 5.6 Government consumption 7.2 5.1 0.6 8.9 7.8 7.6 Gross fixed capital investment 9.8 9.8 8.2 7.8 8.1 8.7 Exports, goods and services 8.0 11.0 1.4 5.7 6.1 6.2 Imports, goods and services 12.8 14.0 1.0 5.6 7.5 7.7 Real GDP growth, at constant factor prices 5.7 7.6 5.5 6.0 6.1 6.0 Agriculture -0.3 0.5 1.2 0.5 1.0 1.1 Industry 8.5 6.5 3.6 4.2 4.4 4.5 Services 5.4 9.2 7.1 7.5 7.5 7.3 Inflation (consumer price index) 3.9 5.8 6.0 3.6 3.2 3.0 Current account balance (% of GDP) -1.5 -4.5 -2.6 -1.8 -1.4 -1.2 Net foreign direct investment inflow (% of GDP) 3.0 2.3 2.0 2.0 1.8 1.8 Fiscal balance (% of GDP) -8.6 -7.3 -6.2 -5.6 -5.2 -4.6 Revenues (% of GDP) 15.5 16.1 15.7 16.0 16.0 16.2 National Government Debt (% of GDP) 60.4 60.9 60.1 59.5 59.2 58.7 Primary balance (% of GDP) -6.4 -5.0 -3.6 -3.1 -2.2 -1.7 a,b International poverty rate ($2.15 in 2017 PPP) 3.0 2.5 2.2 1.9 1.7 1.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 17.8 16.0 14.9 13.6 12.5 11.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 55.3 52.8 51.1 49.3 47.3 45.4 GHG emissions growth (mtCO2e) 4.9 5.4 4.0 5.8 5.0 6.3 Energy related GHG emissions (% of total) 57.1 57.7 57.7 58.6 59.1 60.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on EAPPOV harmonization, using 2021-FIES. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 29 Oct 24 SOLOMON Key conditions and Recent developments challenges ISLANDS The economy returned to 3 percent growth in 2023, driven by the 2023 Pacific Games, Solomon Islands is a small, remote arch- election-related public spending, and a ipelago with 721,000 people scattered large number of construction projects. In- Table 1 2023 across 90 inhabited islands. Geographic creased international visitor arrivals had a Population, million 0.7 dispersion, remoteness from global mar- positive impact on the accommodation, GDP, current US$ billion 1.8 kets, and vulnerability to natural calami- restaurant, and transportation sectors. In GDP per capita, current US$ 2368.1 ties all provide substantial obstacles to 2024, growth is expected to reach 2.5 per- International poverty rate ($2.15) a 26.6 development. Limited state capacity and cent, driven by public investment. Data a 61.0 political economic dynamics frequently from high-frequency phone surveys indi- Lower middle-income poverty rate ($3.65) a impede the design and implementation cate that employment has largely remained Upper middle-income poverty rate ($6.85) 88.5 a of sound public policies. Poor infrastruc- unchanged in the first months of 2024. Gini index 37.1 ture, widespread underemployment, and Inflation reached 4.7 percent in 2023 and b 104.3 School enrollment, primary (% gross) a limited private sector pose significant dropped further to 3.6 percent in June 2024. b 70.7 Life expectancy at birth, years growth challenges. The Solomon Islands In March 2024, the Central Bank of Solomon Total GHG emissions (mtCO2e) 46.4 are particularly vulnerable to natural Islands (CBSI) maintained a tight monetary Source: WDI, Macro Poverty Outlook, and official data. calamities such as earthquakes, cyclones, policy stance, holding the cash reserve ratio a/ Most recent value (2012), 2017 PPPs. and tsunamis, which may cause signifi- at 6 percent. The financial sector remains rel- b/ WDI for School enrollment (2019); Life expectancy (2022). cant economic harm. atively stable, with well-capitalized banks The logging sector has historically been a and adequate liquidity levels. significant driver of growth in the The current account deficit reached 12.9 Solomon Islands, however, due to unsus- percent of GDP in 2023, due to a decline in The economy is expected to grow by tainable extraction the logging sector is in logging and agricultural exports. Foreign 2.5 percent in 2024, driven by national rapid decline, pointing to the need for new reserves fell from 9.5 months of imports in election related spending and public in- sources of growth. World Bank phone sur- 2022 to 8.4 months of imports by the end frastructure investments in the energy vey data collected in the first half of 2024 of 2023, still above the reserve adequacy and transportation sectors. In the medi- indicates that food insecurity remains ele- range of four to seven months of imports. vated, with about half the population be- The current account deficit was financed um term, growth is projected to aver- ing worried that they did not have enough through external concessional borrowing age 2.8 percent of GDP, which is ex- food to eat in the past 30 days and having and foreign direct investment inflows. pected to reduce poverty, while the fis- to skip a meal in the past 30 days. Accord- The fiscal deficit in 2023 is estimated at cal deficit is expected to average 2.9 ing to the 2012/13 Household Income and 5.5 percent of GDP. Total revenues ex- Expenditure Survey (HIES), 61 percent of panded slightly to reach 28.4 percent of percent of GDP. State fragility, climate the population was considered poor based GDP. The government managed to con- change, and subdued global economic on the lower-middle-income poverty line tain expenditure growth, despite facing conditions pose downside risks. ($3.65 per day in 2017 PPP). substantial spending demands, including FIGURE 1 Solomon Islands / Real GDP FIGURE 2 Solomon Islands / Fiscal balance Real GDP, Annual percent change Index (2019=100) Percent of GDP 4 160 0 3 140 -1 2 -2 120 1 -3 0 100 -1 -4 80 -2 -5 60 -3 Real GDP -6 Real GDP, Index (2019=100) (rhs) -4 40 2020 2021 2022 2023 2024 2025 2020 2021 2022 2023 2024 2025 2026 Structural budget balance Budget balance Sources: IMF and World Bank calculations. Sources: IMF and World Bank calculations. MPO 30 Oct 24 expenditures related to the Pacific Games channel. Inflation is projected to average reflects declining recurrent expenditure and election preparations. Expenditures 3.4 percent during 2024-2026 amid cooling and the normalization of development increased slightly to 33.8 percent in 2023, energy and food prices. Poverty is expect- grants after the pandemic and election explained largely by an increase in devel- ed to decline with projected economic preparations. Public debt is considered opment spending. Public debt increased growth and increasing remittances. The sustainable, and the external and overall to 18.8 percent of GDP in 2023, up from new HIES, which is to be collected in 2024/ risk of debt distress is moderate. 15.7 percent of GDP in 2022, due to a ris- 25, will help update the poverty measure. Subdued global economic conditions, cli- ing primary fiscal deficit. The current account deficit is projected mate shocks, low levels of cash buffers, to remain substantial, averaging 6.9 per- and social instability pose downside cent of GDP over the period of 2024-26. risks. An expansion of the tourism in- This is primarily due to increased im- dustry and increasing participation in re- Outlook port needs from infrastructure projects gional labor mobility programs may pro- and an expected decline in logging ex- vide economic benefits, while second or- The economy is expected to grow by 2.8 ports. International reserves are expect- der impacts of infrastructure investment percent in the medium term 2024–26. A ed to decline to 7 months of imports may drive a stronger recovery. Subdued large infrastructure pipeline and increased while remaining adequate. global economic conditions may lower mining activity are expected to offset a After reaching 3.4 percent of GDP in demand for commodity exports, particu- projected decline in logging. The labor mo- 2024, the fiscal deficit is projected to de- larly logs, with negative consequences for bility program is expected to contribute to cline over the medium term, reaching growth, the current account balance, and economic activity through the remittance 2.8 percent of GDP in 2026. This partly government finances. TABLE 2 Solomon Islands / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.6 2.3 3.0 2.5 2.9 2.9 Real GDP growth, at constant factor prices 2.6 2.3 3.0 2.5 2.9 2.9 Agriculture 3.4 3.3 1.8 1.2 2.0 1.8 Industry 1.5 1.0 5.0 6.5 4.5 4.5 Services 2.4 2.0 3.2 2.2 2.9 3.1 Inflation (consumer price index) -0.1 5.5 4.7 3.7 3.3 3.3 Current account balance (% of GDP) -6.0 -15.5 -12.9 -8.3 -7.1 -5.2 Net foreign direct investment inflow (% of GDP) 1.5 2.3 1.7 1.5 1.3 1.2 Fiscal balance (% of GDP) -3.6 -3.8 -5.5 -3.4 -2.6 -2.8 Revenues (% of GDP) 27.6 27.3 28.4 24.6 26.1 26.3 Debt (% of GDP) 15.1 15.7 18.8 21.7 24.5 27.1 Primary balance (% of GDP) -3.3 -3.6 -5.1 -2.9 -2.1 -2.3 GHG emissions growth (mtCO2e) 0.1 0.0 0.0 0.0 0.0 0.0 Energy related GHG emissions (% of total) 0.7 0.7 0.7 0.7 0.7 0.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 31 Oct 24 has been easing. The current account deficit narrowed significantly to 4 percent SOUTH PACIFIC Key conditions and of GDP in FY23 compared to 11.3 percent of GDP in FY22, primarily on account of challenges ISLANDS strong tourism earnings and remittances. The government recorded another year of Due to their high exposure to tourism and fiscal surplus of around 3 percent of GDP travel, the countries are susceptible to ex- in FY23, supported by buoyant revenue Table 1 WSM TON VUT ternal shocks such as those caused by collections and lower recurrent expenses. Population, million 0.23 0.11 0.33 COVID-19. Combined with the natural Unemployment has dropped from 14.5 GDP, current US$ billion 0.93 0.52 1.10 disasters, shocks have resulted in signifi- percent to 5.0 percent between 2017-2021, GDP per capita, current US$ 4114 4886 3323 cant setback in economic growth and fis- with youth unemployment (ages 15-24) LMIC poverty rate ($3.65) 10.5 a b 1.6 34.9 c cal sustainability. Supply bottlenecks, par- dropping from 31.9 percent to 13.4 percent, Gini index a b c ticularly in the aftermath of disasters, amid and informality dropping from 37.3 per- 38.7 27.1 32.3 heightened demand, including for recon- cent to 25.3 percent in the same period. Source: WDI, World Bank, and official data. Notes: The actual year for the table data is 2023. struction, continue to exert pressures on In Tonga, the economy grew by an esti- Abbreviations: LMIC = Lower middle-income; price and threaten livelihoods. Fiscal pol- mated 2.0 percent in FY23, up from near- WSM = Samoa; TON = Tonga; VUT = Vanuatu. icy should aim to support more adaptive zero growth in FY22, driven by household a/ Most recent value (2013), 2017 PPPs. b/ Most recent value (2021), 2017 PPPs. and targeted social protection systems consumption supported by remittances, c/ Most recent value (2019), 2017 PPPs. while continuing to build fiscal space to tourism recovery, and public sector invest- mitigate vulnerability to external shocks. ment. Inflation reached 10 percent in FY23 Finally, boosting potential growth through due to domestic supply disruptions, while increased investment will require imple- the current account deficit remained at 6.7 menting structural reforms that foster a percent as imports supported reconstruc- The economies of Samoa, Tonga, and conducive environment for business and tion. A fiscal surplus of 6 percent of GDP Vanuatu expanded in FY23, largely dri- the private sector. In the near term, this in- was recorded, mainly due to high grant ven by a resurgence in travel and recon- cludes ramping up reconstruction efforts inflows and slower reconstruction spend- struction activities while benefitting in Tonga and Vanuatu following recent ing. Poverty rates in 2021 were 1.6 percent from remittances. Although economies natural disasters. based on the lower-middle-income line and 21.5 percent using the upper-middle- are projected to recover to pre-pandemic income line. About half of households an- levels in 2024-25, uncertainties in the swering the World Bank phone surveys in global environment pose risks to the Recent developments early 2024 expressed concerns about their outlook to increase potential growth, financial status in the coming month. In Samoa, growth rebounded strongly by In Vanuatu, despite the impact of twin cy- governments must embark on structural 8 percent in FY23, following three consec- clones earlier in the year and growth ini- reforms that can boost investment, and utive years of economic contraction, fueled tially being downgraded, growth reached adapt fiscal policy to promote resilience by a strong pick up in tourism post border 2.2 percent in FY23. Economic activity was to mitigate future shocks. reopening and robust remittance inflows. mainly attributed to the industry and ser- Inflation surged to 12.0 percent in FY23 but vices sectors, especially as tourist arrivals FIGURE 1 South Pacific Islands / Overall fiscal balance FIGURE 2 South Pacific Islands / Inflation (annual average) Percent of GDP Percent 12 14 10 12 8 10 6 8 4 6 2 4 0 2 -2 Samoa Samoa -4 0 Tonga Tonga -6 -2 Vanuatu Vanuatu -8 -4 FY2017 FY2019 FY2021 FY2023 FY2025f FY2017 FY2019 FY2021 FY2023e FY2025f Sources: National sources and World Bank projections. Sources: National sources and World Bank projections. MPO 32 Oct 24 improved, reaching 65 percent of pre- subsided in FY24 to 3.6 percent and is FY24, driven by construction-related im- covid levels. In the agriculture sector, the expected to ease over the medium term. ports. The fiscal balance is projected to contraction from cyclone damage was less The current account balance is set to nar- remain in surplus at 3.5 percent of GDP severe than anticipated. Inflation is esti- row to a surplus of 2.3 percent of GDP, in FY24 due to high grant inflows and mated to have averaged 11.2 percent, supported by tourism and remittances, strong tax collection but may swing to a mainly owing to domestic supply chain amid a dip in imports. A fiscal surplus deficit in FY25 as grants normalize and disruptions caused by the cyclone impacts, of 10.2 percent of GDP is estimated for public spending stays elevated. With the minimum wage factors, and high food FY24 due to strong tax revenue and mod- projected steady economic growth, the prices, which could disproportionately af- est capital expenditure. However, a fiscal poverty rate measured with the upper- fect poorer households. A current account deficit of 1.0 percent of GDP is projected middle-income poverty line is likely to deficit of 2.2 percent of GDP is estimated, for FY25 due to an increase in spending decline to 16.0 percent in 2026. as pick up in remittances and tourism in- for the Commonwealth Heads of Govern- In Vanuatu, the economy faced a major creased demand for imports. A fiscal ment Meeting in October 2024. Poverty shock in 2024 with the liquidation of Air deficit of 3.6 percent of GDP was recorded, rates are likely to return to pre-pandemic Vanuatu, significantly impacting tourism an improvement from 2022, bolstered by levels in line with regional peers. and related sectors, as well as overall eco- strong Value Added Tax (VAT) revenue In Tonga, growth is projected at 1.8 per- nomic activity. Growth is projected at only amid delayed project spending. cent in FY24, due to a slowdown of agri- 0.9 percent in 2024, with a gradual recov- cultural production. Growth is expected to ery expected by 2025. Inflation is set to accelerate to 2.4 percent in FY25 due to moderate to 4.2 percent as supply bottle- strong domestic demand, public invest- necks ease. The current account deficit is Outlook ments, and a rebound in agriculture as El projected at 7.4 percent of GDP due to low- Niño effects fade. Headline inflation is an- er tourism receipts. The fiscal deficit is In Samoa, the economy is projected to ticipated to reach below the 5 percent ref- forecasted at 6.7 percent of GDP due to re- grow by a further 10.5 percent in FY24, fol- erence rate in FY24, driven by a steady de- duced non-tax revenues and increased liq- lowed by an average growth of 4.5 percent cline in core prices, and continue to sub- uidation-related expenditures. Poverty is in FY25 and FY26, driven by a tourism re- side. The current account deficit is fore- expected to rise to 48.5 percent by 2026 as bound and service sector growth. Inflation cast to widen to 7.4 percent of GDP in income growth remains weak. TABLE 2 South Pacific Islands / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices Samoa -7.1 -5.3 8.0 10.5 5.5 3.5 Tonga -1.3 0.1 2.0 1.8 2.4 2.0 Vanuatu -1.6 1.9 2.2 0.9 1.5 2.1 a,b Poverty rate Tonga (Upper middle-income poverty rate, $6.85 in 2017 PPP) 21.5 21.3 19.4 18.1 16.9 16.0 Vanuatu (Lower middle-income poverty rate, $3.65 in 2017 PPP) 42.4 43.8 44.4 46.1 47.5 48.5 Sources: World Bank and IMF. Notes: e = estimate; f = forecast. Financial years for Samoa and Tonga are July-June, for Vanuatu it is January-December. Samoa improved the methodology for GDP calcula- tion and revised the historical data in March 2022 GDP release. a/ Calculations based on EAPPOV harmonization, using 2021-HIES for Tonga and 2019-NSDP for Vanuatu. b/ Projection using neutral distribution with pass-through = 1 (High) based on GDP per capita in constant LCU. MPO 33 Oct 24 poverty reduction in the short term, struc- tural challenges and risks remain. Finan- THAILAND Key conditions and cial stress associated with high levels of household debt persist and the escalating challenges impact of climate events on low-income households remain significant obstacles to Table 1 2023 Stronger goods export growth, expansion poverty reduction. Population, million 71.8 in private consumption, and tourism re- GDP, current US$ billion 515.0 covery contributed to a modest pickup in GDP per capita, current US$ 7172.1 growth. Fiscal spending accelerated after Upper middle-income poverty rate ($6.85) a 12.2 a seven-month delay. The severe flood in Recent developments a 34.9 northern Thailand damaged agricultural, Gini index b 99.7 fishery, and livestock areas, potentially In Q2 2024, the economy expanded 2.3 per- School enrollment, primary (% gross) Life expectancy at birth, years b 79.7 putting pressure on food prices. The up- cent (year-on-year), slightly higher than Total GHG emissions (mtCO2e) 480.2 side risk to growth has risen with the in- 1.6 percent in the previous quarter. On a creasing likelihood of the digital wallet quarterly basis, GDP increased by 0.8 per- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2021), 2017 PPPs. program, a large-scale cash handout cent (seasonally adjusted). Growth was b/ WDI for School enrollment (2023); Life expectancy scheme targeting more than 45 million cit- boosted by sustained expansion in private (2022). izens, being implemented. If well targeted consumption, and tourism recovery. Man- at vulnerable households, they could boost ufacturing output turned slightly positive domestic consumption in the short term for the first time in seven quarters. In con- but will add pressure to the public debt. trast, private and public investment con- The goods exports recovery lagged most tracted sharply. There was a significant While lagging ASEAN peers, Thai- major Asian exporters. The goods trade rundown of inventory amidst both exter- surplus remained below pre-pandemic nal and domestic uncertainties. Goods ex- land’s real GDP growth is projected to level, driven by persistently high oil im- ports recovery remained slow. Thailand's accelerate to 2.4 percent in 2024, driven port bills and a rising trade deficit with recovery continued to lag ASEAN peers by the recovery of private consumption China. Weak Chinese demand and in- and post-covid growth averaged 2.1 per- and tourism. Inflation remains subdued creasing imports, induced by trade di- cent, well below the pre-pandemic average version due to the US-China tensions, of 3.4 percent (2015-2019). amid still sluggish domestic demand. were the drivers. In July, headline inflation reached 0.8 per- Poverty is projected to decline to 8.2 In the medium term, potential growth is cent, marking the second lowest rate percent in 2024, supported by accelerat- facing headwinds from structural chal- among emerging markets, trailing only ing growth, easing inflation. While con- lenges such as aging and slowing produc- behind China. Energy prices increased sumption stimulus may boost short- tivity growth. Poverty has declined, but due to the gradual reduction of subsidies, the pace is slowing due to sluggish growth despite falling global oil prices. Food in- term growth, structural reforms are in household incomes and difficulties in flation remained elevated. Core inflation needed to elevate long-term growth. reaching the remaining poor. While con- remained subdued at 0.5 percent, below sumption-stimulus measures targeted at the pre-pandemic average of 0.7 percent low-income households can support from 2016-2019, reflective of the lingering FIGURE 1 Thailand / Real GDP growth and contributions to FIGURE 2 Thailand / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 8 40 180000 6 160000 35 4 140000 30 2 120000 25 0 100000 20 -2 80000 15 -4 60000 10 40000 -6 5 20000 -8 2017 2018 2019 2020 2021 2022 2023 2024f 2025f 2026f 0 0 Private consumption Government consumption 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. Note: *Includes statistical discrepancy. MPO 34 Oct 24 output gap. The Bank of Thailand kept (based on the upper middle-income central bank’s target range, due to the the policy rate unchanged at 2.5 percent poverty line of 6.85 dollars a day, 2017 PPP) moderation in food and energy prices in anticipation of inflation returning to was estimated to have declined from 12.2 and a negative output gap. The fiscal its target range (1-3 percent) by end-2024 percent to 9.4 percent during 2021-2023. deficit is projected to narrow in FY24 amid continued economic recovery. Pub- due to the budget delay, before widening lic debt reached 63.5 percent of GDP. In in FY25 to 3.3 percent of GDP as budget August, the Thai baht appreciated due to execution normalizes, in line with the expectations of the Fed’s easing cycle and Outlook government’s medium-term fiscal frame- a current account surplus. work. The flagship Digital Wallet, which Unemployment remained low at 1.1 per- Growth to accelerate from 1.9 percent in is not yet included in the baseline, could cent in Q2 2024, unchanged from the pre- 2023 to 2.4 percent in 2024. Growth in the potentially boost near-term growth fur- vious year. Non-farm employment picked second half of the year is expected to im- ther by 0.5-1.0 percentage points at a up over the past year, with the economy prove further with support from the ac- substantial fiscal cost of THB 450 billion adding 180,000 manufacturing jobs and celeration of budget execution and goods (2.4 percent of GDP). 230,000 service jobs. Despite the robust la- exports. Tourism and private consump- Poverty is projected to decline to 8.2 per- bor market, household income grew at a tion will remain the key drivers this year, cent in 2024, supported by accelerating modest rate of 3 percent per year dur- but the pace is slowing. Tourism is pro- growth and easing inflation. The one-time ing 2021-2023. Household debt levels de- jected to return to pre-pandemic levels in cash transfer to 14.6 million state welfare clined in 2023 but remained high at near- mid-2025. Goods exports are expected to cardholders, if implemented in 2024, is ly seven times the average household in- grow 2.4 percent this year in value of expected to further enhance poverty re- come. Sluggish income growth, high in- USD term, due to favorable global trade duction efforts. However, ongoing flood flation, and financial stress put pressure despite the slowing Chinese economy. In damage may offset some of these gains. on real household consumption, which 2025, growth is projected to accelerate to In the medium term, sustainable progress on average grew by a mere 1 percent 3.0 percent boosted by private consump- in poverty reduction will depend on ad- per year during 2021-2023. Consumption tion and an investment rebound. dressing structural challenges to improve of low-income households grew slightly Headline inflation will slow to a regional labor income and maintain support for faster, and the poverty headcount rate low of 0.7 percent in 2024, below the vulnerable populations. TABLE 2 Thailand / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.6 2.5 1.9 2.4 3.0 2.9 Private consumption 0.6 6.2 7.1 3.9 3.2 2.8 Government consumption 3.7 0.1 -4.6 1.6 3.1 1.8 Gross fixed capital investment 3.1 2.3 1.2 -1.5 2.8 2.8 Exports, goods and services 11.1 6.1 2.1 4.3 3.9 3.0 Imports, goods and services 17.8 3.6 -2.3 3.2 4.1 2.5 Real GDP growth, at constant factor prices 1.9 3.2 1.9 2.4 3.0 2.9 Agriculture 2.5 1.4 2.0 1.5 2.0 2.4 Industry 6.0 3.6 -2.3 1.2 2.7 3.6 Services -0.3 3.1 4.3 3.1 3.2 2.6 Inflation (consumer price index) 1.2 6.1 1.2 0.6 1.3 1.2 Current account balance (% of GDP) -2.0 -3.2 1.9 2.5 3.6 4.0 Net foreign direct investment inflow (% of GDP) -0.8 0.7 -1.4 -1.1 -1.2 -1.1 Fiscal balance (% of GDP) -6.7 -4.4 -2.0 -1.3 -3.3 -3.1 Revenues (% of GDP) 19.8 19.8 20.8 20.9 21.1 21.5 Debt (% of GDP) 57.7 59.7 62.1 63.1 64.9 66.6 Primary balance (% of GDP) -5.4 -3.1 -0.8 -0.1 -2.1 -1.9 a,b International poverty rate ($2.15 in 2017 PPP) 0.0 0.0 0.0 0.0 0.0 0.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.6 0.4 0.3 0.2 0.1 0.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 12.2 10.5 9.4 8.2 6.8 5.7 GHG emissions growth (mtCO2e) 2.7 1.6 1.9 1.1 2.7 3.0 Energy related GHG emissions (% of total) 53.7 53.0 52.5 51.3 50.4 49.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on EAPPOV harmonization, using 2016-SES and 2021-SES. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using annualized elasticity (2016-2021) with pass-through = 1 based on GDP per capita in constant LCU. MPO 35 Oct 24 as of 2021, leaving many workers vulnera- ble to economic shocks. Public sector jobs TIMOR-LESTE Key conditions and have become increasingly dominant due to low job creation in the private sector. challenges Table 1 2023 Timor-Leste's economy remains heavily Population, million 1.4 dependent on public expenditure, with Recent developments GDP, current US$ billion 1.7 limited private sector development. This GDP per capita, current US$ 1275.9 lack of economic dynamism has con- Preliminary government estimates sug- a 24.4 International poverty rate ($2.15) tributed to low growth, a stagnant labor gest slower economic growth in 2023, at a 69.2 market, and significant external imbal- 2.3 percent, down from 2.9 percent in Lower middle-income poverty rate ($3.65) a 28.7 ances. From 2013 to 2022, Timor-Leste's 2021. This slowdown is largely attributed Gini index School enrollment, primary (% gross) b 110.7 economic growth averaged just 1.1 per- to subdued budget execution during the Life expectancy at birth, years b 69.1 cent, a steep decline from the 4.9 percent government transition period between Total GHG emissions (mtCO2e) 6.0 growth observed in the decade following May and October. Budget revisions and independence (2003-2012). Additionally, extensive government restructuring have Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2014), 2017 PPPs. other contributing factors include political likely disrupted public spending. How- b/ WDI for School enrollment (2020); Life expectancy instability and global disruptions caused ever, increased private consumption, sup- (2022). by the COVID-19 pandemic and Cyclone ported by remittance inflows, helped sus- Seroja, which collectively undermined tain economic activity. The trade deficit earlier progress. remained large but grew more slowly, Growth slowed in 2023 due to low budget The Petroleum Fund, the primary source bolstered by gains in the services sector execution during the government transi- of funding for the state budget, is project- from increased foreign visits during and ed to be fully depleted within the next after the election period. Nonetheless, tion. Inflation fell to 3.4 percent in early decade due to the cessation of production limited domestic production continues to 2024, driven by non-food prices, though at the Bayu-Undan field in 2023 and with- drive up imports to meet demand for food prices remain high. Labor market drawals exceeding sustainable levels. This both consumption and investment. challenges persist with declining partici- situation poses a significant sustainability Headline inflation decreased to 3.4 percent pation, productivity, and wages. Growth risk for the country, requiring urgent al- yoy in the first half of 2023, down from ternative funding sources; otherwise, sig- 9 percent during the same period in 2022. is expected to average 3.5 percent from nificant spending cuts will be unavoid- While non-food prices fell, food and non- 2024-2026, led by government spending. able which could lead to sharp decline in alcoholic beverage prices rose by an aver- Key risks include adverse weather, geopo- public service delivery. age of 7 percent, impacting overall infla- litical tensions, and limited government The impact of recent developments on tion given that food constitutes over half poverty remains uncertain due to a lack of the CPI consumption basket. The appre- absorptive capacity. Structural reforms of updated data, but there are worrying ciation of the US dollar (legal tender) also and fiscal consolidation are essential for signs. Stagnant labor force participation helped ease inflationary pressures. sustainable growth. and decreased productivity persist, with Despite steady growth in tourism-related 77 percent of employment being informal service exports declines in oil, gas, and FIGURE 1 Timor-Leste / Real GDP growth and contributions FIGURE 2 Timor-Leste / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 80 90 1600 60 80 1400 40 70 1200 60 20 1000 50 0 800 40 -20 600 30 -40 20 400 10 200 -60 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0 Gov. cons. Exports GFCF 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 36 Oct 24 coffee production have narrowed the ex- and lowering costs for the private sector. impact of high inflation over the past two port base even further, exacerbating ex- Without significant fiscal reforms, the fis- years has been significant, particularly for ternal imbalances. Imports remain high cal deficit is projected to remain at around the poor and vulnerable populations. due to limited domestic production, with 47.9 percent of GDP over the medium However, the effect of recent develop- the trade deficit widening from 34 per- term, with additional withdrawals from ments on poverty remains uncertain, cent in 2022 to 43 percent in 2023. The the Petroleum Fund continuing to be the pending the results of a new Living Stan- same trend continued into the first half of primary financing source. dards Survey scheduled for 2024. 2024. Timor-Leste's recent accession to the The current account balance is anticipat- The outlook is subject to several downside WTO offers potential to enhance interna- ed to remain in deficit. On the upside, risks, including adverse weather events tional market access and foster partner- increases in tourism and remittance in- and rising food and energy prices due to ships that could accelerate development. flows, spurred by Timor-Leste's ASEAN geopolitical tensions. Low government ab- accession and other high-profile events, sorptive capacity and inefficient invest- are projected to support economic ments pose a downside risk to the project- growth. However, growth in non-oil and ed economic growth. Outlook gas exports will likely remain constrained Timor-Leste should implement long-over- due to the limited export base, still dom- due reforms. The current government, The economy is projected to continue its re- inated by coffee. The ongoing challenges with its strong mandate and a period of covery, with growth of around 3 percent ex- of limited domestic production will con- relative stability, could seize this moment pected in 2024, accelerating to an average of tinue to drive demand for imports, wors- to set the country on a path toward sus- 3.8 percent during 2025-2026. Government ening external imbalances. tainable and diversified growth. Achieving expenditure will remain the main driver of Inflation is expected to decrease to 3.3 per- a 5 percent growth target will depend on this growth. Higher budget execution, cent in 2024, driven by lower global com- policies that support a more resilient econ- above historical averages, will be necessary modity prices, particularly food, and the omy. Structural reforms and fiscal consol- to achieve these targets. At the same time, strengthening US dollar. This trend is ex- idation are paramount and must be ad- more efficient public investments are crucial pected to continue through 2025 and 2026. dressed concurrently to ensure long-term to addressing infrastructure deficiencies Despite the overall decline, the cumulative sustainability and development. TABLE 2 Timor-Leste / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 2.9 4.0 2.3 3.0 3.5 4.0 Private consumption -2.7 14.0 3.0 4.8 4.9 5.0 Government consumption 2.9 -0.2 3.1 0.5 0.5 1.4 Gross fixed capital investment -6.1 29.4 2.8 13.9 12.3 10.8 Exports, goods and services 79.3 30.3 4.5 4.0 2.5 2.5 Imports, goods and services -9.0 22.8 4.3 6.0 5.0 5.0 Real GDP growth, at constant factor prices 3.9 3.8 2.4 3.0 3.5 4.0 Agriculture 5.5 5.4 1.6 2.9 2.9 2.9 Industry -14.0 38.2 -10.4 2.4 2.4 2.4 Services 4.0 2.6 3.0 3.0 3.7 4.3 Inflation (consumer price index) 3.8 7.0 8.4 3.3 2.8 2.5 Current account balance (% of GDP) 9.7 16.3 -21.4 -46.7 -51.4 -55.4 Net foreign direct investment inflow (% of GDP) 4.4 1.7 1.7 1.7 1.7 1.6 a Fiscal balance (% of GDP) -47.0 -60.7 -44.0 -47.1 -46.5 -49.8 Revenues (% of GDP) 45.5 43.4 42.3 39.6 38.3 35.6 Debt (% of GDP) 15.2 15.2 15.3 14.9 14.3 14.0 Primary balance (% of GDP) -46.8 -60.5 -43.7 -46.9 -46.3 -49.7 b,c International poverty rate ($2.15 in 2017 PPP) 28.8 27.8 27.4 26.8 25.9 24.9 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 72.9 72.1 71.9 71.3 70.7 69.9 GHG emissions growth (mtCO2e) 0.5 -0.9 -1.9 -2.3 -2.2 -1.9 Energy related GHG emissions (% of total) 10.1 10.6 11.4 12.3 13.3 14.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ The ESI is part of total revenue, while excess withdrawals from the PF is a financing item. b/ Calculations based on EAPPOV harmonization, using 2007-TLSLS and 2014-TLSLS. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. c/ Projection using annualized elasticity (2007-2014) with pass-through = 1 based on GDP per capita in constant LCU. MPO 37 Oct 24 prices as outbreaks of African swine fever affected pork prices, a main food item. VIET NAM Key conditions and Core inflation continued to decline, falling to 2.6 percent y/y in June 2024 from 4.3 per- challenges cent y/y in June 2023. Credit growth improved after a sluggish Table 1 2023 While Viet Nam is expected to revert to start to 2024, reaching 13.5 percent y/y by Population, million 98.9 higher growth after several years of global end-June, below the 15 percent target of GDP, current US$ billion 429.7 economic turbulence thanks to a rebound the State Bank of Viet Nam (SBV)—driven GDP per capita, current US$ 4346.8 in global trade, bank asset quality remains by demand from manufacturing, trade, a 1.0 International poverty rate ($2.15) a concern amid increasing non-performing and real estate. At the same time, NPLs a 4.2 loans (NPLs) as provisioning for loan loss- have grown from 1.9 percent in 2022 to Lower middle-income poverty rate ($3.65) a 19.7 es appears uneven among banks. 4.6 percent of total loans in 2023—largely Upper middle-income poverty rate ($6.85) Gini index a 36.1 Viet Nam remains highly vulnerable to ex- due to the recognition of bad debts held by School enrollment, primary (% gross) b 123.1 ternal shocks given its dependence on ex- Saigon Joint Stock Commercial Bank—and b 74.6 ports and foreign direct investments. In the could rise further with the end of the for- Life expectancy at birth, years medium to long term, the country faces bearance measures in December 2024. Total GHG emissions (mtCO2e) 505.4 structural challenges that could limit its Viet Nam’s external position deteriorated Source: WDI, Macro Poverty Outlook, and official data. growth potential including infrastructure due to increased unrecorded capital out- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). gaps, environmental deterioration, low flows. Continued interest rate differen- productivity in the domestic economy, and tials and the strengthening of the US dol- aging population. lar in H1-2024 exacerbated capital out- flow. Seeking another investment instru- ment, domestic demand for gold sharply increased which, combined with supply Recent developments controls, led to a substantial price premi- Viet Nam’s real GDP is expected to grow um that fueled informal gold imports and by 6.1 percent in 2024, driven by a re- Real GDP grew by 6.4 percent y/y in capital outflow. H1-2024, reflecting a rebound in exports The SBV responded to emerging ex- bound in manufacturing and services ex- and higher domestic demand. Merchan- change rate pressures through a combina- ports. Domestic demand is growing more dise exports increased by 16.9 percent y/y tion of gradual devaluation, FX interven- gradually, reflecting an ongoing recovery in H1-2024, fueled by stronger US demand, tions, and tighter liquidity. The SBV de- in consumer and investor confidence. supporting manufacturing and export-ori- preciated the central rate by 1.2 percent Poverty is expected to decline from 3.9 ented services. Meanwhile, consumer between January and June 2024, allowing spending and private investments are re- the market rate to depreciate further by percent in 2023 to 3.6 percent in 2024. covering at a slower pace, with growth be- 3.6 percent in the same period. It used Risks to the outlook are broadly balanced. low pre-pandemic rates, affected by low foreign exchange interventions, with re- consumer and investor confidence. serves estimated to have fallen to around Headline inflation increased to 4.3 percent 2.7 months of imports. Tighter liquidity y/y by June 2024 due to elevated food starting in March 2024 led to average FIGURE 1 Viet Nam / Real GDP growth and contributions to FIGURE 2 Viet Nam / Actual and projected poverty rates real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 12 90 80.0 80 70.0 9 70 60.0 6 60 50.0 50 3 40.0 40 30.0 0 30 20 20.0 -3 10.0 10 2013 2015 2017 2019 2021 2023 2025f Private consumption Government consumption 0 0.0 Gross capital formation Net exports 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Change in inventories Statistical discrepancy 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 Table 2. MPO 38 Oct 24 overnight interest rates rising from 0.9 quality were to weaken further, bank percent in March to 2.8 percent in June. lending capacity could be undermined Fiscal balances registered a large surplus Outlook weighing on investment growth. Viet of 4.2 percent in H1-2024, from 1.5 percent Nam also remains vulnerable to inten- in H1-2023, due to higher public revenues Growth is forecast at 6.1 percent in 2024, sifying climate-related natural disasters. and reduced public spending. Public rev- rising to 6.5 percent in 2025 and 2026, On the upside, stronger-than-expected enues climbed to 19.5 percent of GDP in reflecting expected continued export global growth could spur further Viet- H1-2024 (+1pp compared to H1-2023) with growth and improvements in investor namese exports. A more accommodative CIT, VAT, and land sales revenue increas- and consumer sentiment. Headline infla- monetary policy in major advanced ing. Public expenditures lowered to 15.4 tion is forecast to reach 4.5 percent in economies could contribute to an easing percent of GDP (-1.5pp) due to lower cap- 2024 following continued food price in- of global financing costs, with positive ital expenditures. Only 29 percent of the creases, before decelerating to 3.5 (Table spillovers into the banking and financial approved budgeted expenditure for 2024 2) percent by 2026. Poverty is expected sector in Viet Nam. was implemented by end-June, driven by to continue declining and reach 2.9 per- In the short term, should downside risks slow disbursement of investments due to cent by 2026 at the LMIC line. The cur- to growth materialize and given limited delays in land clearance, scarce raw mate- rent account balance is projected to regis- room for additional monetary support, rials, and regulatory constraints. ter a small surplus during 2025-2026, dri- accelerating disbursement of public in- Poverty rates using the lower middle-in- ven by the continued growth of goods vestment would support aggregate de- come country (LMIC) line of $3.65 PPP exports with contributions from tourism mand. To mitigate financial sector risks (and the upper middle-income country and transport services. The government is and vulnerabilities, the authorities could line of $6.85 PPP) are expected to continue expected to maintain a tight fiscal poli- encourage banks to improve capital ad- their decline and are now below pre-pan- cy especially as the economy returns to a equacy ratios and strengthen the insti- demic levels. Despite stabilized unemploy- higher-growth path. tutional framework for prudential super- ment and underemployment rates, rising The risks to the outlook are balanced. vision and early interventions. Structural food prices pose a risk to household pur- Among downside risks, the main uncer- reforms—including in education and chasing power, particularly for lower-in- tainties stem from slower-than-expected business environment to enhance produc- come households. Real income has been global growth, including from the Unit- tivity and competitiveness of the domes- muted since 2022, inching up 2.7 percent ed States, European Union, and Chi- tic economy, and vertical upgrading into annually on average, below pre-pandemic na, and a slower recovery of the real high-value activities for trade—will be growth rates of 8.4 percent. estate sector. If banking sector asset critical to long-term growth. TABLE 2 Viet Nam / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.6 8.1 5.0 6.1 6.5 6.5 Private consumption 2.2 7.7 3.5 5.3 5.9 5.9 Government consumption 4.5 3.6 3.8 5.5 5.4 5.4 Gross fixed capital investment 2.8 5.6 4.1 6.8 7.0 7.2 Exports, goods and services 13.9 6.2 -2.5 11.4 7.4 8.0 Imports, goods and services 15.8 3.3 -4.3 11.7 7.0 7.7 Real GDP growth, at constant factor prices 2.6 8.4 5.2 6.1 6.5 6.5 Agriculture 3.7 3.5 3.8 3.0 3.0 3.0 Industry 3.2 7.9 3.7 8.3 8.0 7.9 Services 1.7 10.1 6.8 5.1 6.0 6.2 Inflation (consumer price index) 1.8 3.1 3.2 4.5 4.0 3.5 Current account balance (% of GDP) -2.2 0.3 5.8 0.9 1.0 1.0 Net foreign direct investment inflow (% of GDP) 4.2 3.7 4.7 4.4 4.4 4.4 Fiscal balance (% of GDP) -1.4 0.7 -1.4 -0.8 -0.4 -0.2 Revenues (% of GDP) 18.8 19.1 17.2 17.2 16.8 16.4 Debt (% of GDP) 38.7 34.0 37.0 36.2 34.2 32.3 Primary balance (% of GDP) -0.2 1.7 -0.6 0.1 0.4 0.6 a,b International poverty rate ($2.15 in 2017 PPP) .. 1.0 0.9 0.8 0.7 0.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 4.2 3.9 3.6 3.2 2.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 19.7 18.7 17.5 16.3 15.1 GHG emissions growth (mtCO2e) -1.7 6.1 4.2 5.2 5.9 5.6 Energy related GHG emissions (% of total) 63.1 63.9 63.9 64.1 64.2 64.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on EAPPOV harmonization, using 2016-VHLSS, 2020-VHLSS, and 2022-VHLSS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using annualized elasticity (2016-2020) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 39 Oct 24 Europe and Central Asia Albania Kazakhstan Russian Federation Armenia Kosovo Serbia Azerbaijan Kyrgyz Republic Tajikistan Belarus Moldova Turkey Bosnia and Herzegovina Montenegro Ukraine Bulgaria North Macedonia Uzbekistan Croatia Poland Georgia Romania MPO 41 Oct 24 the EU accession aspiration, and built on reforms tackling productivity, includ- ALBANIA Key conditions and ing improving the business environment, and expanding Albania’s integration into challenges foreign markets. Table 1 2023 The Albanian economy has shown consid- Population, million 2.8 erable resilience as prudent macroeconom- GDP, current US$ billion 23.0 ic policies supported a strong economic re- Recent developments GDP per capita, current US$ 8300.4 bound, with real GDP growth averaging a 3.9 International poverty rate ($2.15) 4.2 percent in 2022 and 2023. A key factor Following a 3.4 percent real growth rate in a 11.3 in Albania’s resilience has been the prox- 2023, Albania’s economy grew at a higher Lower middle-income poverty rate ($3.65) a 34.2 imity to the EU, a key source of investment pace of 3.6 percent in Q1 of 2024. On the Upper middle-income poverty rate ($6.85) Gini index a 36.0 and remittances, and a main destination supply side, growth was primarily driven School enrollment, primary (% gross) b 95.6 for exports. Tourism remains a key growth by services and construction. Private con- b 76.8 driver, helping to improve external imbal- sumption and investment were the main Life expectancy at birth, years ances and partially contributing to a drivers on the demand side. In the coming Total GHG emissions (mtCO2e) 7.9 steady appreciation of the LEK in recent quarters, investment and services exports Source: WDI, Macro Poverty Outlook, and official data. years. The availability of hydropower, are expected to strengthen. Economic sen- a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). which meets 85 percent of domestic energy timent remains positive (Figure 1), though demand in years with average precipita- showing signs of moderation. tion, has contributed to containing the At the end-2023, the employment rate country’s greenhouse gas emissions. reached 66.7 percent with variation across Albania’s key development challenges are demographics, with a 0.7 percentage point its declining population, partially due to increase for men and 0.3 percentage point Growth in 2024 is expected to remain ro- outmigration; the poor quality of the labor decrease for women. Overall, poverty de- bust at 3.3 percent, on the back of private force and the low quality of jobs created; clined by 1.9 percentage points to reach consumption, tourism, and construction. the moderate pace of structural reforms, 21.7 percent. Based on administrative data especially in the areas of private sector en- for Q1 2024, employment grew by 1.1 per- Price pressures have continued to ease. vironment and governance; and rising fis- cent y-o-y, driven by the private sector. Poverty is expected to continue to decline cal pressures, due to climate risks, contin- The average private sector wage increased as labor income increases. Medium-term gent liabilities and debt refinancing at a by 12.7 percent, reflecting growth across prospects hinge on the recovery of the time of the high cost of external financing. all economic activities. global economy and on the pace of struc- To create the needed fiscal space and ad- Annual inflation rate continued its declin- dress these challenges, Albania will need ing trend, averaging around 2.7 percent tural reforms. The European Union (EU) to implement a Medium-Term Revenue in Q1 of 2024, as a result of downward accession aspirations provide an anchor Strategy to strengthen domestic rev- pressures from lower import prices, do- to speed up convergence. enues. Unlocking further growth is con- mestic currency appreciation, and mone- ditional on the swift implementation of tary policy normalization. In the subse- the government’s program, anchored in quent months up to July 2024, inflation FIGURE 1 Albania / Economic sentiment index (ESI) and FIGURE 2 Albania / Actual and projected poverty rates and GDP growth real GDP per capita Real GDP Growth (percent, y/y,not sa) ESI Poverty rate (%) Real GDP per capita (constant LCU) 20 140 45 800000 15 120 40 700000 35 600000 10 100 30 500000 5 80 25 400000 0 60 20 300000 15 -5 40 200000 GDP growth (lhs) 10 -10 20 5 100000 ESI (rhs) 0 0 -15 0 2016 2018 2020 2022 2024 2026 M 17 M 18 M 19 M 20 M 21 M 22 M 23 Se 7 Se 8 Se 9 Se 0 Se 1 Se 2 Se 3 4 International poverty rate Lower middle-income pov. rate -1 -1 -1 -2 -2 -2 -2 -2 p- p- p- p- p- p- p- ar ar ar ar ar ar ar ar Upper middle-income pov. rate Real GDP pc M Sources: Instat and Bank of Albania. Source: World Bank. Notes: see Table 2. MPO 42 Oct 24 has remained stable at around 2.1 per- (FDI) continued to perform strongly, in- from 2024 onwards. Government plans to cent, mainly driven by wage increases in creasing by 8.5 percent. Foreign currency continue improving tax administration, as the private sector, while food and non-al- reserves reached the level of 5.7 billion envisioned in the Medium-Term Revenue coholic beverages, which constitute close Euros as of July 2024. Strategy. Public debt is expected to decline to 35 percent of the consumption basket, further in the medium term. had a deflationary trend. Leading indicators are pointing upwards: As of July 2024, the government reported there is strong tourism data and increased a fiscal surplus, on account of robust rev- Outlook construction activity, rising credit growth, enue collection and sluggish execution of positive business and consumer senti- capital investment. Budget revenues in- Growth is expected to remain robust at 3.3 ment indicators, and strong tax revenues. creased by over 8 percent y-o-y as of July percent in 2024, with increased tourism Given Albania’s growing reliance on ex- 2024, with growth observed in all cate- and construction expected to drive ex- ternal financing, risks related to the ex- gories, except grants and profits, which ports, and consumption and investment change rate, interest rate, and refinancing were mostly affected by the base effect (as growth at rates similar as in the pre-pan- remain elevated. they had picked up in the previous year). demic period. The inflation rate is project- As a small, open economy, Albania is high- Overall credit increased by 13 percent y- ed to remain below the 3 percent target ly exposed to external shocks, such as a re- o-y through July 2024. Both private busi- in the medium term, despite the increase cession in the EU or further tightening of nesses and household loans registered in wages, which has partially been offset financing conditions in international capi- double digit growth, at approximately by the appreciation of the LEK. The cur- tal markets. Risks to growth emanate from 12.0 percent and 14.5 percent. Gross non- rent account deficit is expected to hover at natural disasters and unfavorable global performing loans reached the level of 4.7 3.8 percent of GDP in the medium term. conditions (including geopolitical devel- percent in July 2024. With higher growth expected, poverty is opments). Fiscal risks emanate from pub- The current account deficit (CAD) widened also projected to decrease. A tighter labor lic-private partnerships and state-owned in H1, primarily driven by the rapid growth market could further boost wages. enterprises (SOEs), in addition to the coun- of imports and the decrease in exports of Albania’s primary balance is projected to try’s hydropower-based energy sector, due goods. Net foreign direct investment improve and reach zero percent of GDP to variations in hydrology. TABLE 2 Albania / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 8.9 4.9 3.4 3.3 3.4 3.4 Private consumption 4.3 7.4 3.1 3.1 3.1 3.0 Government consumption 7.8 -4.7 9.2 10.4 -0.5 0.9 Gross fixed capital investment 19.2 6.5 6.4 9.7 3.4 3.1 Exports, goods and services 52.0 7.5 10.1 0.5 6.5 6.5 Imports, goods and services 31.5 13.1 1.3 5.8 4.3 4.4 Real GDP growth, at constant factor prices 8.2 5.3 3.8 3.0 3.5 3.3 Agriculture 1.8 0.1 -0.7 -0.5 0.2 0.2 a Industry 13.6 7.7 4.0 1.0 2.0 2.0 Services 8.1 5.9 5.2 5.2 5.2 4.8 Inflation (consumer price index) 2.0 6.7 4.8 2.2 2.7 2.9 Current account balance (% of GDP) -7.7 -5.9 -0.9 -3.9 -3.8 -3.7 Net foreign direct investment inflow (% of GDP) 6.5 6.6 5.9 5.3 5.3 5.4 Fiscal balance (% of GDP) -4.6 -3.7 -1.3 -2.3 -2.3 -1.8 Revenues (% of GDP) 27.5 26.8 27.8 29.2 28.4 28.5 Debt (% of GDP) 75.4 65.3 59.8 58.3 57.6 56.3 Primary balance (% of GDP) -2.7 -1.8 0.7 0.0 0.0 0.5 b,c International poverty rate ($2.15 in 2017 PPP) 2.4 1.8 1.5 1.3 1.1 1.0 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 7.3 5.7 4.9 4.3 3.7 3.2 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 27.1 23.6 21.7 20.1 18.5 17.1 GHG emissions growth (mtCO2e) 2.4 -4.2 -4.6 -1.5 -0.7 -0.2 Energy related GHG emissions (% of total) 46.7 46.5 46.0 47.4 49.1 50.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Includes construction. b/ Calculations based on ECAPOV harmonization, using 2014- and 2019-SILC-C. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. c/ Projection using point-to-point elasticity (2013-2018) with pass-through = 1 based on GDP per capita in constant LCU. MPO 43 Oct 24 ARMENIA Key conditions and Recent developments challenges In H1 2024, real GDP growth reached 6.5 percent (yoy), down from 10.4 percent in H1 Table 1 2023 Armenia has weathered multiple shocks 2023. Private consumption and investment Population, million 3.0 since 2020, including the refugee crisis at grew 7.6 and 13.1 percent, respectively. On GDP, current US$ billion 24.1 the end of 2023. This has been possible the supply side, trade, financial, and real GDP per capita, current US$ 8053.0 due to targeted government interventions estate services grew 22 percent (yoy), 15 a 0.8 International poverty rate ($2.15) and effective macroeconomic manage- percent (yoy), and 13 percent (yoy), respec- a 10.0 ment. Following Russia's invasion of tively. In the industrial sector, construction Lower middle-income poverty rate ($3.65) a 51.3 Ukraine in 2022, the Armenian economy and manufacturing were positive contrib- Upper middle-income poverty rate ($6.85) Gini index a 27.9 benefited from significant inflows of utors, whereas mining contracted 11 per- School enrollment, primary (% gross) b 92.9 funds, migrants, and re-routed exports. cent (yoy), due to lower ore extraction (fol- b 73.4 This led to an impressive 10.5 percent lowing the closure of the Sotk mine at the Life expectancy at birth, years average annual growth rate in 2022–2023. border with Azerbaijan). Meanwhile, agri- Total GHG emissions (mtCO2e) 13.2 Recently this growth momentum has be- culture showed signs of recovery, expand- Source: WDI, Macro Poverty Outlook, and official data. gun to slow down due to a gradual out- ing 5 percent (yoy) in the same period. a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). flow of funds and migrants, and a reduc- Armenia's unemployment rate rose to 15.5 tion in net exports. percent in Q1 2024, up from 13.7 percent in Although notable progress has been made Q1 2023. The rise can be partly attributed in recent years in reducing corruption and to the inflow of refugees not yet integrat- improving the business environ- ed into the labor market, and to a decline ment—particularly through more effective in employment levels, particularly female Armenia’s economy expanded by 6.5 tax and customs administration—other workers in urban areas. percent in H1 2024, driven by private key structural challenges persist. There Average inflation fell from 2 percent in consumption and investment. During continues to be low private sector invest- 2023 to 0.3 percent deflation during Janu- ment and constraints such as low labor ary-July 2024, largely due to a 3.7 percent January-July, an average 0.3 percent de- force participation rates and a shortage of fall in food and non-alcoholic beverage flation was recorded, largely due to skilled workers. To address these chal- prices. This is influenced by a high base ef- falling food and non-alcoholic beverage lenges, the government is pursuing an am- fect in 2023, which is expected to weaken in prices. Meanwhile, unemployment rose bitious plan to boost human capital H2 2024. In response, the Central Bank re- in Q1. Growth is expected to moderate through reforms in the education and duced the policy rate cumulatively through health sectors. September by 175 bsp, to 7.5 percent. at around 4.5 percent in the medium Positive progress on resolving Armenia’s In H1 2024, the budget posted a surplus term, with exports and money transfer peace negotiations and reopening of bor- of 0.1 percent of projected GDP, driven inflows easing. ders with neighbors would expand Arme- by an 11 percent under-execution of cur- nia’s economic potential and potentially rent expenditure. Although tax revenues boost growth. increased 7.6 percent in nominal terms, FIGURE 1 Armenia / Real GDP growth and contributions to FIGURE 2 Armenia / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 15 70 3.0 10 60 2.5 5 50 2.0 40 0 1.5 30 -5 1.0 20 -10 10 0.5 -15 2019 2020 2021 2022 2023e 2024f 2025f 2026f 0 0.0 Private consumption Government consumption 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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, Central Bank of Armenia (CBA), and Source: World Bank. Notes: see Table 2. World Bank staff projections. MPO 44 Oct 24 they were still 9 percent below the banks increased 8 percent and 4 percent, continued support for refugees, elevated planned budget. Capital expenditure was respectively, through July 2024. This domestic interest payments, and substan- in line with the budget, and at end-July growth was primarily driven by AMD- tial capital expenditure plans. Further de- government debt was at 44.6 percent of denominated funds, which helped lower terioration is likely in 2025, to be followed the annual GDP forecast. the credit dollarization ratio to 33.2 per- by a period of fiscal consolidation. As a re- Armenia's trade turnover doubled in H1 cent by end-July 2024. sult, the public debt stock is expected to in- 2024, driven by a 134 percent leap in ex- The national absolute poverty rate contin- crease over the next two years. ports and an 87 percent rise in imports ued to fall, reaching 23.7 percent in 2023, The current account deficit (CAD) is ex- (both in nominal terms), primarily due to although the decline was slower than in pected to widen to 3.3 percent of GDP in the re-export of precious stones and metals previous years and less than proportionate 2024, and potentially deteriorate further in (70 percent of total exports). The number to economic growth. the medium term, mainly due to the posi- of tourists declined 6.1 percent, largely due tive impact of re-exports phasing out. The to a 24 percent fall in Russian visitors. CAD is expected to remain below 4.5 per- Meanwhile, net non-commercial money cent of GDP in the medium term. transfers were 48 percent lower than in H1 Outlook Poverty, as measured by the upper mid- 2023, mainly due to reduced inflows from dle-income poverty line of USD 6.85, is Russia. By mid-August, the AMD had ap- Supported by domestic demand, growth expected to remain about 49 percent in preciated 4 percent against the USD, com- in 2024 is expected to slow to 5.5 percent 2024. Rising unemployment and slower pared with the end of 2023. before gradually converging to a potential GDP growth may suppress real wages, af- Armenia's financial stability indicators re- growth rate of 4.5 percent in the medium fecting the trend in poverty reduction. mained robust as of June 2024, with a 20.2 term. Average inflation is expected to rise Downside risks to this outlook include percent Capital Adequacy Ratio and a low gradually toward 4 percent target in the geopolitical instability, challenges in Non-Performing Loans ratio at 1.2 percent. medium term. refugee integration, and potential Banking sector profitability improved, The fiscal deficit is projected to rise to slowdowns in the economies of key and credit and deposits by commercial 4.7 percent of GDP in 2024, driven by trading partners. TABLE 2 Armenia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.8 12.6 8.3 5.5 5.0 4.6 Private consumption 2.8 5.6 5.6 6.3 4.9 4.5 Government consumption -6.2 -2.2 28.3 2.1 1.0 4.6 Gross fixed capital investment 23.6 14.0 10.1 11.6 8.0 8.1 Exports, goods and services 18.6 59.9 30.7 29.2 -15.3 1.6 Imports, goods and services 12.9 35.0 30.2 29.3 -13.1 3.2 Real GDP growth, at constant factor prices 5.6 13.1 8.0 5.5 5.0 4.6 Agriculture -0.8 -2.8 2.9 4.1 3.5 3.0 Industry 2.6 9.8 2.7 6.5 5.8 4.5 Services 8.7 18.1 11.4 5.3 4.9 4.8 Inflation (consumer price index) 7.2 8.6 2.0 0.6 3.2 4.0 Current account balance (% of GDP) -3.5 0.3 -2.3 -3.3 -3.8 -4.3 Net foreign direct investment inflow (% of GDP) 2.5 4.9 2.2 2.0 2.0 2.1 a Fiscal balance (% of GDP) -4.5 -2.2 -1.9 -4.7 -5.5 -4.6 Revenues (% of GDP) 24.9 25.1 26.0 26.1 26.2 26.5 b Debt (% of GDP) 60.2 46.7 48.4 50.3 53.8 55.4 Primary balance (% of GDP) -2.0 0.1 0.7 -1.5 -2.1 -1.1 c,d International poverty rate ($2.15 in 2017 PPP) 0.5 0.8 0.8 0.8 0.9 0.9 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 8.7 10.0 9.5 9.2 8.9 8.6 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 51.7 51.3 49.6 48.6 47.6 46.6 GHG emissions growth (mtCO2e) 5.9 6.6 11.5 7.9 6.4 4.8 Energy related GHG emissions (% of total) 63.1 65.3 68.7 67.8 68.7 70.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ The 2023 fiscal balance registered a deficit of -4.1 percent of GDP, including realized liabilities to Karabakh. b/ Excludes CBA debt. c/ Calculations based on ECAPOV harmonization, using 2010-ILCS, 2018-ILCS, and 2022-ILCS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. d/ Projection using annualized elasticity (2010-2018) with pass-through = 0.69 based on GDP per capita in constant LCU. MPO 45 Oct 24 in 2023. Hydrocarbon sector growth re- mained lackluster at 0.4 percent in real AZERBAIJAN Key conditions and terms as decline in crude oil production offset expansion in natural gas produc- challenges tion. Bolstered by fast real growth in the construction sector (18.4 percent, yoy), Table 1 2023 Azerbaijan’s continued reliance on hydro- which is fueled by public investment in Population, million 10.2 carbons as a major source of export and reconstruction, non-hydrocarbon sector GDP, current US$ billion 72.7 fiscal revenue remains its main vulnera- activity expanded by 6.9 percent in H1 GDP per capita, current US$ 7134.4 bility. Declining oil production, oil price 2024. Other drivers of economic activity a 99.8 School enrollment, primary (% gross) volatility, and the global transition away included real growth in transportation a 73.5 from fossil fuels are challenges to long- (15.4 percent, yoy), ICT (12.2 percent, Life expectancy at birth, years Total GHG emissions (mtCO2e) 53.1 term growth prospects. yoy), and hospitality (10.2 percent, yoy). Source: WDI, Macro Poverty Outlook, and official data. Private sector development is constrained On the demand side, investment growth a/ Most recent WDI value (2022). by the economy’s large state footprint, an gained momentum (9.4 percent, yoy in uneven playing field for companies, shal- real terms) due to greater public invest- low financial markets, and a weak hu- ment, and consumption growth remained man capital base. robust. The official unemployment rate Global mitigation efforts, resulting in de- fell to 5.4 percent by end-June, from 5.6 clining fossil fuel demand and fuel prices, percent in December 2023. can lead to substantial reductions in Annual inflation fell to 1.1 percent in June Azerbaijan’s resource rents. Carbon bor- 2024 as external pressures subsided and Economic growth rose to 4.3 percent in der adjustment measures could adversely Nominal effective exchange rate appreci- H1 2024, driven by the non-hydrocar- impact the country’s economy further. ated, further supporting the disinflation Azerbaijan’s role in hosting COP29 in No- process. Inflation remained below the Cen- bon sector supported by public invest- vember 2024 may provide an opportuni- tral Bank’s target range (4+/-2 percent), ment. Annual inflation fell to 1.1 per- ty to boost climate mitigation and adap- prompting a cut in the policy rate by 75 cent as external pressures subsided. Ex- tation efforts. Phasing out distortionary basis points to 7.25 percent, in three steps ternal and fiscal surpluses narrowed fossil fuel subsidies would substantially over six months in 2024. reduce carbon emissions while fostering The fiscal balance recorded a surplus of due to slowing energy prices. In the private investment in renewable energy, 10.3 percent of GDP in H1 2024, com- medium term, growth is estimated to contributing to boosting the economy in pared with 18.1 percent in H1 2023. This hover around 2.5 percent as oil produc- the long run. is due to an increase in expenditure and a tion continues to decline. Risks to this fall in hydrocarbon revenue. Revenue fell by 11.1 percent (yoy), due to lower hy- outlook are balanced. drocarbon sector receipts caused by low- Recent developments er prices. Tax collection in the non-hydro- carbon sector grew by 8.6 percent in re- Growth rose to 4.3 percent in real terms al terms. Expenditure increased by 13.5 in H1 2024, compared with 1.1 percent percent (yoy) in real terms, propelled FIGURE 1 Azerbaijan / Non-oil GDP growth and oil price FIGURE 2 Azerbaijan / Official poverty rate and unemployment rate US$ per bbl Percent Percentage of population Percent 120 12 10 10 Crude oil price, avg (lhs) Official poverty rate (lhs) Non-oil GDP growth (rhs) 100 9 Unemployment rate (rhs) 8 8 80 6 6 6 60 3 4 4 40 0 2 2 20 -3 0 0 0 -6 10 11 12 13 14 15 16 17 18 19 20 21 22 * 23 14 15 16 17 18 19 20 21 22 23 24 25 26 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 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 2013–2022.*Preliminary. MPO 46 Oct 24 by a 25.7 percent increase in capital down to 1.7 percent. Deposit dollarization major external pressures, inflation will expenditure. Current expenditure rose fell to 40 percent. hover around 3.2 percent amid slowing by 8.8 percent (yoy) in real terms. The domestic demand. 2024 budget was amended in June, with The fiscal balance is projected to remain in both revenue and expenditure revised surplus in the medium term, although the upwards. For budgeted revenue, the re- Outlook surplus will narrow due to rising expendi- vision was largely due to an increase ture, largely on public investment. Rising in the benchmark oil price from US$60 Supported by additional public expen- expenditure is a challenge to compliance to US$75; additional expenditure was diture on non-hydrocarbon sectors, the with the medium-term targets for the non- mostly allocated to the reconstruction economy is projected to expand by 3.2 hydrocarbon primary fiscal balance. program. The substantial fiscal surplus percent in 2024, faster than previously an- The external balance is expected to re- allowed State Oil Fund reserves to in- ticipated. The hydrocarbon sector is pro- main in surplus in the medium term be- crease to US$58bn (equivalent to 80 per- jected to decline in 2024–2026, due to cause of continuing favorable energy cent of GDP) by end-June 2024. falling crude oil production because the prices. However, a projected fall in sur- Compared with H1 2023, the trade surplus major oilfield is aging, whereas natural plus is in line with declining crude oil narrowed to 11.5 percent of GDP in H1 gas production is expected to stabilize. production and rising imports. 2024, with exports declining by 28 percent Non-hydrocarbon sector growth is ex- Risks to the outlook are balanced. On (yoy) on the back of lower oil and gas pected to slow in the medium term, due the downside, geopolitical tensions add prices and a decline in crude oil produc- to the impact of public investment in to uncertainty, although they could also tion; whereas, due to increased public in- reconstruction abating; consumption lead to higher commodity prices. With vestment, imports increased by 9.4 percent growth is expected to cool further. With- public investment as the main driver of (yoy). Central Bank reserves edged up to out structural reforms to boost private in- non-hydrocarbon sector growth, there is USD 11.7 billion (16.2 percent of GDP) by vestment, growth is projected to hover a risk that the economy will be increas- end-June 2024, corresponding to 5.6 around 2.5 percent in the medium term. ingly vulnerable to fluctuations in energy months of imports. Inflation is projected to remain within the prices. This could also divert the focus Credit to the economy expanded by 12 per- Central Bank’s target in 2024, despite some away from structural reforms needed to cent in H1 2024 (yoy) in real terms, with increase in H2 2024 due to the government support private sector-led growth. In July, both consumer and business loans increas- raising fuel prices in June 2024. In the Fitch upgraded Azerbaijan’s credit rating ing by 10 percent. The NPL ratio edged medium term, assuming the absence of to BBB- investment grade. TABLE 2 Azerbaijan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.6 4.6 1.1 3.2 2.7 2.4 Private consumption 7.0 4.9 4.0 4.1 3.7 3.6 Government consumption 3.8 6.3 8.1 5.1 5.0 4.8 Gross fixed capital investment -6.0 5.7 9.6 11.4 8.2 6.0 Exports, goods and services 5.6 3.3 -2.9 0.4 0.4 0.4 Imports, goods and services 2.5 3.2 1.9 2.7 2.8 2.8 Real GDP growth, at constant factor prices 5.6 4.6 1.1 3.2 2.7 2.4 Agriculture 3.3 3.4 3.2 3.0 3.0 3.0 Industry 4.1 2.4 -0.9 0.2 0.2 0.2 Services 8.6 8.5 3.8 7.7 6.0 5.1 Inflation (consumer price index) 6.7 13.8 2.1 4.2 3.4 3.0 Current account balance (% of GDP) 15.2 29.7 11.5 8.5 7.4 6.1 Net foreign direct investment inflow (% of GDP) -4.1 -1.4 -1.1 -1.0 -1.0 -0.9 Fiscal balance (% of GDP) 4.1 5.7 8.1 5.5 3.7 3.0 Revenues (% of GDP) 36.5 31.6 40.7 38.4 35.9 33.9 Debt (% of GDP) 18.2 11.6 21.8 21.9 22.2 23.0 Primary balance (% of GDP) 4.8 6.1 8.4 6.1 4.3 3.5 GHG emissions growth (mtCO2e) 5.2 -2.0 -0.7 1.1 1.1 1.2 Energy related GHG emissions (% of total) 62.7 60.8 60.4 61.2 61.8 62.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 47 Oct 24 concerns and geopolitical tensions exac- erbate the economic outlook, with the BELARUS Key conditions and potential for further sanctions or more stringent enforcement of existing ones. challenges Maintaining accommodative policies pre- sents challenges in balancing social bene- Table 1 2023 In 2024, Belarus experienced stronger- fits, wages, economic support, and over- Population, million 9.2 than-anticipated economic growth, though all stability. This, combined with a dete- GDP, current US$ billion 71.8 this success strains the limits of its eco- riorating current account, exchange rate GDP per capita, current US$ 7817.0 nomic policy effectiveness. To support do- volatility, price controls, and labor force a 0.0 International poverty rate ($2.15) mestic demand, the government has em- constraints, increases the risk of substan- a 0.1 ployed a range of extensive administrative tial inflationary pressures. Belarus’s econ- Lower middle-income poverty rate ($3.65) a 1.3 measures alongside expansionary mone- omy, with its outdated Soviet-era frame- Upper middle-income poverty rate ($6.85) Gini index a 24.4 tary and fiscal policies. Nevertheless, the work and inefficiencies, combined with School enrollment, primary (% gross) b 94.7 country’s potential GDP is constrained by limited opportunities for diversification, b 73.1 the imposition of sanctions and restricted requires continuous budgetary support Life expectancy at birth, years access to advanced technologies, despite and reforms to address its deep-seated Total GHG emissions (mtCO2e) 83.9 efforts to stimulate investment activity. In economic challenges. Source: WDI, Macro Poverty Outlook, and official data. response to sanctions, Belarus is seeking a/ Most recent value (2020), 2017 PPPs. b/ Most recent WDI value (2022). to establish new trade routes and redirect external trade through Russia, though this shift has resulted in increased logistical Recent developments costs and payment delays. In the medium term, the government's focus will be on From January to August 2024, Belarus's In 2024, Belarus's economy is projected mitigating supply chain disruptions and GDP grew by 4.9 percent year-on-year, to register strong growth, driven by Rus- enhancing local production through im- with second-quarter performance notably sia’s recovery and reduced sanctions im- port substitution, supported by substantial exceeding potential GDP due to robust pact. However, the long-term growth investments and subsidies from Russia. consumer spending, rising investment ac- These administrative adjustments are in- tivity, and heightened demand from Rus- faces obstacles from the limitations of ac- tended to bolster economic resilience, but sia, particularly in the defense sector. The commodative policies and ongoing macro- increased dependence on the Russian mar- unemployment rate is at a record low of economic challenges. Tightening mone- ket—amidst growing competition for Be- 3 percent amid persistent labor shortages. tary conditions, inflation, and currency larusian products—exposes the economy Domestic trade drove growth, with high challenges are expected, while ongoing to significant risks. The vulnerability to industrial sector performance from re- weakened external demand is pro- duced inventories and increased exports stimulus measures strain the fiscal nounced, particularly if Russia’s economic boosting the transport sector. Agriculture stance. The economy's insulation from outlook deteriorates. Addressing labor benefited from accelerated harvests and global trends limits growth and worsens market rigidities will be crucial, as will in- favorable weather, while construction ac- competitiveness and productivity. vestments aimed at stimulating potential tivity surged due to investments in the growth. Additionally, heightened security Russian market and import substitution. FIGURE 1 Belarus / Quarterly real GDP growth and FIGURE 2 Belarus / Actual and projected poverty rates and contributions to real quarterly GDP growth real private consumption per capita Percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 40 25 7000 30 20 6000 20 10 5000 0 15 4000 -10 -20 3000 10 -30 2000 -40 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 5 1000 2021 2022 2023 2024 0 0 HH Consumption GG Consumption Gross Capital Formation Exports 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Imports Stat discrepancy International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real priv. cons. pc Source: World Bank calculations based on Belstat data. Source: World Bank. Notes: see Table 2. MPO 48 Oct 24 The IT sector showed signs of stabilization. In 2023, real disposable income rose by already overheated economy is expected On the demand side, buoyant household 6.3 percent, reversing the previous year's to slow to 1.2 percent in 2025. Consump- spending, supported by increased lending, decline. Employment fell by 1.5 percent, tion will continue to drive growth, though moderate interest rates, rising wages, and but real wages and pensions increased. at a slower pace due to a tight labor mar- high consumer confidence. Poverty, based on the UMIC poverty line ket, while investments will contribute Inflation reached 5.7 percent in January- ($6.85/day 2017PPP), is low and is expect- positively but face constraints from August, year on year, driven by non-reg- ed to decrease from 0.69 percent in 2023 tighter monetary conditions. Net exports ulated prices, while regulated prices re- to 0.57 percent in 2024. may negatively impact growth due to re- mained stable. In response, the Central liance on a single market and a challeng- Bank raised the overnight lending rate by ing external environment. 0.5 percentage points to 11 percent and In the medium term, inflation, a tight labor increased the reserve requirement for for- Outlook market, and financial losses in enterprises, eign currency liabilities by 2 percentage coupled with a shift of resources to less points to 20 percent. The national curren- Belarus's economy is projected to grow productive sectors, will diminish the effec- cy depreciated slightly due to sanctions by 4 percent in 2024, exceeding previous tiveness of economic stimulus measures. and reduced trade inflows, tracking the forecasts, though growth is expected to With a projected slowdown in Russia, Be- Russian ruble's fluctuations. With region- slow in the latter half of the year. This larusian growth is likely to fall short of its al budgets offsetting central spending, the expansion is driven by significant wage potential, even with administrative efforts general government recorded a surplus of increases and improvements in the Russ- to sustain macroeconomic stability. Elevat- 1.2 percent of GDP. ian economy. Manufacturing remains the ed inflationary pressures are expected, The financial sector reported strong main growth driver, bolstered by a recov- with prices predicted to rise by 6.5 percent profits, mainly from state-owned banks ery in external trade, largely fueled by in 2024 and remain above historical aver- investing in state bonds, with non-per- Russian demand. Future growth will de- ages. Trade logistics and lower commodity forming assets stable. On the back of a pend on effective expansionary policies, prices may strain the current account, lead- mild trade surplus, the current account support for state-owned enterprises, tar- ing to currency pressures and a worsening registered a 3.9 percent GDP deficit for geted lending, domestic borrowing, and fiscal outlook due to stimulus measures Q1-Q2 2024, despite a 13 percent drop rising disposable income. and job preservation efforts. The fiscal out- in remittances. The deficit was largely However, the economy faces challenges look is expected to remain challenging due financed by foreign direct investments, from mounting inflationary pressures to government stimulus measures, indexa- with external debt slightly decreasing and overall macroeconomic challenges. tion, and job preservation efforts. Despite and foreign reserves rising to USD 8.5 With a projected slowdown in the Russian higher inflation, poverty levels are expect- billion by August 2024. economy and tighter monetary policy, the ed to remain stable through 2024 and 2025. TABLE 2 Belarus / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.4 -4.7 3.9 4.0 1.2 0.8 Private consumption 4.9 -1.2 4.1 7.3 2.0 1.9 Government consumption -0.8 -0.1 1.4 0.9 0.1 0.5 Gross fixed capital investment -5.5 -13.3 12.1 2.4 1.5 1.3 Exports, goods and services 10.1 -12.3 23.1 3.0 2.8 2.6 Imports, goods and services 5.7 -11.4 29.1 4.7 3.8 4.0 Real GDP growth, at constant factor prices 2.4 -4.7 3.7 3.9 1.3 0.8 Agriculture -4.1 4.4 -0.4 3.8 1.9 1.1 Industry 3.1 -6.2 8.0 5.7 1.8 0.8 Services 3.0 -5.1 1.1 2.5 0.8 0.8 Inflation (consumer price index) 9.5 15.2 5.1 6.5 6.9 6.2 Current account balance (% of GDP) 3.1 3.6 -1.5 -5.1 -4.9 -5.6 Net foreign direct investment inflow (% of GDP) 1.9 1.9 2.7 1.9 1.9 1.9 Fiscal balance (% of GDP) 0.2 -1.5 1.2 -0.9 -1.1 -1.1 Revenues (% of GDP) 35.7 36.0 41.1 34.8 34.4 34.3 Debt (% of GDP) 35.8 38.7 37.7 37.5 37.8 37.9 Primary balance (% of GDP) 1.8 0.1 2.8 0.7 0.5 0.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.1 0.1 0.1 0.0 0.0 0.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 1.0 1.0 0.7 0.6 0.5 0.5 GHG emissions growth (mtCO2e) 0.1 -3.7 0.9 1.7 -0.1 -0.1 Energy related GHG emissions (% of total) 62.4 61.7 61.9 62.5 62.5 62.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2020-HHS. Actual data: 2020. Nowcast: 2021-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2020) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. MPO 49 Oct 24 Border Adjustment Mechanism in 2026 is expected to further challenge BiH's export BOSNIA AND Key conditions and competitiveness by 2030. To achieve sustained long-term growth of challenges HERZEGOVINA 3-4 percent, reforming the economy and the energy system is crucial. However, the Bosnia and Herzegovina (BiH) has been pace of reform remains slow due to lack granted permission by the European Coun- of consensus on country level policies that Table 1 2023 cil to begin accession talks in March 2024, would bring BiH closer to EU member- Population, million 3.2 pending the implementation of necessary ship; furthermore, frequent elections, GDP, current US$ billion 24.1 reforms. To meet the economic criteria for widespread corruption, and the fragment- GDP per capita, current US$ 7514.9 EU membership, BiH must tackle internal ed division of responsibilities between the School enrollment, primary (% gross) a 87.9 market fragmentation by bolstering nation- two entities and cantons also contribute to a 75.3 wide regulatory and supervisory bodies, the slow pace of reforms. Overcoming Life expectancy at birth, years improving the transparency and efficiency these obstacles is vital for BiH to move to- Total GHG emissions (mtCO2e) 22.9 of the large public sector, and reducing the wards a more prosperous future. Source: WDI, Macro Poverty Outlook, and official data. footprint of state-owned enterprises. a/ WDI for School enrollment (2023); Life expectancy (2022). BiH’s economy has shown macroeconomic stability and resilience over the past, in- cluding during the COVID-19 pandemic. Recent developments This resilience is attributed to three eco- nomic anchors: the currency board (which In Q1 2024, real GDP growth rose 2.7 per- ties the BiH mark to the euro), the state- cent, discontinuing the sharp slowdown in wide collection of indirect taxes through 2023. The pick-up in output growth is Real GDP growth rose 2.7 percent in ITA, and the prospects of EU membership. largely due to a recovery in private con- Q1 2024, from 1.6 percent in 2023 due Despite macro stability and resilience, re- sumption fueled by an increase in mini- al income growth has averaged only 2 mum wages and a tightening labor market. to the modest economic expansion in the percent per annum from 2009 to 2023, Stronger retail sales volumes in the first European Union (EU) and a decelera- leading to stagnant living standards, with half of 2024 suggest robust private con- tion in investment growth. Upcoming real per capita consumption remaining sumption outcomes during this period. municipal elections are expected to lead at just 40 percent of the EU27 average. Inflation reached 1.8 percent in July 2024 y/ to a widening fiscal deficit to 1.7 per- Achieving faster convergence with the y, compared to 4.0 percent the year before, EU27 remains difficult due to low invest- marking a drop in transport prices and a cent of GDP in 2024, yet public debt re- ment rates and a growth model that de- slowdown in utility prices. As a result, in- mains around 36 percent of GDP. Liv- pends on private consumption. The need flation from January to July 2024 decelerat- ing standards are stagnant, in part due for structural reforms is even more critical ed to 1.9 percent from 12.2 percent during to an anemic labor market. given the challenges of a declining popula- the same period the year before. tion and the likely slowdown in total fac- The labor market showed mixed signals. tor productivity over the long term. In ad- The employment rate rose to 41.9 percent dition, the introduction of the EU Carbon in Q1 2024, up from 41.5 percent in 2023, FIGURE 1 Bosnia and Herzegovina / Real GDP growth and FIGURE 2 Bosnia and Herzegovina / Labor market contributions to real GDP growth indicators Percent, percentage points Percent 8 45 40 6 Q1 2023 Q2 2023 35 Q3 2023 Q4 2023 4 30 Q1 2024 2 25 20 0 15 -2 10 5 -4 2019 2020 2021 2022 2023e 2024f 2025f 2026f 0 Agriculture Industry Services GDP Emp. Rate (15-89) Unemp. Rate (15-74) Sources: Agency for Statistics (BHAS) and World Bank staff calculations. Sources: LFS 2023 - 2024 report, and World Bank staff calculations. MPO 50 Oct 24 whereas the unemployment rate in- portion of the educated labor force. Popu- creased to 13.5 percent, a 0.3 percentage lation aging, driven by outmigration, also point increase compared to the previous Outlook dampens productivity and burdens public year. Economic vulnerability to shocks service delivery, particularly in health. The in BiH remains high—according to the An improvement in the EU economic land- economic activity rate remains low at 2023 Life in Transition Survey, 40 percent scape, coupled with higher private con- around 48 percent compared to the EU of the population report being unable to sumption and investment driven by con- average of 75 percent, with women’s par- save, running into debt, or not being able struction activities, is set to raise real GDP ticipation at roughly 37 percent. Gender to cover basic household expenses for growth in BiH to 2.8 percent in 2024, and discrepancies in employment remain par- longer than 1 month in case of loss of 3.2 percent in 2025. Inflation is expected to ticularly stark at the lower levels of ed- their main income source. decelerate to half a percent by 2026 bar- ucation. Thus, creating conditions to acti- Higher government spending and smaller ring any further external shocks. By 2026, vate the female labor force would benefit revenues (in GDP terms) contributed to a real output growth is projected to rise to economic growth. Furthermore, the sharp consolidated fiscal deficit of 0.9 percent of 3.9 percent fueled by strengthened exports rise in minimum wages, in January of GDP in 2023, which followed a surplus of and private consumption stemming from 2023 and 2024, may impact external com- 0.5 percent of GDP the year before. The improved economic conditions in the EU petitiveness, which could also be affected deficit in 2023 was driven by an estimat- and tightening labor markets in BiH. The by the EU’s Carbon Border Adjustment ed 16 percent increase in subsidies, social current account deficit is expected to Mechanism, considering that two-thirds benefits and transfers in FBiH, and an 11 widen to around 3.6 percent of GDP due to of BiH’s electricity production comes percent increase in RS. Nevertheless, pub- higher imports of consumer goods. from coal-fired thermal power plants. In lic debt remains relatively low at around In the last quarter of 2024, policymakers addition, a lack of digitalization and uni- 36 percent of GDP. are focused on the municipal elections fied databases and registries hampers reg- Meanwhile, the current account deficit im- leaving little space for economic reforms. ulatory compliance and business opera- proved to 2.8 percent in 2023. It was almost Several structural challenges hinder tions. Finally, geopolitical risks pose a fully financed by net foreign direct invest- stronger output growth. Productivity is af- threat of exacerbating domestic political ment inflows, and other investments, fected by the large footprint of state- frictions, undermining the much-needed mainly foreign loans. owned enterprises, which employ a sizable push for structural reforms. TABLE 2 Bosnia and Herzegovina / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.3 3.8 1.6 2.8 3.2 3.9 Private consumption 4.0 3.0 2.0 2.5 2.8 3.2 Government consumption 6.1 2.7 4.1 4.6 1.5 3.7 Gross fixed capital investment 33.9 18.1 0.2 5.8 8.3 2.2 Exports, goods and services 5.0 9.9 -6.0 1.0 3.0 4.0 Imports, goods and services 8.0 12.0 -3.0 3.0 3.9 2.0 Real GDP growth, at constant factor prices 7.4 4.2 1.7 2.8 3.2 3.9 Agriculture 3.4 3.5 3.1 3.0 3.2 3.2 Industry 10.0 1.4 -3.4 0.5 2.0 3.2 Services 6.8 5.5 3.6 3.6 3.6 4.2 Inflation (consumer price index) 2.0 14.0 6.1 2.0 0.9 0.4 Current account balance (% of GDP) -1.8 -4.3 -2.8 -3.2 -3.8 -3.6 Net foreign direct investment inflow (% of GDP) 3.3 3.0 3.2 3.2 3.1 3.1 Fiscal balance (% of GDP) -0.3 0.5 -0.9 -1.7 -0.2 -0.4 Revenues (% of GDP) 43.2 46.0 44.8 43.9 45.4 45.2 Debt (% of GDP) 37.8 35.8 36.3 35.8 35.2 34.3 Primary balance (% of GDP) 0.3 1.2 -0.2 -1.0 0.4 0.2 GHG emissions growth (mtCO2e) -1.4 -2.7 -2.2 0.4 1.8 2.5 Energy related GHG emissions (% of total) 88.7 88.9 88.8 88.7 88.5 88.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 51 Oct 24 among the less educated. Income inequal- ity remains high, making the country the BULGARIA Key conditions and most unequal EU member. Since early 2021, Bulgaria has been marred challenges by political instability and lost reform mo- mentum. Thus, the country has failed to Table 1 2023 Since the start of the century, Bulgaria’s deliver on major policy goals, including Population, million 6.4 authorities have adhered to macroeconom- some of the milestones under the National GDP, current US$ billion 102.2 ic stability, underpinned by a currency Recovery and Resilience Plan. GDP per capita, current US$ 15855.4 board arrangement and fiscal prudence. Despite the political turmoil, near-term eu- a 0.7 International poverty rate ($2.15) This has helped the country weather the rozone entry has remained a key govern- a 2.0 recent crises relatively well while remain- ment priority. Should inflation meet the Lower middle-income poverty rate ($3.65) a 5.8 ing on a stable income convergence path. Maastricht criterion before end-2024, as ex- Upper middle-income poverty rate ($6.85) Gini index a 39.0 Bulgaria’s GDP per capita reached 64 per- pected, the country could join the euro- School enrollment, primary (% gross) b 87.3 cent of the European Union (EU) average zone from mid-2025 or January 2026. Full- b 74.4 (in purchasing power parity terms) in 2023, fledged Schengen Area membership and Life expectancy at birth, years while the country joined the ranks of high- OECD accession have been consistently Total GHG emissions (mtCO2e) 50.1 income countries effective July 1, 2024. pursued, too. Yet, continued political tur- Source: WDI, Macro Poverty Outlook, and official data. Despite that, the country continues to face moil and early elections in October 2024 a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). multiple development challenges. A key jeopardize the reform agenda. horizontal constraint is deep-rooted in- stitutional and governance weaknesses, which enable state capture by vested in- terests and discourage investment. This Recent developments suppresses productivity and private sec- The Bulgarian economy has embarked tor growth, while also resulting in subop- The first two quarters of 2024 saw a recovery on a recovery path in early 2024 timal public services. A rapid decline in of GDP growth to 1.9 and 2 percent y/y, re- aligned with the moderate pick-up of ac- the population—one of the worst global- spectively, in line with the firming of growth ly—also limits the country’s economic po- in the wider EU. Noteworthy, while growth tivity in the eurozone. The widening tential while exerting increasing pressure in Q1 was driven by final consumption, Q2 gap between real wage and productivity on public systems. saw exports embarking on a recovery path, growth and the potential build-up of a Despite some recent progress, Bulgaria too. Consumption was fed by unabating construction-credit bubble warrant close continues to experience one of the highest wage growth, which accelerated to 13 and monitoring. The country struggles with a levels of income poverty and inequality 15 percent y/y in real terms in Q1 and Q2 within the EU. From 2016 to 2020, eco- 2024, respectively, due to a hike of the min- continued political crisis that jeopardizes nomic growth led to improved living imum wage by 19 percent from start-2024 the reform agenda. standards and significant poverty reduc- and long-standing labor shortages. While tion. However, this trend reversed in 2021 the gap between real wage and productiv- due to the lingering effects of the pandem- ity growth has been consistently positive ic, inflation, and rising unemployment since 2013 (the only exception to this trend FIGURE 1 Bulgaria / Real wage and productivity growth gap FIGURE 2 Bulgaria / Actual and projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 16 25000 14 10 20000 12 10 15000 5 8 0 6 10000 4 Real wage growth, y/y 5000 -5 Productivity growth, y/y 2 Wage and productivity growth gap 0 0 -10 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 International poverty rate Lower middle-income pov. rate 3 4 5 6 7 8 9 0 1 2 3 4 /1 /1 /1 /1 /1 /1 /1 /2 /2 /2 /2 /2 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 52 Oct 24 was 2022, when inflation shot up marked- the 3 percent Maastricht ceiling, given the This trend is mirrored by an ongoing con- ly), it reached a 15-year high of above 10pp government’s aspiration for prompt euro- struction boom and fuels concerns about in Q1 2024, fueling concerns about the zone accession. As in previous years, how- the build-up of a construction-credit bub- economy’s competitiveness. ever, this may require cutting down on ble, which may be followed by a painful The pick-up of growth and the minimum planned capital spending. In late August correction and increase in non-performing wage increase—which affected positively 2024, the government successfully placed a loans. For the time being, however, non- the bottom of the income distribution - are record-high volume of EUR 4.34bn of EUR performing loans remain low at 3.64 per- expected to have supported further pover- and USD-denominated bonds on interna- cent as of June 2024, down from 3.80 per- ty reduction in early 2024. Despite this pos- tional markets, which testified to contin- cent a year ago. In an attempt to mitigate itive development, the employment rate ued market access at attractive terms. those risks, effective October 1, the central among the working-age population with bank introduced several requirements for low education (ISCED 0-2) dropped from new mortgage loans to households includ- 39.2 percent in Q3 2023 to 33.2 percent in ing a 50 percent ceiling for the loan service- Q1 2024, highlighting a worrying trend Outlook to-income ratio, an 85 percent ceiling for amidst the broader recovery. loan-to-mortgage value, and a maximum Consumer price inflation kept decelerat- The economy’s growth is projected to pick 30-year loan maturity. ing in the year to date, further improving up in 2024-2025 with the expected recovery Political risks have re-escalated in recent the purchasing power of households. An- in the eurozone. This is expected to have a months following a failed attempt at for- nual average HICP inflation slowed to 4.3 benign impact on domestic poverty reduc- mation of a regular government after the percent in July, which narrowed the gap tion, while also keeping Bulgaria on its con- latest round of early elections in June 2024. with the line criterion for eurozone en- vergence path towards average EU incomes. The country is now heading towards new try to just 1.3 percentage points. Should Bulgaria’s target to join the eurozone from snap elections in October—the 7th in a row this disinflationary trend continue, Bul- mid-2025 or January 2026 is also within in about three years—which jeopardizes garia could meet the criterion—which is reach, should the disinflation trend contin- the reform agenda and provides fertile the only remaining hurdle to euro adop- ue in the coming months, as expected. ground for populist policies. The latter tion—before year-end. Credit to households remains on the radar could result in further expansion of cur- The fiscal position remains stable. The due to its accelerating growth that reached rent expenditure at the expense of capital general government deficit on a cash ba- 19 percent y/y in June 2024. The increase spending, as evidenced in the past. Even if sis reached 0.5 percent of the World was propelled by long-term household the headline fiscal deficit is likely to stay Bank’s GDP projection in the year to July mortgage loans and consumer loans (with below the 3 percent Maastricht ceiling, pub- 2024. The deficit for the full year, on an above 5-year maturity) which grew by 25 lic investment would remain below peers, accrual basis, is expected to be kept below and 15 percent y/y, respectively, in June. capping the country’s growth potential. TABLE 2 Bulgaria / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.7 3.9 1.8 2.2 2.8 2.7 Private consumption 8.5 3.9 5.4 2.6 3.1 3.6 Government consumption 0.4 5.5 -0.4 11.3 3.6 2.8 Gross fixed capital investment -8.3 6.5 3.3 -2.6 1.3 2.6 Exports, goods and services 11.2 11.6 -1.9 2.3 5.6 6.0 Imports, goods and services 10.7 15.0 -6.3 3.5 5.5 6.6 Real GDP growth, at constant factor prices 8.0 5.3 1.8 2.2 2.8 2.7 Agriculture 28.8 -4.4 -3.9 1.5 1.2 1.0 Industry 1.7 12.1 0.9 1.3 5.2 5.3 Services 8.8 3.9 2.6 2.5 2.1 1.9 Inflation (consumer price index) 3.3 15.3 9.5 2.6 2.2 2.0 Current account balance (% of GDP) -1.7 -1.4 -0.3 -0.7 -0.5 -1.0 Net foreign direct investment inflow (% of GDP) 1.8 2.4 3.2 2.5 2.8 2.7 Fiscal balance (% of GDP) -2.7 -0.8 -3.0 -3.1 -3.0 -2.9 Revenues (% of GDP) 37.7 38.6 36.3 39.0 39.5 39.8 Debt (% of GDP) 23.9 22.6 22.9 23.4 23.7 23.6 Primary balance (% of GDP) -2.3 -0.4 -2.6 -2.7 -2.6 -2.5 a,b International poverty rate ($2.15 in 2017 PPP) 0.7 0.5 0.5 0.5 0.5 0.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.0 1.8 1.7 1.7 1.6 1.6 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 5.8 5.2 5.1 5.0 4.8 4.6 GHG emissions growth (mtCO2e) 6.8 6.0 -0.7 -0.6 -0.1 -0.1 Energy related GHG emissions (% of total) 78.9 76.3 74.8 74.0 73.1 72.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2022-EU-SILC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 53 Oct 24 to long term. Downside risks to growth coming from the external environment CROATIA Key conditions and remain significant. Geopolitical tensions continue to be elevated, making global challenges economic developments as well as energy price dynamics highly uncertain. At the Table 1 2023 Croatia's growth remains robust, but de- same time, inflation in the euro area Population, million 3.9 spite the positive momentum several chal- could remain elevated given increases in GDP, current US$ billion 82.7 lenges loom. The country's economic activ- labor costs, which may result in tighter GDP per capita, current US$ 21423.7 ity has been consistently outpacing aver- than expected monetary policy. However, a 0.3 International poverty rate ($2.15) age growth in the EU over the last three Croatia's overall macroeconomic imbal- a 0.4 years, and in 2023 Croatia's GDP per capita ances remain contained, given a robust Lower middle-income poverty rate ($3.65) a 1.8 (in PPS) reached 76 percent of the EU aver- banking sector, a positive current and Upper middle-income poverty rate ($6.85) Gini index a 28.9 age, up from 67 percent in 2019. The pos- capital account and public debt that has School enrollment, primary (% gross) b 95.9 itive trends continued in the first half of fallen to close to 60 percent of GDP. b 77.6 2024, but growth has become increasingly Life expectancy at birth, years dependent on consumption and public in- Total GHG emissions (mtCO2e) 17.4 vestment, largely driven by rising wages, Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2021), 2017 PPPs. expansionary fiscal policy, and the inflow Recent developments b/ Most recent WDI value (2022). of EU funds. At the same time, produc- tivity growth has been relatively subdued Economic activity in Croatia continued to which, when taken together with strongly expand in the first half of 2024, with an- Croatia's economic activity continued to rising labor costs, may weigh on Croatia's nual real GDP growth averaging 3.6 per- external competitiveness and export per- cent, primarily driven by robust domestic expand in the first half of 2024, mainly formance, with manufacturing production demand. Personal consumption remained driven by strong domestic demand. The already weak due to relatively subdued strong, bolstered by ongoing increases in medium-term outlook is relatively favor- external demand. Moreover, the tourism real disposable income. Investment activ- able, as the external environment is ex- sector, one of the key drivers of economic ity also gained momentum, with its aver- growth over the past three years, is show- age annual growth rate reaching double pected to gradually improve and domes- ing signs of reaching peak capacity. De- digits. This reflects the continuation of a tic demand to remain robust, in part pendence on the tourism sector makes the strong rise in public investment, but after supported by the inflow of European economy vulnerable to shocks. The sec- several years of sluggish developments Union (EU) funds. However, rising la- tor also exerts strong pressure on local private investments are also gaining mo- bor costs amid subdued productivity infrastructure, which raises sustainability mentum. Moreover, after a sharp decline concerns, further highlighting the need in 2023, exports of goods began to recover, growth pose a risk for the country's ex- for economic diversification. Against the while exports of services fell, partly due to ternal competitiveness and export per- backdrop of a tight labor market and ris- a strong rise in the same period of 2023 formance. Poverty in 2024 is expected to ing unit labor costs, accelerating produc- and relatively subdued tourism activity in decline to 1.3 percent. tivity growth will be essential for sustain- Q2 2024. Employment growth was broad- ing income convergence in the medium based across sectors in the first half of 2024, FIGURE 1 Croatia / Real GDP growth and contributions to FIGURE 2 Croatia / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 9 18000 8 16000 10 7 14000 5 6 12000 5 10000 0 4 8000 3 6000 -5 2 4000 1 2000 -10 2017 2018 2019 2020 2021 2022 2023 2024e 2025f 2026f 0 0 Final consumption Gross fixed capital formation 2009 2011 2013 2015 2017 2019 2021 2023 2025 Change in inventories Net exports International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real GDP pc Sources: CROSTAT and World Bank. Source: World Bank. Notes: see Table 2. MPO 54 Oct 24 with construction, the public sector and However, while Croatia's income inequal- to support goods exports, following their tourism making the strongest contribu- ity is below the EU average, pockets of decline in 2023, while exports of services tions to employment growth. The tight la- poverty persist, and inequality of oppor- may be constrained by an adverse base bor market continued to exert upward tunity remains high. Marginalized com- effect early in the year and a moderation pressure on private sector wages. Overall, munities, those with low education, the in tourist arrivals. Growth over the next wage growth further accelerated after a elderly living alone, and the unemployed two years is expected to average 2.9 per- strong rise in 2023, reflecting a substantial are most at risk. cent. Inflation, after averaging 4.2 percent increase in public sector wages following in 2024, is expected to gradually decline the reform of the public sector wage sys- over the forecast horizon toward the Eu- tem in April 2024. This has also resulted in ropean Central Bank’s target of 2 percent. worsening of the general government bud- Outlook However, a tight labor market and still get balance, despite relatively strong rev- elevated wage growth could keep infla- enue collection. At the same time, infla- Following relatively favorable economic tion slightly above that level. Strong wage tion is moderating and in August 2024 it developments in the first half of the year, growth in the public sector in 2024, cou- stood at 3 percent, down from 5.4 percent Croatia's economic growth in 2024 is ex- pled with an increase in the number of at the end of last year. This deceleration pected to strengthen compared to 2023 be- public sector employees, is expected to was driven by lower inflation for industrial fore moderating somewhat over the sub- significantly widen the fiscal deficit to products and food, while there was a slight sequent two years. Real GDP growth in nearly 3 percent of GDP. Nevertheless, uptick in energy inflation. Meanwhile, ser- 2024 is projected to reach 3.5 percent, dri- expenditures are projected to remain re- vices inflation, though easing somewhat, ven primarily by robust domestic demand. strained over the next two years, which, remained high at over 7 percent. Poverty, This is underpinned by a tight labor mar- along with continued economic expan- as measured by the share of population ket, expansionary fiscal policy—partially sion, should allow for gradual fiscal ad- living below the upper-middle income fueled by the inflow of EU funds—and a justment and a steady decline in public poverty line at 6.85 USD in PPP terms, is robust growth of public and private invest- debt. Poverty is projected to decline mar- estimated to have declined modestly from ment in the first half of the year. A gradual ginally to 1.1 percent by 2025 and then to 1.4 percent in 2023 to 1.3 percent in 2024. recovery in external demand is expected 1 percent in 2026. TABLE 2 Croatia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 13.0 7.0 3.1 3.5 3.0 2.8 Private consumption 10.6 6.7 3.0 5.6 3.5 2.7 Government consumption 3.1 2.7 6.6 3.4 2.5 2.1 Gross fixed capital investment 6.6 0.1 4.2 10.8 4.0 4.2 Exports, goods and services 32.7 27.0 -2.9 0.1 2.2 2.4 Imports, goods and services 17.3 26.5 -5.3 4.8 2.9 2.5 Real GDP growth, at constant factor prices 12.2 7.9 2.3 3.5 3.0 2.8 Agriculture 9.6 -4.3 0.4 0.0 0.9 1.0 Industry 12.4 2.7 -0.5 2.0 2.2 2.3 Services 12.3 10.5 3.4 4.2 3.3 3.0 Inflation (consumer price index) 2.7 10.7 8.4 4.2 2.8 2.2 Current account balance (% of GDP) 1.0 -2.8 1.1 0.1 0.0 0.3 Net foreign direct investment inflow (% of GDP) 5.1 5.3 1.9 2.1 2.2 2.2 Fiscal balance (% of GDP) -2.5 0.1 -0.7 -2.9 -2.4 -1.7 Revenues (% of GDP) 45.2 44.5 46.7 45.3 45.5 46.1 Debt (% of GDP) 77.5 67.8 63.0 60.0 59.1 58.1 Primary balance (% of GDP) -1.0 1.5 1.0 -1.3 -0.7 -0.1 a,b International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.3 0.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.4 0.4 0.3 0.3 0.3 0.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 1.8 1.4 1.4 1.3 1.1 1.0 GHG emissions growth (mtCO2e) 4.0 -1.8 -0.1 0.9 0.2 -0.1 Energy related GHG emissions (% of total) 88.5 88.6 88.1 87.8 87.6 87.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2022-EU-SILC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 55 Oct 24 private consumption. Domestic demand has been bolstered by rising real wages GEORGIA Key conditions and (up 10.9 percent in H1, yoy) along with strong credit growth (up 20.4 percent in challenges real terms in H1, yoy). On the supply side, growth was led by services, including Table 1 2023 Over the past decade, Georgia has education and transportation followed by Population, million 3.7 achieved considerable progress in income public administration and trade. GDP, current US$ billion 30.5 growth and poverty alleviation following Annual inflation moderated to 1 percent GDP per capita, current US$ 8218.4 earlier market reforms and strengthened (yoy) in August, despite a 7-percent (yoy) a 4.3 International poverty rate ($2.15) macroeconomic management. rise in the transport and hospitality sector. a 15.0 Nevertheless, structural challenges persist, Core inflation was 0.9 percent (yoy), Lower middle-income poverty rate ($3.65) a 47.7 notably weak firm-level productivity growth down from 2.7 percent a year ago. The Upper middle-income poverty rate ($6.85) Gini index a 33.5 and limited high-quality job creation. Central Bank has lowered its policy rate School enrollment, primary (% gross) b 103.4 About a third of workers remain engaged by a cumulative 150 basis points since b 71.6 in low-productivity agriculture; Georgia the beginning of the year, reflecting eas- Life expectancy at birth, years also has a large share of self-employed in ing inflationary pressures. Total GHG emissions (mtCO2e) 18.1 other sectors. Access to finance, particu- The banking sector remains profitable, Source: WDI, Macro Poverty Outlook, and official data. larly for SMEs, and skills mismatches, are with return on assets reaching 4.2 per- a/ Most recent value (2022), 2017 PPPs. b/ WDI for School enrollment (2023); Life expectancy among the critical obstacles, firms face. cent in June 2024 and return on equity (2022). Georgia's economic openness and reliance reaching 24.4 percent. NPLs are low at on tourism further increase its vulnerabil- 1.6 percent in June 2024. ity to external shocks, such as geopolitical The current account deficit narrowed by tensions, global market volatility, and pan- 1.5 percentage points (yoy) in H1 2024, to Growth reached 9.1 percent in H1 2024, demics. Nonetheless, the recent granting 6.0 percent of GDP, despite a deficit rise of in December 2023 of EU candidate status 16.9 percent in the trade of goods. This was driven by strong private consumption presents Georgia with a strategic oppor- offset by positive contributions from the due to rising real wages. Unemployment tunity to accelerate reforms. The EU ac- services sector and current transfers. Ex- decreased and poverty continued to de- cession process could provide a platform ports of goods fell 7.8 percent (yoy) in H1 cline. Growth is projected at 7.5 percent for enhancing governance, aligning regu- 2024, driven by weaker domestic exports lations, and boosting economic resilience, (down 11.5 percent, yoy) as commodity for 2024. Weakening exports and remit- thereby enabling Georgia to converge with exports slowed, whereas imports grew 2.4 tances suggest a widening of the current more prosperous EU member states. percent (yoy). Gross money transfers fell account deficit in 2024. The fiscal deficit 30.3 percent (yoy) in H1, with inflows is expected to reach 3 percent. Risks to from Russia decreasing 71.4 percent the outlook remain, notably related to (yoy). However, this decline was partly the October Parliamentary elections. Recent developments offset by increased inflows from the EU, US, and UAE. Proceeds from internation- Georgia's economy expanded by 9.1 per- al visitors increased 5 percent (yoy) in H1 cent in H1 2024, driven by public and 2024. On the financing side, lower net FDI FIGURE 1 Georgia / Gross money transfers from abroad and FIGURE 2 Georgia / Actual and projected poverty rates and tourism proceeds real GDP per capita Million US$ Poverty rate (%) Real GDP per capita (constant LCU) 1600 80 25000 1400 70 1200 20000 60 1000 50 15000 800 40 600 10000 30 400 20 200 5000 10 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2020 2021 2022 2023 2024 International poverty rate Lower middle-income pov. rate RF US EU Others Tourism proceeds Upper middle-income pov. rate Real GDP pc Sources: Geostat, NBG, and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 56 Oct 24 inflows, which accounted for about 3.6 fell 3 percentage points, to 13.7 percent as the deficit is projected to remain below the percent of GDP in H1, highlighted weak of end-June, which was accompanied by a level of 10.3 percent recorded in 2021. external investor confidence. higher labor force participation rate. On the fiscal side, tax revenues are expect- The GEL depreciated by 4.1 percent against ed to remain strong, contributing 25 per- the USD in the first eight months of 2024. cent of GDP in 2024, boosted by the tax The GEL remains 11.8 percent stronger hikes on gambling, effective from July 2024. than its end-2021 level. Official reserves Outlook Total expenditure is anticipated to rise to 31 fell 14 percent (yoy) in July to USD 4.7 bil- percent of GDP due to election-related ex- lion, equivalent to 3.3 months of imports. Growth is expected to reach 7.5 percent in penditure; the deficit is expected to remain Georgia’s fiscal performance remained sol- 2024, buoyed by private consumption dri- at 3 percent of GDP, as per the fiscal rule. id and a deficit of 0.1 percent of projected ven by robust real wages and employment Key downside risks include uncertainties GDP was recorded in H1 2024. General figures. In the medium term, growth is ex- surrounding the post-election landscape government revenues increased 18.5 per- pected to moderate to 5 percent, returning and Georgia’s commitment to making de- cent (yoy) in nominal terms, mainly due to its potential rate. Supported by robust cisive progress on EU accession. Other to a 21.4 percent rise in tax receipts. Cur- growth, poverty is expected to keep falling risks include geopolitical tensions in the rent expenditures rose 16 percent (yoy), in the medium term. region, a faster reduction in remittances, while capital expenditure surged 27 per- Inflation is forecast to stay below the 3-per- lower tourism revenues, and rising global cent. Public debt stood at 40.4 percent of cent target in 2024 and return to the target commodity prices, all of which could im- GDP at end-June 2024. level by end-2025. Monetary policy is ex- pede growth and increase debt levels. En- Georgia's economic expansion has trans- pected to be eased to support economic suring the independence of the central lated into tangible benefits for its popu- growth, while remaining prudent. bank, maintaining sound monetary and lation, with the poverty headcount (USD The current account deficit is forecast to fiscal policy with sufficient buffers, and en- 6.85, PPP 2017) continuing to decline, widen to around 5.5 percent of GDP in suring exchange rate flexibility will be es- from 47.7 percent in 2022 to 43.6 percent 2024 and 2025, due to the slowing of exports sential to mitigating potential shocks and in 2023. During H1 2024, unemployment and remittances from Russia. Nonetheless, safeguarding macroeconomic stability. TABLE 2 Georgia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 10.6 11.0 7.5 7.5 5.2 5.0 Private consumption 12.3 -2.8 3.6 4.3 2.9 2.2 Government consumption 7.1 -0.8 6.2 15.9 10.1 9.6 Gross fixed capital investment -4.8 9.9 30.8 14.3 5.2 6.5 Exports, goods and services 23.5 37.4 8.2 2.5 6.0 7.0 Imports, goods and services 8.8 16.9 8.6 3.5 4.0 5.0 Real GDP growth, at constant factor prices 12.2 9.8 7.9 7.5 5.2 5.0 Agriculture 2.3 -1.8 -2.8 2.5 2.5 3.0 Industry 1.0 15.1 5.1 5.0 5.0 5.0 Services 17.4 9.6 10.0 8.7 5.5 5.2 Inflation (consumer price index) 9.6 11.9 2.5 2.2 3.0 3.0 Current account balance (% of GDP) -10.3 -4.5 -4.4 -5.5 -5.4 -4.9 Net foreign direct investment inflow (% of GDP) 4.9 7.1 4.3 3.4 4.0 4.4 Fiscal balance (% of GDP) -7.0 -3.5 -2.9 -3.0 -2.8 -2.6 Revenues (% of GDP) 24.9 26.6 27.6 28.2 27.1 26.9 Debt (% of GDP) 49.0 39.1 38.1 37.7 37.2 37.2 Primary balance (% of GDP) -5.7 -2.4 -1.4 -1.2 -0.9 -0.6 a,b International poverty rate ($2.15 in 2017 PPP) 5.5 4.3 3.7 3.1 2.8 2.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 19.1 15.0 12.9 10.9 9.5 8.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 55.4 47.7 43.6 39.2 36.4 33.8 GHG emissions growth (mtCO2e) 2.7 0.7 -1.2 0.3 -0.1 0.5 Energy related GHG emissions (% of total) 55.6 56.0 55.9 56.4 56.6 56.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2022-HIS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 57 Oct 24 (H1) of 2024, down from 5.3 percent a year ago. Slowing growth momentum is evi- KAZAKHSTAN Key conditions and dent across all demand components, with investment and government spending no- challenges tably weak. Investment declined by 3.5 percent y-o-y in real terms (+13.3 percent Table 1 2023 Kazakhstan’s progress toward high in- in H1 2023) and government spending Population, million 19.8 come has slowed in recent years; to regain was 4.5 percent lower in real terms y- GDP, current US$ billion 262.6 momentum, the government should focus o-y (+17 percent). Total sales growth, a GDP per capita, current US$ 13232.8 on the effective implementation of key re- proxy for consumer spending, slowed to a 0.0 International poverty rate ($2.15) forms to support growth diversification 3.9 percent y-o-y in real terms (+10.4 per- a 0.3 and enhance inclusion. The government’s cent in H1 2023), reflecting waning con- Lower middle-income poverty rate ($3.65) a 10.6 goal of achieving 6 percent growth in the sumer demand. On the supply side, in- Upper middle-income poverty rate ($6.85) Gini index a 29.2 medium term and doubling the size of its dustrial production showed tepid growth School enrollment, primary (% gross) b 100.5 economy by 2030 (compared to the 2023 of 2.7 percent y-o-y in H1 (+3.8 percent in b 74.4 level) cannot be attained in the absence H1 2023) due to lower oil production (-1.6 Life expectancy at birth, years of significant reforms, given the moder- percent); construction edged to 8.6 per- Total GHG emissions (mtCO2e) 314.2 ate potential growth that is hampered by cent (+7.7 percent); and services slowed to Source: WDI, Macro Poverty Outlook, and official data. stagnant productivity and dominance of 3.3 percent y-o-y (+5.5 percent). a/ Most recent value (2021), 2017 PPPs. b/ WDI for School enrollment (2023); Life expectancy extractive industries. The official unemployment rate held con- (2022). To stimulate foreign and domestic invest- stant at 4.7 percent in Q2. To bolster living ment and facilitate technology transfer, standards, the government implemented a Kazakhstan must enhance competition by 21.4 percent nominal increase in minimum removing market distortions and other wage, effectively doubling the amount Growth is projected to accelerate to 4.7 barriers to dynamic private sector growth. since 2021 (+70 percent rise in real term). Improving state-owned enterprise efficien- Consumer price inflation decreased from percent in 2025, driven by new oil pro- cy and establishing a robust governance 9.7 percent in December 2023 to 8.5 per- duction flows, before subsiding towards framework would further support compe- cent y-o-y in August and September, its long-term potential rate, thereafter. tition. Addressing infrastructure gaps, com- which is above the target rate of 5 per- Inflation is expected to decrease but will plemented with strengthening human cap- cent. Food and nonfood prices moderat- ital and policies to support decarboniza- ed, while service prices remain elevated remain above the central bank target. tion, also can enhance the competitiveness due to robust sectoral wage growth. The Poverty rate is projected to decrease mar- of firms and the quality of services. central bank trimmed its policy rate by 25 ginally to 6.1 percent by 2026. Downside basis points to 14.5 percent in June, main- risks include weakening global demand taining a tight policy stance. and lower prices for oil. Global decar- A reduction in goods imports and an bonization efforts pose a long-term chal- Recent developments increase in service exports improved the trade balance, raising it to lenge, warranting transition toward a Kazakhstan’s economy slowed to 3.2 per- US$11.3bn in H2 2023 (from US$9.6bn in new, sustainable growth model. cent year-on-year (y-o-y) in the first half H1 2023). This, coupled with a significant FIGURE 1 Kazakhstan / Real GDP growth and contributions FIGURE 2 Kazakhstan / Poverty rate, percent of population to real GDP growth living on less than $6.85 (PPP) per day Percent, percentage points Percent of population 6 40 35 actual 4 30 forecast 2 25 20 0 15 Non-oil sector Oil sector 10 -2 Net taxes Real GDP growth 5 -4 0 2020 2021 2022 2023 2024e 2025f 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Sources: Statistical Office of Kazakhstan and World Bank staff estimates. Source: World Bank staff estimates. MPO 58 Oct 24 27.7 percent y-o-y decline in the primary Non-performing loans amounted to only deficit is projected to decrease gradually income balance, shifted the current ac- 3 percent of the loan portfolio in June from 2.1 percent of GDP in 2024 to 1 per- count to a surplus of US$0.8bn in H1 2024, 2024, but this warrants close monitoring cent in 2026, through increased revenue compared to a deficit of US$5.0bn in H1 given rising household indebtedness and mobilization—primarily via tax code re- 2023. foreign direct investment inflows, elevated interest rates. forms—and more targeted and tempered declined by 56.3 percent compared to a budget spending. The revised tax code is year earlier, reaching US$2.2bn, as a major likely to include higher income taxes for oil production expansion project nears businesses and households, along with completion. Gross international reserves Outlook increased levies on luxury items. How- grew to US$41bn, covering approximately ever, uncertainty around revenue gains eight months of imports. Between January Economic growth is projected to pick up and growing pressures for social and in- and August, the tenge depreciated by 4.5 temporarily to 4.7 percent in 2025, sup- frastructure spending may pose risks to percent against the U.S. dollar. ported by increased oil production, be- meeting these fiscal goals. The fiscal deficit expanded in H1 2024 as fore gradually slowing down to its long- Poverty is expected to fall to 7.9 percent slower economic growth hit revenues, term potential rate of 3.0–3.5 percent in (at US$6.85/day) in 2024, 6.7 percent in widening the consolidated budget deficit the ensuing years. 2025, and 6.1 in 2026 as growth continues to 1 percent of GDP from 0.4 percent in Private consumption and net exports, and inflation subsides. 2023. Spending dropped by 1.3 ppts of boosted by higher oil exports, will be the Economic growth faces significant down- GDP to 24.2 percent due to cuts in defense primary growth drivers. Investment activ- side risks. A decline in global oil de- and healthcare, although social welfare, ity should remain subdued, contributing mand/prices would harm exports, fiscal housing, utility infrastructure, and interest modestly in 2025–2026. revenues, and growth. Increased budget payments rose. Revenues declined by 1.8 Inflation will gradually decline in 2025 as spending and reversal of fiscal consolida- ppts to 23.3 percent of GDP, with oil-relat- energy and food prices stabilize, but tion could worsen the fiscal balance, sus- ed and non-oil revenues falling. persistent service sector inflation will tain inflationary pressure, and keep bor- The banking sector remains resilient, sup- keep it above the 5 percent target until rowing costs elevated. Furthermore, the ported by robust capital and liquidity late 2026. Ongoing tariff adjustments and growing frequency of extreme weather positions exceeding regulatory require- potential fiscal imbalances may hinder the events (e.g., droughts, wildfires, floods) ments. Real bank loans increased by 13.8 disinflationary trend. threatens agricultural output, infrastruc- percent y-o-y in June, driven primarily by The current account deficit is projected ture, and economic stability, potentially consumer borrowing (2/3 of total growth), to narrow in 2025 and beyond, under- stoking inflation and requiring further helping to sustain consumer spending. pinned by higher oil exports. The fiscal fiscal intervention. TABLE 2 Kazakhstan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.3 3.2 5.1 3.4 4.7 3.5 Private consumption 6.3 3.9 4.6 3.8 5.2 4.1 Government consumption -2.4 4.3 10.3 -2.7 3.2 0.5 Gross fixed capital investment 2.6 3.8 20.7 2.6 4.0 3.6 Exports, goods and services 2.3 9.6 1.9 1.9 6.3 2.1 Imports, goods and services -0.3 13.1 14.7 1.7 5.1 3.5 Real GDP growth, at constant factor prices 4.1 2.9 4.7 3.4 4.6 3.4 Agriculture -2.2 9.1 -7.4 3.0 3.0 2.0 Industry 4.5 2.7 5.7 3.4 6.0 3.8 Services 4.4 2.5 5.2 3.4 3.8 3.2 Inflation (consumer price index) 8.5 20.3 9.8 8.4 7.1 6.0 Current account balance (% of GDP) -1.4 3.1 -3.3 -2.7 -2.0 -1.6 Net foreign direct investment inflow (% of GDP) -1.0 -3.6 -0.9 -0.4 -2.3 -1.7 Fiscal balance (% of GDP) -5.1 -0.2 -1.6 -2.1 -1.6 -1.0 Revenues (% of GDP) 16.8 21.5 21.5 20.3 20.1 20.2 Debt (% of GDP) 23.7 22.5 22.0 23.6 23.9 25.1 Primary balance (% of GDP) -3.9 1.2 0.0 -0.4 -0.1 0.5 a,b International poverty rate ($2.15 in 2017 PPP) 0.0 0.0 0.0 0.0 0.0 0.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.3 0.3 0.2 0.2 0.1 0.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 10.6 10.7 8.8 7.9 6.7 6.1 GHG emissions growth (mtCO2e) 6.1 -1.5 0.4 0.9 1.3 1.2 Energy related GHG emissions (% of total) 71.3 71.6 72.1 72.8 73.6 74.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2021-HBS. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 59 Oct 24 gaps. The positive trend in the national average for poverty reduction may ob- KOSOVO Key conditions and scure regional disparities. Poverty is more prevalent among people with lower ed- challenges ucation and children, so it is essential to emphasize human capital accumula- Table 1 2023 After a slowdown in 2023, Kosovo’s tion. A significant portion of Kosovo's Population, million 1.7 growth accelerated in the first part of 2024, workforce comprises the working poor, GDP, current US$ billion 10.4 yet within the bounds of its structural con- who face low wages and limited human GDP per capita, current US$ 6142.0 straints. The fiscal performance remained capital. This situation is exacerbated by a 21.4 Upper middle-income poverty rate ($6.85) robust, with revenue growth continuing to low labor force participation, especially a 29.0 be strong. However, the country is con- among women, influenced by high reser- Gini index b 79.5 fronted with the need to undertake re- vation wages and attractive outside op- Life expectancy at birth, years Source: WDI, Macro Poverty Outlook, and official data. forms that demand substantial fiscal re- tions, including migration. a/ Estimated number, 2017 PPPs. sources. Key among these is the implemen- b/ Most recent WDI value (2022). tation of a new energy strategy, improve- ment of water security, and the accelera- tion of reforms aimed at bolstering human Recent developments capital and connectivity. Kosovo’s growth model relies mainly on consumption and GDP growth accelerated in the first quar- construction investment, financed signifi- ter of 2024, with provisional estimates in- cantly by the country’s diaspora. Recent dicating a 5.6 percent increase. Private Economic activity picked up during the growth trends in exports of ICT and other consumption growth (9.7 percent y/y) first quarter of 2024, on the back of robust business services are encouraging. Foreign provided the highest contribution. On the consumption growth as prices stabilized. direct investments (FDI) in 2024 continue supply side, net taxes on products con- Over the medium term, growth is project- to increase but remain primarily focused tributed most to the growth. Consumer on real estate. In 2023, labor force partici- inflation decelerated, averaging 2.1 per- ed to strengthen further, fueled by con- pation inched up to 40.7 percent. However, cent between January and August 2024. sumption, rising real incomes, credit ex- the working-age population has shrunk, Core inflation, however, remains elevated pansion, and increased public wages and partly due to ongoing outmigration. Visa (3.6 percent by August). Labor market transfers. A strengthened European liberalization with the EU has reduced formalization continued in 2023, reflected costs and spurred an increase in interna- in a 4.5 percent increase in formal em- Union (EU) accession process, backed by tional travel and higher service imports. ployment. The current account deficit the EU growth plan, has the potential to The country lags peers in human capital (CAD) for the first half of the year in- improve trade integration, attract more development. To transition to a growth creased by ¼ from the same period of FDI, and bolster economic growth. model that favors more and better-quality last year, driven by a higher deficit in the jobs, Kosovo should continue to maintain goods balance. Cumulative remittances’ macroeconomic stability and accelerate re- growth by July slowed down to 0.5 per- forms that target the closing of regulatory, cent, compared to 11.3 percent during the human capital, and vital infrastructure same period of last year. By August 2024, FIGURE 1 Kosovo / Consumer price inflation FIGURE 2 Kosovo / Actual and projected poverty rate and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 15 70 7000 12 60 6000 HCPI Core Inflation 50 5000 9 40 4000 6 30 3000 20 2000 3 10 1000 0 0 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 -3 Upper middle-income pov. rate Real GDP pc Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Source: Kosovo Statistics Agency. Source: World Bank. Notes: see Table 2. MPO 60 Oct 24 the government ran a fiscal surplus and increase, but more greenfield and produc- tax revenues grew by 11 percent, reflect- tive FDI is needed. Driven by higher cur- ing increased compliance and formaliza- Outlook rent and capital expenditures, the fiscal tion gains. Meanwhile, expenditures in- deficit is expected to edge up to 1.1 per- creased by 14 percent, driven by increases GDP growth is projected to accelerate to cent of GDP in 2024 and remain in line in wage spending. In the first quarter of 3.8 percent in 2024 and gradually con- with fiscal rules over the medium term. 2024, public and publicly guaranteed debt verge towards 4 percent over the medium An increase in spending pressures asso- (PPG) fell to 15.8 percent of GDP, down term. Growth is likely to be spurred by ciated with the upcoming electoral cy- from 17.5 percent in 2023. The financial consumption, underpinned by rising in- cle represents a risk. Continued geopolit- sector remains robust. By July 2024, credit comes, credit, and public spending. Pub- ical uncertainty, including that associat- increased by 13.6 percent (y/y) and non- lic infrastructure and private real estate ed with the domestic political context, al- performing loans remained stable at 2 investments, along with post-2025 renew- so entails risk. A reinforced EU accession percent. Poverty reduction is projected to able energy investments, are also expect- process could enhance growth prospects. continue, with a decline of 2.2 percentage ed to contribute to growth. On the pro- With growth expected to accelerate, points in 2024 (from 21.4 percent in 2023) duction side, services and construction poverty is also projected to decrease. A due to slightly higher growth. However, will provide the highest contribution. tighter labor market is anticipated to growth has been skewed towards urban Merchandise exports will remain sub- boost wages. While outmigration has centers, leading to increased inequality. dued in 2024, gradually recovering by sparked concerns about human capital Another important dimension is suscep- 2026. International price stabilization is losses, migration can also incentivize the tibility to shocks and its welfare conse- expected to slow domestic consumer optimal use of domestic human capital. quences. In 2022, price increases reached price inflation to 2 percent in 2024. How- The declining population could be offset levels not seen in decades, and energy ever, upward pressure on wages could by increasing female labor force partici- price shocks posed concerns for the most keep core inflation higher. Outmigration pation, constrained by lack of childcare vulnerable groups. Similarly, geopolitical and increased travel spending abroad, as- services. Expanding childcare services tensions and subsequent supply-chain sociated with visa liberalization, represent would not only improve labor market op- disruptions have heightened worries a drag on growth. The CAD is expected portunities for women but also enhance about their effects on those at the lower to deteriorate in 2024 but improve start- children's school readiness through better end of the economic distribution. ing in 2025. Real estate FDI is projected to early childhood education (ECE). TABLE 2 Kosovo / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 10.7 4.3 3.3 3.8 3.9 4.0 Private consumption 7.3 3.4 3.9 4.8 3.7 3.9 Government consumption 9.0 0.2 2.3 6.7 5.3 5.9 Gross fixed capital investment 13.0 -3.2 3.0 5.7 5.2 4.5 Exports, goods and services 76.8 18.9 6.3 6.0 4.1 4.8 Imports, goods and services 31.4 5.4 5.9 6.9 4.4 4.7 Real GDP growth, at constant factor prices 7.8 5.2 2.3 3.8 3.9 4.0 Agriculture -2.5 4.5 3.0 3.0 2.5 1.8 Industry 7.8 4.0 1.6 1.8 4.0 4.2 Services 9.8 6.1 2.5 5.1 4.1 4.3 Inflation (consumer price index) 3.3 11.6 4.9 2.0 1.9 1.8 Current account balance (% of GDP) -8.7 -10.3 -7.6 -8.1 -7.6 -7.5 Net foreign direct investment inflow (% of GDP) 4.0 6.3 6.8 7.1 7.0 6.9 Fiscal balance (% of GDP) -1.3 -0.5 -0.3 -1.1 -1.7 -1.9 Revenues (% of GDP) 27.4 27.9 29.4 29.2 29.4 29.6 Debt (% of GDP) 21.1 19.7 17.2 17.2 18.1 18.9 Primary balance (% of GDP) -0.9 -0.1 0.2 -0.7 -1.3 -1.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 25.5 22.8 21.4 19.2 17.1 15.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2017-HBS. Actual data: 2017. Nowcast: 2018-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2017) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 61 Oct 24 supported by the transit trade of goods mainly from China to Russia and rising KYRGYZ Key conditions and inflows of remittances. Real GDP expand- ed by 8.1 percent in H1 2024, driven challenges REPUBLIC by consumption, exports, and investment. On the production side, growth has been The Kyrgyz Republic remains one of the supported by construction and services poorest countries in the region, with which grew by 48 percent and 7.7 percent Table 1 2023 poverty levels remaining stubbornly high. in real terms, respectively. Population, million 7.1 As a small, relatively undiversified econo- Consumer price inflation fell gradually GDP, current US$ billion 14.0 my, the Kyrgyz Republic is subject to sig- over H1 2024, to 5.0 percent in July 2024, GDP per capita, current US$ 1974.0 nificant economic risks. Domestic prices the lower end of the central bank’s target International poverty rate ($2.15) a 0.3 are sensitive to rising global food and fuel range of 5–7 percent, enabling the central a 11.3 prices, and international earnings depend bank to cut the policy interest rate by 400 Lower middle-income poverty rate ($3.65) a on gold exports and remittances. The econ- basis points to 9 percent by May 2024. The Gini index 26.4 b omy has limited gross international re- drop in inflation was driven by declining School enrollment, primary (% gross) 96.2 serves to absorb shocks, while nondiscre- food price inflation, while fuel price infla- b 72.0 Life expectancy at birth, years tionary fiscal expenditure is high, and the tion accelerated, and inflation of nonfood Total GHG emissions (mtCO2e) 14.0 country is at a moderate risk of debt distress. and service prices remained elevated. Cred- Source: WDI, Macro Poverty Outlook, and official data. The country has a young and growing it to the economy continued to grow, year- a/ Most recent value (2022), 2017 PPPs. population, abundant natural resources, on-year (y-o-y), at 15 percent in real terms b/ WDI for School enrollment (2023); Life expectancy (2022). and is near large markets. However, eco- as of June 2024. While the nonperforming nomic opportunities and job creation are loans ratio increased to 11.9 percent as of limited due to a stagnant private sector, end-June 2024, from 9.2 percent at end-De- constrained by a weak competitive envi- cember 2023, the banking sector remained ronment, undue advantage of poorly per- well capitalized, with capital adequacy and Economic growth remained strong and forming SOEs, a high level of informality, liquidity ratios at 22.3 percent and 78.8 per- inflation declined sharply in the first half and an onerous business environment. Pri- cent, respectively, well above requirements. of 2024. The fiscal balance was positive vate sector-led growth will require ambi- The current account deficit reached 80.4 owing to strong revenue performance. tious reforms to ensure a level playing percent of GDP (US$2.2bn) in the first field, reduce the cost of regulatory com- quarter (Q1) of 2024, the largest deficit to GDP growth is projected at 5.8 percent in pliance, remove barriers for cross-border date. This anomaly is likely driven by the 2024, mainly driven by consumption and trade, and maximize spillovers from FDI. under-reporting of re-exports of imported investment. Inflation is projected to re- goods to Russia, mainly from China--it main at around 4 percent. The fiscal bal- was almost entirely matched in the Balance ance is projected to improve in 2024 due of Payments by an increase in “errors and to lower capital spending. Recent developments omissions” to 77 percent of GDP (US$2.1 billion). Exports of goods and services The Kyrgyz economy continued to per- grew by 22 percent (in US$ terms) in Q1 form strongly in the first half (H1) of 2024, 2024, owing to increases in gold, tourism, FIGURE 1 Kyrgyz Republic / Headline, food, and fuel FIGURE 2 Kyrgyz Republic / Real GDP growth and poverty inflation rate Percent Percent of population Percent 80 35 12 Headline 30 60 8 Food 25 Fuel 4 40 20 15 0 20 10 -4 0 5 0 -8 -20 2007 2009 2011 2013 2015 2017 2019 2021 2023e 2025f Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 Lower middle-income pov. rate (lhs) GDP growth Source: Kyrgyz authorities. Sources: Kyrgyz authorities and World Bank staff. MPO 62 Oct 24 and trade logistics service exports. Imports a year ago, respectively. Public debt de- absence of structural reforms to raise pro- of goods and services increased by 38 per- creased from 45.5 percent of GDP in De- ductivity and potential growth. cent (in US$ terms), including imports des- cember to 41.2 percent by end-June. In Assuming the central bank maintains a pru- tined for re-export. However, early re- 2023, the poverty rate (US$3.65/day dent monetary stance, inflation is projected leased data for Q2 2024 suggest that ex- poverty line), dropped to 9.7 percent, from to remain below 5 percent by end-2024 and ports and imports both declined. Remit- 11.3 percent in 2022. This decline was sup- thereafter in the medium term. tances (in US$ terms) grew by 6.4 percent ported by lower inflation and robust The current account deficit is projected at in H1 2024, y-o-y, although as a share of growth. Poverty reduction is expected to 10.8 percent of GDP in 2024 and to narrow GDP, they were lower than a year ago (22.4 continue into 2024, driven by the imple- to 8.2 percent by 2026 as an external de- percent vs 25.6 percent). mentation of social protection programs, mand for goods and services grows and re- The som strengthened by 3 percent against higher pensions, and increased lending to mittance inflows increase. the U.S. dollar over H1 2024, although the vulnerable households. The fiscal balance is projected at a surplus real effective exchange rate depreciated by of 2.6 percent of GDP in 2024 mainly as 0.3 percent. Gross international reserves a result of repayments of on-lent loans by increased to 3.3 months of imports SOEs and lower capital spending. In the (US$3.8bn) from 3.1 months (US$3.2bn) at Outlook medium-term, the fiscal balance is expect- end-December 2023. ed to remain positive despite a rise in cur- The government’s fiscal position remained GDP growth is projected to slow to 5.8 per- rent spending while revenues remain strong in H1 2024, with an estimated sur- cent in 2024, as exports continue to be broadly unchanged as a share of GDP. plus of 5.6 percent of GDP, supported by weak in H2 2024 due to an expected reduc- In the medium term, the poverty level is increases in tax and non-tax revenues com- tion in re-exports. Aggregate demand is expected to continue declining to around pared to a year ago (by 1.3 and 2 percent- expected to be supported by public and 8 percent, driven by the positive effects age points of GDP, respectively), as well as private consumption and investment. On of lower inflation and expanding social repayments of on-lent loans to the budget the production side, construction and ser- protection programs. by SOEs (7.9 percent of GDP). Current and vices are expected to contribute the most Risks to this outlook arise mainly from the capital expenditures declined by 1.2 and to growth. GDP is expected to stabilize at geopolitical situation and the uncertain 3.2 percentage points of GDP compared to 4.5 percent over the medium term in the outlook for transit trade and remittances. TABLE 2 Kyrgyz Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.5 9.0 6.2 5.8 4.5 4.5 Private consumption 18.8 17.0 10.4 6.2 4.3 4.4 Government consumption 0.5 4.4 0.9 0.6 0.5 0.3 Gross fixed capital investment 8.0 6.9 11.0 12.9 13.2 13.4 Exports, goods and services 16.4 59.2 -4.9 28.7 10.2 9.7 Imports, goods and services 38.8 66.7 34.1 15.0 8.7 9.0 Real GDP growth, at constant factor prices 5.5 12.1 4.7 5.8 4.5 4.5 Agriculture -4.5 7.3 0.6 2.5 2.2 2.3 Industry 6.5 11.9 2.7 5.3 6.0 6.0 Services 14.5 16.0 8.4 8.3 5.4 5.3 Inflation (consumer price index) 11.9 13.9 10.8 4.6 4.5 4.3 Current account balance (% of GDP) -8.0 -42.4 -48.2 -10.8 -8.6 -8.2 Net foreign direct investment inflow (% of GDP) 6.1 4.2 1.1 3.8 3.6 3.2 Fiscal balance (% of GDP) -0.3 -1.3 1.2 2.6 2.5 1.4 Revenues (% of GDP) 31.8 34.6 37.2 36.6 37.1 37.2 Debt (% of GDP) 55.8 46.9 45.5 40.9 40.4 39.9 Primary balance (% of GDP) 1.2 0.0 2.3 3.6 3.3 2.1 a,b International poverty rate ($2.15 in 2017 PPP) 0.7 0.3 0.3 0.2 0.2 0.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 12.5 11.3 9.7 8.4 7.7 7.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.2 60.1 57.2 54.7 53.2 51.5 GHG emissions growth (mtCO2e) 9.9 -0.6 -0.4 0.0 0.3 1.0 Energy related GHG emissions (% of total) 66.2 64.5 64.0 63.2 62.2 61.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2016-KIHS, 2019-KIHS, and 2022-KIHS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using point-to-point elasticity (2016-2019) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 63 Oct 24 country remains vulnerable to adverse weather events and energy shocks due to its MOLDOVA Key conditions and heavy dependence on energy imports and limited diversification in energy sources. challenges Climate change worsens these vulnerabili- ties, increasing the frequency and severity Table 1 2023 Moldova’s economy is showing signs of of droughts and other natural hazards, Population, million 2.4 recovery, while unprecedented challenges thereby posing substantial risks to Moldo- GDP, current US$ billion 16.5 due to the spillover effects of Russia's inva- va's agricultural sector and livelihoods. GDP per capita, current US$ 6861.1 sion of Ukraine are still unfolding. A mod- With EU candidate status, strong reform a 0.0 International poverty rate ($2.15) erate economic recovery in the first half of momentum, and growth-enhancing, cli- a 0.3 2024 improved household incomes and in- mate-resilient investments are needed to Lower middle-income poverty rate ($3.65) a 14.4 vestments. Nevertheless, there are signif- foster long-term, sustainable development Upper middle-income poverty rate ($6.85) Gini index a 25.7 icant macroeconomic risks, including the and convergence toward EU income levels. School enrollment, primary (% gross) b 106.5 potential intensification of the war in b 68.6 Ukraine, additional energy disruptions, Life expectancy at birth, years particularly the potential discontinuation Total GHG emissions (mtCO2e) 15.1 of gas transit through Ukraine, and head- Recent developments Source: WDI, Macro Poverty Outlook, and official data. winds from the upcoming elections in 2024 a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). and 2025. Moldova's medium-term Despite ongoing spillovers from Russia's prospects hinge on structural reforms and invasion of Ukraine, the economy is progress toward EU accession. Despite sus- showing promising recovery signs. In the tained economic growth over two decades, first half of 2024, the economy grew by poverty remains pervasive, particularly in 2.2 percent, driven by rebounds in do- Moldova’s economy is recovering despite rural regions, with limited access to ser- mestic trade, manufacturing, and a sub- ongoing spillovers from Russia's invasion vices and viable economic opportunities. stantial recovery in the energy sector, of Ukraine. Essential structural reforms Traditional means of poverty alleviation, which saw double-digit growth following and further integration with the Euro- such as remittances and social assistance, the 2023 energy crisis. The IT sector con- are slowing, while low labor force partic- tinued to experience robust growth, while pean Union (EU) is needed to address ipation and employment rates impede a agriculture remained resilient, though persistent socio-economic challenges, in- shift to employment-based poverty reduc- summer droughts may affect yields later. cluding poverty, low productivity, and tion, underscoring the urgency for struc- On the demand side, growth was fueled by climate vulnerabilities. While a gradual tural reforms. Nearly a quarter of young investments and restocking, while net ex- recovery is anticipated in 2024, signifi- people aged 15-34 were neither employed ports had a negative impact due to rising nor in education and training (NEET). imports. Private consumption improved cant risks persist, including the threat of Moldova faces structural challenges in- with increasing disposable incomes and continued conflict, potential energy dis- cluding low productivity growth, gover- lower interest rates. ruptions, and uncertainties surrounding nance deficiencies, a large state footprint, The current account deficit (CAD) im- upcoming elections. limited competition, an imbalanced busi- proved to 11.8 percent of GDP in the ness environment, and tax distortions. The first quarter of 2024, despite a 6.5 percent FIGURE 1 Moldova / Actual and projected macroeconomic FIGURE 2 Moldova / Actual and projected poverty rates and indicators 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 25 50000 0 20 40000 -5 15 30000 -10 10 20000 -15 5 10000 -20 0 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Real GDP growth rate Current account balance International poverty rate Lower middle-income pov. rate Fiscal balance Upper middle-income pov. rate Real priv. cons. pc Source: World Bank, based on national statistics. Source: World Bank. Notes: see Table 2. MPO 64 Oct 24 decline in remittances. This improvement Poverty rates, as measured by the diversification and competitiveness, in line was driven by a narrower trade deficit and US$6.85 2017 PPP poverty line, are ex- with the EU accession agenda. enhancements in the primary income ac- pected to have remained stable, marginal- Inflation is projected to stay near the low- count. The CAD was mainly financed ly dropping from 15.7 percent in 2022 to er end of the 3.5 to 6.5 percent target through cash, deposits, and trade loans 13.3 percent in 2023. range in 2024, with a medium-term aver- while direct investments fell. External debt age of around 5 percent. However, infla- decreased by 2.4 percentage points from the tion remains sensitive to supply-side fac- end of 2023, reaching 60.9 percent of GDP. tors, such as geopolitical tensions, energy Inflation continued to decelerate in 2024, Outlook prices, and climate conditions. averaging 4.2 percent (y-o-y) in the first While the CAD is expected to narrow eight months, driven by weaker domestic The economy is projected to grow by 2.8 further in 2024, aided by improvements demand and lower energy prices. In re- percent in 2024, supported by rising real in the trade balance and stable remit- sponse, the Central Bank lowered the wages due to lower inflation, favorable in- tances from the EU. However, it will like- base interest rate from 4.75 percent in ear- terest rates, and a positive fiscal impulse. ly remain above pre-pandemic levels due ly 2024 to 3.6 percent in August 2024. Despite a decline in real remittances, pri- to high import prices, transport costs, During the same period, banks main- vate consumption is expected to be a ma- and low foreign direct investment amid tained high liquidity, and the ratio of non- jor growth driver, supported by grad- ongoing uncertainties. performing loans dropped to a five-year ual improvements in investments. The in- The fiscal deficit is projected to remain low of 6.1 percent. crease in imports and reduced external high at 4.1 percent of GDP in 2024 due to In January-July, total revenues rose by demand for exports will result in a nega- spending on economic support, refugee as- 12.2 percent, y-o-y, driven by social con- tive contribution from net exports. On the sistance, and infrastructure. It is expected tributions, VAT and excise duties on im- supply side, growth will be supported by to decrease to 3 percent of GDP by 2026 as ported goods, and personal income taxes. the IT sector and domestic trade. The in- fiscal support declines. Expenditures to support the economy re- dustrial sector’s contribution is anticipat- As inflationary pressures ease, the poverty mained elevated, including spending on ed to increase, although external demand rate, as measured by the US$6.85 2017 PPP wages, subsidies, and goods and services. remains below pre-2021 levels. Agricul- poverty line, is expected to decrease to The fiscal deficit registered 3 percent of tural growth will be modest due to sum- 10.63 percent in 2024. With the anticipated GDP. Public and publicly guaranteed mer drought, despite strong results early economic recovery and normalization of debt decreased to 33.8 percent of GDP in in the year. Medium-term growth will be inflation, poverty is projected to decline the first half of 2024. fueled by reforms focused on economic further to 8.6 percent in 2025. TABLE 2 Moldova / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 13.9 -4.6 0.7 2.8 3.9 4.5 Private consumption 17.3 -4.8 -0.5 2.4 3.3 3.8 Government consumption 4.4 4.8 -2.2 0.8 0.7 0.2 Gross fixed capital investment 1.9 -10.5 -1.3 5.1 5.3 5.6 Exports, goods and services 17.5 29.7 5.1 0.2 4.7 5.9 Imports, goods and services 21.2 18.2 -5.1 1.1 3.8 4.3 Real GDP growth, at constant factor prices 13.4 -4.2 1.5 2.8 3.9 4.5 Agriculture 50.3 -23.5 31.9 1.9 3.3 3.8 Industry 0.5 -10.3 -10.0 4.4 4.8 5.2 Services 12.4 3.0 -0.1 2.6 3.8 4.5 Inflation (consumer price index) 5.1 28.7 13.4 4.5 5.1 4.9 Current account balance (% of GDP) -12.4 -17.1 -11.9 -11.0 -10.5 -9.7 Net foreign direct investment inflow (% of GDP) 2.7 3.7 2.5 1.7 2.2 2.5 Fiscal balance (% of GDP) -1.9 -3.2 -5.2 -4.1 -3.4 -2.8 Revenues (% of GDP) 32.0 33.3 34.1 33.7 33.8 33.8 Debt (% of GDP) 33.8 35.9 36.0 38.5 38.1 37.5 Primary balance (% of GDP) -1.1 -2.2 -3.4 -2.4 -1.7 -1.4 a,b International poverty rate ($2.15 in 2017 PPP) 0.0 .. .. .. .. .. a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.3 0.4 0.3 0.2 0.2 0.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 14.4 15.7 13.3 10.6 8.6 7.0 GHG emissions growth (mtCO2e) 6.9 0.2 7.2 8.1 8.8 9.6 Energy related GHG emissions (% of total) 64.8 63.5 65.7 69.2 72.7 75.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2021-HBS. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. MPO 65 Oct 24 After years of political instability follow- ing the 2020 elections and the first power MONTENEGRO Key conditions and shift in 30 years, Montenegro's govern- ment, formed in October 2023 and reshuf- challenges fled in July 2024, has made EU accession its priority. By March 2024, key judiciary Table 1 2023 Montenegro, characterized by its small and prosecution appointments were Population, million 0.6 open economy, rich biodiversity, and EU made, and in June 2024, a positive In- GDP, current US$ billion 7.6 ambitions, has shown resilience despite terim Benchmark Assessment Report GDP per capita, current US$ 12252.6 vulnerabilities to external and domestic marked a crucial step, enabling the coun- a 2.0 International poverty rate ($2.15) demand shocks. As a euroized economy, try to begin closing chapters and move a 3.7 it relies heavily on fiscal policy for macro- closer to EU membership. Lower middle-income poverty rate ($3.65) a 12.2 economic stability. Given its reliance on Upper middle-income poverty rate ($6.85) Gini index a 34.3 tourism and the challenges of environmen- School enrollment, primary (% gross) b 100.7 tal degradation and climate change, the Life expectancy at birth, years b 76.2 country would benefit from more sustain- Recent developments able development strategies. After a 15.3 Total GHG emissions (mtCO2e) 3.5 percent contraction in 2020, the economy The solid growth from 2023 continued into Source: WDI, Macro Poverty Outlook, and official data. rebounded swiftly in 2021-23, averaging 2024, although GDP growth moderated a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). 8.6 percent growth per annum. Growth is from 4.4 percent in Q1 to 2.7 percent in Q2. estimated to remain robust in 2024 at 3.4 While increased private consumption and percent, driven by private consumption, investment supported growth, their high still supported by foreign residents, pri- import dependence led to higher imports, marily Russian and Ukrainian citizens. weighing on overall growth. By July, real Montenegro’s economy is expected to Montenegro successfully reduced its pub- retail trade had grown by 6.4 percent, and grow by 3.4 percent in 2024. Growth is lic debt from 103.5 percent of GDP in the value of construction works by 3.1 projected to moderate but remain solid at 2020 to 59.3 percent in 2023, but a lumpy percent. However, tourist overnight stays 3.5 percent in 2025, boosted by wage in- debt repayment profile represents a vul- fell by 4 percent, and industrial produc- nerability. While one-off revenues result- tion by 6.5 percent. creases. However, fiscal challenges persist ed in a fiscal surplus of 0.6 percent of Strong employment gains across all sec- as the government reduces pension con- GDP in 2023, a return to fiscal deficits is tors continued into 2024. In Q2, LFS tributions, likely increasing the deficit to expected in the medium term. Tax rev- data showed employment and activity 4.1 percent of GDP in 2025. Public debt enues remain below 2021 levels following rates of 56.7 percent and 64 percent, re- is expected to rise to an estimated 64.5 the 2022 reform, which removed health- spectively, while the unemployment rate care contributions and introduced the PIT dropped to 11.4 percent. percent of GDP by 2026. Maintaining allowance (Europe Now 1). Under the By July, annual inflation averaged 4.6 per- fiscal sustainability will require disci- government's Fiscal Strategy 2024-27 (Eu- cent, and real wages increased by 1.2 per- plined policies amid high external financ- rope Now 2), revenues are projected to de- cent y/y. Poverty (income below $6.85/day ing costs and geopolitical uncertainties. cline further with the proposed reduction in 2017 PPP) is projected to have declined in pension contributions. to 8.8 percent in 2023. FIGURE 1 Montenegro / Real GDP growth and contributions FIGURE 2 Montenegro / Actual and projected poverty rates to real GDP growth and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 20 30 7000 15 25 6000 10 5000 5 20 0 4000 15 -5 3000 -10 10 2000 -15 5 1000 -20 2018 2019 2020 2021 2022 2023e 2024f 2025f 2026f 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 Table 2. MPO 66 Oct 24 The financial sector is well capitalized and Most of the poor are chronically unem- liquid, and credit growth remains strong. ployed, students, or out of the labor force, In June, the average capital adequacy ratio Outlook often living in the northern region. Thus, was at 19.5 percent, while non-performing reducing poverty further requires target- loans declined to 5 percent from 6.1 percent The growth outlook is positive albeit ed government policies alongside sus- of total loans a year ago. By June 2024, bank- challenged by an unfavorable global envi- tained economic growth. The fiscal deficit ing sector lending and deposits increased ronment. Coming from a very high base, is expected to increase in 2025 to an esti- by 12.5 and 2.1 percent y/y respectively. growth is expected to moderate to 3.4 mated 4.1 percent of GDP before gradu- In H1, the current account deficit (CAD) percent in 2024, still led by private con- ally declining to 3.7 percent in 2026. The widened due to lower service exports and sumption, but also investments. Consid- reduction in pension contributions is ex- a decline in net income accounts, driven ering the anticipated increase in the mini- pected to create a revenue shortfall de- by higher dividend and interest pay- mum and net wages from October 2024 as spite the government's planned compen- ments. Net foreign direct investment reflected in the Fiscal Strategy, personal satory measures. Implementing addition- (FDI) fell by 5 percent, covering a third consumption is expected to drive growth al fiscal consolidation measures would of the CAD, with the remainder financed in 2025 to 3.5 percent, despite a closure improve fiscal performance and help en- through new debt. External debt stays of the thermal power plant in 2025 for re- sure sustainability. Public debt is expect- high at 130 percent. construction that will require greater en- ed to rise to an estimated 64.5 percent In the first seven months of 2024, the cen- ergy imports. Medium-term growth is ex- of GDP in 2026. Maintaining debt sus- tral government achieved a fiscal surplus pected to be sustained and stimulated tainability will require strong fiscal dis- of 0.4 percent of GDP. Revenues rose by by the progress towards EU membership. cipline, especially amid challenging glob- 8.6 percent, despite one-off revenues in The CAD is projected to widen to 12.6 al financial conditions and significant fi- 2023, supported mainly by stronger VAT percent of GDP in 2024 and further to nancing needs over 2025-27. The outlook and CIT collection. 13.7 percent in 2025 due to higher energy is clouded by potential downside risks. Expenditures grew by 17.9 percent, main- imports, with just half of it financed by Heightened geopolitical uncertainties ly due to increased social transfers fol- net FDI, which may challenge sustain- may weaken growth prospects for Mon- lowing the minimum pension increase to ability. Inflation is expected to soften on- tenegro's trading partners, while the high €450 in January 2024. In June, public debt ly slightly to 3.7 percent in 2025 and cost of external financing poses a risk stood at 60.8 percent of GDP, and in further to 2.7 percent in 2026. Poverty given the country's substantial financing September, S&P upgraded Montenegro’s is projected to decline by 1.8 percentage needs. Domestic political developments credit rating from 'B' to 'B+'. points from 2023 to 7.0 percent in 2026. also pose a risk. TABLE 2 Montenegro / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 13.0 6.4 6.3 3.4 3.5 3.2 Private consumption 4.0 9.7 6.5 4.0 4.8 3.5 Government consumption 0.5 1.5 3.1 2.8 2.7 1.8 Gross fixed capital investment -12.3 0.1 6.9 6.6 4.6 3.0 Exports, goods and services 81.9 22.7 9.0 0.4 3.8 4.0 Imports, goods and services 13.7 21.3 5.9 3.1 5.3 3.5 Real GDP growth, at constant factor prices 13.2 6.3 5.7 3.4 3.4 3.2 Agriculture -0.5 -2.9 -0.3 0.5 0.5 0.5 Industry 1.4 -5.2 5.1 -2.5 -6.8 5.0 Services 19.1 10.6 6.5 5.0 6.0 3.1 Inflation (consumer price index) 2.4 13.0 8.6 4.2 3.7 2.7 Current account balance (% of GDP) -9.2 -12.9 -11.4 -12.6 -13.7 -13.2 Net foreign direct investment inflow (% of GDP) 11.7 13.2 6.2 7.0 7.0 7.0 Fiscal balance (% of GDP) -2.1 -4.9 0.6 -2.8 -4.1 -3.7 Revenues (% of GDP) 44.0 38.6 42.2 41.5 39.7 39.7 Debt (% of GDP) 84.0 69.2 59.3 62.2 61.6 64.5 Primary balance (% of GDP) 0.2 -3.3 2.4 -0.8 -1.8 -1.3 a,b International poverty rate ($2.15 in 2017 PPP) 2.0 1.8 1.7 1.6 1.5 1.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.7 3.0 2.8 2.6 2.5 2.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 12.2 10.1 8.8 8.1 7.5 7.0 GHG emissions growth (mtCO2e) 3.9 2.6 2.6 -2.3 -4.4 0.6 Energy related GHG emissions (% of total) 67.8 69.2 70.3 70.0 69.1 69.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2022-SILC-C. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. MPO 67 Oct 24 the pandemic has not kept pace with that of its peers. Ensuring sustainability, rising NORTH Key conditions and productivity, and undertaking necessary labor and regulatory structural reforms challenges MACEDONIA are essential for EU accession to progress and to enable sustainable growth. North Macedonia is struggling to recover after crises. Real GDP growth has re- Table 1 2023 mained muted in 2024, after mere 1 per- Population, million 1.8 cent in 2023, reflecting delays in the take- Recent developments GDP, current US$ billion 14.8 off of highway construction works, weaker GDP per capita, current US$ 8146.5 external demand, and lingering price pres- Output growth averaged 1.8 percent in H1 Upper middle-income poverty rate ($6.85) a 19.0 sures. Poverty reduction, having stalled in 2024 with strong domestic demand while a 33.5 2023, is estimated to have resumed in 2024 exports and imports dropped. Services led Gini index b due to rising wages and employment growth, while construction picked up and School enrollment, primary (% gross) 91.4 b growth vis-à-vis 2023. agriculture had a negative contribution. Life expectancy at birth, years 74.4 Fiscal challenges remain persistent. While Relative to end-2023, labor market indica- Total GHG emissions (mtCO2e) 9.5 some reforms have been made to boost do- tors in Q2 2024 improved slightly, with the Source: WDI, Macro Poverty Outlook, and official data. mestic revenues, spending efficiency re- employment rate rising by a notch to 45.6 a/ Most recent value (2019), 2017 PPPs. b/ Most recent WDI value (2022). mains low, and fiscal discipline weak. The percent, while the participation rate re- fiscal deficit remains at around 5 percent mained almost unchanged at 52.1 percent. post-pandemic, pushing the debt-to-GDP The unemployment rate dropped slightly ratio close to 62 percent of GDP. Both the to 12.5 percent, and the youth unemploy- fiscal deficit and public debt remain above ment rate (15-24) remained high at 26.9 Real growth remained constrained in H1 the newly introduced fiscal rules, further percent. Nominal net wage growth, driven 2024 amidst lingering inflationary pres- challenged by pre-election spending com- by public sector and minimum wage in- sures, weak external demand, and delayed mitments related to pensions, public sector creases, spiraled up to 14.8 percent in June wages, and transfers to municipalities. 2024, outpacing inflation by close to 12 pp. highway construction. Fiscal consolida- Monetary tightening has helped contain While headline inflation eased from dou- tion targets are likely to be missed for the surge in prices but persistent in- ble-digit growth in 2022 to 3 percent in July 2024 following election promises. The fis- flationary pressures risk prolonging the 2024, core inflation remains high—at above cal deficit and public debt remain elevated tightening cycle and further dampening 5 percent, led by wage pressures and ser- over the medium term with higher economic activity. Rising wages and pen- vices. At the same time, the Central Bank sions risk keeping inflation higher for initiated the first policy rate cut of 25 basis mandatory spending and build-up of fis- longer and cause a slower return to the points to 6.05 percent in September 2024. cal risks related to arrears, pensions, and long-term average. The fiscal deficit (with the state roads spending pressures ahead of local elec- Crisis-induced scars to the economy have finances included) is projected to reach tions. The growth outlook is positive, but significantly slowed potential growth and 5.1 percent of GDP in 2024 after a July income convergence with the European budget revision that increased spend- downside risks prevail. Union (EU). The country's rebound after ing on wages, pensions and transfers, FIGURE 1 North Macedonia / Fiscal performance FIGURE 2 North Macedonia / 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 0 45 350000 60 40 -2 300000 50 35 -4 250000 40 30 30 25 200000 -6 20 20 150000 -8 15 10 100000 10 0 -10 50000 5 Q2 18 19 20 21 22 23 Q1 20 20 20 20 20 20 24 24 0 0 20 20 Guarantees (lhs) Foreign debt (lhs) 2009 2011 2013 2015 2017 2019 2021 2023 2025 Domestic debt (lhs) Total public debt (lhs) Upper middle-income pov. rate Real GDP pc Fiscal deficit with PESR (rhs) Sources: North Macedonia State Statistics Office, Ministry of Finance, and World Source: World Bank. Notes: see Table 2. Bank staff calculations. Note: Fiscal deficit with PESR included. MPO 68 Oct 24 and lowered capital spending. Public declined to 81.8 percent of GDP in Q1 growth, falling by a further 1.2 percentage debt went up to 61.5 percent of GDP in Q2 2024, but roughly half of the total is private points over the forecast period. 2024, mostly on account of higher issuance and mostly intercompany lending. The baseline scenario is built on the as- of domestic securities. Expenditure arrears sumption that the focus on the EU acces- have surged to 4.7 percent of GDP in Q2 sion agenda remains a priority for the new 2024 on account of poor fiscal discipline of administration that won the general elec- local utility companies, public health insti- Outlook tions in May 2024. At the same time, low tutions, and state-owned enterprises. productivity, inefficient capital deploy- Banking sector stability has been main- The medium-term outlook remains pos- ment, and weak external demand, com- tained in line with an increase in the itive, but risks are tilted strongly to the pounded by limited fiscal space and ris- capital adequacy ratio to 18.9 percent in downside. Growth is expected to step ing fiscal risks amidst high interest rates, Q1 2024, while the liquidity rate (with- up in the medium term to an average continue to impede growth prospects and out government securities) settled around of 2.7 percent during 2025-2026. This further slow the pace of income conver- 20 percent. At the same time, the NPL projection assumes a rebound of public gence with EU peers. Additional delays of ratio went above 3 percent for the first investments and a gradual recovery of decarbonization targets, along with carbon time since 2022, but solely as a result of consumption and exports. pricing, risk a loss in domestic public rev- methodological changes. Headline inflation is projected to remain enues and international competitiveness The CAB returned to negative territory above or close to 3 percent in 2024-25, but given the start of the EU Carbon Border at 1.2 percent of GDP in H1 2024 owing to slow thereafter to a long-term average Adjustment Mechanism. In this context, to a worsening of the goods trade bal- of 2 percent. Poverty rates are projected following up on the Growth Plan pledges ance, while services exports held up and to maintain a slow declining pathway, is critical to carve out a growth-conducive remittances eased. External debt slightly helped by real wage and employment economic environment. TABLE 2 North Macedonia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.5 2.2 1.0 1.8 2.5 3.0 Private consumption 8.8 3.8 2.4 1.2 1.4 2.6 Government consumption 0.9 -5.0 -0.6 8.4 1.8 0.5 Gross fixed capital investment -0.7 3.4 -4.5 5.1 5.1 5.2 Exports, goods and services 14.3 11.4 -0.1 3.0 5.2 5.6 Imports, goods and services 14.8 12.4 -5.8 3.2 4.0 4.6 Real GDP growth, at constant factor prices 4.0 2.4 1.0 1.8 2.5 3.0 Agriculture -8.7 -5.0 -3.8 1.2 1.1 1.1 Industry -2.0 -1.9 -2.4 1.6 1.4 1.4 Services 7.7 4.6 2.5 2.0 3.0 3.6 Inflation (consumer price index) 3.2 14.2 9.4 3.5 2.8 2.0 Current account balance (% of GDP) -2.8 -6.1 0.7 -1.8 -2.0 -2.0 Net foreign direct investment inflow (% of GDP) 3.3 5.0 3.8 3.7 3.5 3.4 Fiscal balance (% of GDP) -5.3 -4.5 -4.7 -4.9 -4.0 -3.7 Fiscal balance with the state roads (% of GDP) -5.7 -4.8 -4.9 -5.1 -4.3 -3.9 Revenues (% of GDP) 32.1 32.1 34.9 37.3 37.1 37.1 Debt (% of GDP) 60.3 59.0 62.0 63.5 63.1 62.8 Primary balance (% of GDP) -4.1 -3.4 -3.1 -2.9 -2.0 -1.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 18.7 17.8 17.6 16.9 16.1 15.8 GHG emissions growth (mtCO2e) -1.1 -2.0 0.5 0.0 0.6 0.9 Energy related GHG emissions (% of total) 71.8 71.7 71.7 71.4 71.3 71.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2020-SILC-C. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2019) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 69 Oct 24 social protection remains a priority for advancing inclusion. POLAND Key conditions and Medium-term economic prospects hinge on reaping the benefits of technological challenges and green transitions, advancing social mobility and inclusion, and addressing la- Table 1 2023 The Polish economy has weathered global bor shortages. Meeting the technological Population, million 37.6 and regional shocks, underpinned by a di- transformation and EU decarbonization GDP, current US$ billion 806.5 verse economic structure, integration with objectives requires investment and plan- GDP per capita, current US$ 21428.0 regional supply chains, a commitment to ning, including ensuring a just transition a 0.9 Upper middle-income poverty rate ($6.85) macroeconomic stability, a robust financial that supports vulnerable groups while a 28.5 sector, and tight labor markets that have containing regional disparities. Gini index b 100.1 led to notable wage increases and con- School enrollment, primary (% gross) Life expectancy at birth, years b 77.3 sumer spending. The shocks however have Total GHG emissions (mtCO2e) 324.1 weakened the fiscal stance, while the en- Source: WDI, Macro Poverty Outlook, and official data. ergy crisis led to a sharp increase in in- Recent developments a/ Most recent value (2021), 2017 PPPs. flation which reduced purchasing power, b/ Most recent WDI value (2022). weighed down on growth, and increased After a sharp deceleration in 2023 (at 0.2 poverty in 2023. percent) marked by lower private con- The new administration that took office in sumption amidst high inflation and the Poland's real 2024 GDP growth is fore- December 2023 marked the first political unwinding of household crisis support casted to exceed expectations due to a transition in 8 years. It has since unlocked measures, real GDP growth has accelerat- frozen European Union (EU) funds and ed in 2024. Growth surprised on the upside stronger rebound in private and public shifted course on key agendas, such as in Q2 (3.2 percent year-on-year (y/y)) consumption on the back of slowing infla- upholding the rule of law, strengthening thanks to government and private con- tion and high wage growth. The positive fiscal institutions, and steering the green sumption picking up. A tight labor market, medium-term outlook depends on the new transition towards the EU commitment. staggered increase in the minimum and Poland's economic strategy is at a criti- public wages have resulted in one of the government intensifying, in 2025, re- cal turning point: it requires boosting pro- largest increases in average real monthly forms and investments that address ductivity through innovation, rapidly de- wage (11.5 percent y/y in Q2). structural challenges, particularly accel- carbonizing the energy sector to retain Inflation markedly slowed down reaching erating the green transition in line with economic competitiveness, and re- and 2 percent y/y in March 2024—down from upskilling the labor force in the backdrop its peak of 18.4 percent y/y in February 2023 the European Green Deal and adapting of a rapidly aging population. Restor- -, due to falling global commodity prices, a the labor force to technological advance- ing fiscal buffers while supporting invest- stronger zloty, and fewer supply disrup- ments. A rise in national extreme poverty ments in healthcare, defense, and renew- tions. The zloty remains strong, thanks to rates in 2023, expected to continue in able energy will require balancing effi- improved risk perceptions and an increas- 2024, underlines the need to strengthen cient spending and tax policy reforms. ing interest rate disparity vis-à-vis the Eu- Promoting the efficiency of spending on ro. Inflationary pressures are expected to the social protection system. pick up in H2 2024, however, primarily social benefits and promoting adaptive FIGURE 1 Poland / Potential output growth and FIGURE 2 Poland / Actual and projected poverty rate and contributions to potential output growth real private consumption per capita Percent, percentage point Poverty rate (%) Real private consumption per capita (constant LCU) 6 6 45000 5 40000 5 35000 4 4 30000 3 25000 3 20000 2 2 15000 1 10000 1 0 5000 0 0 -1 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2000 2003 2006 2009 2012 2015 2018 2021 2024 Upper middle-income pov. rate Real priv. cons. pc TFP Capital Labour Potential Sources: GUS and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 70 Oct 24 due to the phasing out of energy price compensatory increases however do not alongside increased defense and election- caps. This has prevented the National extend to the poorest 6.6 percent of the related spending, is set to keep the gener- Bank of Poland from continuing its mone- population in extreme poverty in 2023, al government deficit at 5 percent of GDP tary easing cycle, which started in Septem- who rely heavily on means-tested benefits in 2024-2025. Entry into the EU's excessive ber 2023 (75 bps cut). Headline inflation whose coverage deteriorated during the deficit procedure (EDP) should gradually rose again in August 2024 (4.3 percent y/y). period. The ability of the Polish tax and trigger a fiscal consolidation, but the pace The banking sector remains well capital- benefit system to reduce income inequal- is expected to be slow due to the high lev- ized and higher interest rates allowed for ity, which has risen since 2017, remains els of defense spending in light of geopo- further improvement in capital adequacy. comparatively low and is expected to re- litical tensions. Public debt is sustainable Continuous strengthening is required to fi- main at the same level in 2024. but will rise relatively fast in the forecast nance growing investment needs, in the period, with the 2025 borrowing needs of context of an accelerated green transition. the general government sector expected to The fiscal deficit widened in 2023, reaching reach record highs. 5.1 percent of GDP, on the back of high Outlook Household income is projected to grow debt service costs (2.1 percent of GDP), in- significantly in 2024 for families, work- creased defense spending (around 4 per- Economic growth is set to accelerate to 3.2 ers, and retirees due to strong labor cent of GDP), untargeted measures to pro- percent in 2024 and 3.7 percent in 2025. markets, an increase in real wages and tect households from the energy and food While private consumption will continue pensions, and the expansion of Poland’s price shocks, and the time-lagged impact to be a major driver, investment stimulated child benefit. Consequently, relative of the significant personal income tax re- by structural reforms and unlocked EU poverty is expected to decrease in 2024 form in 2022. It is expected to remain at the funds is also expected to play a significant and 2025. However, socially vulnerable same level in 2024. role, especially in 2025-2026. Net exports’ households remain at risk due to re- Poverty rose in 2023 using Poland’s ex- contribution to growth should turn nega- duced support from minimum-income treme and relative concepts, as nominal tive in 2024 as domestic demand fuels im- programs. National extreme poverty wage growth was outpaced by price in- ports while EU exports remain weak. A rates should remain stable in 2024 and creases and the real value of several ben- gradual improvement in exports is expect- only decline in 2025 when minimum-in- efits declined due to a lack of indexation ed from 2025 onwards. Inflation should come programs are recalibrated for in- in transfers or thresholds and smallhold- stabilize at around 3.5-5 percent and move flation. Agricultural price volatility com- er farmers suffering from lower prices. closer to the NBP target of 2.5 percent (+/- bined with damages from the 2024 The rise in relative poverty—from 11.7 to 1 percent band) only in the medium term. floods could lead to elevated extreme 12.2 percent between 2022-23—was mut- The combination of revenue shortfalls poverty rates among farming house- ed by real growth in pensions. These (from the tax reforms and exemptions) holds in 2024 and 2025. TABLE 2 Poland / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.9 5.6 0.2 3.2 3.7 3.4 Private consumption 6.1 5.5 -1.0 4.8 3.6 3.1 Government consumption 5.0 0.5 2.8 5.0 4.0 3.5 Gross fixed capital investment 1.2 2.7 13.1 -0.5 7.8 5.9 Exports, goods and services 12.3 7.4 3.4 2.8 4.0 3.7 Imports, goods and services 16.1 6.8 -2.0 3.9 5.5 4.4 Real GDP growth, at constant factor prices 6.6 5.9 1.2 3.0 3.7 3.3 Agriculture -11.5 1.1 -0.9 1.6 1.1 1.5 Industry 1.9 7.5 0.7 1.8 3.5 3.1 Services 9.7 5.2 1.5 3.7 3.8 3.4 Inflation (consumer price index) 5.1 14.4 12.0 3.6 4.7 2.9 Current account balance (% of GDP) -1.2 -2.4 1.6 0.9 0.1 -0.5 Net foreign direct investment inflow (% of GDP) 3.8 3.7 2.3 2.3 2.3 2.2 Fiscal balance (% of GDP) -1.8 -3.4 -5.1 -5.1 -5.2 -4.5 Revenues (% of GDP) 42.3 40.2 41.6 41.2 41.6 42.0 Debt (% of GDP) 53.6 49.2 49.6 51.4 54.5 57.5 Primary balance (% of GDP) -0.7 -1.9 -3.0 -2.9 -2.9 -2.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 0.9 0.9 1.4 1.3 1.2 1.1 GHG emissions growth (mtCO2e) 8.0 -3.8 -3.1 1.3 1.5 0.6 Energy related GHG emissions (% of total) 88.0 87.5 87.1 87.3 87.5 87.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2012-EU-SILC and 2022-EU-SILC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using point-to-point elasticity (2011-2021) with pass-through = 0.7 based on private consumption per capita in constant LCU. MPO 71 Oct 24 ROMANIA Key conditions and Recent developments challenges Economic growth decelerated to 1.5 per- cent y-o-y in the first half of 2024. Private Table 1 2023 Romania has significantly advanced consumption continued to be the primary Population, million 18.7 its economic development and EU engine of growth (up 5.3 percent y-o- GDP, current US$ billion 344.7 convergence but needs more inclu- y), supported by wage and pension in- GDP per capita, current US$ 18417.8 sive and sustainable economic creases and a pick-up in credit mainly a 1.8 International poverty rate ($2.15) growth, both economically and en- in the second quarter. Investment mo- a 3.0 vironmentally. Growth obstacles en- mentum decelerated (up 6 percent y-o- Lower middle-income poverty rate ($3.65) a 7.1 compass regional disparities, insti- y) from the double-digit expansion in H2 Upper middle-income poverty rate ($6.85) Gini index a 33.9 tutional weaknesses, skilled labor 2023, largely due to a reduction in the School enrollment, primary (% gross) b 90.8 shortages and declining active work- new construction works component. The b 75.3 ing-age population, and vulnerabili- trade deficit worsened, reflecting an in- Life expectancy at birth, years ties to natural hazards and climate creased differential between export vol- Total GHG emissions (mtCO2e) 72.6 change. Pro-cyclical fiscal measures umes (down 3.3 percent y-o-y) and im- Source: WDI, Macro Poverty Outlook, and official data. have fueled consumption, leading to ports (up 4 percent y-o-y), despite mod- a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). consistently high twin deficits. erating import prices. On the supply side, Romania has achieved considerable construction growth slowed to 1 percent progress in mitigating poverty and y-o-y, from 11 percent in 2023, as res- inequality, despite facing unprece- idential construction contracted by 22.2 dented challenges caused by mul- percent, while civil engineering projects Romania’s economy grew by 1.5 percent tiple crises. Despite reaching high- grew by 7.6 percent, driven by public in the first half of 2024, driven by Euro- income status, Romania's rates of investment. Industry is yet to recover pean Union (EU) funds-led investment poverty and inequality are still (down 0.6 percent y-o-y), with the energy and resilient private consumption amid some of the highest within the EU, sector down 6.4 percent y-o-y impacted with stark regional differences by diminished hydroelectric production elections. Softer growth in 2024 reflects across the country. and a fall in energy exports. Unemploy- poor performance in industry and con- A key challenge in the short term is ment remains contained at 5.1 percent struction and a worsening trade balance. to address fiscal pressures while si- in June 2024, below the EU average of Growth is expected to firm up over the multaneously tackling persistent in- 6 percent. However, recent quarterly un- medium term to near potential. Fiscal and clusion challenges. To achieve a sus- employment rates among low-educated tainable recovery and support fiscal workers continue to be on an upward current account deficits remain elevated. consolidation efforts, it is vital to im- trend. Nominal net wages grew by 12.5 Poverty is projected to decline slightly to plement the key structural reforms percent y-o-y in June 2024, above head- 6 percent in 2024, supported by strong and investment priorities under the line inflation, driven by public sector wage and pension growth. National Recovery and Resilience wage increases. Annual inflation deceler- Plan (NRRP). ated to 4.9 percent in June 2024 as a result FIGURE 1 Romania / Real GDP growth and contributions to FIGURE 2 Romania / Actual and projected poverty rates real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 30 40 60000 35 20 50000 30 40000 10 25 20 30000 0 15 20000 10 -10 10000 5 -20 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Gov. cons. Private cons. GFCF International poverty rate Lower middle-income pov. rate Exports Imports GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 72 Oct 24 of decreases in core inflation and lower en- ($6.85/day PPP) declining slowly, reaching with the resumption of the Excessive ergy prices. With faster than expected dis- 6 percent in 2024. On the downside, eco- Deficit Procedures (EDP) and the new eco- inflation, the National Bank of Romania nomic growth has slowed, and unemploy- nomic governance framework. The Euro- lowered the monetary policy rate from 7 ment is rising among those with lower ed- pean Commission and the Romanian Gov- percent to 6.5 percent through two 25-ba- ucation levels, potentially hindering ernment are expected to reach an agree- sis-point cuts in July and August 2024. Pri- poverty reduction. However, there are also ment on the medium-term fiscal adjust- vate sector credit growth accelerated to 6.7 positive signs. Strong real wage growth, ment path. To achieve a deficit under 3 percent y-o-y in June 2024, reflecting an especially in the construction sector, along percent of GDP in the medium term, a net increase in the domestic currency compo- with increases in pensions, are expected to fiscal adjustment exceeding 4 percent of nent (up 8.7 percent y-o-y). improve household incomes. Additional- GDP is needed. This translates to an aver- The fiscal deficit increased to 3.6 percent ly, the easing of inflation should enhance age yearly structural adjustment of around of annual GDP in the first half of 2024, 1.3 purchasing power, which could help 0.9 percent of GDP, under the assumption percentage points higher than in the same counterbalance the effects of slower eco- of a seven-year adjustment path. Measures period of last year. Revenues increased by nomic growth on poverty. Despite lower to balance the budget are available as sev- 13.5 percent y-o-y, driven by direct tax rev- energy prices, energy poverty continues to eral taxes that contribute significantly to enues (up 18.9 percent y-o-y). Expenditure affect most economically disadvantaged the budget have rates below the EU aver- grew by 21.2 percent y-o-y, with personnel segments of the population. age, while tax collection is still low relative expenses surging 23.1 percent y-o-y fol- to peers. Curbing major expenditure items lowing public sector wage increases. Fiscal and reducing or eliminating inefficient in- consolidation remains a much-needed pri- vestments could yield additional savings. ority. The high fiscal deficit has resulted in Outlook Giving the needed fiscal consolidation a 13.7 percentage points increase in Roma- and the labor market challenges, slow nia’s public debt-to-GDP ratio from 35.1 Growth is projected to level at around 2 poverty reduction is expected going for- percent in 2019 to 48.8 percent at end-2023. percent in 2024, reflecting continued ward. Despite recent fiscal reforms, in- However, the country maintains robust geopolitical and global market uncertain- cluding ongoing pension changes that market access, and its debt-to-GDP ratio ties affecting external demand. Economic make the system more pro-poor and remains below the Stability and Growth growth is anticipated to accelerate over the slightly more redistributive, there is still Pact debt anchor of 60 percent. medium term, driven by private consump- room to improve pro-poor fiscal policies Poverty projections for the coming period tion and EU-financed investment. Fiscal with a balanced approach to revenue and present a mixed picture, with poverty consolidation is expected to accelerate expenditure measures. TABLE 2 Romania / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.7 4.1 2.1 2.0 2.7 3.5 Private consumption 7.2 5.8 2.8 5.5 4.0 4.1 Government consumption 1.8 -3.3 6.0 0.8 0.9 1.1 Gross fixed capital investment 2.9 5.9 14.4 6.8 7.1 7.3 Exports, goods and services 12.6 9.7 -1.4 -2.9 -0.3 0.9 Imports, goods and services 14.8 9.5 -1.4 3.9 3.8 3.7 Real GDP growth, at constant factor prices 5.3 3.6 2.0 2.0 2.7 3.5 Agriculture 13.7 -23.4 10.2 -5.0 1.1 1.1 Industry 0.9 -4.6 -2.3 0.2 0.9 2.0 Services 6.8 9.4 3.3 3.1 3.4 4.2 Inflation (consumer price index) 5.1 13.8 10.4 5.3 3.9 3.2 Current account balance (% of GDP) -7.2 -9.2 -7.0 -7.2 -7.0 -6.4 Net foreign direct investment inflow (% of GDP) 3.7 3.5 2.0 2.2 2.5 2.9 Fiscal balance (% of GDP) -7.2 -6.3 -6.6 -7.3 -6.2 -5.0 Revenues (% of GDP) 32.9 33.7 33.6 34.5 35.3 36.2 Debt (% of GDP) 48.5 47.5 48.8 51.8 54.1 54.7 Primary balance (% of GDP) -5.7 -4.7 -5.2 -6.0 -4.8 -3.6 a,b International poverty rate ($2.15 in 2017 PPP) 1.8 1.7 1.6 1.5 1.4 1.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.0 2.8 2.6 2.5 2.4 2.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 7.1 6.6 6.3 6.0 5.7 5.4 GHG emissions growth (mtCO2e) 7.6 -6.1 -5.9 -2.5 -1.4 -0.6 Energy related GHG emissions (% of total) 87.4 87.1 86.5 86.3 86.3 86.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2014-EU-SILC and 2022-EU-SILC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using point-to-point elasticity (2013-2021) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 73 Oct 24 Growth in H1 was supported by man- ufacturing (+6.7 percent) due to import RUSSIAN Key conditions and substitution and military-led activity, as well as by trade services (+5.3 percent) challenges FEDERATION supported by strong domestic demand. Nevertheless, retail trade turnover The evolution of Russia’s economy growth continued to soften compared continues to be shaped by the coun- to Q1 2024. Mining sector output fell Table 1 2023 try’s invasion of Ukraine and sanc- by 2.4 percent, largely dragged by coal a 143.7 tions. The policy response to sanctions and iron ore extraction, while natural Population, million GDP, current US$ billion 2020.3 includes sizable fiscal support, a drive gas and oil production growth rebound- GNI per capita, Atlas method, current US$ a 11610.0 toward significant industrial import ed. On the demand side, growth has Lower middle-income poverty rate ($3.65) a 0.4 substitution, and measures to seek al- been driven by private consumption, a 2.0 ternative export markets. These re- propelled by high wage growth stem- Upper middle-income poverty rate ($6.85) b sponses, as well as expanded military- ming from tight labor market conditions Gini index 35.1 c related economic activity, have effec- and continuing fiscal stimulus. Invest- School enrollment, primary (% gross) 101.9 tively raised economic growth, al- ment growth was supported by the sub- c 72.5 Life expectancy at birth, years though they also are generating high sidized mortgage program and strong Total GHG emissions (mtCO2e) 1580.9 inflation and labor market shortages. corporate lending. Sources: WDI, MPO, Rosstat. In the short to medium term, the main Labor market conditions remain tight as a/ Most recent value (2021). policy challenge is to gradually nar- unemployment reached a historic low of b/ Most recent value (2020). c/ Most recent WDI value (2019). row the positive output gap and bring 2.5 percent by end-June, driving up real inflation down to the central bank's wages by 7 percent year on year (y-o-y), target while minimizing the slowdown albeit real wage growth slowed compared Economic growth is projected at 3.2 in growth. In the medium to long to Q1 2024, when it reached 14 percent. term, the growth potential is limited Inflation remained high in H1 2024, percent in 2024, with robust growth due to adverse labor market dynamics, with annual inflation (core inflation) supported by strong consumption from market and technological access re- reaching 8.6 percent (8.7 percent), well higher wages, fiscal stimulus, and im- strictions, as well as tightening of the above the central bank's target, prompt- port substitution. Inflation has remained cross-border transactions. ing it to raise the policy rate to 19 percent in September 2024, from its above the central bank target, as domes- mid-2023 low of 7.5 percent. The main tic production and labor market tight- factor driving inflation is strong growth ness pushes prices higher. Medium term Recent developments in domestic demand, outstripping the growth is expected to decelerate to 1.1 capacity of the economy to supply suf- percent by 2026 as tight monetary poli- Economic growth of 5 percent in the ficient goods and services. first half (H1) of 2024 was supported by The current account balance remained cy tempers domestic demand. Poverty is momentum built up in late 2023; how- in surplus in H1 2024. The foreign projected to decline modestly between ever, the economy has started to show trade surplus widened due to a 2024 and 2026. signs of slowing down in mid-2024. marked decline in imports, despite FIGURE 1 Russian Federation / Real GDP growth and FIGURE 2 Russian Federation / Current account balance contributions to real GDP growth and nominal USD growth of exports and imports Percent, percentage points Percent Percent of GDP 15 45 12 10 10 30 8 5 15 6 0 0 4 -5 -15 2 -10 -30 0 2019 2020 2021 2022 2023 2024 2025 2026 2019 2020 2021 2022 2023 2024 2025 2026 Imports Exports Gross fixed investment Government consumption Export growth (nominal USD) Import growth (nominal USD) Private consumption 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. MPO 74 Oct 24 strong domestic demand—possibly re- 2024–2026 period as rising financing costs lated to the tightening of sanctions on weigh on private sector investment. import payments. Outlook Inflation is also projected to decline as The fiscal balance recorded a small deficit tight monetary policy is expected to per- of 0.5 percent of GDP in H1 2024, as It is presently difficult to produce growth sist, softening domestic demand pressures. the increase in spending slightly outpaced forecasts for Russia due to the significant Exports are expected to rise in the revenues. Revenues stood at 19.5 percent changes to the economy associated with medium term as major export items of GDP, bolstered by additional revenues Russia’s invasion of Ukraine, and the de- (notably crude oil and gas) will grad- from the mining sector, while spending cision by Russia to limit publication of ually recover following a dip in 2023. accelerated to 20 percent of GDP. economic data, notably related to external On the one hand, exports are estimat- Credit to the economy continued to ex- trade, financial and monetary sectors. ed to grow, on average, by 1.2 percent pand at a solid pace, further supporting Available data limits our ability to assess during the 2024–2025 period; on the domestic demand. Consumer and corpo- the economic performance. other hand, imports are projected to rate lending exhibited high growth, ex- The recent deceleration in real wage decelerate due to slowing domestic de- panding by 14 percent and 11 percent in growth, retail trade turnover, and fiscal mand and a tightening of sanctions on real terms, respectively, in H1 2024. High spending points to a softening of economic import payments. The current account wages were an important factor in sus- growth and a gradual narrowing of the surplus is expected to decrease to 2.2 taining high consumer lending, while ro- positive output gap. Growth is projected to percent of GDP in 2024 and moderate bust corporate lending is a result of state- slow for the rest of the year, reaching 3.2 to 0.7 percent by 2026. led programs. Mortgage lending has been percent for 2024. In 2025 and 2026, growth Elevated expenditures are expected to cooling, given the government’s winding is expected to slow further toward its po- keep the general government balance in a down of support programs. tential level. Private consumption growth deficit of 2.1 percent of GDP in 2024, grad- The poverty rate (at the US$6.85-2017 is expected to decrease as the tight mon- ually declining thereafter. PPP international line) remained relative- etary stance—including more stringent Poverty is expected to continue declining, ly low, at around 2 percent from 2021 to macroprudential measures—and a lessen- though marginally, and is expected to 2023. However, a significant share of the ing of real wage growth temper private de- reach 1.6 percent in 2026. However, ad- population (around 15 percent) remains mand. Gross fixed capital formation ditional conflict-related mobilizations or at risk of falling into poverty in the event growth is set to ease in the medium term stricter sanctions pose risks to poverty and of an economic shock. and average 3.4 percent during the vulnerability reduction prospects. TABLE 2 Russian Federation / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.9 -1.2 3.6 3.2 1.6 1.1 Private consumption 11.9 -1.1 6.0 2.8 1.4 1.2 Government consumption 2.9 3.0 3.7 3.4 2.6 2.1 Gross fixed capital investment 9.3 6.7 10.5 4.9 3.0 2.3 Exports, goods and services 3.3 -13.9 -8.2 1.0 1.2 1.5 Imports, goods and services 19.1 -11.0 16.9 2.2 2.0 2.0 Real GDP growth, at constant factor prices 6.5 -0.3 3.4 3.2 1.7 1.1 Agriculture 1.3 7.0 0.5 1.2 1.2 1.2 Industry 4.3 0.4 1.5 2.0 1.4 1.4 Services 8.0 -1.1 4.5 3.9 1.8 1.0 Inflation (consumer price index) 6.7 13.7 6.0 6.9 4.4 4.2 Current account balance (% of GDP) 6.6 10.3 2.4 2.2 1.0 0.7 Net foreign direct investment inflow (% of GDP) -1.4 -1.2 -1.3 -1.0 -0.9 -0.8 a Fiscal balance (% of GDP) 0.8 -1.4 -2.3 -2.1 -1.7 -1.3 Revenues (% of GDP) 35.4 34.2 34.5 35.9 35.2 34.9 Debt (% of GDP) 17.2 16.7 17.1 17.6 18.4 18.6 a Primary balance (% of GDP) 1.6 -0.5 -1.2 -0.7 -0.2 0.3 b,c International poverty rate ($2.15 in 2017 PPP) 0.2 0.2 0.2 0.2 0.2 0.2 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.4 0.4 0.4 0.4 0.4 0.4 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 2.0 2.1 1.9 1.7 1.6 1.6 GHG emissions growth (mtCO2e) 4.8 -2.3 2.9 3.3 1.9 1.5 Energy related GHG emissions (% of total) 90.9 90.5 90.3 90.0 89.7 89.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal and Primary Balance refer to general government balances. b/ Calculations based on ECAPOV harmonization, using 2022-VNDN. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 75 Oct 24 SERBIA Key conditions and Recent developments challenges Strong GDP growth in Q1 and Q2 2024 (4.6 and 4 percent, y/y) was driven by a recov- Table 1 2023 Growth in 2024 is projected at 3.8 ery of private sector consumption and in- Population, million 6.6 percent, y/y, higher than the previ- vestment. On the other hand, net exports GDP, current US$ billion 75.6 ously projected figure of 3.5 percent made a negative contribution to growth in GDP per capita, current US$ 11447.0 thanks to a better-than-expected per- the first half of the year due to lower-than- a 1.2 International poverty rate ($2.15) formance of the construction and ser- expected export growth, as external de- a 2.5 vices sectors in the first half of the mand weakened, and imports remained at Lower middle-income poverty rate ($3.65) a 7.5 year. However, a severe drought that a high level (in part explained by increased Upper middle-income poverty rate ($6.85) Gini index a 33.1 hit Serbia this summer had a signif- investment). Manufacturing remained re- School enrollment, primary (% gross) b 89.1 icant negative impact on agriculture, silient to external developments. Its output b 75.5 which may still cause a downward was 3.6 percent higher over the first seven Life expectancy at birth, years revision of 2024 GDP projections. On months (y/y) thanks to the good perfor- Total GHG emissions (mtCO2e) 61.4 the expenditure side, consumption mance of the food, tobacco, metals, elec- Source: WDI, Macro Poverty Outlook, and official data. and investment were the main dri- tronics, and automotive sectors. a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). vers of growth in the first half of Labor market indicators improved slight- 2024 while net exports had a nega- ly in the first half of 2024. The unemploy- tive contribution. Consumption start- ment rate reached 8.2 percent in Q2 2024 The growth of the Serbian economy ac- ed to recover because of the continued (a record low since Q2 2020) and the em- increase in incomes as well as a steady ployment rate continued to increase (to celerated in the first half of 2024 leading decline in inflation. In order to reduce reach a record high level of 51.4 per- to an increase in projected GDP growth the high degree of volatility associat- cent) even though informal employment for the year as a whole to 3.8 percent. ed with the agriculture (and related declined marginally. Wages increased by The incidence of poverty declined to an food industry) output, Serbia needs to 14.7 percent in nominal terms (9.2 per- introduce policy and investment mea- cent, in real terms) in H1 2024 compared estimated 6.9 percent. However, there is sures to mitigate the negative impact to the same period of 2023. a possibility of revising down the pro- of increasing climate shocks and to Poverty (based on the upper-middle in- jected growth considering the severe promote private sector participation in come line of $6.85/day in 2017 PPP) is esti- drought that hit Serbia in 2024. Poverty these measures. mated to have declined from 7.5 percent in reduction is projected to continue at a Over the medium term, under the 2021 to 6.9 percent in 2022. In 2023, pover- baseline scenario, the Serbian economy ty levels are likely to have stayed the much slower pace, as the remaining is expected to grow at around 4 per- same, as private consumption growth was poor are often characterized by chronic cent. With limited space for future modest, affected by the high inflation and unemployment and thus not benefiting stimulus packages, structural reforms the phasing out of government support from positive market trends. are needed to accelerate private sector programs, which had fueled the strong led growth. post-COVID-19 recovery of 2021. FIGURE 1 Serbia / Indexes of the level of sectoral GDP FIGURE 2 Serbia / Actual and projected poverty rates and real private consumption per capita Index, 2000=1.0 Poverty rate (%) Real private consumption per capita (constant LCU) 3.0 35 700000 Agriculture value add 30 600000 2.5 Service value add 25 500000 Industry value add 2.0 20 400000 15 300000 1.5 10 200000 5 100000 1.0 0 0 2012 2014 2016 2018 2020 2022 2024 2026 0.5 International poverty rate Lower middle-income pov. rate 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 Upper middle-income pov. rate Real priv. cons. pc Source: World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 76 Oct 24 Inflation continued to gradually decline The current account deficit is expected to medium-term, driven primarily by con- in the first half of 2024, mainly due to increase to 4.1 percent of GDP in 2024. sumption and to some extent by invest- a significant decline in food-related infla- Over the first half of the year the CAD ment. There are both up and downside tion. However, the headline inflation in- already more than doubled compared to risks. Downside risks relate to the im- dex edged up again in July, due to an in- the same period of 2023. The trade balance pact of climate change on agriculture and crease in food prices, most likely because keeps widening as well as the primary in- infrastructure. On a positive side, there of the drought. The NBS kept unchanged come deficit. At the same time, net trans- could be a more significant impact of ex- the key policy rate at 6.5 percent from Ju- fers declined marginally, although still re- ports on growth, including but not limit- ly 2023 through June 2024 when it was porting a major surplus. Net FDI has con- ed to the recent private sector investment lowered for the first time. Currently, the tinued to perform strongly, remaining in the automotive sector. Inflation is ex- key policy rate is 6 percent. broadly unchanged in euro terms (at EUR 2 pected to decline gradually and to stay Budgetary revenues overperformed sig- billion in H1). Foreign currency reserves in- within the NBS target band. The fiscal nificantly in H1 2024 (up 14.1 percent in creased to a record high level of EUR 27.5 deficit is now projected at a higher level nominal terms, y/y), primarily thanks to billion by June. Overall credit decreased by than before since the government decided a higher-than-planned collection of con- 1.2 percent (y/y) through June 2024. How- to de facto suspend fiscal rules until 2029, tributions for social insurance, VAT, and ever, loans to private businesses and in the context of large-scale infrastructure excises. Over the same period, expendi- households were up by 7.3 percent and 4.8 public spending plans. tures increased by 15.2 percent in nom- percent respectively. Gross nonperforming Continued economic growth will keep inal terms. As a result, the consolidated loans declined to 2.9 percent in June 2024. bringing more Serbians out of poverty. fiscal surplus was lower than in the same However, the remaining poor are increas- period of 2023, while still reaching 0.4 ingly concentrated among pensioners, the percent of annual GDP. After a continued long-term unemployed, or those com- decline over 15 months (February Outlook pletely out of the labor force. Thus, tar- 2023-May 2024), public debt increased sig- geted social assistance or other direct chan- nificantly in June 2024 (by 2.1pp) to reach The Serbian economy is expected to nels will become essential to continue 52.6 percent of GDP. grow at around 4 percent over the poverty reduction. TABLE 2 Serbia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.7 2.5 2.5 3.8 4.2 4.0 Private consumption 7.9 4.0 0.8 4.0 4.2 4.0 Government consumption 4.3 0.4 0.1 8.4 4.3 3.1 Gross fixed capital investment 15.7 1.9 3.9 6.1 6.9 5.9 Exports, goods and services 20.5 16.6 2.4 6.2 6.8 5.7 Imports, goods and services 18.3 16.1 -1.1 8.6 7.1 6.0 Real GDP growth, at constant factor prices 7.7 2.2 2.6 3.8 4.2 4.0 Agriculture -5.5 -8.3 4.8 -3.0 3.4 3.4 Industry 8.9 0.1 -0.8 3.0 4.5 4.5 Services 8.8 4.5 4.1 4.9 4.1 3.8 Inflation (consumer price index) 4.0 11.9 12.1 4.5 3.1 3.0 Current account balance (% of GDP) -4.3 -6.9 -2.6 -4.1 -4.7 -5.0 Net foreign direct investment inflow (% of GDP) 6.9 7.2 5.5 5.5 5.5 5.5 Fiscal balance (% of GDP) -4.1 -3.0 -2.2 -2.2 -2.5 -2.3 Revenues (% of GDP) 43.2 43.4 42.6 43.3 43.4 43.2 Debt (% of GDP) 57.1 55.6 52.6 52.0 50.4 48.4 Primary balance (% of GDP) -2.4 -1.5 -0.4 -0.2 -0.5 -0.5 a,b International poverty rate ($2.15 in 2017 PPP) 1.2 1.2 1.2 1.2 1.2 1.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.5 2.4 2.3 2.2 2.1 2.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 7.5 6.9 6.7 6.2 5.8 5.4 GHG emissions growth (mtCO2e) -3.2 0.8 0.2 2.0 1.7 1.5 Energy related GHG emissions (% of total) 74.2 75.0 74.9 75.2 75.5 75.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2022-EU-SILC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. MPO 77 Oct 24 public sector, including SOEs. Resolving structural issues in the energy system, im- TAJIKISTAN Key conditions and proving regulation and competition in the telecom and aviation sectors, and remov- challenges ing inefficient tax exemptions are crucial for unlocking the country's economic po- Table 1 2023 Tajikistan is the poorest country in the tential. Strengthening the education, Population, million 10.1 ECA region, with a GNI per capita of healthcare, and social protection systems GDP, current US$ billion 12.1 US$1,440 (Atlas method) and a poverty is vital for human capital development GDP per capita, current US$ 1189.0 rate of 10.7 percent (based on the LMIC and equipping the workforce with the a 6.1 International poverty rate ($2.15) poverty line) in 2023. The country is necessary skills. Given Tajikistan’s high a 25.7 struggling to overcome structural bottle- exposure to climate change and natural Lower middle-income poverty rate ($3.65) a 66.4 necks, such as poor human capital, insuf- disaster risks, the country should also ex- Upper middle-income poverty rate ($6.85) Gini index a 34.0 ficient physical infrastructure, and weak pand on measures to build better envi- School enrollment, primary (% gross) b 95.9 institutions, hampering productive job ronmental resilience. b 71.3 creation and making the economy suscep- Life expectancy at birth, years tible to external shocks. Total GHG emissions (mtCO2e) 18.6 Tajikistan heavily depends on remittances Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2015), 2017 PPPs. (38 percent of GDP in 2023), particularly Recent developments b/ WDI for School enrollment (2017); Life expectancy from Russia, and has a narrow export (2022). base comprised mainly of primary com- According to official preliminary esti- modities. This lack of diversity makes it mates, Tajikistan's economy grew 8.2 per- vulnerable to external economic shocks, cent year-on-year (yoy) in the first half such as fluctuations in the Russian econo- (H1) of 2024. Growth was driven by strong my, shifts in migration policies, and glob- household consumption and investments, al commodity market changes. while net exports declined. Increased re- Two of Tajikistan's most pressing issues mittance inflows fueled domestic demand In the first half of 2024, Tajikistan's GDP are persistent high unemployment rates as labor migrants benefited from a tight grew by 8.2 percent due to strong remit- and weak private sector dynamism. Most Russian labor market and robust real wage tance inflows and investments. Growth is of the population has limited access to ba- growth. The economy saw broad-based sic services, such as quality education and output expansion across all sectors, with projected to exceed 7 percent in 2024 healthcare, and clean water. Deterrence in services and agriculture leading the way. and to slow over the medium term. To foreign investment and local private sector In H1 2024, Tajikistan's current account im- sustain robust economic growth, ambi- development is due to an uneven playing proved, with a 2.6 percent GDP surplus tious policy reforms are needed to facili- field for private enterprises, uncompetitive compared to a 1.9 percent deficit in the tate the transition to a dynamic private state-owned enterprise (SOE) practices, same period of 2023. Despite a widening and weak governance and rule of law. trade deficit, remittance inflows grew by sector-led development model. 50 percent yoy to US$3bn, more than off- Reform priorities for Tajikistan should fo- cus on opening the economy to fair com- setting the trade deficit increase. Foreign petition and improving governance in the direct investment (FDI) has remained low FIGURE 1 Tajikistan / Fiscal balance and public debt FIGURE 2 Tajikistan / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) -0.5 45 90 1200 80 1000 -1.0 70 40 60 800 -1.5 50 600 35 40 -2.0 30 400 20 30 200 -2.5 10 Fiscal balance (lhs) 0 0 Public and publicly guaranteed debt (rhs) 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 -3.0 25 International poverty rate Lower middle-income pov. rate 2021 2022 2023e 2024f 2025f 2026f Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance and World Bank staff estimates and projections. Source: World Bank. Notes: see Table 2. MPO 78 Oct 24 at 0.5 percent of GDP due to challenges The financial sector's earnings have im- Strong remittance inflows and elevated in the business environment. The central proved due to strong foreign exchange in- prices for Tajikistan’s major export com- bank accumulated international reserves flows. Return on Assets (Equity) increased modities are expected to maintain a sur- of US$4.2 billion by June 2024, equivalent from 3.7 (19.2) percent at end-2023 to 4.7 plus in the current account, while FDI in- to about seven months of imports. (25.2) percent. The banking sector has a flows are expected to remain subdued due Prudent monetary policy and exchange capital adequacy ratio of 21.4 percent, well to the weak business environment. rate stability reduced headline inflation to above the 12 percent minimum threshold, To ensure the stability of public finances, 3.5 percent yoy in June 2024. In August, the but it faces risks from poor asset quality. authorities intend to maintain the medi- central bank cut the policy rate to 9 per- Nonperforming loans accounted for 12.2 um-term fiscal deficit below 2.5 percent of cent (from 10 percent at end-2023), mark- percent as of mid-2024. GDP and restrict non-concessional bor- ing a third cut in 2024 as the inflation out- According to the Listening-to-Tajikistan rowing solely to finance the construction look became more favorable. survey, 3 percent of the population aged of the Rogun hydro power project (HPP). The government maintained a conserva- 15+ reported to have lost a job or busi- External and domestic risks weigh on eco- tive fiscal stance, with a budget deficit of ness, and about 2.4 percent reported to nomic prospects. A potential escalation in 0.7 percent of GDP in H1 2024 (compared be looking for a job during H1 2024. Russia's invasion of Ukraine, as well as Rus- to 0.2 percent in H1 2023). Revenue collec- A higher share of households (approxi- sia’s stricter migration policies and a new tion declined to 31 percent of GDP in H1 mately 25 percent) received remittances risk of military mobilization, could nega- 2024 from 33.5 percent the previous year. during H1 2024 compared to 17 percent tively impact labor outmigration and remit- Despite strong economic growth, tax rev- in H1 2023. tance flows. On the domestic front, slow enues were adversely affected by a reduc- progress in implementing structural re- tion in the VAT rate, from 15 percent to forms to support private sector-led growth 14 percent. This reduction, coupled with a and efficient public services could hamper decrease in grant disbursements following Outlook growth prospects. There is also pressure on a significant increase last year, resulted in public finances due to loss-making SOEs, an overall revenue decline. Concurrently, Tajikistan’s economy is projected to grow the upcoming repayment of a US$500 mil- budget expenditures were cut to 31.7 per- by 7.2 percent in 2024, supported by re- lion Eurobond, and the construction of the cent of GDP in H1 2024 from 33.7 percent mittance-induced household consumption Rogun HPP. Climate change and natural the previous year. The government cur- and investments. Inflation is projected at disasters could further impede economic tailed spending on goods and services. The 3.5 percent for 2024 and remains below development and stability. budget deficit was primarily financed the central bank’s inflation target range of Poverty, at US$3.65/day, is projected to through external borrowing. 6 percent (+/-2). further decline to 9 percent in 2024. TABLE 2 Tajikistan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 9.4 8.0 8.3 7.2 5.5 5.0 Private consumption 4.4 15.1 4.9 14.6 3.2 3.0 Government consumption 4.6 -0.7 13.4 11.0 5.0 5.5 Gross fixed capital investment 12.0 11.9 22.5 13.4 5.1 2.6 Exports, goods and services 55.4 -24.0 24.8 -2.9 2.7 3.2 Imports, goods and services 20.0 4.0 29.3 12.8 5.8 3.1 Real GDP growth, at constant factor prices 9.9 9.0 9.3 7.2 5.5 5.0 Agriculture -0.3 -4.5 5.0 5.0 4.5 4.5 Industry 13.2 9.1 8.0 7.5 6.6 6.0 Services 12.8 16.9 12.9 7.9 4.7 4.0 Inflation (consumer price index) 9.0 6.6 3.7 3.5 5.2 5.4 Current account balance (% of GDP) 8.2 15.3 4.8 9.8 8.3 6.8 Net foreign direct investment inflow (% of GDP) 0.4 1.5 0.8 1.1 1.3 1.4 Fiscal balance (% of GDP) -1.1 -1.3 -1.0 -2.3 -2.4 -2.4 Revenues (% of GDP) 26.7 27.2 30.1 28.4 27.8 27.7 Debt (% of GDP) 41.9 31.8 30.5 30.2 29.6 29.0 Primary balance (% of GDP) -0.3 -0.6 -0.2 -1.6 -1.7 -1.7 a,b International poverty rate ($2.15 in 2017 PPP) 2.8 2.3 2.1 1.7 1.5 1.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.2 12.4 10.7 9.0 8.3 7.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 50.6 46.8 43.8 40.8 38.6 36.8 GHG emissions growth (mtCO2e) 0.0 1.9 2.3 2.3 2.0 2.3 Energy related GHG emissions (% of total) 42.4 42.8 43.3 44.1 44.7 45.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2015-HSITAFIEN. Actual data: 2015. Nowcast: 2016-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2015) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 79 Oct 24 August 2024. Automobile sales declined by approximately 16 percent (yoy) in July. TÜRKIYE Key conditions and The labor market continues to be strong. The seasonally adjusted unemployment challenges rate fell to 8.5 percent in May, before rising to 8.8 percent in July. Labor force partici- Table 1 2023 Türkiye’s normalization of macroeconom- pation rates increased, reaching 73 percent Population, million 85.4 ic policies after the May 2023 elections for men and 37 percent for women—the GDP, current US$ billion 1119.6 has started to deliver results. Exchange highest level for women since January GDP per capita, current US$ 13106.3 rate stability supported by capital inflows 2005. The gross wages and salaries index a 0.4 International poverty rate ($2.15) together with strong monetary policy was 115.4 percent (44 percent in real a 1.4 tightening that brought the policy rate terms) higher in Q2 2024 than in 2023, Lower middle-income poverty rate ($3.65) a 7.6 from 8.5 percent in May 2023 to 50 per- due in part to large minimum wage in- Upper middle-income poverty rate ($6.85) Gini index a 44.4 cent in March 2024 helped stabilize do- creases in July 2023 and January 2024. School enrollment, primary (% gross) b 102.6 mestic markets and increase confidence The current account deficit, down to USD b 78.5 in TRY assets. 45.0 billion in 2023, continues to improve, Life expectancy at birth, years The outlook calls for careful calibration of with the 12-month cumulative deficit nar- Total GHG emissions (mtCO2e) 482.8 monetary and fiscal policies to rein in in- rowing to USD 19.1 billion by July 2024. Source: WDI, Macro Poverty Outlook, and official data. flation without a hard landing; social poli- Risk premia continue to fall with the CDS a/ Most recent value (2021), 2017 PPPs. b/ WDI for School enrollment (2021); Life expectancy cies to protect the vulnerable; and action to premia at approximately 250 in mid-July (2022). tackle structural barriers to faster econom- compared to 500 in July 2023 and nearly ic performance, including low productiv- 900 in July 2022. The Government’s com- ity growth, low labor force participation mitment to the economic program gen- and employment, and weakening FDI. erated a surge in portfolio inflows, and Macroeconomic normalization is deliver- the resulting real appreciation of the TRY incentivized firms and households to ing results: disinflation has begun; switch from FX to TRY assets. This growth is rebalancing; current account Recent developments helped the CBRT to significantly improve dynamics have improved; FX reserves are its reserves. By end-May, net reserves, rebuilding; financial markets have stabi- Despite substantial tightening of monetary excluding swaps, turned positive for the policy, the economy expanded 5.1 percent first time since early-2020. By mid-Sep- lized; and risk premia have declined. Yet, in 2023 and 3.8 percent (yoy) in H1 2024. tember, net reserves had reached USD monetary efforts need to be complemented Private consumption continued to be the 48.8 billion (USD 26.5 billion, excluding with appropriate fiscal policies. Economic main driver of growth, and the contribu- swaps). However, real TRY appreciation growth is projected to slow to 3.2 percent tion of net exports turned positive in Q1 is negatively affecting exports in recent in 2024 and 2.6 percent in 2025 as the for the first time since Q3 2022. However, months, especially lower-value products, growth momentum has slowed in both while imports of final consumption goods economy adjusts, calling for social poli- production and demand. The PMI, which remain strong. cies that protect the vulnerable and re- had increased to above the 50-threshold in- Inflation peaked at 75.5 percent in May be- duce poverty and inequality. dicating expansion in Q1, fell to 47.8 by fore easing to 52.0 percent in August, FIGURE 1 Türkiye / Real GDP growth and contributions to FIGURE 2 Türkiye / Actual and projected poverty rates and real GDP growth 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 10 15000 -5 10000 5 -10 5000 2021 2022 2023 2024 2025 2026 Private consumption Government spending 0 0 Investment Exports 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 80 Oct 24 thanks to monetary policy tightening, ex- 5.2 percent of GDP in 2023. The Govern- despite the economic slowdown. Strong la- change rate dynamics, and base effects. In- ment has issued a new tax package to bor market performance and minimum flation is particularly high in some of the generate further revenue for the budget, wage hikes exceeding CPI increases are the categories making up a larger consump- including regulations to combat the infor- main drivers of continued poverty reduc- tion share of poor households. For exam- mal economy. Meanwhile, general public tion. However, minimum wage hikes are ple, rental inflation reached over 120 per- debt to GDP remains manageable, at 28.5 less likely to reach informal workers or cent in August. Expectations for inflation percent as of Q1 2024. those out of the labor force, such as the el- continue to improve; in September, market derly or parents with no access to child- participants’ expectations for the next 12 care. Moreover, relying on the minimum months stood at 27.5 percent. wage to protect the poor has other eco- Monetary policy normalization and grad- Outlook nomic consequences, notably the fueling ual unwinding of macroprudential regula- of inflation. Well-implemented and flexible tions have helped improve bank profitabil- Economic growth is projected to slow in social protection programs can mitigate ity and capital adequacy. Banks have eased the short term, to 3.2 percent in 2024 and the economic slowdown’s impact on commercial lending, but high policy rates 2.6 percent in 2025, on the back of tighter poverty. Revamping the social protection that have driven up deposit and credit in- policy and subdued global growth, before system to improve targeting and coverage terest rates are constraining loan growth. picking up at 3.8 percent in 2026. Disin- is warranted: in 2021, the share of public The banking sector's net FX position has flation started in June and is forecast to transfers to the bottom three deciles was improved, and the risk premium for exter- continue gradually, given the tight mon- lower than to the top three deciles. nal borrowing has declined, although ex- etary policy. The current account balance Risks to the outlook continue downside. ternal debt costs have increased due to is forecast to improve further in H2 2024 Inadequate growth rebalancing would global conditions. Regulatory forbearance and remain low in 2025, due to the rebal- challenge macroeconomic stabilization. is being phased out, which may impact the ance in growth composition, which will Domestic private consumption is still ro- capital ratio of some banks; however, capi- rely less on domestic consumption and bust, and there is a risk that the domestic tal buffers remain high. Tighter credit con- have greater contribution from invest- adjustment will create external imbalances ditions have begun to take a toll on house- ment and net exports. General govern- whereby recent real TRY appreciation hold credit and MSMEs, with increasing ment deficit is forecast to remain high in could further hamper exports and boost credit card defaults and a gradual rise in 2024, given the economic slowdown and non-oil imports. Mounting geopolitical insolvency and concordat filings, although earthquake recovery needs, and despite tensions would also hinder exports. The levels remain moderate. fiscal consolidation efforts. lack of significant fiscal consolidation, pri- The annualized budget deficit eased to 4.7 Poverty is projected to decline more slowly marily on the expenditure side, could slow percent of GDP in Q2 2024, after reaching in the short term, to 6.3 percent in 2024, the disinflation process. TABLE 2 Türkiye / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 11.4 5.5 5.1 3.2 2.6 3.8 Private consumption 15.4 18.9 13.6 3.3 2.3 3.6 Government consumption 3.0 4.2 2.4 1.6 1.8 1.9 Gross fixed capital investment 7.2 1.3 8.4 0.8 1.5 2.6 Exports, goods and services 25.1 9.9 -2.8 1.9 3.4 4.1 Imports, goods and services 1.7 8.6 11.8 -4.1 1.9 3.5 Real GDP growth, at constant factor prices 12.7 6.2 4.2 3.2 2.6 3.8 Agriculture -3.0 1.3 0.2 0.6 1.2 1.5 Industry 13.0 -0.6 2.7 2.4 3.1 3.9 Services 13.2 10.1 5.8 2.7 2.6 4.0 Inflation (consumer price index) 19.6 72.3 53.9 57.9 29.2 15.9 Current account balance (% of GDP) -0.8 -5.0 -4.0 -1.7 -2.1 -2.4 Net foreign direct investment inflow (% of GDP) 0.8 1.0 0.4 0.9 1.1 1.4 Fiscal balance (% of GDP) -2.6 -0.8 -6.2 -5.0 -3.4 -3.2 Revenues (% of GDP) 30.9 27.8 29.0 32.4 33.8 34.0 Debt (% of GDP) 41.5 30.3 28.4 28.5 29.6 30.8 Primary balance (% of GDP) 0.0 1.4 -3.7 -1.3 0.3 0.6 a,b International poverty rate ($2.15 in 2017 PPP) 0.4 0.4 0.4 0.4 0.4 0.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.4 1.3 1.2 1.1 1.1 1.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 7.6 7.1 6.6 6.3 6.0 5.7 GHG emissions growth (mtCO2e) 7.9 -5.2 -0.8 3.0 3.4 4.3 Energy related GHG emissions (% of total) 78.8 77.1 75.9 75.3 74.7 74.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2021-SILC-C and 2022-SILC-C. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using point-to-point elasticity (2020-2021) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 81 Oct 24 facility, has provided an important anchor for EU alignment. The IMF’s Extended UKRAINE Key conditions and Fund Facility program remains on-track and acts as a stability anchor and catalyzer challenges for budgetary assistance. The authorities’ “reform matrix” provides a transparent Table 1 2023 Two and half years after Russia’s inva- tool to monitor reform implementation. GDP, current US$ billion 178.8 sion, Ukraine’s economy remains shaped Looking ahead, an extended war that is a 0.0 International poverty rate ($2.15) by active hostilities, which impact pro- now expected to last well into 2025 could a 0.2 Lower middle-income poverty rate ($3.65) duction factors and critical inputs. Con- exacerbate existing challenges: balancing a 7.1 Upper middle-income poverty rate ($6.85) currently, the policy framework has shift- growing military expenditure and decreas- a 25.6 ed from an exclusive focus on stability to- ing external assistance flows with an in- Gini index b 92.8 wards an attempt to close the output gap crease in domestic revenue mobilization School enrollment, primary (% gross) Life expectancy at birth, years b 68.6 and enhance growth potential while bal- and maintaining the economy’s growth Total GHG emissions (mtCO2e) 156.3 ancing macro accounts. momentum, boosting external competi- Since February 2022, aid inflows have tiveness, and controlling inflation. Ad- Source: WDI, Macro Poverty Outlook, and official data. a/ 2020 value, 2017 PPPs. helped Ukraine manage imbalances and dressing these challenges requires well- b/ Most recent WDI value (2022). provide social support, while a restrictive targeted policies, including efficiency-en- monetary policy contributed to exchange hancing tax policy reforms and the effec- rate stability and the mitigation of infla- tive use of foreign exchange reserves to aid tionary pressure. More recently, growth reconstruction and recovery. has picked up, as the private sector activity benefited from an exceptional harvest, tar- Ukraine’s situation remains challenging, geted investments to re-open maritime ex- even though the economy continues to port routes, and the restoration of energy Recent developments prove resilient and has narrowed the out- capacity. Increased exchange rate flexibili- put gap. Reforms and close coordination ty has also helped competitiveness. These GDP growth has proven resilient, reach- factors, combined with continued high ing 6.5 percent in Q1-2024. High fre- with international partners have mitigat- government consumption, resulted in quency indicators point to continued re- ed some of the adverse impacts on growth higher-than-expected growth in 2023 that silience from Q2 onwards, supported by potential and helped meet fiscal needs, but has proven resilient to renewed attacks. a further recovery in sectors oriented to- war-related risks and uncertainty about They have, however, also augmented price wards domestic demand and strong ex- pressure from steep increases in electricity ports. However, confidence and indus- continued external assistance remain sig- tariffs to result in increased inflation. trial output is hampered by attacks on nificant. While social assistance has The economy’s potential is expected to Ukraine’s electricity infrastructure. helped mitigate some poverty impacts, the start benefiting from structural reforms. After dropping to a low of 3.2 percent in extended duration of the war is increasing The opening of accession negotiations with April, inflation has started to increase and the toll on households. the European Union (EU) in June 2024, stood at 5.4 percent in July. This was dri- combined with the implementation of the ven by supply-side factors, especially in- Ukraine Plan under the EU’s financing creases in energy tariffs, and augmented FIGURE 1 Ukraine / Quarterly GDP growth, year-over-year FIGURE 2 Ukraine / Food inflation and food insecurity Percent Percent 30 25 19.2 20 20 9.6 10 6.2 6.3 4.7 6.5 15 2.9 0 -2.3 10 -10 -10.3 -14.6 5 -20 -30 0 -30.8 -30.6 -40 -36.6 -5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Apr-23 Jun-23 Aug-23 Oct-23 Dec-23 Feb-24 Apr-24 Jun-24 2021 2022 2023 2024 Food CPI (y/y) Insufficient food (% respondents) Source: Ukraine Statistics Office. Source: State Statistics Service of Ukraine. MPO 82 Oct 24 by a loser monetary policy and gradual mitigated poverty, as 20 percent of house- the baseline assumption as consumption exchange rate devaluation on the demand holds received conflict-related support. and reconstruction investment support side. Strong agricultural output kept food The situation remains challenging: in Q3 the demand side. Inflation is expected inflation in check. Banks continue to be 2024, only 40 percent of adults were em- to pick up in 2024 and remain in the profitable and stable. ployed, and over half of households re- high single digits throughout 2025 on the The current account deficit increased from ported worse financial well-being com- back of looser monetary policy. Improved US$2.7bn in the period from January to Ju- pared to February 2023. GDP and private consumption growth in ly 2023 to US$10.8bn in the same period 2025 may point to more economic stabil- in 2024 because of declining grant receipts, ity for households. whereas a US$1.5 bn trade deficit reduc- The current account deficit is projected at tion resulting from increased maritime ex- Outlook 6.1 percent of GDP in 2024 and expected ports and diminished imports due to land to widen in 2025 due to higher imports border blockades, provided relief. Reserves Ukraine’s economic outlook is condition- and a reduction in grants. After the war stood at USD 37.2 billion on August 1. al on the timing and quantity of external the trade deficit is expected to remain el- Following the approval of external assis- assistance receipts and the duration of evated due to reconstruction needs. The tance from Ukraine’s international part- Russia’s invasion. For 2024, growth is fiscal deficit (excluding grants) is expect- ners, the fiscal gap for 2024 has been closed projected at 3.2 percent, which balances ed to remain high until end-2025 at above since March. While higher defense expen- tailwinds resulting from positive trade, 20 percent of GDP before declining to ditures require a budget amendment that harvest, and industrial output indicators around 11.4 percent in 2026. is under preparation, the associated fiscal with the adverse impacts of lower energy This scenario is subject to exceptionally needs are expected to be met from domes- capacity—and associated power out- high downside risks due to the vulnera- tic sources. A restructuring of external ages—especially during the winter months bility of Ukraine’s economic trajectory to commercial debt has been completed and and the impact of continued attacks.Under external financing shortfalls and the pos- will generate fiscal savings of US$11 bil- an indicative scenario which assumes that sible prolongation of the active hostili- lion over the next three years. active hostilities will continue throughout ties beyond 2025. Should downside risks Poverty (measured by national standards) 2025, growth is expected to decelerate to materialize, a more stringent macroeco- was estimated to have increased by 1.8 2 percent in 2025 as the output gap is nomic adjustment could become neces- million in 2023 due to reduced employ- closed and input constraints start to bind. sary, with tradeoffs on household welfare ment and incomes. Despite labor market Starting from 2026, Ukraine’s economic whose loses had so far been mitigated by slowdowns, social assistance programs growth will accelerate to 7 percent under fiscal measures. TABLE 2 Ukraine / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.4 -28.8 5.3 3.2 2.0 7.0 Private consumption 6.9 -27.9 6.2 2.7 4.3 6.5 Government consumption 0.8 31.4 9.0 3.0 0.5 -4.3 Gross fixed capital investment 9.1 -33.9 52.9 15.0 11.7 26.7 Exports, goods and services -8.6 -42.0 -5.4 7.2 4.9 8.6 Imports, goods and services 14.2 -17.4 8.5 9.1 9.8 11.3 Real GDP growth, at constant factor prices 3.5 -28.8 5.3 3.2 2.0 7.0 Agriculture 14.4 -25.2 7.6 -6.0 -3.0 5.0 Industry 7.2 -42.7 4.7 5.0 3.5 10.0 Services 0.5 -24.7 5.0 4.4 2.5 6.5 Inflation (consumer price index) 9.4 20.2 12.9 5.8 8.6 7.5 Current account balance (% of GDP) -1.9 5.1 -5.4 -6.1 -6.9 -7.9 Net foreign direct investment inflow (% of GDP) 3.8 0.1 2.6 1.9 2.0 4.0 a Fiscal balance (% of GDP) -4.0 -15.6 -19.6 -22.0 -20.2 -11.4 Revenues (% of GDP) 36.5 49.8 54.8 43.0 41.5 39.4 Debt (% of GDP) 49.0 77.8 84.4 90.1 94.1 89.1 a Primary balance (% of GDP) -1.2 -12.5 -15.7 -17.6 -16.4 -8.4 a,b International poverty rate ($2.15 in 2017 PPP) .. 0.0 0.0 0.0 0.0 0.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 0.5 0.2 0.2 0.1 0.1 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 10.5 8.3 8.4 6.7 5.6 GHG emissions growth (mtCO2e) -0.4 -28.4 -1.8 -3.7 -1.1 0.4 Energy related GHG emissions (% of total) 72.7 66.5 68.2 68.8 69.0 68.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal Balance and Primary Balance are excluding grants in 2022-2026. b/ Calculations based on ECAPOV harmonization, using 2020-HLCS. c/ Projection using neutral distribution (2020) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. Actual data: 2020. Nowcast: 2021-2023. Forecasts are from 2024 to 2026. MPO 83 Oct 24 compared to 6.2 percent in H1 2023, led by investment and private consumption. Re- UZBEKISTAN Key conditions and al consumption growth accelerated to 6.8 percent in H1, led by wage and remittances challenges growth, while real investment increased by 36.6 percent, with FDI accounting for Table 1 2023 Uzbekistan implemented bold reforms in 29 percent of this investment. Investment Population, million 36.4 recent years, liberalizing its economy and growth was driven by spending on ma- GDP, current US$ billion 101.6 improving prospects for private sector de- chinery, equipment, inventory, and con- GDP per capita, current US$ 2788.9 velopment. Uzbekistan’s reform program, struction, including solar and wind power a 2.3 International poverty rate ($2.15) together with significant fiscal support, plants, chemical and metallurgical com- a 5.0 placed it on a relatively high growth path, plexes, rail investments, and construction Lower middle-income poverty rate ($3.65) a 17.3 with an average real GDP growth per capi- of Asian Games facilities. Exports (in nom- Upper middle-income poverty rate ($6.85) Gini index a 31.2 ta of 3.4 percent over the last five inal U.S. dollar value) increased moder- School enrollment, primary (% gross) b 94.3 years—above average for lower middle-in- ately in H1 2024, by 5.5 percent compared b 71.7 come countries. Nevertheless, job creation to 24.7 percent a year earlier led by ser- Life expectancy at birth, years has lagged with just 1.1 percent average vices, food, and chemicals exports, while Total GHG emissions (mtCO2e) 201.9 growth over the last five years. But it exports of gold, textiles, and machinery Source: WDI, Macro Poverty Outlook, and official data. needs to accelerate as population growth decreased moderately. Imports expanded a/ Most recent value (2022), 2017 PPPs. b/ WDI for School enrollment (2023); Life expectancy averaged 2 percent over the last five by 11 percent in H1 2024, led by rising (2022). years and with a projected yearly net natural gas imports, machinery and equip- increase of 250,000 in the working-age ment, and intermediate industrial goods. population. To achieve sustainable, job- Overall, in H1 2024, Uzbekistan registered rich economic growth Uzbekistan needs a current account surplus of 1 percent of to continue its reforms program to re- GDP, as remittance inflows surged to 14 duce state-owned enterprise dominance percent of GDP, compared to 13 percent of in the economy, liberalize key economic GDP in 2023, offsetting the H1 trade deficit The economy is projected to grow by 6 sectors (e.g., telecoms and raw materials), of 13 percent of GDP. percent in 2024. Fiscal consolidation is and minimize the trade barriers caused Between January and August 2024, the expected to continue in the medium term, by regulatory inefficiency and gaps in sum depreciated by 1.8 percent against the public infrastructure. Faster job creation U.S. dollar due to the flow-on impact of ru- based on adjusting energy prices to cost- and productivity growth also will require ble depreciation. By August 31, 2024, inter- recovery levels and reductions in tax ben- increased labor force skills. national reserves reached US$39.2bn, ris- efits. The medium-term outlook remains ing by US$6.5bn from August 2023 and positive since ongoing ambitious reforms representing 9 months of import cover. are expected to stimulate private sector- In H1 2024, as a share of GDP, budget led growth and job creation. Recent developments revenue was 30 percent, while expendi- ture was 35.9 percent resulting in a bud- Real GDP grew by 6.4 percent year-on- get deficit of 5.9 percent—higher than 5.7 year (y-o-y) in the first half (H1) of 2024 percent in H1 2023. FIGURE 1 Uzbekistan / Real GDP growth and contributions FIGURE 2 Uzbekistan / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant million LCU) 15 20 5.4 18 5.2 10 16 14 5.0 5 12 4.8 10 0 4.6 8 -5 6 4.4 4 4.2 -10 2 2021 2022 2023 2024 2025 2026 0 4.0 Private Consumption Government Spending 2022 2024 2026 Investment Net Exports International poverty rate Lower middle-income pov. rate Stocks Growth Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations based on official data. Source: World Bank. Notes: see Table 2. MPO 84 Oct 24 Headline inflation peaked in June 2024 at in 2023 (applying the UMIC poverty line notably reduced energy subsidies and on 10.6 percent, largely due to energy tariff in- of US$6.85/day). However, poverty reduc- lending to SOEs, and higher revenue col- creases, but has since slowed to 10.5 per- tion was less than it could have been be- lection. Fiscal consolidation is expected to cent in July and August, with food in- cause income growth has been skewed in continue in the medium term, with the flation decelerating to a record low of favor of the wealthier segments of the pop- budget deficit decreasing to 3.0 percent of 2.9 percent in July, prompting the central ulation, especially in urban areas, resulting GDP by 2025, as the government reduced bank to cut interest rates by 50bps to 13.5 in an increase in income inequality in 2023. tax expenditures and anticipated privati- percent in July. Compensation measures zation proceeds support revenues. (including a cash transfer of US$21 equiv- Headline inflation is expected to decline to alent to low-income households) are ex- 9 percent in 2025 and gradually approach pected to mitigate the negative impacts of Outlook the inflation target of 5 percent in 2027. tariff increases on the poor. The government is expected to adhere to Real credit growth, y-o-y, was 18 percent Growth is projected at 6.0 percent in 2024, its debt limits, with public debt decreasing in July 2024, down from 26 percent in July moderating slightly to 5.8 percent in 2025. to 35.9 percent of GDP in 2024 and 34.6 2023, as the central bank’s new regulations Consumption growth in 2024 is expected percent of GDP in 2025. Higher remit- tightened bank underwriting standards in to remain strong as average real wages in- tances and real growth in private con- higher-risk segments (e.g., car loans; sub- crease and remittance inflows remain high. sumption will lead to further poverty re- sidized lending to family businesses). The Import growth should accelerate in 2024 duction, with the UMIC poverty rate pro- banking sector remains adequately capital- and continue buoyancy in the medium jected to decrease to 15.2 percent in 2024. ized, with a capital ratio of 17.1 percent in Ju- term to support Uzbekistan’s economic Downside risks to this outlook include a ly 2024, higher than 16.4 percent a year earli- modernization. Supported by high remit- deterioration in Russia’s economic perfor- er, and above the required 13 percent. Non- tances, the current account deficit is pro- mance, higher external inflationary pres- Performing Loans increased to 4.1 percent jected to narrow in 2024 compared to 2023. sures, and tighter-than-expected global fi- in July 2024 from 3.6 percent in July 2023. The overall fiscal deficit is expected to re- nancial conditions. Upside risks include Average real wage growth of 7.2 percent in duce to 3.7 percent of GDP in 2024 due higher global gold and copper prices, and 2023 contributed to a reduction in pover- to higher-than-expected nominal GDP in stronger productivity growth and FDI due ty from 17.3 percent in 2022 to 16.9 percent 2024 and fiscal consolidation measures, to ongoing structural reforms. TABLE 2 Uzbekistan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 8.0 6.0 6.3 6.0 5.8 5.9 Private consumption 11.9 11.5 6.2 6.1 5.9 6.0 Government consumption 3.1 3.5 1.4 0.9 1.0 1.0 Gross fixed capital investment 3.1 -0.3 21.5 13.5 10.4 9.9 Exports, goods and services 13.4 24.6 7.7 5.5 9.4 11.7 Imports, goods and services 23.4 13.5 11.5 18.2 16.1 16.0 Real GDP growth, at constant factor prices 8.0 6.0 6.3 6.0 5.8 5.9 Agriculture 4.0 3.6 4.1 4.0 3.9 4.0 Industry 8.1 5.6 6.2 6.5 6.5 6.6 Services 10.3 7.5 7.5 6.7 6.3 6.4 Inflation (consumer price index) 10.8 11.4 10.0 10.9 9.1 7.8 Current account balance (% of GDP) -7.0 -3.5 -7.7 -4.6 -6.3 -6.2 Net foreign direct investment inflow (% of GDP) 3.3 3.2 2.4 3.2 3.5 4.0 Fiscal balance (% of GDP) -6.0 -4.0 -5.5 -3.7 -3.0 -3.0 Revenues (% of GDP) 25.9 30.8 29.2 29.2 29.2 29.7 Debt (% of GDP) 34.8 32.5 35.3 35.9 34.6 34.2 Primary balance (% of GDP) -5.6 -3.6 -4.7 -2.6 -1.8 -1.8 a,b International poverty rate ($2.15 in 2017 PPP) .. 2.3 2.1 2.0 1.9 1.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 5.0 4.7 4.4 4.2 4.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 17.3 16.1 15.2 14.2 13.3 GHG emissions growth (mtCO2e) 6.3 3.2 3.6 3.7 3.7 3.8 Energy related GHG emissions (% of total) 61.9 62.1 62.4 62.7 62.9 63.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on ECAPOV harmonization, using 2022-HBS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 85 Oct 24 Latin America and the Caribbean Argentina Ecuador Panama Barbados El Salvador Paraguay Belize Grenada Peru Bolivia Guatemala Saint Lucia Brazil Guyana Saint Vincent and the Grenadines Chile Haiti Suriname Colombia Honduras Trinidad and Tobago Costa Rica Jamaica Uruguay Dominica Mexico Dominican Republic Nicaragua MPO 87 Oct 24 The government’s focus is on addressing macroeconomic imbalances, restoring fis- ARGENTINA Key conditions and cal and external sustainability, reducing inflation, correcting price distortions, and challenges lowering country risk. Complementing these efforts are policies aimed at facil- Table 1 2023 Argentina’s economy has stagnated over itating trade and reducing market dis- Population, million 46.5 the past 17 years, with GDP per capita tortions. Key initiatives include reducing GDP, current US$ billion 646.6 in 2023 at approximately the same level trade barriers, eliminating price controls, GDP per capita, current US$ 13900.4 as in 2006. Despite abundant natural re- and removing subsidies, particularly in a 0.6 International poverty rate ($2.15) sources, high human capital, and strong energy and transport. Establishing robust a 2.5 comparative advantages in agriculture, and credible fiscal sustainability is essen- Lower middle-income poverty rate ($3.65) a 10.9 energy, and key manufacturing sectors, tial for maintaining Argentina’s overall Upper middle-income poverty rate ($6.85) Gini index a 40.7 growth has been hindered by exception- macroeconomic stability and reinforcing School enrollment, primary (% gross) b 110.2 ally high macroeconomic volatility, dri- microeconomic reforms. b 76.1 ven by the monetary financing of fiscal Life expectancy at birth, years deficits, and associated persistent high in- Total GHG emissions (mtCO2e) 423.5 flation. Capital and exchange rate con- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2022), 2017 PPPs. trols, trade and market distortions, and Recent developments b/ Most recent WDI value (2022). abrupt changes in policy direction have deterred private investment and con- The economy contracted 1.6 percent in strained growth. The presidential election 2023 and the poverty rate reached an es- An economic stabilization program is cycle and a severe drought exacerbated timated 13.3 percent of the urban popu- these imbalances in 2023. lation (using a poverty line of US$6.85/ underway, underpinned by a strong fis- Although Argentina’s poverty rates are day per capita, per day PPP 2017). In cal adjustment, a correction in relative relatively low compared to other Latin December 2023, the newly elected gov- prices, and the strengthening of the American and Caribbean countries, ernment initiated a stabilization program Central Bank’s balance sheet while poverty increased over the last decade, anchored in fiscal discipline, the align- bucking the regional downward trend. In ment of relative prices—including a 55 maintaining exchange rate and capital 2023, average per capita household in- percent devaluation followed by a 2 per- controls. By mid-2024, the fiscal deficit come was 40 percent less in real terms cent monthly crawling peg—and the re- was eliminated, and inflation markedly than in 2016, with the poor and vulner- duction of the monetary overhang while reduced. The economy is expected to able experiencing greater losses. Unem- maintaining currency controls. The econ- contract 3.5 percent in 2024, and pover- ployment has remained low as informali- omy further contracted by 5.1 percent (y- ty acts as a stabilizer in the labor market. o-y) in 2024Q1, with all sectors shrinking ty to rise to 16.3 percent. Balancing in- Informal employment now accounts for except agriculture, fishing, and mining. flation reduction and the removal of ex- about 40 percent of all jobs. Post-pandem- At the end of June, Congress approved change controls presents considerable ic, the primary driver of increased pover- a comprehensive reform package (Ley de risks to the economic outlook. ty has been rising inflation, especially the Bases) aimed at deregulating markets and cost of food and necessities. attracting investments. FIGURE 1 Argentina / Central government primary balance FIGURE 2 Argentina / Actual and projected poverty rates and monthly CPI inflation and real GDP per capita Percent of GDP Percent Poverty rate (%) Real GDP per capita (constant LCU) 1.5 30 18 20000 Primary Balance (lhs) 1.0 16 18000 Monthly Inflation (rhs) 25 14 16000 0.5 14000 12 0.0 20 12000 10 -0.5 10000 15 8 -1.0 8000 6 6000 -1.5 10 4 4000 -2.0 2 2000 5 -2.5 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 -3.0 0 International poverty rate Lower middle-income pov. rate Feb-23 May-23 Aug-23 Nov-23 Feb-24 May-24 Aug-24 Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations based on Ministry of Economy and INDEC. Source: World Bank. Notes: see Table 2. Note: Primary balance is calculated as the rolling 12 months as percent of GDP. MPO 88 Oct 24 The stabilization program brought fiscal to over 1,500 bps in July. Lower inflation im- surplus of 0.6 percent in 2024, driven by discipline and reduced inflation. In the proves welfare, but rising unemployment agricultural recovery and reduced im- first half of 2024, the government achieved (from 5.7 percent in 2023Q4 to 7.7 percent in port demand. Growth is expected to ac- a primary surplus of 1 percent of GDP, fol- 2024Q1), could reverse these gains. celerate in 2025 as the country continues lowing a deficit of 2.7 percent in Decem- to address macroeconomic imbalances. ber 2023, mainly through a significant re- The poverty rate is projected to increase al reduction in spending, particularly on to around 16 percent in 2024. Social assis- pensions. Inflation, which spiked to 25.5 Outlook tance programs are well-targeted but are percent (m-o-m) in December, steadily de- insufficient to fully offset the real income creased to 4.2 percent by August. The cur- Real GDP is projected to contract by losses experienced by vulnerable and mid- rent account balance turned positive in 3.5 percent in 2024, primarily due to dle-income populations. early 2024 (from a 3.2 percent of GDP the initial recessionary impacts of fiscal However, significant risks persist. External deficit in 2023) and net international re- and price adjustments and a significant risks include global shocks such as ongo- serves were boosted in Q1 thanks to a statistical carryover from 2023Q4. The ing declines in commodity prices and ad- more competitive peso and a delay in im- decline is expected to come entirely verse climate conditions. These risks are port payments. The gap between the offi- from non-agricultural sectors. Agricul- intensified by the absence of fiscal buffers. cial exchange rate and the blue-chip swap ture is anticipated to recover following Domestically, social vulnerabilities stem- narrowed from over 200 percent to about the 2023 drought, though its contribu- ming from eroding incomes and limited 40 percent by June. tion will be diminished by low interna- legislative support could destabilize re- However, towards the end of Q2, the tional prices for soy. An economic re- form efforts. The limited legislative back- continued real appreciation of the peso covery is expected to start gradually in ing raises concerns about the sustainability alongside a reduction in international the second half of 2024 as real wages of the fiscal adjustment process. Balancing reserves and currency and capital con- improve and the negative effects of fis- inflation reduction with the lifting of ex- trols, increased the risk perception of cal adjustments begin to ease. Inflation change controls is complex. Rapid restora- the economic program. Argentina’s is expected to continue to moderate to- tion of confidence is essential to regain ac- country risk, which had fallen to a low wards the end of 2024. The current ac- cess to capital markets for foreign currency of 1,100 basis points (bps) in April, rose count balance is projected to record a debt servicing from 2025 onward. TABLE 2 Argentina / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 10.4 5.3 -1.6 -3.5 5.0 4.7 Private consumption 9.5 9.4 1.0 -6.8 3.9 3.5 Government consumption 7.1 3.0 1.5 -18.4 1.7 3.2 Gross fixed capital investment 34.0 11.2 -2.0 -21.8 12.0 10.2 Exports, goods and services 8.5 4.6 -7.5 21.7 4.5 4.6 Imports, goods and services 18.6 17.8 1.7 -15.5 4.9 4.8 Real GDP growth, at constant factor prices 10.5 5.1 -1.5 -3.5 5.0 4.7 Agriculture 1.9 -2.8 -22.9 19.2 2.0 2.0 Industry 15.4 5.6 -0.2 -4.0 4.5 4.5 Services 9.6 6.0 0.8 -5.6 5.7 5.1 Current account balance (% of GDP) 1.4 -0.6 -3.2 0.6 0.6 0.8 Net foreign direct investment inflow (% of GDP) 1.1 2.1 3.2 0.8 0.3 0.6 a Fiscal balance (% of GDP) -4.4 -3.9 -4.6 0.0 0.9 0.8 Revenues (% of GDP) 33.4 33.9 31.8 31.6 33.1 33.4 a Debt (% of GDP) 85.8 89.7 174.3 91.3 83.2 80.0 a Primary balance (% of GDP) -2.5 -1.8 -2.7 1.7 2.8 3.3 b,c International poverty rate ($2.15 in 2017 PPP) 0.9 0.6 0.5 1.1 1.0 1.0 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.8 2.5 2.6 4.1 3.7 3.4 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 11.4 10.9 13.3 16.3 15.6 14.2 GHG emissions growth (mtCO2e) 5.7 4.0 -2.9 -4.5 -0.2 1.6 Energy related GHG emissions (% of total) 41.0 42.7 41.4 38.5 37.1 36.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal data refer to the general government. b/ Calculations based on SEDLAC harmonization, using 2023-EPHC-S2. Actual data: 2022 and 2023 (Preliminary). Nowcast: 2024. Forecasts are from 2025 to 2026. c/ Projections using microsimulation methodology. MPO 89 Oct 24 households. Around 55.3 percent of the population was covered by at least one so- BARBADOS Key conditions and cial protection benefit in 2019. Yet, as of 2022, the National Assistance Program challenges (NAP)—the Barbados Welfare Depart- ment’s main social assistance pro- Table 1 2023 Barbados faces several challenges due to gram—reached just 6,500 households with Population, million 0.3 its small size, heavy reliance on tourism, cash assistance. The National Insurance GDP, current US$ billion 6.4 import dependency, and vulnerability to Scheme (NIS), which provides social insur- GDP per capita, current US$ 22638.2 external shocks, particularly those related ance, faces longer-term challenges related a 95.6 School enrollment, primary (% gross) to climate change. In July 2021, hurricane to increasing expenditure on old-age pen- a 77.7 Elsa, a category 1 storm, struck Barba- sions because of an aging population. Life expectancy at birth, years Total GHG emissions (mtCO2e) 4.1 dos—the first hurricane to hit the island Source: WDI, Macro Poverty Outlook, and official data. in over 60 years. Barbados faced a greater a/ Most recent WDI value (2022). threat in late June 2024 when Hurricane Beryl, a Category 3 storm, passed about Recent developments 40 miles south of the island. The country is vulnerable to import inflation pressures Real GDP is expected to increase by 3.9 and has limited capacity to respond to percent in 2024, following its recovery to Economic recovery in Barbados contin- these pressures due to its exchange rate pre-pandemic levels in 2023, driven by an ues despite significant challenges facing peg regime. High levels of public debt, 18 percent increase in tourist arrivals be- the country due to its small size, heavy worsened by the recent economic down- tween the first semester of 2023 and the reliance on tourism, and vulnerability turn, have reduced fiscal space. Nonethe- same period in 2024. The revival of to climate-related and other external less, the Government is committed to im- tourism is contributing to growth in the plementing the BERT 2022 plan, which services sector, particularly in hotels, retail shocks. Two recent hurricanes, after an aims to reduce public debt to about 60 per- trade, and entertainment, as well as in the over sixty-year break, highlighted these cent of GDP by 2035/36, promote the tran- agriculture sector, benefiting from higher increasing vulnerabilities. Barbados sition to green energy, diversify the econ- demand for local produce. grapples with high public debt, but the omy, and enhance competitiveness. The The primary fiscal balance is projected to plan also includes a commitment to social reach 4.0 percent of GDP in FY2024, up government is committed to the Barba- cohesion, with investments in education from 3.7 percent in FY2023, due to reduced dos Economic Recovery and Transfor- and health, provision of affordable hous- public expenditures. The public debt-to- mation (BERT) 2022 plan to reduce ing, and enhanced social safety nets. GDP ratio decreased to 116.5 percent at the debt, promote green energy, and en- According to the last official poverty esti- end of 2023, from 119.1 percent at the end mates from 2016/17, around 17.2 percent of of 2022. The government has enhanced fis- hance competitiveness. Risks from glob- the population lived below Barbados’ ba- cal management, including through the es- al economic shocks and climate-related sic needs threshold, and 3.4 percent of the tablishment of a Fiscal Council to oversee disasters persist. population could not afford even a min- the fiscal strategy implementation. imum food basket. The poverty rate was The Central Bank of Barbados has main- higher among female-headed and larger tained its benchmark rate at 2 percent. FIGURE 1 Barbados / Real GDP growth and contributions to FIGURE 2 Barbados / Fiscal balance and public debt real GDP growth Percent, percentage points Percent of GDP Percent of GDP 15 160 6 10 140 4 120 5 2 100 0 80 0 -5 60 -2 -10 40 -4 -15 20 2020 2021 2022 2023 e 2024 f 2025 f 2026f 0 -6 Agriculture Industry 2020 2021 2022 2023 e 2024 f 2025 f 2026 f Services Net taxes on production Real GDP growth Debt (lhs) Fiscal balance Primary balance Sources: Government of Barbados and World Bank staff calculations. Sources: Government of Barbados and World Bank staff calculations. MPO 90 Oct 24 Average inflation is expected to ease to strongest in tourism, construction, manu- continues to modernize tax exemptions, 4.0 percent in 2024 from 5.0 percent in facturing, and retail. strengthen revenue administration, and 2023, driven by lower international fuel enhance public financial management. prices and freight costs. In 2023, pro- The current account deficit is expected longed droughts and increased demand to decrease to 5.7 percent of GDP by for restaurants and recreational activities Outlook 2026, driven by expected strong perfor- led to higher prices for specific food mance in the tourism sector and sup- items and domestic services. Efforts to The economy is expected to keep grow- ported by fiscal consolidation. Overall, enhance monetary and financial sector ing, although at a slower rate. Real GDP the government's dedication to fiscal policies contributed to a well-capitalized, is projected to increase by 2.8 percent consolidation, climate resilience, and liquid, and profitable banking system, in 2025 and 2.3 percent in 2026. Efforts debt sustainability, along with ongoing with credit to the private sector growing to carry out structural reforms, improve support from international financial in- a modest 1.7 percent in 2023. The ex- fiscal institutions, and encourage invest- stitutions, adds credibility to the coun- ternal position continued to strengthen, ments in renewable energy projects are try's ambitious reform agenda. with the current account deficit expected anticipated to support sustainable and in- However, there are risks to this outlook, to narrow to 7.4 percent of GDP in 2024 clusive growth. Government efforts to including potential global economic and fi- from 9.1 percent of GDP in 2023. Foreign adapt the economy to climate change and nancial shocks, climate-related natural dis- reserves reached 6.1 months of imports of improve the business environment are ex- asters, and an escalation of regional con- goods at the end of 2023. pected to further stimulate investment. flicts in other parts of the world, which In March 2024, the unemployment rate Inflation is predicted to drop below 3 per- could impact global commodity prices and in Barbados was 6.9 percent, down from cent starting in 2025. Fiscal consolidation raise inflation. While the public debt to 8.9 percent in March 2023. However, the is set to continue, with the fiscal balance GDP ratio has fallen back to pre-pandemic overall labor force participation rate fell reaching a small surplus and by 2026. levels and is projected to continue declin- from 63.9 percent to 60.9 percent over The government is actively working to re- ing, it remains high and exacerbates the the same period. Job creation has been duce transfers to state-owned entities and potential impact of these risks. TABLE 2 Barbados / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -1.2 13.5 4.4 3.9 2.8 2.3 Real GDP growth, at constant factor prices -1.3 13.8 4.3 3.9 2.8 2.3 Agriculture -22.2 -12.8 2.5 5.0 3.0 3.0 Industry -6.3 6.0 4.2 2.9 2.8 2.4 Services 0.4 16.0 4.4 4.0 2.8 2.3 Inflation (consumer price index) 1.6 4.9 5.0 4.0 2.9 2.4 Current account balance (% of GDP) -10.5 -10.1 -9.1 -7.4 -6.2 -5.7 Fiscal balance (% of GDP) -4.7 -2.0 -1.7 -1.7 -0.4 0.1 Revenues (% of GDP) 28.2 29.0 28.0 27.3 27.3 27.3 Debt (% of GDP) 131.5 119.1 116.5 107.9 101.8 96.3 Primary balance (% of GDP) -0.9 2.5 3.7 4.0 4.4 4.5 GHG emissions growth (mtCO2e) 3.3 2.7 0.4 0.2 0.3 0.4 Energy related GHG emissions (% of total) 31.9 32.7 32.1 31.4 30.6 29.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 91 Oct 24 No recent internationally comparable poverty statistics are available for Belize. BELIZE Key conditions and Census data point to a longer-term decline in multidimensional poverty, as defined challenges by the Statistical Institute of Belize. Nonetheless, 26.4 percent of the popula- Table 1 2023 Belize, an upper middle-income country, tion still lived in multidimensional poverty Population, million 0.4 relies heavily on tourism, agriculture, and in 2024. There is significant geographic GDP, current US$ billion 3.3 remittances for foreign exchange. Its eco- and demographic variation in poverty GDP per capita, current US$ 7988.1 nomic health is closely tied to the United rates; in 2024, the southern district of Tole- a 99.9 School enrollment, primary (% gross) States, which is its primary source of do had the highest rate of multi-dimen- a 71.0 tourists and remittances, the main desti- sional poverty at 57.5 percent, and the Life expectancy at birth, years Total GHG emissions (mtCO2e) 6.8 nation for its exports, and a key investor. poverty rate among Belize’s Maya popula- Source: WDI, Macro Poverty Outlook, and official data. Belize's economy is also sensitive to fluc- tion reached 60.2 percent. a/ Most recent WDI value (2022). tuations in energy prices because its ex- change rate is pegged to the US dollar and because of its status as a net importer of oil and gas. Additionally, the country Recent developments faces significant risks from climate-relat- ed issues such as flooding, wind damage, In 2024, Belize's economy is expected to ex- and coastal erosion. pandwellaboveitshistoricaltrend,withreal Belize's economy bounced back from the After enduring a period of economic in- GDP rising by 4.3 percent, largely due to impact of the COVID-19 pandemic, stability and substantial fiscal imbalances growth in tourism, agriculture, construc- showing strong growth, reduced debt, a exacerbated by the COVID-19 pandemic, tion, retail and wholesale trade, transporta- Belize is stabilizing its economy. The tion, and business process outsourcing. primary fiscal surplus, decelerating infla- country has successfully reduced public Overnight tourist arrivals exceeded pre- tion, and low unemployment rate. How- debt through debt restructuring and a pandemic levels. Already in 2023, real GDP ever, it is crucial to maintain fiscal disci- blue bond issuance, although debt servic- was 16 percent higher than before the pan- pline and transparency and to enhance ing costs remain high. Belize is also im- demic,andtheunemploymentratedropped proving fiscal management by building significantly from 10.4 percent before the the business environment. Persistent financial reserves to support a counter- pandemic to 3.0 percent in April 2024. poverty and inequality, reliance on cyclical fiscal approach and enhancing fis- However, labor force participation, which tourism and energy imports, and vulner- cal discipline. Despite these improve- decreased sharply during the pandemic, ability to climate-related disruptions pose ments, the business environment still remained low at 57.4 percent. This is espe- faces major challenges, including limited cially true for women (44.8 percent) com- risks to long-term growth. credit availability for the private sector, pared to men (71.0 percent) and for those inadequate infrastructure, skill shortages, with lower levels of education. Heightened and high crime rates. These factors hinder security risks due to ongoing gang-related job creation, economic growth, and violence could potentially impede eco- poverty reduction. nomic activity in the affected areas. FIGURE 1 Belize / Real GDP growth and contributions to FIGURE 2 Belize / Fiscal balances and public debt real GDP growth Percent, percentage points Percent of GDP Percent of GDP 25 120 2 20 100 0 15 10 -2 5 80 0 -4 -5 60 -6 -10 40 -15 -8 -20 20 -10 -25 2020 2021 2022 2023 2024 e 2025 f 2026 f 0 -12 Private Consumption Government Consumption 2020 2021 2022 2023e 2024f 2025f 2026f Investment Net trade Discrepancy Real GDP Growth Debt (lhs) Fiscal balance Primary balance Sources: Government of Belize and World Bank staff calculations. Sources: Government of Belize and World Bank staff calculations. MPO 92 Oct 24 Average inflation is projected to slow The Central Bank of Belize focused its deficit is projected to remain relatively sta- from 4.4 percent in 2023 to 3.1 percent in monetary policy on supporting overall ble. Accordingly, poverty rates are expect- 2024. The fiscal position has been slow- economic stability and growth, including ed to remain relatively stable. ly deteriorating over the last 2 years but maintaining an adequate level of inter- The fiscal position is expected to slowly remains robust. The overall fiscal deficit national reserves to strengthen the cur- deteriorate, with the primary balance ap- is projected to widen from 1.4 percent rency peg. Gross international reserves proaching zero. Public debt is expected to of GDP in FY2023 (ending in March amounted to 3.4 months of imports at decline but will remain well above 50 per- 2024) to 1.7 percent in FY2024 due to the end of 2023. cent of GDP due to slower nominal GDP higher interest payments, despite govern- Domestic banks saw an increase in regula- growth and high global interest rates. ment efforts to secure concessional exter- tory capital, a decrease in nonperforming Other risks to the outlook remain, includ- nal financing. The primary surplus is al- loans, and higher returns on assets in 2023. ing higher global food and fuel prices, and so narrowing. Revenues are expected to However, high nonperforming loans, low climate-related disasters. One of Belize's bounce back from 23.2 percent of GDP capital buffers, and tight liquidity in some key policy priorities for 2025-2026 is in- in FY2023 to 24.2 percent of GDP in banks continue to constrain real private creased targeted spending on social pro- FY 2024, while total expenditure will in- sector credit growth. grams. If combined with improvements in crease to 25.9 percent of GDP. However, data management, and interoperability of the acquisition of the Port of Belize and systems to ensure effectiveness and value the settlement of outstanding litigations for money, this could have a significant po- with a foreign investor helped to reduce Outlook tential to reduce poverty. Reforms of the public debt to 64.2 percent of GDP by business environment to improve trade in- the end of 2024. Belize's economic outlook is characterized tegration, investments in skills and edu- The current account showed a notable im- by moderation in growth and inflation. Re- cation, and efforts to tackle energy con- provement in 2023, narrowing from 8.3 al GDP growth is expected to slow to about straints and costs are all crucial to boosting percent of GDP in 2022 to 3.6 percent, 1 percent in 2025-2026, reflecting the clos- economic growth and employment. In the reflecting a rise in the services balance ing of the output gap due to the comple- process, it is important for the government due to lower shipping costs and higher tion of post-COVID-19 recovery. Inflation to maintain fiscal discipline and trans- tourism receipts, and a fall in the primary is projected to fall to 2.0 percent, driven by parency. Other priorities include infra- income deficit. It is expected to remain anticipated declines in global commodity structure, crime prevention, and remain- stable in 2024. prices and inflation. The current account ing vigilant to financial stability risks. TABLE 2 Belize / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 17.9 8.7 4.7 4.3 1.2 0.5 Private consumption 16.9 8.0 5.0 7.5 2.0 1.2 Government consumption 16.7 6.6 5.3 14.5 6.7 2.5 Gross fixed capital investment 26.0 12.8 5.1 3.9 1.9 0.1 Exports, goods and services 37.7 16.6 7.9 2.2 0.5 -0.1 Imports, goods and services 32.1 10.2 9.7 8.3 3.1 1.1 Real GDP growth, at constant factor prices 17.2 6.3 4.5 4.3 1.2 0.5 Agriculture 19.1 -0.1 8.6 6.7 3.5 2.1 Industry 18.6 -2.2 3.3 3.2 0.7 0.0 Services 16.5 9.7 4.1 4.2 1.0 0.4 Inflation (consumer price index) 3.2 6.3 4.4 3.1 2.3 2.0 Current account balance (% of GDP) -6.5 -8.3 -3.6 -3.5 -3.4 -3.8 Net foreign direct investment inflow (% of GDP) 5.1 4.7 4.2 4.5 4.7 4.8 a Fiscal balance (% of GDP) -1.4 -0.6 -1.4 -1.7 -1.8 -1.9 Revenues (% of GDP) 23.4 24.0 23.2 24.2 24.9 25.2 a Debt (% of GDP) 82.3 67.1 66.3 64.2 62.3 61.7 a Primary balance (% of GDP) 0.0 1.3 0.9 0.4 0.2 0.1 GHG emissions growth (mtCO2e) -1.4 0.2 0.2 0.0 -0.1 0.0 Energy related GHG emissions (% of total) 9.9 10.9 11.6 12.3 12.9 13.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (April 1st -March 31st). MPO 93 Oct 24 The ongoing demographic transition, in- creasing urbanization, and a more edu- BOLIVIA Key conditions and cated workforce increase the urgency of generating more and better jobs. Foster- challenges ing private investment, as well as pro- ductivity gains among small and medi- Table 1 2023 The Government's state-led development um-sized enterprises, is critical to accel- Population, million 12.4 strategy focused on import substitution, erating growth and job creation; these GDP, current US$ billion 45.1 natural resource extraction, public invest- would benefit from reducing red tape, re- GDP per capita, current US$ 3643.3 ment through state-owned enterprises, moving tax distortions, modernizing la- a 2.0 International poverty rate ($2.15) and generous subsidies has led to struc- bor regulations, improving transport and a 5.4 turally high fiscal deficits, dwindling re- logistics, easing agricultural export re- Lower middle-income poverty rate ($3.65) a 15.2 serves, and limited access to international strictions, and fostering environmentally Upper middle-income poverty rate ($6.85) Gini index a 40.9 capital markets. Macroeconomic imbal- and socially sustainable mining. School enrollment, primary (% gross) b 99.6 ances have been compounded by chal- b 64.9 lenges such as a narrow export base, a Life expectancy at birth, years decline in gas production, and a weak Total GHG emissions (mtCO2e) 138.7 business environment that is depressing Recent developments Source: WDI, Macro Poverty Outlook, and official data. private investment. Growth has slowed a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). significantly, and the country has limited GDP growth decelerated to 3.1 percent buffers to respond to external and cli- in 2023 due to declining gas production, mate shocks. A credible medium-term dollar and fuel shortages, political ten- The economic situation continues to de- plan to reduce the fiscal deficit, improve sions, and a severe drought. Fuel and the business environment, and strength- food subsidies and a fixed exchange rate teriorate as macroeconomic imbalances en institutions is critical to address have helped keep inflation low in recent weigh on growth and poverty reduc- macroeconomic imbalances, ignite new years, but inflation has increased signif- tion. Limited access to external financ- sources of growth, and reinvigorate icantly in early 2024, with the 12-month ing, increased economic uncertainty, poverty reduction. rolling inflation at 5.2 percent in August; Fiscal sustainability and performance this was due to supply constraints and and low levels of international reserves could be enhanced by transitioning from pressures in the parallel exchange rate will continue to constrain public spend- universal subsidies to better-targeted sup- market. The fiscal deficit increased from ing and private sector activity. Bolivia port mechanisms, rationalizing public in- 7.1 percent of GDP in 2022 to 10.9 percent would benefit from implementing a vestment, making public procurement in 2023, driven by declining gas revenues, medium-term strategy to enhance more efficient, and improving the focus high subsidies, and rising interest pay- and progressivity of social spending. Cur- ments. Public debt increased to an esti- macroeconomic stability, fiscal policy ef- rent social assistance programs are not ef- mated 84.9 percent of GDP in 2023. ficiency and progressivity, and private fectively supporting the poor and vulner- Employment and labor force participa- investment-led growth as it addresses able, with modest benefits not indexed to tion rates stagnated between end-2021 dollar shortages in the short term. inflation and design that limits their ability and end-2023 due to the slowdown in to respond swiftly to economic shocks. economic activity. Underemployment FIGURE 1 Bolivia / Public debt and international reserves FIGURE 2 Bolivia / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 100 45 4500 Public debt 40 4000 80 35 3500 International reserves 30 3000 60 25 2500 20 2000 40 15 1500 10 1000 20 5 500 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 2024 2026 Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Bolivia and Ministry of Economy and Public Affairs. Source: World Bank. Notes: see Table 2. MPO 94 Oct 24 stood at 6.3 percent (2023 Q4), still above into a deficit of US$1.1 billion in 2023 due Poverty is projected to increase in 2024 and pre-pandemic levels (4.3 percent in to lower gas exports and increased fuel stagnate towards the medium term amid 2019Q4). Gender gaps persist, with men imports. In 2023, the Government drew the economic slowdown and constrained being 11.2 percentage points more likely down the country's SDR allocation and public spending. The purchasing power of to participate in the labor market than tried to mobilize financing from develop- poor and vulnerable households is at risk women (at 72.4 percent). Job quality re- ment banks to preserve the exchange rate of eroding, given mounting inflationary mains a structural problem: in 2023Q4, peg. However, a wider external deficit pressures. Inflation is expected to increase 73 percent of workers were not covered and repayments on foreign debt took the to 5.7 percent in 2024 and will be partic- by social security, 42 percent earned less international reserves to 1.9 billion dollars ularly high for food products, as dollar than the minimum wage, and 46 percent in August 2024, contributing to the severe shortages, political tensions, and social un- were self-employed. Informality dispro- shortage of U.S. dollars. rest disrupt imports and supply chains. portionately affects women, youth, and The current account deficit is projected to agricultural workers. remain close to 3.0 percent due to declin- Real per capita household income in 2023 ing natural gas production and export re- is expected to remain below its 2021 levels. Outlook strictions. The impact of mobilizing for- While average labor income has increased eign and public investment in lithium in real terms, particularly among the self- Growth is expected to slow to 1.4 percent development and gas exploration is ex- employed, public transfers have decreased in 2024 as existing macroeconomic imbal- pected to be limited during the projec- due to the phasing out of COVID-19 pro- ances increasingly limit private consump- tion period, given the long investment grams and below-inflation adjustments on tion and exports, while fuel and dollar horizons. Limited access to external fi- social assistance benefits. In this context, shortages weigh on economic activity. The nancing will constrain public spending, poverty levels are estimated at 16 percent fiscal deficit is projected to continue at including public investment. in 2023 at the international upper-middle high levels due to falling hydrocarbon rev- Depleted macroeconomic policy buffers income country poverty line (US$6.85/day enues and high subsidies. Public debt, in- increasingly expose the economy to down- per capita, 2017 PPP) and the Gini index cluding with the Central Bank, will in- side risks, including lower commodity at 41.1, just above the threshold of high-in- crease from 80.1 percent in 2022 to 87.2 prices and limited resilience to natural dis- equality countries. percent in 2024 (Figure 1). The Govern- asters like the fires Bolivia is suffering this The country's external situation weak- ment recently proposed a referendum on year. Social tensions limit the capacity to ened in 2023. The current account balance the continuation of fuel subsidies and the maneuver to address imbalances in a more fell to -2.6 percent of GDP, as the trade presidential reelection rule, which still adverse economic context, eroding confi- surplus of US$1.0 billion in 2022 turned needs to be confirmed. dence in the boliviano. TABLE 2 Bolivia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.1 3.6 3.1 1.4 1.5 1.5 Private consumption 5.3 3.4 3.2 2.4 2.0 1.9 Government consumption 5.4 3.7 2.4 0.2 0.1 0.1 Gross fixed capital investment 11.9 5.6 5.7 1.9 0.8 0.8 Exports, goods and services 15.4 15.1 -8.8 -5.0 -2.1 1.9 Imports, goods and services 15.7 8.8 -2.5 -1.9 -1.5 1.5 Real GDP growth, at constant factor prices 6.4 3.7 3.1 1.4 1.5 1.5 Agriculture 1.8 3.8 2.7 2.0 2.3 2.3 Industry 9.6 1.0 1.1 0.7 0.8 0.8 Services 5.8 5.7 4.6 1.8 1.8 1.8 Inflation (consumer price index) 0.7 1.7 2.6 5.7 4.5 4.0 Current account balance (% of GDP) 3.9 2.1 -2.6 -3.0 -3.6 -3.5 Net foreign direct investment inflow (% of GDP) 1.2 0.2 0.1 -0.2 -0.1 -0.1 Fiscal balance (% of GDP) -9.3 -7.1 -10.9 -9.8 -9.7 -9.7 Revenues (% of GDP) 25.1 26.6 24.9 23.9 24.2 24.3 Debt (% of GDP) 81.6 80.1 84.9 87.2 90.9 93.9 Primary balance (% of GDP) -7.9 -5.5 -9.0 -8.1 -7.8 -7.8 a,b International poverty rate ($2.15 in 2017 PPP) 2.0 2.3 2.2 3.3 3.3 3.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 5.4 5.6 5.5 7.1 7.2 7.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.2 16.2 16.0 17.3 17.4 17.5 GHG emissions growth (mtCO2e) 4.1 1.1 0.3 0.0 0.0 0.2 Energy related GHG emissions (% of total) 15.1 16.1 16.3 16.5 16.6 16.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-EH. Actual data: 2022 (Preliminary). Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 95 Oct 24 only a marginal reduction y-o-y. The indi- rect tax reform will improve the progres- BRAZIL Key conditions and sivity of the system by exempting a basic basket of goods and by implementing a challenges targeted cashback for poor families. Fiscal sustainability remains a critical issue Table 1 2023 Brazil’s economy has continued to expe- as Brazil’s public debt and deficit are high Population, million 204.1 rience robust growth in recent years. Past compared to peers. The government re- GDP, current US$ billion 2173.5 and ongoing structural reforms are start- vised its primary balance targets within its GDP per capita, current US$ 10646.8 ing to yield results. A reform of indirect fiscal framework, aiming for a zero prima- a 3.5 International poverty rate ($2.15) taxes is expected to streamline the tax sys- ry balance in 2024 and 2025, and a 0.25 per- a 8.4 tem, reduce economic distortions, and cent of GDP surplus in 2026. Maintaining Lower middle-income poverty rate ($3.65) a 23.5 boost business productivity while making the framework’s credibility is essential for Upper middle-income poverty rate ($6.85) Gini index a 52.0 the system more progressive. However, to anchoring inflation expectations. Despite School enrollment, primary (% gross) b 103.5 achieve faster, inclusive and sustained strong efforts to increase revenues, signifi- b 73.4 long-term growth, Brazil will require com- cant public spending pressures and budget Life expectancy at birth, years plementary reforms that focus on enhanc- rigidities make it challenging to achieve Total GHG emissions (mtCO2e) 2170.2 ing the competitiveness and efficiency of primary surpluses needed to stabilize the Source: WDI, Macro Poverty Outlook, and official data. the economy. This needs to include im- debt-to-GDP ratio. a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). proving business climate, reductions in fi- nancial and market distortions, expanding infrastructure investment, further integrat- Growth is projected to reach 2.8 percent ing into global value chains, and improv- Recent developments ing educational quality. Brazil faces demo- in 2024, gradually converging towards graphic challenges as the share of elderly Brazil’s GDP expanded by 2.9 percent y-o- its medium-term potential. The govern- population is expanding rapidly, which y in the first half of 2024, driven by a ro- ment has made progress in advancing places greater strain on pension and bust labor market that boosted private con- structural reforms, notably the recent in- healthcare costs. sumption. In July 2024, the unemployment The impact of the pandemic on education rate fell to 6.8 percent, the lowest since direct tax reform. However, the fiscal out- continues to reverberate three years later, 2014, and real average household income look remains challenging. Additional ef- with test scores below 2019 levels across rose 4.8 percent. Inflation stood at 4.2 per- forts will be required to ensure gradual primary and secondary schools, and a cent in August (from 4.5 percent in July), consolidation and stabilize public debt. drop in enrollment. Other dimensions of close to the target range’s upper limit (4.5 Labor market conditions are improving; wellbeing, however, continued to im- percent), driven by prices inertia in the ser- prove slowly but steadily. Although con- vices sector, and exchange rate deprecia- nonetheless, the poor remain dependent secutive crises exacerbated poverty over tion (16.8 percent in the eight months up to on welfare transfers, with Bolsa Familia`s the past decade, the poverty rate (mea- August). Consequently, the Central Bank expenditures stabilization decelerating sured at $6.85/day per capita, 2017 PPP) paused its rate-cutting cycle in June and in- poverty alleviation. fell to a historic low of 21.8 percent in creased the policy rate by 25 basis points 2023. Inequality has remained high with in September, adopting a more cautious FIGURE 1 Brazil / Fiscal balances and general government FIGURE 2 Brazil / Actual and projected poverty rates and gross debt real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 100 16 45 8000 Gross debt (lhs) Primary deficit 14 40 7000 90 Overall deficit 12 35 6000 10 30 80 5000 8 25 4000 70 6 20 3000 4 15 60 10 2000 2 5 1000 0 50 -2 0 0 2012 2014 2016 2018 2020 2022 2024 2026 40 -4 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 Upper middle-income pov. rate Real GDP pc Source: Central Bank of Brazil. Source: World Bank. Notes: see Table 2. MPO 96 Oct 24 approach due to concerns over deteriorat- to an increase in the public debt, which a more accommodative monetary policy ing inflation expectations and a challenging reached 78.5 percent, up from 74.4 per- and lowering interest payments. Public global environment. The current account cent by end-2023. debt is projected to reach 77.9 percent of deficit stood at 1.8 percent of GDP in August, GDP by 2026, stabilizing by 2028. fully covered by net foreign direct invest- Without the fiscal leeway for significant ment (FDI) inflows (2.0 percent of GDP). policy interventions and modest growth The rapid decline in the poverty rates from Outlook predicted across employment sectors, 2022 and 2023 has slowed down in 2024 poverty reduction in 2025 and 2026 is ex- as Bolsa Familia transfers have stabilized. GDP growth in 2024 is expected at 2.8 pected to remain moderate. Strengthening Still, the poverty rate (US$ 6.85/day per percent mainly driven by consumption the targeting of the social protection sys- capita, 2017 PPP) continued to decrease and sustained by a robust labor market. tem and lowering inflation could support gradually to 21.3 percent in 2024, driven by Inflation is anticipated to gradually con- faster poverty reduction. a 3 percent increase in the real minimum verge to 3.7 percent by 2026, within the Macroeconomic risks, tilted to the down- wage and the strong labor market. Central Bank’s target range. However, side, include slower-than-planned fiscal The primary fiscal balance deteriorated the recent deterioration of inflation ex- consolidation, which could prompt a from a 1.2 percent of GDP surplus in 2022 pectations is likely to delay further cuts tighter-than-expected monetary policy, al- to a 2.4 percent of GDP deficit in 2023, in the monetary policy rate. The cur- so raise risk premiums, and worsen debt largely due to increased pensions spend- rent account deficit is expected to remain dynamics. Additionally, global financial ing, social assistance, and an unusually moderate and fully financed by net FDI. conditions could deteriorate due to a slow- large payment of judicial debts (0.9 per- Medium-term growth is projected to sta- er pace of monetary normalization in ad- cent of GDP). Fiscal pressures persisted bilize around 2.3 percent, reflecting the vanced economies or an economic slow- in the first half of 2024, as spending, impact of structural reforms on potential down in China. This could limit invest- particularly on social and pension trans- output. A gradual fiscal consolidation is ment and export growth and exacerbate fers, outpaced revenue growth, placing expected to reduce the primary deficit to currency and inflation pressures. Nonethe- the 12-month cumulative primary deficit 0.3 percent of GDP in 2024, turning in- less, Brazil's ample reserves, flexible ex- at 2.3 percent of GDP by July 2024. This, to a 0.2 percent surplus by 2026. The change rate, low external debt, and re- together with a growth in interest pay- overall fiscal deficit is also expected to silient financial system provide solid ments to 7.7 percent of GDP, contributed narrow in the medium term, facilitating macroeconomic buffers. TABLE 2 Brazil / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.8 3.0 2.9 2.8 2.2 2.3 Private consumption 3.0 4.1 3.1 3.5 2.0 2.3 Government consumption 4.2 2.1 1.7 1.6 1.6 1.6 Gross fixed capital investment 12.9 1.1 -3.0 3.9 2.7 2.1 Exports, goods and services 4.4 5.7 9.1 3.5 3.3 3.3 Imports, goods and services 13.8 1.0 -1.2 8.0 3.0 3.0 Real GDP growth, at constant factor prices 4.5 3.1 3.0 2.8 2.2 2.3 Agriculture 0.0 -1.1 15.1 -2.0 2.0 3.0 Industry 5.0 1.5 1.6 3.0 2.0 2.0 Services 4.9 4.1 2.1 3.3 2.3 2.3 Inflation (consumer price index) 8.3 9.3 4.6 4.2 3.8 3.7 Current account balance (% of GDP) -2.4 -2.1 -1.0 -1.6 -1.8 -1.9 Net foreign direct investment inflow (% of GDP) 1.8 2.1 1.8 2.2 2.4 2.5 Fiscal balance (% of GDP) -4.2 -4.6 -8.9 -7.3 -6.3 -6.0 Revenues (% of GDP) 34.2 36.6 34.9 35.4 35.3 35.2 Debt (% of GDP) 77.3 71.7 74.4 76.5 77.4 77.9 Primary balance (% of GDP) 0.7 1.2 -2.4 -0.3 0.0 0.2 a,b International poverty rate ($2.15 in 2017 PPP) 5.8 3.5 2.7 2.6 2.6 2.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 11.3 8.4 7.2 7.1 7.0 6.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 28.4 23.5 21.8 21.3 21.1 20.9 GHG emissions growth (mtCO2e) 15.1 -8.2 -8.0 1.2 -3.9 -3.6 Energy related GHG emissions (% of total) 16.9 17.5 19.6 21.0 21.8 22.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2023-PNADC. Actual data: 2022 and 2023 (Preliminary). Nowcast: 2024. Forecasts are from 2025 to 2026. b/ Projection using microsimulation methodology. MPO 97 Oct 24 mining sector. Non-mining sectors, in- cluding manufacturing, commerce, and CHILE Key conditions and services, remained weak. On the demand side, growth was led by public invest- challenges ment and exports. Poverty ($6.85/day per capita 2017 PPP) Table 1 2023 Chile has a track record of sound macro- stayed around 5 percent between 2022 Population, million 19.6 economic policies and robust institutions, and 2023. The Gini inequality coefficient GDP, current US$ billion 335.9 which enabled it to restore macroeconomic remained at 43 points. Poverty is higher GDP per capita, current US$ 17113.5 balance after the disruptions created by among women, the youth, and low- a 0.4 International poverty rate ($2.15) COVID-19 and its aftermath. Over the past skilled workers. a 0.9 decade, growth averaged 2 percent, while The employment rate increased by 1.2 per- Lower middle-income poverty rate ($3.65) a 4.7 productivity stagnated, constraining the centage points (pp) y-o-y in the first half Upper middle-income poverty rate ($6.85) Gini index a 43.0 creation of better and higher-paying jobs. of 2024, reaching 56.9 percent by June, still School enrollment, primary (% gross) b 100.2 Gender gaps in labor market outcomes re- below the pre-pandemic value (58.1 per- b 79.5 main pronounced. While income poverty cent in 2019H1). Unemployment fell slight- Life expectancy at birth, years has significantly declined, regional dispar- ly by 0.2 pp to 8.3 percent. Gender gaps in Total GHG emissions (mtCO2e) 42.5 ities persist and progress in non-monetary the labor market deepened, with the em- Source: WDI, Macro Poverty Outlook, and official data. dimensions lags. Inequality of opportuni- ployment rate increasing at a higher pace a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). ties and low quality of public services con- for men than for women, reaching 66.2 and strain upward social mobility. 48.0 percent, respectively. Unemployment Reforms focusing on reducing regulatory fell to 7.9 percent for men but rose to 9.0 barriers, fostering technology adoption, pro- percent for women. Job quality deteriorat- moting competition, improving education ed, especially among women, with infor- and managerial capabilities, and increasing mality reaching levels of 26.9 and 29.9 per- Growth is recovering in 2024 as tight female labor force participation and job cent for men and women, respectively. fiscal and monetary policies are gradual- quality could help raise potential growth. The inflation reduction trajectory since the ly relaxed, but inflation is proving stub- Chile is expected to benefit from the green peak in 2022 hit a bump in March 2024 transition given its potential for renewable when inflation started rising again and born on the last mile towards target and energy and endowment with copper and reached 4.7 y-o-y in August. This was the reforms are needed to rekindle produc- lithium, critical inputs to electrification. result of currency depreciation in the first tivity growth. The labor market contin- Chile is vulnerable to climate change, being four months of the year and an adjustment ues to recover, although gender gaps affected by droughts, floods, and wildfires. in electricity tariffs that had been frozen persist. Poverty and inequality are ex- since 2019. The Central Bank temporarily paused the monetary easing cycle at its Ju- pected to stay around 2023 levels. Cli- ly meeting but resumed it in August. The mate change presents both challenges Recent developments exchange rate has since stabilized at and new opportunities for green growth. around 930 CLP / US$, while the gradual Real GDP grew 1.9 percent y-o-y in the increase in electricity prices is scheduled to first half of 2024, largely driven by the continue until January 2025. FIGURE 1 Chile / Growth of the IMACEC (monthly indicator FIGURE 2 Chile / Actual and projected poverty rates and of economic activity) real GDP per capita Percent growth Poverty rate (%) Real GDP per capita (constant million LCU) 25 30 12.0 20 25 10.0 15 10 20 8.0 5 15 6.0 0 -5 10 4.0 -10 5 2.0 -15 0 0.0 -20 2009 2011 2013 2015 2017 2019 2021 2023 2025 Jan-19 Sep-19 May-20 Jan-21 Sep-21 May-22 Jan-23 Sep-23 May-24 International poverty rate Lower middle-income pov. rate Imacec (y/y) Imacec SA (3m/3m growth rate) Upper middle-income pov. rate Real GDP pc Source: World Bank based on Central Bank of Chile. Source: World Bank. Notes: see Table 2. MPO 98 Oct 24 Real public expenditures rose 6.5 percent likely contract this year, but a recovery is offset by lower lithium prices. The fis- y-o-y in 2024H1 as public investment ac- expected in the medium term as expecta- cal deficit would shrink to 2 percent of celerated, while real revenues contracted tions and business confidence improve. GDP and continue to narrow gradual- 4.7 percent. The latter was due to a signif- The successive adjustments to electricity ly over the medium term amid a de- icant decline in annual income tax collec- tariffs will keep inflation above 4 percent cline in the expenditures-to-GDP ratio. tion after weak economic activity in 2023, in the coming quarters. Inflation is ex- These projections assume a consolida- which was only partially offset by higher pected to decline afterward, returning to tion path toward medium-term struc- copper revenue. As a result, the 12-month the 3 percent target by the first half of tural deficit targets. The public debt-to- rolling fiscal deficit reached 3.6 percent of 2026. As this is a temporary supply side GDP ratio is projected to be near 41 per- GDP in June 2024. shock, the Central Bank is expected to cent by 2026. The current account deficit continue with the monetary policy easing is expected to decline toward 2 percent until the rate is closer to neutral at over the medium term assuming contin- around 4 percent. Based on these growth uously high copper prices. Outlook and inflation projections, poverty Downside risks to the outlook include (US$6.85/day, 2017 PPP) and income in- geopolitical tensions, weaker-than-expect- Real GDP growth is expected at 2.5 per- equality are estimated to remain around ed growth in the U.S. and China, and cent in 2024 and to converge to potential 5 percent and 43 Gini points in 2024, re- stronger-than-expected climate effects in 2025 and 2026. Net exports continue spectively, and fall gradually thereafter. like El Niño and La Niña. Domestic risks to be a main driver of growth this year, Fiscal revenue is expected to pick up in stem mainly from political gridlock while consumption is expected to recover 2024H2 amid recovering growth and high blocking structural reforms and potential amid lower interest rates. Investment will copper prices, which would be partially social discontent. TABLE 2 Chile / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 11.3 2.1 0.2 2.5 2.2 2.2 Private consumption 21.0 1.6 -5.2 2.6 2.2 2.2 Government consumption 14.1 6.5 1.7 4.5 2.4 0.2 Gross fixed capital investment 16.0 3.9 -1.1 -0.5 3.9 3.7 Exports, goods and services -1.5 0.8 -0.3 4.7 2.9 3.1 Imports, goods and services 31.9 1.5 -12.0 3.4 4.4 3.2 Real GDP growth, at constant factor prices 10.2 2.3 1.1 2.5 2.2 2.2 Agriculture 3.8 -0.1 -0.4 2.5 2.3 2.2 Industry 1.9 -1.8 2.7 3.1 1.9 1.8 Services 14.7 4.2 0.6 2.3 2.3 2.3 Inflation (consumer price index) 4.5 11.6 7.6 3.7 4.5 3.0 Current account balance (% of GDP) -7.3 -8.6 -3.5 -2.6 -2.4 -2.1 Net foreign direct investment inflow (% of GDP) 0.2 1.7 4.6 3.0 3.0 3.0 Fiscal balance (% of GDP) -7.5 1.4 -2.3 -2.0 -1.4 -1.1 Revenues (% of GDP) 26.1 28.0 25.1 22.8 23.0 23.0 Debt (% of GDP) 36.4 37.8 39.4 40.5 41.2 41.1 Primary balance (% of GDP) -6.7 2.4 -1.2 -0.8 -0.1 0.0 a,b International poverty rate ($2.15 in 2017 PPP) 0.1 0.4 0.4 0.4 0.4 0.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.3 0.9 0.9 0.9 0.9 0.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 3.5 4.7 4.9 4.9 4.8 4.7 GHG emissions growth (mtCO2e) 2.6 -13.6 -2.9 2.6 1.9 1.8 Energy related GHG emissions (% of total) 171.7 182.1 183.7 180.8 178.6 176.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-CASEN. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 99 Oct 24 diversified and climate-resilient economy over time, aligning it with the country’s COLOMBIA Key conditions and ambitious climate goals. Tackling these issues while maintaining challenges fiscal responsibility is crucial for Colombia to meet its development potential. Table 1 2023 Colombia's macroeconomic stability has Population, million 52.1 long been anchored by a robust institu- GDP, current US$ billion 363.6 tional framework, featuring a rules-based GDP per capita, current US$ 6980.3 fiscal system, a flexible exchange rate, Recent developments a 6.0 International poverty rate ($2.15) and a modern inflation-targeting regime. a 14.0 However, economic growth has been de- Economic growth ticked up in the first Lower middle-income poverty rate ($3.65) a 34.8 celerating, with productivity offering half of 2024 (1.4 percent, y-o-y), driven Upper middle-income poverty rate ($6.85) Gini index a 54.8 minimal support to GDP growth over by resilient private consumption and ex- School enrollment, primary (% gross) b 104.8 the years. Despite engaging in multiple ports, and by improvements in still low b 73.7 trade agreements, the country has strug- investment levels. The health, educa- Life expectancy at birth, years gled to diversify and expand its export tion, public administration, agriculture, Total GHG emissions (mtCO2e) 272.7 base. Persistent infrastructure deficiencies, and entertainment sectors are driving Source: WDI, Macro Poverty Outlook, and official data. subpar educational outcomes, and institu- growth and a mild increase in employ- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). tional challenges further limit Colombia's ment. Still, with a weak performance in economic potential. commerce and manufacturing, employ- Colombia also faces significant social and ment and unemployment rates wors- geographic inequalities, including in hu- ened slightly. The labor force participa- man capital. To tackle poverty and stim- tion rate declined marginally, more for ulate prosperity across all regions, it is women than for men. After an expected cool-off in 2023, crucial to enhance productivity, make the The official poverty and extreme pover- growth accelerated but is expected to re- most of trade potential, reform the social ty rates declined in 2023, driven by a main weak at 1.5 percent in 2024. Fis- security system, foster more efficient and rise in real incomes (10 percent among inclusive labor markets, and reform the the lowest quintile), mostly from higher cal consolidation to comply with the Fis- intergovernmental fiscal transfer system labor market earnings. Social transfers cal Rule and Colombia’s long-standing to ensure widespread access to quality declined among the poorest, partly as low productivity dynamics limit the public services. the emergency social program Ingreso prospects of a more vigorous growth Colombia faces increasing climate chal- Solidario closed. process going forward. Declining infla- lenges. Climate-related events disrupt The current account deficit (CAD) narrowed livelihoods and damage assets throughout to 2.5 percent in 2023 helped by the decelera- tion and interest rates are mitigating the country. Additionally, Colombia’s fos- tion of economic activity, and remained low factors. Poverty reduction is expected to sil fuel sector, a large source of fiscal rev- (1.9 percent 12-month average) in 2024H1. moderate, in line with economic activity. enue, exports, and foreign direct invest- Export volumes (especially of non-oil goods ment (FDI), is vulnerable to global decar- and tourism) remained strong, imports con- bonization. Colombia could foster a more tinued to recover, primary payments fell, FIGURE 1 Colombia / GDP and components FIGURE 2 Colombia / Actual and projected poverty rates and real GDP per capita Index 2019=100 Poverty rate (%) Real GDP per capita (constant million LCU) 140 60 25.0 130 120 50 20.0 110 40 100 15.0 90 30 80 10.0 20 70 60 5.0 10 50 2018Q1 2019Q1 2020Q1 2021Q1 2022Q1 2023Q1 2024Q1 0 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: National Administrative Department of Statistics (DANE), and World Source: World Bank. Notes: see Table 2. Bank staff calculations. MPO 100 Oct 24 and remittance inflows hit new highs. FDI the second half of 2024. Central govern- continuous fiscal discipline. The costs of inflows declined but remain above pre- ment debt reached 58.2 percent of GDP the approved pension reform add to the pandemic levels, and portfolio investment in June. EMBIG spreads fell in 2024H1 fiscal challenges in the medium term. outflows moderated. with respect to 2023 but remain high Amid moderate economic growth in Tight monetary policy underpinned the among regional peers. 2024, modest progress is expected in fall in inflation from a peak of 13.3 per- poverty reduction. Agricultural sector cent (y-o-y) in March 2023 to 6.8 percent growth could benefit rural areas. Pro- in July 2024. While still above the 2-4 jections estimate 31.7 percent of people percent target range for 2024, the Central Outlook living below the poverty line ($6.85/day Bank started an easing cycle in December 2017 PPP). While inflation declined, high- as inflation expectations remain anchored, GDP growth is expected at 1.5 percent in er prices buffer improvements in real in- with cuts that gradually reduced the 2024 and 3.0 percent in 2025, as the econ- comes and food security, and climate monetary policy rate 250 bps to 10.75 per- omy recovers and converges to its poten- shocks may affect households, particular- cent. The Colombian Peso strengthened tial growth rate by 2026. Private consump- ly in regions like Caribe and Pacífico. In- 3.2 percent in 2024H1 and volatility sub- tion, solid export growth alongside moder- vesting in access to quality education for dued, benefiting from high interest rates, ate increases in imports, and a steady rise the poor is paramount for poverty and global financial liquidity, and a reduction in private investment are expected to sup- inequality reduction prospects. in policy uncertainty. port the pick-up, as inflation and interest Risks to the outlook are tilted to the down- After a good performance in 2023 led rates recede. The CAD is anticipated to re- side. Fiscal slippages or protracted uncer- largely by cyclical factors and yields of main constant in 2024 and widen slightly tainty about the approval process of next the 2022 tax reform, fiscal accounts un- going forward as the economy accelerates year's public budget could prove costly, derperformed in the first half of the and imports increase. while persistent inflation and policy uncer- year driven by lower-than-anticipated tax Revenue underperformance and the fad- tainty could weigh on private investment. collection. Low revenue from oil and ing impact of cyclical factors are expected Spikes in armed violence could intensify mining corporate income taxes, partially to drive an increase in the fiscal deficit to regional disparities. On the external side, due to the courts’ partial reversal of 4.7 percent of GDP in 2024, which still re- negative terms of trade shocks or tighter the tax reform, explained an 8.7 percent quires a large fiscal consolidation effort in external financial conditions could limit (y-o-y) fall. To comply with the fiscal the second half of the year. Given Colom- growth prospects. Excessive rain from an rule, the government announced spend- bia’s track record, the government is ex- expected La Niña event could occasionally ing cuts across current and capital ex- pected to continue to comply with the fis- disturb road connectivity and dispropor- penditures worth 1.9 percent of GDP for cal rule going forward, which will call for tionately affect the poor and vulnerable. TABLE 2 Colombia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 10.8 7.3 0.6 1.5 3.0 2.9 Private consumption 14.7 10.7 0.8 0.6 2.7 2.6 Government consumption 9.8 0.8 1.6 0.2 0.5 0.5 Gross fixed capital investment 16.7 11.5 -9.6 0.6 5.5 4.8 Exports, goods and services 14.6 12.3 3.4 3.3 4.6 4.9 Imports, goods and services 26.7 23.6 -15.0 8.9 3.1 3.0 Real GDP growth, at constant factor prices 10.3 6.4 0.6 1.5 3.0 2.9 Agriculture 4.4 -0.8 1.4 3.9 3.3 3.2 Industry 8.1 6.9 -2.0 0.9 3.1 2.8 Services 11.9 7.0 1.5 1.5 2.9 2.9 Inflation (consumer price index) 3.5 10.2 11.7 6.9 3.9 3.1 Current account balance (% of GDP) -5.6 -6.1 -2.5 -2.5 -2.6 -2.6 Fiscal balance (% of GDP) -7.1 -6.5 -2.9 -4.7 -4.3 -3.6 Revenues (% of GDP) 26.6 27.6 32.4 28.8 28.8 28.8 Debt (% of GDP) 65.7 64.6 61.3 60.7 59.8 59.2 Primary balance (% of GDP) -3.7 -2.1 1.2 0.0 0.4 0.6 a,b International poverty rate ($2.15 in 2017 PPP) 7.3 6.0 4.8 4.7 4.7 4.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 16.4 14.0 12.2 12.0 11.8 11.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 38.8 34.8 32.4 31.7 31.4 31.3 GHG emissions growth (mtCO2e) 3.6 -1.1 -2.5 -0.9 0.4 1.0 Energy related GHG emissions (% of total) 28.2 26.9 25.8 26.0 26.4 26.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2023-GEIH. Actual data: 2022 and 2023 (Preliminary). Nowcast: 2024. Forecasts are from 2025 to 2026. b/ Projections using microsimulation methodology. MPO 101 Oct 24 revenues. A 2018 reform was implemented to stabilize the fiscal situation, but the pan- COSTA RICA Key conditions and demic and commodity price shocks de- layed the adjustment. Public debt in- challenges creased from 56 percent in 2019 to 68 per- cent of GDP in 2021. Increased revenues, Table 1 2023 Costa Rica's income per capita has doubled expenditure control measures, and strong Population, million 5.1 in the past two decades, thanks to an out- growth enabled the country to post the GDP, current US$ billion 81.8 ward-oriented growth model, investments first primary surplus in a decade in 2022. GDP per capita, current US$ 16021.4 in human capital, and good governance. The public debt ratio is declining but re- a 0.9 International poverty rate ($2.15) The country upgraded and diversified its mains relatively high. a 3.0 exports, making it less vulnerable to exter- Addressing Costa Rica's twin challenges of Lower middle-income poverty rate ($3.65) a 12.7 nal shocks. It also strengthened its green inclusion and fiscal management is crucial. Upper middle-income poverty rate ($6.85) Gini index a 46.7 trademark through sustainable natural re- Growth needs to become more inclusive School enrollment, primary (% gross) b 107.6 sources management and reforestation. across the different socioeconomic groups. b 77.3 However, integration between the ex- Fiscal policies should continue to support Life expectancy at birth, years port-oriented and domestic-oriented seg- creditworthiness and protect vulnerable Total GHG emissions (mtCO2e) 8.2 ments of the economy remains weak, groups. Improving revenue mobilization Source: WDI, Macro Poverty Outlook, and official data. leading to income and territorial dispar- and spending efficiency are essential to ad- a/ Most recent value (2023), 2017 PPPs. b/ Most recent WDI value (2022). ities. Despite accessible healthcare and dress these challenges. education, monetary poverty reduction has been limited (2.9 p.p. between 2010 and 2023), and inequality has persisted Growth accelerated to 5.1 percent in 2023 (Gini index above 47 since 2010). Mon- Recent developments etary poverty remained particularly high but lost steam in the first half of 2024. among vulnerable groups such as Afro- Growth surpassed expectations at 5.1 per- Low inflation and decreasing interest descendants, Indigenous populations, cent in 2023, bolstered by robust domestic rates since Q12023 boosted private con- and migrants. The pandemic deepened and external demand, but decelerated to these challenges, with the aggregate 4.5 percent in the first half of 2024, impact- sumption and investment, but slower poverty rate (measured by the US$6.85/ ed by weakening external demand. Infla- growth in trade partners decelerated ex- day, 2017 PPP) increasing from 13.7 per- tion subsided in early 2023, transitioning ternal demand in H12024. Poverty cent in 2019 to 19.9 percent in 2020. to deflation for most of that year, reaching (US$6.85 poverty line) declined slightly, As labor market conditions improved, 0.3 percent y/y in August 2024. This shift but inequality remains high. Fiscal con- poverty gradually declined to below 2019 allowed the central bank to ease monetary levels, but female labor force participa- policy, which stimulated private consump- solidation is enhancing market access and tion remains among the lowest in the re- tion and investment. While the export-ori- should continue to promote spending effi- gion (49.3 percent in 2022). ented sector is still the primary source of ciency while targeting resources to pro- Additionally, fiscal challenges arose be- growth, it has decelerated, expanding 8.6 tect the most vulnerable. tween 2008 and 2018 due to increased percent in June 2024, compared to 24.7 per- spending without a corresponding rise in cent in June 2023. FIGURE 1 Costa Rica / Economic activity growth (seasonally FIGURE 2 Costa Rica / Actual and projected poverty rates adjusted) and real GDP per capita Growth y/y (percent) Poverty rate (%) Real GDP per capita (constant million LCU) 42 25 10.0 36 9.0 30 20 8.0 7.0 24 15 6.0 18 5.0 12 10 4.0 6 3.0 0 5 2.0 IMAE - Economic Activity Index 1.0 -6 IMAE - Definitive Regime 0 0.0 -12 IMAE - Special Regime 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 -18 International poverty rate Lower middle-income pov. rate Feb-20 Aug-20 Feb-21 Aug-21 Feb-22 Aug-22 Feb-23 Aug-23 Feb-24 Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Costa Rica and World Bank staff calculations. Source: World Bank. Notes: see Table 2. Notes: Special Regime includes Free Trade Zone, Active Improvement, and Refund of Rights regimes. Definitive Regime focuses on domestic use or consumption. MPO 102 Oct 24 With stable inflation and resilient labor 61.1 percent in the end of 2023 and 59.4 Fiscal consolidation is expected to per- market conditions, the poverty rate percent in June 2024. Solid fiscal perfor- sist throughout the forecast period, (US$6.85/day, 2017 PPP) declined to 12.7 mance prompted upgrades in Costa Ri- underpinned by a fiscal rule that con- percent in 2023, the lowest in over a ca's sovereign credit ratings. strains spending growth, bringing the decade. While also declining, poverty mea- debt-to-GDP ratio below 60 percent sured with the national poverty line stayed threshold. Recent strides in debt man- at 24.4 percent in 2023. agement and the deepening of domes- The current account deficit narrowed in Outlook tic markets are likely to reduce Cos- 2023, driven by a larger trade surplus, and ta Rica's financing costs, while tax ad- was financed by robust foreign direct in- Amid global uncertainty and a slowdown ministration efforts should reinforce rev- vestment (FDI). Exports, particularly of in key trading partners, growth is pro- enue mobilization. Announced reforms, medical equipment, tourism, and business jected to moderate to around 3.5 percent including cuts in tax expenditures, ad- services, saw notable expansion, outstrip- during the forecast period. External de- justments to income tax, and a decrease ping the recovery in imports. While ex- mand is anticipated to continue deceler- in the fragmentation of social programs, ports and imports decelerated in early ating through early 2026, while domes- could further accelerate the pace of ad- 2024, the trade balance remained stable. tic demand is expected to temper in 2026 justment and help establish safeguards Costa Rica maintained its position as one as monetary policy normalizes and fiscal against shocks while protecting the poor of the world's leading recipients of green- consolidation advances. The current ac- and vulnerable. field FDI relative to GDP. count deficit is projected to widen mar- This economic outlook is subject to The fiscal deficit widened from 2.5 per- ginally to 2.1 percent of GDP, reflecting a downside risks. Costa Rica's high sus- cent in 2022 to 3.3 percent of GDP in deceleration in external demand and sta- ceptibility to external shocks, such 2023, pressured by a record-high interest bilization of terms of trade. Nonetheless, high global prices, dampened global bill of 4.8 percent of GDP and a smaller the deficit is anticipated to be fully cov- growth, and tightening financial con- primary surplus of 1.6 percent of GDP. ered by FDI inflows. ditions, could pose challenges. Climate The latter was the result of the phase- The poverty rate ($6.85/day, 2017 PPP) is vulnerabilities, exacerbated by phe- out of large one-off revenues associated projected to decline to 11.5 percent in 2026 nomena like La Niña, compound these with an institutional restructuring, which supported by robust labor market out- uncertainties and could disproportion- exceeded spending controls. The primary comes. Targeting and efficiency enhance- ately impact the poor. Additionally, re- surplus declined to 1 percent of GDP in ments in social assistance, especially for cent surges in migration and perceived the first half of 2024, as revenues un- historically marginalized groups and those criminality could increase expenditure derperformed. Nonetheless, the debt-to- below the poverty line, could further re- demands, potentially impeding the pace GDP ratio continued to decline reaching duce poverty and vulnerability. of fiscal consolidation. TABLE 2 Costa Rica / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.9 4.6 5.1 4.0 3.5 3.4 Private consumption 8.3 2.6 5.0 3.4 3.4 3.2 Government consumption 1.7 2.4 0.1 0.8 1.0 1.0 Gross fixed capital investment 7.8 1.5 8.6 5.6 5.7 5.2 Exports, goods and services 15.9 18.5 10.0 6.4 6.4 6.6 Imports, goods and services 19.2 8.1 5.2 7.0 6.8 6.7 Real GDP growth, at constant factor prices 7.9 4.6 5.1 4.0 3.5 3.4 Agriculture 2.2 -2.3 3.5 2.0 2.1 2.2 Industry 12.3 2.1 8.3 2.7 2.7 2.9 Services 7.0 5.8 4.3 4.5 3.9 3.6 Inflation (consumer price index) 1.7 8.3 0.5 1.5 3.0 3.0 Current account balance (% of GDP) -3.2 -3.2 -1.5 -2.1 -2.1 -2.0 Net foreign direct investment inflow (% of GDP) 4.8 4.4 4.5 4.5 4.5 4.7 Fiscal balance (% of GDP) -5.0 -2.5 -3.3 -3.2 -2.5 -1.9 Revenues (% of GDP) 15.7 16.4 15.3 15.5 15.6 16.2 Debt (% of GDP) 67.6 63.0 61.1 60.6 59.8 59.6 Primary balance (% of GDP) -0.3 2.1 1.6 1.7 1.8 2.1 a,b International poverty rate ($2.15 in 2017 PPP) 1.2 0.9 0.9 0.8 0.8 0.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.7 3.3 3.0 2.9 2.8 2.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 14.5 14.1 12.7 12.3 11.9 11.5 GHG emissions growth (mtCO2e) 8.5 6.0 0.3 5.0 3.2 2.9 Energy related GHG emissions (% of total) 99.6 98.6 97.1 94.8 93.0 91.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2023-ENAHO. Actual data: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 103 Oct 24 a new international airport, geothermal energy investments, and a large housing DOMINICA Key conditions and program. CBI revenues have remained buoyant but tend to be volatile and depen- challenges dence thereon may increase financing risk. Dominica’s vulnerability to hurricanes and Table 1 2023 As a small island developing state (SIDS), climate change requires increasing focus Population, million 0.1 Dominica faces economic challenges and on resilience through fiscal buffers, cli- GDP, current US$ billion 0.7 climate vulnerability. Post-pandemic, eco- mate-resilient investment, as well as ex- GDP per capita, current US$ 8953.9 nomic growth has been largely supported pansion of public and private insurance a 91.9 School enrollment, primary (% gross) by infrastructure investments and a re- protection and social assistance within a a 73.0 bound in tourism. The country’s growth context of limited fiscal space. Life expectancy at birth, years Total GHG emissions (mtCO2e) 0.2 potential has declined over the past few Source: WDI, Macro Poverty Outlook, and official data. decades amid shrinking total factor pro- a/ Most recent WDI value (2022). ductivity and lower contribution from la- bor, stemming in part, from emigration of Recent developments skilled labor. Fiscal policy is constrained by the Fiscal Responsibility Law (FRL) of Growth maintained its momentum at 4.7 2021, which requires achieving a minimum percent in 2023, amid further improve- primary surplus of 2 percent of GDP by ments in tourism and investment in cli- A recovery in tourism infrastructure 2026 to reduce public debt below 60 per- mate-resilient infrastructure. Tourist ar- spending and easing inflation have sup- cent of GDP by 2035. Finally, as a pegged rivals surpassed pre-pandemic levels, dri- ported economic activity in Dominica exchange rate regime, Dominica lacks ef- ven by growth in cruise arrivals. Imple- in 2023, although high food prices con- fective monetary policy tools, therefore mentation of initiatives in agriculture are structural reforms are needed to ensure ef- expected to boost contribution from the tinue to disrupt livelihoods of vulnera- ficient financial intermediation. sector in 2024. After peaking at 7.8 per- ble populations. Completion of major Pandemic-related support, increased infra- cent in 2022, inflation eased to 3.5 percent ongoing infrastructure projects will structure spending, and fiscal measures to in 2023, driven in part by a reduction in boost growth. An uptick in public debt mitigate the impact of inflation on the energy costs. poorest led to high fiscal deficits and Inflation continues to affect households’ resulting from pandemic-related spend- pushed public debt over 100 percent of purchasing power and access to food, giv- ing has led authorities to implement GDP. Fiscal imbalances have only gradu- en Dominica’s dependence on imported fiscal rule-based austerity measures ally come down as recurrent expenditures food products. In April 2024, virtually all throughout the forecast horizon. Wors- are now returning to pre-pandemic levels. respondents to the Food Security and Further efforts will be needed to comply Livelihoods Survey reported an increase in ening external conditions and climate- with Dominica’s FRL. the prices of food, gas, and electricity in related events pose downside risks to The government is implementing a the three months prior to the survey. Food growth and debt sustainability. highly ambitious public investment insecurity persisted with 21 percent of re- pipeline, largely financed by citizenship spondents reporting that they had gone a by investment (CBI) revenues, including whole day without eating in the previous FIGURE 1 Dominica / Real GDP growth and sectoral FIGURE 2 Dominica / Public debt contributions to real GDP growth Percent, percentage points Percent of GDP 15 120 10 100 5 80 0 -5 60 -10 40 -15 Public bebt -20 20 Public external debt 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Agriculture Industry Services 0 Net taxes Real GDP growth 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Sources: Government of Dominica and World Bank staff calculations. Sources: Government of Dominica and World Bank staff calculations. Note: See Table 2. MPO 104 Oct 24 30 days and 42 percent reporting that they Caribbean Central Bank’s (ECCB’s) region- current spending is reduced and ra- were hungry but did not eat. al prudential requirements. tionalized, and fiscal rules metrics are The fiscal position has improved, register- adhered to; this includes primary bal- ing an estimated deficit of 4.0 percent in ances of 2.0 percent of GDP by 2026, FY23 compared to 7.6 percent in FY22. though further measures will be needed Lower capital spending offset the drop in Outlook to achieve this target. A combination revenue from CBI inflows. Public debt re- of sound fiscal policy and sustained mains high at 101.8 percent of GDP at the GDP growth is expected to be robust at 4.6 growth is expected to push public debt end of 2023, down from 105.7 in 2022. Ap- in 2024 and remain buoyant over the fore- levels below 60 percent of GDP by 2035, proximately 90 percent of Dominica’s ex- cast horizon driven primarily by tourism as mandated by Eastern Caribbean Cur- ternal debt is owed to multilateral and bi- and a robust public investment program fi- rency Union membership. lateral creditors on concessional terms. nanced by CBI revenues. Geothermal de- The CAD, financed in part by CBI inflows, The current account deficit (CAD) further velopments and a new international air- is expected to narrow to 20.9 percent of widened to 33.9 percent of GDP in 2023 port should boost potential growth. Infla- GDP in 2024 and continue closing there- as an increase in imports of goods, driven tion is expected to decline to 3 percent in after as tourism receipts increase and infra- by large infrastructure projects, more than 2024 and stabilize at 2 percent amid weak- structure-related imports decline. offset the increase in tourism receipts. Fi- er pressure from international prices. Solid The economic outlook is subject to con- nancing of the CAD continues to come pri- growth prospects and lower inflation siderable downside risks due to volatile marily from CBI revenues, grants, and for- should contribute to a reduction in poverty food and fuel prices, global geo-political eign direct investment inflows. Reserves, rates in the medium term. There is an ur- events, and volatile CBI revenues. Nat- as of 2023, are adequate at 5.0 months of gent need for updated poverty data, and ural disasters, climate change, tighter import coverage. other key indicators like labor market sta- global financial conditions, fiscal vulner- Financial sector stability risks are limited tistics, to monitor households’ wellbeing abilities, and public debt sustainability as banks are well capitalized, however, and inform the design of public policy. concerns pose additional risks. The fi- non-performing loans remain high, and The fiscal deficit is forecast to narrow nancial sector is vulnerable to risks from provisioning is below the Eastern as infrastructure spending winds down, the credit unions. TABLE 2 Dominica / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.9 5.6 4.7 4.6 4.2 3.2 Real GDP growth, at constant factor prices 6.8 6.7 4.4 4.6 4.2 3.3 Agriculture 23.4 -0.7 -2.0 5.9 3.2 2.0 Industry 5.0 0.6 5.0 3.4 3.3 3.0 Services 4.5 9.4 5.3 4.6 4.5 3.5 Inflation (consumer price index) 1.5 7.8 3.5 3.0 2.0 2.0 Current account balance (% of GDP) -32.9 -26.7 -33.9 -20.9 -19.1 -17.8 a Fiscal balance (% of GDP) -8.6 -7.6 -4.0 -3.3 -2.0 -1.5 Revenues (% of GDP) 61.5 65.2 45.5 42.1 41.7 41.3 a Debt (% of GDP) 111.3 105.7 101.8 98.1 95.9 92.2 a Primary balance (% of GDP) -5.9 -4.6 0.4 -0.2 0.3 0.6 GHG emissions growth (mtCO2e) 3.1 3.0 2.8 2.7 2.6 2.4 Energy related GHG emissions (% of total) 75.6 75.8 76.1 76.3 76.5 76.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (July 1st -June 30th). MPO 105 Oct 24 caps primary expenditure growth at 7 per- cent starting in 2025 and aims to reduce DOMINICAN Key conditions and debt to 40 percent by 2035. Re-elected in May 2024, President Abinader's bicameral challenges REPUBLIC majority may enable him to advance long- awaited reforms, including a tax overhaul, The Dominican Republic (DR) stands out the resumption of the energy pact, and in LAC, for its fast growth and sharp re- pension reforms. Table 1 2023 ductions in poverty and inequality. From Increasing productivity is also essential, Population, million 10.7 2005 to 2023, GDP grew an average of 5.2 including by: (i) improving education; (ii) GDP, current US$ billion 121.5 percent, while poverty more than halved, boosting competitiveness; (iii) revamping GDP per capita, current US$ 11305.6 from 48.2 to 17.9 percent (US$6.85 per the innovation strategy and adopting International poverty rate ($2.15) a 0.8 day, 2017 PPPs). The Gini Index declined green technologies; and (iv) improving a 4.0 from 50 to 38.4, and the middle class dou- service delivery. These changes should go Lower middle-income poverty rate ($3.65) a bled, from 21 to 43 percent. Non-mone- hand in hand with improvements in labor Upper middle-income poverty rate ($6.85) 21.5 a tary poverty also declined as the provi- market regulations and social protection Gini index 37.0 sion of public services improved. Howev- systems to reduce inequalities. b 100.5 School enrollment, primary (% gross) er, significant socioeconomic and spatial b 74.2 Life expectancy at birth, years inequities in living standards persist, in- Total GHG emissions (mtCO2e) 41.9 cluding gender gaps and differences be- Source: WDI, Macro Poverty Outlook, and official data. tween urban and rural areas. Prudent Recent developments a/ Most recent value (2022), 2017 PPPs. monetary and fiscal policies helped b/ Most recent WDI value (2022). macroeconomic stability, underpinning After slowing down to 2.4 percent in 2023, growth and social progress. However, the GDP expanded by 5 percent in January-Ju- DR struggles with low-revenue mobiliza- ly 2024. Boosted by interest rate cuts and tion (at 15.7 percent of GDP in 2023), and liquidity support, the construction sector Poised for a rebound, the Dominican significant monetary losses in the energy grew 4.6 percent, driven by strong public economy anticipates a 5.1 percent sector, covered by government transfers and private investment. Service sectors, of 1.1 percent of GDP in 2023. like hospitality and financial services, growth in 2024, fueled by monetary eas- Recent shocks, including the pandemic, maintained momentum, both expanding ing effects and public investment. How- surging commodity prices, and floods, by 8.0 percent, which helped offset the 11.3 ever, challenges such as low revenue have strained the country’s finances. Pub- percent contraction in the mining sector. mobilization and socioeconomic dispari- lic debt continues to exceed pre-pandemic The current account deficit (CAD) con- ties remain. The re-election of President levels, and new expenditure needs have tracted in the first half of 2024 due to high- emerged. In 2023, interest payments alone er exports and remittances. Exports Abinader in 2024 with a bicameral ma- consumed three percentage points of GDP, reached US6.8 billion, growing 2.3 percent jority sets the stage for crucial reforms curtailing public investment. To create year-over-year (y-o-y), boosted by tourism in taxation, energy, and labor market to more fiscal space, the country would need revenues, which surged 14.1 percent with bolster sustainable development. to improve tax collection and spending ef- 5.3 million arrivals. Remittances grew by ficiency. The new fiscal responsibility law 4.4 percent. Foreign direct investment FIGURE 1 Dominican Republic / Index of monthly FIGURE 2 Dominican Republic / Actual and projected economic activity (IMAE) poverty rates and real GDP per capita Annual percent growth Poverty rate (%) Real GDP per capita (constant LCU) 16 50 350000 y/y growth rate 45 14 300000 Moving average of growth 40 rates (12 months) 12 35 250000 10 30 200000 25 8 150000 20 6 15 100000 10 4 50000 5 2 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate Dec-21 May-22 Oct-22 Mar-23 Aug-23 Jan-24 Jun-24 Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations based on Central Bank data. Source: World Bank. Notes: see Table 2. MPO 106 Oct 24 (FDI) exceeded USD 2.3 billion, fully fi- in goods and services (31.6 percent) and in- (e.g., procurement reforms and consolida- nancing the CAD. terest payments (25.2 percent). tion of social programs). Consequently, the Inflation declined throughout the year, public debt-to-GDP ratio is expected to de- reaching 3.5 percent y-o-y in July 2024, crease progressively, falling below 57 per- within the central target range (4 per- cent post-2026. Beyond this baseline, a cent +/- 1 percent). The policy rate, Outlook comprehensive fiscal reform focused on which had been maintained at 7 percent enhancing revenue mobilization and pub- since November 2023, was lowered to In 2024, economic growth is anticipated lic expenditure management is crucial to 6.75 percent in August 2024. Labor mar- to accelerate to 5.1 percent as the effects support the ongoing fiscal efforts, while ket displayed strong dynamism, adding of the monetary easing, higher public ensuring sustainable economic growth. 172,443 new jobs between March 2023 investment, and record tourism arrivals The macroeconomic outlook faces three and March 2024—a 4 percent y-o-y in- boost activity. Inflation is expected to main risks. First, the persistence of geopo- crease. Three-quarters of these were for- stabilize around 4 percent. Over the litical tensions could lead to volatility in mal positions, with women filling 80 medium term, robust consumption and commodity prices, pressuring the govern- percent of them. investment are expected to underpin ment to maintain energy subsidies. Sec- In 2023, the poverty rate fell to 17.9 per- growth, bolstered by structural reforms ond, the anticipated slowdown in the U.S. cent, below the pre-pandemic level of 20.2 such as fiscal, energy, water, and labor, economy could directly affect the DR's ex- percent. The reduction was largely ex- as well as initiatives aimed at improving ternal accounts. Third, weather-related plained by rising labor income and gov- education quality and attracting FDI. By events, could negatively impact agricul- ernment transfers. Real per capita income 2027, growth is forecasted to stabilize at ture and tourism, disproportionately im- grew by 11.7 percent in 2023, marking the around 5 percent. Robust growth and pacting the poor. Climate-induced GDP highest increase since 2016. job creation, together with stable infla- deviations from baseline could reach up The fiscal deficit increased slightly to 1.1 tion will support poverty reduction in to 16.7 percent of GDP by 2050. The high percent of GDP in the first half of 2024 2024 and 2025, reaching 17.7 and 16.9 exposure to shocks and limited financial from 0.6 percent in the first half of 2023. percent respectively. buffers pose additional fiscal risks. There- Total revenue surged by 9.4 percent, dri- Fiscal consolidation is expected over the fore, strengthening resilience through in- ven by improved tax administration and medium term, anchored on the implemen- clusive growth, reducing inequality, and exceptional income from the renegotiation tation of the Fiscal Responsibility Law, the enhancing fiscal sustainability is impera- of airport concessions. Expenditures grew phase-out of untargeted subsidies, and tive to sustain economic progress and en- by 15.1 percent y-o-y, fueled by increases measures to improve spending efficiency sure broader social benefits. TABLE 2 Dominican Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 12.3 4.9 2.4 5.1 4.7 5.0 Private consumption 6.6 5.1 2.5 5.1 5.0 5.2 Government consumption 0.1 3.9 2.3 4.3 -1.3 1.8 Gross fixed capital investment 22.1 4.0 2.0 3.6 4.3 4.9 Exports, goods and services 36.2 13.7 -0.5 4.1 3.9 5.0 Imports, goods and services 25.7 14.4 0.3 2.4 2.3 3.7 Real GDP growth, at constant factor prices 11.1 4.6 2.2 5.1 4.7 5.0 Agriculture 2.6 5.0 3.9 4.0 3.6 3.4 Industry 16.5 1.3 -0.3 4.7 4.4 4.6 Services 9.3 6.3 3.3 5.4 5.0 5.3 Inflation (consumer price index) 8.2 8.8 4.8 3.8 4.0 4.0 Current account balance (% of GDP) -2.8 -5.8 -3.6 -3.5 -3.6 -3.4 Net foreign direct investment inflow (% of GDP) 3.4 3.6 3.6 3.7 3.7 3.7 a Fiscal balance (% of GDP) -2.9 -3.2 -3.3 -3.3 -2.9 -2.6 Revenues (% of GDP) 15.6 15.3 15.7 16.2 15.4 15.3 b Debt (% of GDP) 62.6 58.6 58.3 58.3 58.0 57.1 a Primary balance (% of GDP) 0.2 -0.4 -0.1 0.2 0.7 0.9 c,d International poverty rate ($2.15 in 2017 PPP) 0.9 0.8 0.9 0.9 0.9 0.8 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.3 4.0 3.9 3.7 3.4 3.3 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 23.2 21.5 17.9 17.7 16.9 16.6 GHG emissions growth (mtCO2e) 7.4 0.0 -0.8 2.2 2.1 2.1 Energy related GHG emissions (% of total) 64.6 63.9 62.9 62.8 62.8 62.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are shown for the non-financial public sector (i. e. excluding central bank quasi-fiscal balances). b/ Consolidated public sector debt. c/ Calculations based on SEDLAC harmonization, using 2023 - ECNFT-Q03. Actual data: 2022 and 2023 (preliminary). Forecasts are from 2024 to 2026. d/ Projections using microsimulation methodology. MPO 107 Oct 24 expanding trade, and improving labor reg- ulations is vital. Despite high primary ECUADOR Key conditions and school enrollment, education quality re- mains low, especially for Indigenous and challenges rural populations. Post-pandemic econom- ic struggles have deepened healthcare in- Table 1 2023 Ecuador faces a challenging political land- equalities, yet child undernutrition de- a 18.0 Population, million scape, natural disasters, and deteriorating creased from 20.1 percent in 2023 to 19.3 a 116.6 GDP, current US$ billion security, which have hindered growth, lim- percent in 2024. Adapting to climate GDP per capita, current US$ 6476.6 ited poverty reduction, and strained fiscal change is key for resilient growth and b 3.8 International poverty rate ($2.15) conditions. The country remains cut off poverty reduction. The evolving political b 10.3 from international capital markets. The Oc- landscape, with general elections in Febru- Lower middle-income poverty rate ($3.65) b 29.6 tober 2023 snap elections resulted in a frag- ary 2025, will influence the reform agenda. Upper middle-income poverty rate ($6.85) Gini index b 44.6 mented National Assembly and a minority School enrollment, primary (% gross) c 97.5 government with an 18-month mandate. c 77.9 Since taking office, the Government has Life expectancy at birth, years Total GHG emissions (mtCO2e) 100.2 worked to reduce fiscal imbalances, im- Recent developments proving fiscal accounts in early 2024. In Source: WDI, Macro Poverty Outlook, and official data. May, the IMF approved a 48-month EFF Real GDP grew by 1.2 percent y-o-y in a/ Most recent value (2022). b/ Most recent value (2023), 2017 PPPs. program for $4 billion, with an immediate 2024Q1, rebounding from a 0.7 percent con- c/ Most recent WDI value (2022). $1 billion disbursement for budget sup- traction in the previous quarter. Growth was port. This, along with additional multilat- driven primarily by a decrease in imports eral financing, eased liquidity constraints (-3.3 percent) and an inventory buildup, Ecuador faces significant challenges cen- and closed the financing gap. which more than offset contractions in in- tered around structurally low growth, Economic growth remains weak due to vestment (-1.3 percent), private consump- fiscal tightening, declining oil produc- tion (-1.1 percent), exports (-0.5 percent) and low-quality employment, and strained fis- tion, political uncertainty, and an energy public consumption (-0.3 percent). Oil dis- cal accounts. The government passed re- crisis. The worst drought in 60 years has ruptions, the El Niño, political uncertainty, forms that helped improve the fiscal stance, led to historically low reservoir levels, and insecurity negatively impacted private it also secured international financial sup- causing electricity generation deficits, na- consumption and investment. tionwide blackouts, and power rationing Labor market conditions slightly im- port. Medium-term priorities include in 2023 and 2024, highlighting the need proved, with the unemployment rate maintaining fiscal consolidation, enhanc- for investment. dropping 0.7 percent y-o-y in June 2024 ing security, and addressing the energy With declining oil output and global de- (3.1 percent), resulting in a 1 percent de- crisis. Poverty reduction is expected to carbonization trends, private investment cline in poverty (national poverty line) and stall, in line with the slow economic ac- and formal job creation are crucial for a virtual stagnation of the Gini at 45.6 in growth in sectors like mining and agricul- 2024. Job quality remains a structural prob- tivity. Unlocking sustainable growth re- lem, with informality increasing 0.7 per- ture. Reducing barriers to private sector quires boosting investment by removing development by strengthening the insol- cent y-o-y to 53.5 percent in 2024 (76.6 per- barriers to private sector development. vency framework, promoting competition, cent in rural areas). Structural gender gaps FIGURE 1 Ecuador / Emerging Market Bond Index (EMBI) FIGURE 2 Ecuador / Actual and projected poverty rates and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 35 50 7000 45 30 6000 40 35 5000 25 30 4000 20 25 20 3000 15 15 2000 10 10 1000 5 5 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate Jul-20 Jan-21 Jul-21 Jan-22 Aug-22 Feb-23 Aug-23 Mar-24 Sep-24 Upper middle-income pov. rate Real GDP pc Source: JP Morgan Chase. Source: World Bank. Notes: see Table 2. MPO 108 Oct 24 remain, with women disproportionally The NFPS fiscal deficit is projected to represented among the unemployed (3.7 end in 2024 at around 2.1 percent of percent), partially employed, and those Outlook GDP and to narrow further in 2025 and earning less than minimum wage. 2026. Public debt is projected to peak at The central government balance improved Growth is projected to decline to 0.3 percent 57.5 percent of GDP in 2025, significant- from a US$1.464 million deficit (1.2 percent in 2024 due to negative carryover, sharp fis- ly below pandemic levels, before resum- of GDP) in 2023H1 to a US$85 million sur- cal tightening, and energy shortages. Addi- ing its downward trajectory. The current plus (about 0.1 percent of GDP) in 2024H1. tionally, oil output has fallen significantly account surplus is forecast to remain at This was helped by revenue-raising re- due to pipeline damages caused by the re- 1.9 percent of GDP in 2024, narrowing to forms approved earlier this year, including gressive erosion of the Coca River and the around 1.3 percent by 2026. Oil export an increase of the VAT rate from 12 to 15 unwinding of oil production in the Yasuni growth is expected to weaken, while im- percent; temporary taxes on large firms National Park following the 2023 referen- ports will recover modestly as economic and banks; higher withholding require- dum. A reduction in political uncertainty activity increases. International reserves ments for companies’ upfront payments; following February´s elections, along with are projected to gradually increase sup- raised capital outflows tax; and a tax improvements in security, energy, and fis- ported by multilateral financing, and a amnesty program, together with profit cal conditions due to recently taken mea- modest resurgence in foreign investment. transfers from the Central Bank’s gold sures, is expected to support a gradual eco- Several risks could impact this outlook. Re- sales. The consolidation was further sup- nomic recovery since 2025. laxing fiscal consolidation plans and paus- ported by reduced capital spending and Weak economic growth and structural labor ing growth-enhancing reforms ahead of purchases of goods and services. market inequalities will continue to restrain the 2025 elections could delay the return The current account balance posted a household income growth potential, lead- to international capital markets. Addition- record-high surplus of US$1.5 billion in ing to a slow decline in poverty from 29.6 ally, Ecuador’s reliance on oil revenues 2024Q1. Exports expanded 5.9 percent y- percent in 2023 to 28.5 percent in 2026, de- makes it vulnerable to volatile oil prices o-y while imports contracted 7.6 percent, spite low inflation (US$6.85/day, 2017 PPP). and any faster-than-expected decline in generating a US$1.2 billion trade surplus. Climatic shocks such as La Niña could dis- production levels. A resurgence of insecu- International reserves rose from US$ 4.5 proportionally hit the poorest. However, rity, weaker-than-anticipated growth in billion (1.5 months of imports) in Decem- inflation is projected to remain low despite the U.S. or China, and natural hazards ber 2023 to US$ 7.2 billion (2.4 months of emerging pressures generated by a higher such as stronger-than-expected La Niña imports) in July 2024. VAT rate and lower fuel subsidies. events, add substantial risks. TABLE 2 Ecuador / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 9.8 6.2 2.4 0.3 1.6 2.2 Private consumption 11.3 7.4 1.4 0.2 2.0 2.5 Government consumption 0.0 1.8 3.7 -3.2 -4.3 -2.7 Gross fixed capital investment 13.2 8.5 0.5 0.6 2.7 5.0 Exports, goods and services 9.4 7.3 2.3 1.2 2.3 2.1 Imports, goods and services 21.5 10.5 -0.9 -0.9 0.9 2.3 Real GDP growth, at constant factor prices 9.5 6.0 1.6 0.3 1.6 2.2 Agriculture 9.0 2.3 5.1 3.7 3.7 3.7 Industry 12.5 4.9 -0.7 0.4 1.1 1.8 Services 8.2 7.1 2.2 -0.2 1.5 2.2 Inflation (consumer price index) 0.1 3.5 2.2 2.0 1.8 1.4 Current account balance (% of GDP) 2.9 1.8 1.9 1.9 1.6 1.3 Net foreign direct investment inflow (% of GDP) 0.6 0.8 0.3 0.3 0.9 1.5 Fiscal balance (% of GDP) -1.6 0.0 -3.6 -2.1 -1.5 -0.4 Revenues (% of GDP) 35.8 38.7 36.7 38.8 38.0 38.3 Debt (% of GDP) 61.6 57.0 55.3 56.8 57.5 57.0 Primary balance (% of GDP) -0.3 1.6 -1.4 0.4 1.2 2.3 a,b International poverty rate ($2.15 in 2017 PPP) 3.6 3.2 3.8 3.8 3.5 3.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 10.9 9.5 10.3 10.4 9.8 9.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 31.7 29.9 29.6 29.6 29.2 28.5 GHG emissions growth (mtCO2e) 2.2 1.8 1.7 2.2 2.9 3.2 Energy related GHG emissions (% of total) 34.9 35.6 36.3 37.5 38.8 40.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2023-ENEMDU. Actual data: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 109 Oct 24 economy, and further reduce poverty and inequality, comprehensive reforms are EL SALVADOR Key conditions and needed to address inefficiencies in labor markets, enhance poor skill acquisition, challenges and improve infrastructure. After focus- ing on security in his first term, President Table 1 2023 El Salvador is a small, dollarized economy Bukele has signaled a shift towards Population, million 6.4 closely tied to the U.S. through trade and strengthening the economy and growth GDP, current US$ billion 34.0 remittances. Between 2000 and 2023, GDP during his second term which can impact GDP per capita, current US$ 5344.2 grew at an average annual rate of 2.1 per- poverty reduction. However, ongoing fis- a 3.4 International poverty rate ($2.15) cent, while official poverty declined by 14 cal and external imbalances present major a 8.6 percentage points, reaching 30.3 percent of challenges to achieving sustained growth Lower middle-income poverty rate ($3.65) a 27.5 the population in 2023. However, poverty through policy reforms. Upper middle-income poverty rate ($6.85) Gini index a 38.8 has risen in the past two years, with School enrollment, primary (% gross) b 90.8 around 10 percent of the population living b 71.5 in extreme poverty in 2023. Inequality re- Life expectancy at birth, years Total GHG emissions (mtCO2e) 13.4 mains among the lowest in the region. Recent developments Since 2022, strict security measures have Source: WDI, Macro Poverty Outlook, and official data. significantly reduced gang violence, con- In 2023, El Salvador's economy grew by 3.5 a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). tributing to economic gains and job cre- percent, surpassing its historical average. ation. However, structural challenges re- This heightened economic performance main: low productivity and human capital was driven by public investment, exports, deficiencies, stemming from malnutrition and private consumption, bolstered by in- and poor schooling, impede further creased foreign demand, higher remit- In recent decades, El Salvador has sus- progress on inclusive growth. tances, an improved business environment tained stable, albeit low growth, achiev- The progress on crime reduction coincided following enhanced security measures, ing reductions in poverty and inequality, with a deterioration in fiscal accounts (and and a significant drop in inflation from 7.2 although progress on poverty has slowed the stalling of poverty reduction), with percent in 2022 to 4.0 percent in 2023. In public debt exceeding 84 percent of GDP 2024, tourism, exports, and public spend- since the pandemic. The country has also in 2023. Financing options are restricted ing continued to drive growth, with the managed to curb gang violence—a signif- to pensions, banks, official creditors, and first quarter reporting an annual growth icant barrier to inclusive growth. GDP short-term domestic debt. The 2023 pen- rate of 2.6 percent. Meanwhile, year-to- growth is projected at 2.9 percent in 2024 sion reform provided short-term fiscal re- year inflation declined to slightly below 2 but is expected to slow to 2.5 percent by lief of approximately USD 1.5 billion but percent in June. also poses risks of deepening structural While stronger economic activity boosted 2026 due to limited measures to address imbalances and generating contingent lia- government revenues by 6.8 percent in fiscal and external imbalances as well as bilities, particularly through a higher min- 2023, higher government spending (12.3 other structural obstacles to growth. imum pension payout. percent rise) increased the fiscal deficit to To enhance productivity, attract foreign 4.7 percent of GDP, 2.0 percentage points direct investments (FDI), diversify the higher than 2022. Public debt peaked at FIGURE 1 El Salvador / Coinbase bitcoin price FIGURE 2 El Salvador / Actual and projected poverty rates and real GDP per capita Bitcoin Price (US$) Poverty rate (%) Real GDP per capita (constant LCU) 80,000 60 5000 4500 70,000 50 4000 60,000 3500 40 50,000 3000 30 2500 40,000 2000 20 30,000 1500 1000 20,000 10 500 10,000 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Upper middle-income pov. rate Real GDP pc Source: Federal Reserve Economic Data. Source: World Bank. Notes: see Table 2. MPO 110 Oct 24 84.9 percent of GDP, despite two sovereign made poverty reduction a priority for the The primary balance is expected to im- debt buyback operations in 2023 and 2024. new presidential term. prove in 2024, largely due to reduced pub- Sovereign spreads remained close to 700 lic spending linked to the election cycle, bps, with limited financing options re- elimination of specific subsidies, and pub- stricted to pensions, banks, and official lic sector wage and employment adjust- creditors. To address these challenges, au- Outlook ments. The overall fiscal deficit is projected thorities are negotiating an IMF program, to close at 4.5 percent of GDP. This deficit though Bitcoin’s legal tender status re- While growth in 2024 (2.9 percent) will re- will likely be financed through investment mains a contentious issue amid its recent main above the historical average, it will projects from multilaterals, pension assets value volatility. slow over the medium term due to slower not yet invested in treasury bills, and in- The current account deficit narrowed to 1.4 US growth and uncertainty regarding fis- creased domestic debt holdings. percent of GDP, aided by lower commod- cal and external imbalances. Inflation is El Salvador’s fiscal position will remain ity prices, growing remittances that projected to ease to 2.1 percent in 2024. challenging in the medium term as liquid- reached 24.2 percent of GDP in 2023, and The current account deficit is projected to ity needs persist. While the government is tourism receipts. Foreign Direct Invest- widen to 2.7 percent of GDP in 2024 and closing the 2024 financing gap, it still needs ment rose to 2.1 percent of GDP, helping remain stable over the medium term, dri- to secure an annual USD 900 million for to finance the deficit, but international re- ven by slower remittance growth and a de- 2025 and 2026, with a concerning USD 1.7 serves stayed low at 9.1 percent of GDP teriorating trade balance. This deficit will billion gap in 2027, including a Eurobond (about 2 months of imports). be partially financed by FDI, expected to payment due that year. Between 2021 and 2023, national poverty remain low at 2.0 percent of GDP. Without Risks to economic performance include a figures have been increasing (2.5 percent- additional capital inflows or fiscal adjust- potential global slowdown, changes in age points), while international poverty ments, international reserves are expected U.S. immigration policy, reliance on do- figures at 6.85 USD per capita per day to remain low. mestic financing that could crowd out pri- (2017 PPP) show a decrease of a slightly Despite these recent favorable conditions vate investment, and financial exposure to higher magnitude (3.6 percentage points). in terms of growth and low inflation, Bitcoin's volatility. Additionally, with a 79 Official and international poverty figures poverty measured with the upper-middle percent likelihood of a La Niña event in diverge due to methodological differences, country poverty line of US$6.85/day (2017 late 2024, supply chain disruptions could particularly in how they account for the PPP) is projected to stay stable, as growth further slow economic activity and in- impact of inflation. The government has in remittances is expected to decline. crease fiscal pressures. TABLE 2 El Salvador / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 11.9 2.8 3.5 2.9 2.7 2.5 Private consumption 9.5 2.5 3.4 2.6 2.4 2.2 Government consumption 9.0 -1.2 3.2 2.5 2.3 2.1 Gross fixed capital investment 25.3 4.4 8.9 3.0 2.9 2.7 Exports, goods and services 29.8 9.1 5.2 2.3 2.2 2.3 Imports, goods and services 28.8 0.9 -1.4 2.0 2.1 2.1 Real GDP growth, at constant factor prices 10.3 3.4 3.4 2.9 2.7 2.5 Agriculture 3.2 -1.2 0.4 0.7 1.4 1.6 Industry 9.2 4.1 4.8 3.0 2.9 2.5 Services 11.4 3.5 3.1 3.1 2.7 2.6 Inflation (consumer price index) 3.5 7.2 4.0 2.1 1.9 1.7 Current account balance (% of GDP) -4.3 -6.8 -1.4 -2.7 -2.8 -2.7 Net foreign direct investment inflow (% of GDP) 1.3 0.4 2.1 2.2 1.9 2.0 a Fiscal balance (% of GDP) -5.5 -2.7 -4.7 -4.5 -4.4 -4.4 Revenues (% of GDP) 24.5 24.6 24.7 25.0 24.9 24.8 b Debt (% of GDP) 83.9 79.2 84.9 84.6 84.2 83.5 a Primary balance (% of GDP) -2.5 0.4 0.2 0.4 0.5 0.5 c,d International poverty rate ($2.15 in 2017 PPP) 3.6 3.4 3.1 3.1 3.1 3.0 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 8.7 8.6 7.7 7.7 7.6 7.5 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 28.4 27.5 24.8 24.9 25.0 24.9 GHG emissions growth (mtCO2e) 8.5 0.5 -0.6 1.4 1.0 1.1 Energy related GHG emissions (% of total) 53.2 53.5 53.4 53.8 53.7 53.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal and Primary Balance correspond to the non-financial public sector. b/ Debt is total public debt. c/ Calculations based on SEDLAC harmonization, using 2023-EHPM. Actual data: 2022 and 2023 (Preliminary). Nowcast: 2024. Forecasts are from 2025 to 2026. d/ Projections using microsimulation methodology. MPO 111 Oct 24 management of the Investment Migration Agency (IMA) program, a critical source GRENADA Key conditions and of financing for Grenada, needs to be fur- ther improved to increase spending effi- challenges ciency. A post-Hurricane Beryl recovery plan, a return to the fiscal rules over the Table 1 2023 From 2015 to 2019, Grenada’s econom- medium term, more effective social pro- Population, million 0.1 ic performance surpassed those of its tection programs, and additional struc- GDP, current US$ billion 1.3 eastern Caribbean peers, with an av- tural reforms are needed to sustain inclu- GDP per capita, current US$ 10524.5 erage growth rate of 3.3 percent, rela- sive growth, reduce poverty and inequal- a 0.3 International poverty rate ($2.15) tively low public debt, and continued ity, and strengthen climate resilience. Tar- a 1.3 poverty reduction. Growth has been geted policies to boost job creation and Lower middle-income poverty rate ($3.65) a 13.8 driven by construction and tourism, skill development for women and youth Upper middle-income poverty rate ($6.85) Gini index a 43.8 supported by structural reforms initi- are also required. School enrollment, primary (% gross) b 83.4 ated in 2015. The 2023 Fiscal Resilience b 75.3 Act (FRA) further enhanced Grenada’s Life expectancy at birth, years fiscal policy framework by simplify- Total GHG emissions (mtCO2e) 2.5 ing rules, broadening the definition of Recent developments Source: WDI, Macro Poverty Outlook, and official data. public debt to include State-Owned a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). Enterprises (SOEs), and strengthening Economic growth decelerated to 4.7 the role of the medium-term fiscal percent in 2023 as the recovery in framework as a fiscal policy guiding tourism was offset by a downturn tool. The Eastern Caribbean Currency in agriculture and construction, which Union’s fixed exchange rate anchors were impacted by adverse weather Despite the devastation of Hurricane low inflation and price stability. and delays in project completions. Beryl, Grenada’s economy is anticipated Grenada’s financial sector remains sta- Hurricane Beryl, which hit the island to continue growing, supported by ble and liquid. in July 2023 left damages currently es- tourism and construction. Even with However, vulnerabilities remain. The timated at 16.5 percent of 2023 GDP. country is highly vulnerable to natural Stayover arrivals that surpassed pre- greater fiscal needs for post-Beryl re- hazards, which are expected to in- COVID levels during the first six construction efforts, the country is ex- crease in intensity and frequency with months of 2024, partially offsetting the pected to reduce its debt, helped by climate change. Income inequality, economic impacts of Beryl. Inflation strong revenues. Building climate re- measured by the Gini index, was esti- remained at 2.2 percent in 2023, most- silience and closing infrastructure gaps mated at 44 points in 2018 (the latest ly driven by increases in food prices, year with data available), which is a resulting from underperformance in will be critical for Grenada to maintain relatively high level by global stan- the agriculture sector, but eased to inclusive growth and continue reducing dards. Gender disparities in access to an average 1.3 percent year-on-year in poverty and inequality. economic opportunities persist, and the first five months of 2024. The un- youth unemployment remains signifi- employment rate dropped from 12.0 cantly above the national average. The percent in 2023Q2 to 8.5 percent in FIGURE 1 Grenada / Real GDP growth and sectoral FIGURE 2 Grenada / Actual and projected poverty rates and contributions to real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 20 25000 8 18 6 16 20000 4 14 2 12 15000 0 10 -2 8 10000 -4 Agriculture 6 -6 Industry 4 5000 -8 Services 2 -10 Net Taxes 0 0 -12 Real GDP growth 2018 2020 2022 2024 2026 -14 International poverty rate Lower middle-income pov. rate 2016 2018 2020 2022 2024 2026 Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 112 Oct 24 2024Q1. However, it continues to be to decline thereafter as lower capital significantly higher among women spending, coinciding with a reduction in (10.8 percent) and the youth (19.1 per- Outlook IMA inflows. The robust implementation cent). Poverty ($6.85 a day in 2017 of compliance strategies by the Inland Rev- PPP) is estimated to have declined Growth is projected at 3.2 percent in 2024, enue Department (IRD), substantial re- from 15.6 percent in 2022 to 13.9 per- with an average of 4.4 percent over the ceipts from the IMA program, and rela- cent in 2023, reaching pre-pandemic medium term. This projection reflects the tively vibrant economic activity buoyed levels (13.8 percent in 2018). re-construction efforts and a recovery in revenue collections to 40.2 percent of GDP The current account deficit reached 13.9 both the agriculture and tourism sectors. in 2024. Nonetheless, tax revenue collec- percent of GDP in 2023. Remittance in- Given Grenada's heavy reliance on im- tion is projected to normalize in the medi- flows increased to 5.8 percent of GDP ports, the high import prices will continue um term, reaching an average of 30 percent in 2023 from 5.5 percent of GDP in to impose considerable pressures on the of GDP. As a result, the fiscal balance will 2022, below their pandemic peak. IMA restaurant and food industry. Inflation is remain in an average deficit of 0.7 percent inflows were larger than expected in projected at 2.1 percent in 2024 and con- of GDP. Public debt (71.5 percent of GDP 2023, supporting both public and pri- verge to 2.0 percent thereafter. The current in 2024) is expected to continue its down- vate investment. Foreign Direct Invest- account deficit is projected to widen to 17.5 ward trajectory, as the Government is not ment (11.3 percent of GDP in 2023) percent of GDP in 2024 and remain ele- expected to rely on additional borrowing helped finance the external deficit, as vated, as reconstruction efforts and food to finance its recovery efforts. did loans from multilateral and bilateral import demand offset the expansion of External risks are mainly on the downside development partners. tourism receipts. Gains in poverty reduc- and are associated with the uncertainty The fiscal surplus reached 8.4 percent of tion will stall in 2024, with poverty (at the around geopolitical tensions, the possibili- GDP in 2023, as revenues increased to line of $6.85 a day in 2017 PPP) projected to ty of a global economic slowdown, and re- 35.8 percent of GDP owing to higher IMA stay around 14.0 percent. As the economy newed increases in commodity prices. Do- revenue inflows and buoyant economic recovers, poverty is expected to return to mestically, a faster implementation of con- activity. Public sector debt ratio increased its downward trend, reaching around 12.0 struction projects could spur a new wave to 75 percent of GDP in 2023, reflecting percent in 2026. of economic growth. In contrast, the coun- the FRA that was introduced in 2023 and Fiscal expenditures are expected to rise in try’s vulnerabilities to natural disasters, broadened debt coverage by including 2024 amid post-hurricane reconstruction and volatility in CBI inflows could nega- debt of all SOEs. and higher wages. However, it is projected tively impact future growth. TABLE 2 Grenada / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.7 7.3 4.7 3.2 4.7 4.4 Real GDP growth, at constant factor prices 5.2 6.2 2.2 3.2 4.7 4.4 Agriculture 15.7 -16.8 -18.1 -6.5 5.1 4.5 Industry 15.3 17.4 -2.9 2.1 7.1 7.5 Services 2.0 5.5 5.2 4.0 4.0 3.5 Inflation (consumer price index) 1.4 2.6 2.6 2.1 2.0 2.0 Current account balance (% of GDP) -14.5 -11.1 -13.9 -17.5 -13.2 -12.2 Fiscal balance (% of GDP) 0.3 0.9 8.4 -0.7 -1.5 0.0 Revenues (% of GDP) 31.6 32.9 35.8 40.2 30.0 29.7 a Debt (% of GDP) 71.4 64.5 75.0 71.5 69.8 68.5 Primary balance (% of GDP) 2.1 2.6 10.1 1.0 0.2 1.7 b,c International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.1 0.1 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.3 1.3 1.3 1.3 1.1 1.1 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 17.3 15.6 13.9 13.7 12.9 11.9 GHG emissions growth (mtCO2e) 0.8 1.1 1.2 0.9 1.7 1.6 Energy related GHG emissions (% of total) 13.0 13.2 13.3 13.4 13.8 14.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ The debt coverage over the period 2023-2026 was expanded to include the non-guaranteed debt of all SOEs, aligned with the new FRA. b/ Calculations based on CONLAC harmonization, using 2018-SLCHB. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2018) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 113 Oct 24 in cash transfers in 2024. However, Guatemala needs to increase and improve GUATEMALA Key conditions and infrastructure and social expenditure per- manently to reach results, requiring higher challenges government revenues (currently at 12.9 percent of GDP for the central govern- Table 1 2023 While Guatemala has grown steadily in the ment), to preserve fiscal sustainability. Population, million 17.6 last 10 years, poverty and inequality reduc- GDP, current US$ billion 104.4 tion have been very limited. Guatemala’s GDP per capita, current US$ 5933.4 GDP per capita grew by 1.9 percent from International poverty rate ($2.15) a 9.5 2014 to 2023 while the average for LAC was Recent developments a 25.9 0.3 percent over the same period. However, Lower middle-income poverty rate ($3.65) a 55.4 poverty under the upper-middle income The economy has rebounded from nega- Upper middle-income poverty rate ($6.85) Gini index a 48.3 country international poverty line ($6.85/ tive spillovers of recent political turmoil. School enrollment, primary (% gross) b 103.9 day per capita, 2017 PPP) remains one of the The country’s sovereign risk returned to b 68.7 highest in the region at 55.2 percent of the being the lowest among CADR countries. Life expectancy at birth, years population, the same as in 2014 (55.4 per- In the first half of 2024, economic activity Total GHG emissions (mtCO2e) 42.1 cent). Human capital outcomes have shown grew by 3.5 percent, led by the finance, Source: WDI, Macro Poverty Outlook, and official data. little progress in this period, particularly for health, and hospitality sectors. On the de- a/ Most recent value (2014), 2017 PPPs. b/ Most recent WDI value (2022). racial minorities. Child malnutrition re- mand side, growth was driven by remit- mains critical, with 44 percent of children tances-fueled private consumption. under five stunted in 2022. Remittances reached 19.5 percent of GDP in Guatemala has grown steadily in recent Guatemala faces several structural chal- 2023 and together with a lower trade deficit, lenges: low and ineffective social expendi- propelled the current account surplus to 3.1 years with sound macroeconomic perfor- ture, lack of dynamism in the labor market, percent of GDP. They decelerated mildly in mance but with poor social outcomes, and low productivity, driven by poor infra- 2024—7 percent up to July versus 12.1 per- due to low and ineffective social expen- structure. Social expenditure reached 6.3 cent by July 2023, reflecting a deceleration in diture and low productivity. Addressing percent of GDP in 2021, compared to 9.3 per- the US economy. Higher imports increased cent on average for Central America and Do- the trade deficit by 13 percent. Nonetheless, these challenges requires higher and bet- minican Republic (CADR). Informality the current account remained in surplus, ter social expenditure and infrastructure reached 70.3 percent in 2023, while labor and international reserves reached 10 investment. The government moved in force participation stood at 59 percent, months of imports in July. the right direction by increasing cash with a much lower rate among women Inflation declined from 4.2 percent in 2023 transfers and public investment in (39.7 percent), hindering efforts to reduce to 3.1 percent in August of 2024, despite El poverty and inequality. Total factor pro- Niño’s impacts on food prices, helped by 2024, but these changes need to be per- ductivity remained stagnant over the last lower housing and food prices. sistent and sustainably funded by re- 10 years, dragging on growth potential. Fiscal results reflected prudent manage- current revenues to preserve a sound The government has moved in the right di- ment with low deficit and low debt in 2023 macroeconomic environment. rection by increasing infrastructure spend- (0.8 and 27.2 percent of GDP respectively). ing and by promising a temporary increase The central government posted a budget FIGURE 1 Guatemala / Higher spending on social programs FIGURE 2 Guatemala / Actual and projected poverty rates and investment to increase government deficit and debt and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 18 29.5 60 40000 16 35000 29 50 14 30000 28.5 12 40 25000 10 28 30 20000 8 27.5 15000 6 20 27 10000 4 10 26.5 5000 2 0 0 0 26 2014 2016 2018 2020 2022 2024 2026 2022 2023 2024 2025 2026 International poverty rate Lower middle-income pov. rate Expenditure (lhs) Revenue (lhs) Debt (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 114 Oct 24 surplus in the first half of 2024 due to higher growing remittances, and higher gov- MPO baseline forecast includes average revenues and constant nominal expendi- ernment expenditure, bringing GDP deficits of 2.4 percent of GDP and debt tures. However, an expenditure increase of growth near to its potential (estimated at 28.7 percent of GDP by 2026, which approximately 1.8percentage points of GDP at 4 to 4.5 percent). Over time, gov- is sustainable. The binding constraint is for the 2024 budget was recently approved ernment consumption and investment not the debt level, but payment capacity and is expected to reverse this surplus. are expected to increase their contri- as the interest-payment-to-revenue ratio The 2023 ENCOVI (Encuesta Nacional de bution to growth, while private con- is expected to increase from 13.4 in 2024 Condiciones de Vida) confirmed that the sumption’s contribution will slow to 15.2 percent in 2029. incidence of poverty has declined very lit- down due to lower remittances growth Poverty is projected to decline modest- tle over the last decade, and inequality has and higher government spending. ly towards 54.3 percent in 2025 ($6.85/ increased, signaling little improvement in External accounts will record a smaller day, 2017 PPP) thanks to economic living standards for those at the bottom surplus due to lower remittances growth growth, lower inflation, and increased of the distribution. Inequality measured by and higher imports. International reserves social spending. Inequality is estimat- the Gini Index reached 50.2 in 2023, com- are expected to remain at comfortable lev- ed to remain at similar levels in the pared to 48.3 in 2014. Similarly, gaps in ac- els and the exchange rate is expected to next two years. cess to essential services remain. For ex- remain stable. Inflation will converge to Main risks to the forecast are the ef- ample, while 63.3 percent of the non-poor the central bank target range (4 +/- 1 per- fects of La Niña on agricultural out- population has access to a sewerage sys- cent), expelling any left-over effect from put, and on inflation, which would de- tem, that number reaches 39 percent for external shocks. mand a more restrictive monetary pol- the poor (non-extreme) and 14.1 percent Guatemala can achieve higher and more icy. Natural disasters, a common oc- for the extreme poor. egalitarian growth if it continues to im- currence in the country, could reduce prove its social safety net system and GDP, pressuring the already low tax increase infrastructure investment, as revenues, and trigger additional ex- proposed in the medium-term macro- penditures, adding fiscal pressures. Fi- Outlook fiscal framework contained in the 2025 nally, a harder landing in the US and budget. This expenditure increase will policy changes related to trade, re- Guatemala’s economic activity is rebound- be financed by efficiency gains in tax mittances and migration could affect ing, benefitting from lower uncertainty, administration and higher debt. The Guatemala’s external sector. TABLE 2 Guatemala / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 8.0 4.2 3.5 3.7 4.0 4.0 Private consumption 8.5 4.3 4.4 4.0 4.3 4.3 Government consumption 4.6 7.2 3.3 0.6 4.1 1.0 Gross fixed capital investment 19.8 4.3 7.4 6.9 6.5 8.5 Exports, goods and services 10.2 7.5 -2.5 2.3 2.1 2.0 Imports, goods and services 19.5 4.8 5.9 4.1 4.8 4.8 Real GDP growth, at constant factor prices 7.8 4.4 3.1 3.7 4.0 4.0 Agriculture 4.2 2.8 2.2 1.1 3.5 3.0 Industry 8.6 4.6 2.5 2.0 3.3 3.3 Services 8.1 4.6 3.5 4.7 4.3 4.4 Inflation (consumer price index) 4.3 6.9 6.3 3.4 4.6 4.0 Current account balance (% of GDP) 2.2 1.3 3.1 2.8 1.9 1.2 Net foreign direct investment inflow (% of GDP) 3.4 0.8 0.8 1.8 1.8 1.8 Fiscal balance (% of GDP) -1.1 -1.7 -1.3 -2.3 -2.5 -2.3 Revenues (% of GDP) 12.7 12.9 12.8 12.9 12.9 12.7 Debt (% of GDP) 30.6 29.0 27.2 27.9 28.4 28.6 Primary balance (% of GDP) 0.6 -0.1 0.4 -0.3 -0.5 -0.3 a,b International poverty rate ($2.15 in 2017 PPP) 10.8 10.4 11.5 11.2 10.9 10.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 28.1 27.4 27.8 27.2 27.2 25.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 57.0 56.0 55.2 54.8 54.3 53.4 GHG emissions growth (mtCO2e) 7.1 3.9 3.1 1.9 3.5 3.3 Energy related GHG emissions (% of total) 54.6 55.8 56.5 56.7 57.5 58.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2014-ENCOVI. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 115 Oct 24 investments. However, faster with- drawals also raise the risk of increas- GUYANA Key conditions and ing spending inefficiency, accelerating inflation, and dampening the competi- challenges tiveness of non-oil sectors. A reliance on oil revenues may also contribute to Table 1 2023 Guyana is a small state with abundant economic imbalances and vulnerabil- Population, million 0.8 natural resources, including significant oil ities to commodity price fluctuations GDP, current US$ billion 17.2 and gas reserves and extensive forest cov- (“Dutch Disease” effects). GDP per capita, current US$ 20765.4 er. With much of its territorial waters still Guyana is also advancing on an initiative a 99.7 School enrollment, primary (% gross) unexplored, Guyana’s gross oil resources to sell carbon credits from forest conserva- a 66.0 are conservatively estimated at over 11 tion, with a portion of the proceeds ear- Life expectancy at birth, years Total GHG emissions (mtCO2e) 24.8 billion barrels, one of the world’s largest marked to support sustainable forest man- Source: WDI, Macro Poverty Outlook, and official data. on a per capita basis. The start of oil pro- agement and for the Amerindian commu- a/ Most recent WDI value (2022). duction in 2019 led to an unprecedent- nities. Transparent and accountable gover- ed rate of economic growth, and Guyana nance, along with robust public financial was reclassified as a high-income country management, can help ensure equitable in July 2023. and sustainable growth. Guyana's resource wealth is helping ad- dress longstanding social and economic needs. It helped finance the pandemic re- Guyana remains one of the world's sponse and is addressing infrastructure Recent developments fastest-growing economies following the gaps, and human development needs. development of its oil and gas sector. Poverty and social exclusion are prevalent Rapid growth continued reaching 33.8 in Guyana’s hinterland regions and among percent in 2023 and accelerating further The government is implementing an Amerindians. Agriculture, forestry, and in the first half of 2024 as oil protection ambitious investment program to trans- fishing are important drivers of job cre- expanded. Oil production reached 143 form the non-oil economy and address ation and poverty reduction, as more million barrels in late 2023 as a third development needs. Lack of recent data than 70 percent of the working-age pop- oil field entered production, supporting ulation resides in rural areas. However, a an oil GDP growth of 45.9 percent. The on poverty and equity limits the effec- lack of recent data has inhibited an as- non-oil economy grew by 12.3 percent tiveness and monitoring of public poli- sessment of progress on poverty reduc- in 2023, driven mainly by construction, cies to reduce poverty. Sound manage- tion and social inclusion. manufacturing, and agriculture, support- ment of oil and gas resources remains Guyana’s oil revenues are held in the ed by substantial public investment. Agri- Natural Resource Fund (NRF), a sov- cultural output grew by 6.9 percent, led critical for inclusive growth. ereign wealth fund with withdrawal by sugar production. rules governed by the NRF Act 2021. Inflation decelerated in 2023 and early The NRF was amended in 2024 to in- 2024 as food prices moderated. How- crease the pace of withdrawals from ever, inflationary pressure has modestly the fund and enable additional public reaccelerated, as drought and supply FIGURE 1 Guyana / Oil Production, real oil GDP, and real FIGURE 2 Guyana / Natural Resource Fund (NRF) transfers non-oil GDP under NRF Act 2021 and 2024 revisions Real GDP (G$B, 2012 prices) Oil production (thousand barrels per day) Percent of GDP 10,000 900 9 9,000 NRF Withdrawals (SM24 NRF Act 2021) 800 8 8,000 NRF Withdrawals (AM24 NRF Act 2024) 700 7 7,000 600 6 6,000 500 5,000 5 400 4,000 4 300 3,000 3 2,000 200 2 1,000 100 1 0 0 2021 2022 2023e 2024f 2025f 2026f 0 Oil GDP Non-Oil GDP Oil Production (rhs) 2022 2023e 2024f 2025f 2026f Sources: Government of Guyana and World Bank staff calculations. Sources: Government of Guyana and World Bank staff calculations. Notes: e=estimate, f=forecast. Notes: e=estimate, f=forecast. MPO 116 Oct 24 chain disruptions contributed to high- recent legislative amendments, NRF trans- er food prices, and inflation reached fers in 2024 are expected to reach US$ 1.6 4.0 percent by June 2024. Higher food Outlook billion, up from US$ 1.2 billion under the prices disproportionately affect the previous formula. Public debt as a percent- poor and vulnerable, who allocate a Strong GDP growth is expected over the age of GDP is expected to remain stable larger portion of their budget to food medium term, driven by rising oil produc- as the economy continues to expand. In- than the better off. tion to up to 550,000 bpd as a third platform creased exports of oil, gold, and bauxite The fiscal deficit was 12.7 percent of reaches full capacity. A fourth oil develop- will sustain the current account surplus non-oil GDP in 2023, despite NRF trans- ment project is expected to start operation in over the medium term, despite the impor- fers of approximately US$ 1 billion in 2025, further increasing GDP growth. Real tation of oil production platforms. Net for- 2023 (5.8 percent of non-oil GDP), up non-oil GDP is projected to expand by an av- eign direct investment flows are expected from US$ 607 million in 2022 (4.1 per- erage of 9.8 percent annually from 2024-26. to remain negative as a result of the repa- cent of non-oil GDP). The NRF with- Growth will be driven by positive spillovers triation of investments in the oil sector. drawal limit was significantly increased from the oil sector supported by the Local The extractive sector is Guyana’s dom- in February 2024, to support non-oil Content Act, which requires the use of inant source of growth and fiscal rev- capital investment and mitigation mea- Guyanese goods and services in many sec- enues, which increases the country’s sus- sures to help households navigate high- tors, and an expanding public investment ceptibility to oil-related shocks and re- er prices. The income tax threshold was program. Inflation is expected to be moder- quires proactive management. Prudent raised, and a fuel excise tax was re- ate in 2024, rising over the medium term as a NRF management and strengthening the duced. The central government debt- result of increased government investment medium-term fiscal framework are crit- to-GDP ratio increased to 26.3 percent and consumption. Poverty reduction will ical for preventing the economy from of GDP in 2023 due to both external depend on the government’s efforts to overheating. Oil production has environ- and domestic borrowing. The current boost the purchasing power of poor and mental consequences that must be care- account surplus narrowed to 10.2 per- vulnerable households and job creation in fully considered, and the sector may face cent of GDP in 2023 (down from 25.9 non-oil sectors fostered by infrastructure additional risks amid global decarboniza- percent in 2022) as a result of importa- and human capital development. tion efforts. Addressing climate change tion of a third oil platform. The nominal The fiscal deficit is projected to average risks is crucial for poverty reduction, as exchange rate and the real effective ex- 13.9 percent of non-oil GDP as the increase rising sea levels and flooding threaten change rate remained stable in 2023 fol- in NRF transfers finances additional capi- large segments of the population with lowing a slight appreciation in 2022. tal spending from 2024-26. As a result of food insecurity and job losses. TABLE 2 Guyana / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f a Real GDP growth, at market prices (total) 20.1 63.3 33.8 43.0 12.3 15.7 b Real GDP growth, at market prices (non-oil) 4.6 11.5 12.3 12.5 8.5 8.2 Agriculture -9.1 11.7 6.9 10.9 6.0 4.2 Industry 5.0 12.7 14.6 12.3 10.3 10.0 Services 12.1 9.3 10.9 7.7 7.1 6.1 Inflation (consumer price index) 4.5 6.9 2.8 3.1 4.9 5.5 c Current account balance (% of GDP) -24.8 25.9 10.2 28.7 24.2 30.2 Net foreign direct investment inflow (% of GDP) 27.6 -20.7 -6.9 -29.3 -19.4 -18.2 d Fiscal balance (% of GDP) -10.2 -11.7 -12.7 -16.7 -14.7 -10.2 Revenues (% of GDP) 16.2 14.3 16.8 16.6 17.2 16.5 Debt (% of GDP) 38.9 24.8 26.3 27.9 28.6 27.8 d Primary balance (% of GDP) -9.5 -11.1 -11.9 -15.7 -13.9 -9.3 GHG emissions growth (mtCO2e) 0.6 16.7 12.5 16.6 8.4 10.6 Energy related GHG emissions (% of total) 16.7 23.7 28.6 34.2 35.3 36.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Total GDP at 2012 prices. b/ Non-oil GDP at 2012 prices. c/ BOP definition in current US$. d/ Share of non-oil GDP. MPO 117 Oct 24 restoring security and organizing elections were installed. Political uncertainty and HAITI Key conditions and ongoing gang violence have depressed in- vestor confidence, and the ICAE (a high- challenges frequency index of economic activity) fell by 4.0 percent year-on-year (yoy) at end Table 1 2023 Deep structural challenges including state H12024. Agriculture contracted by 6.6 per- Population, million 11.7 capture by vested interests, a non-en- cent over the same period owing to low GDP, current US$ billion 20.8 abling business environment, underin- rainfall and violent gangs driving farmers GDP per capita, current US$ 1771.5 vestment in human capital, and deficient off their land in the country’s two largest a 29.2 International poverty rate ($2.15) infrastructure, continue to hamper eco- producing areas, i.e. the departments of a 58.0 nomic growth and poverty reduction. Un- Artibonite (33 percent) and Ouest (19 per- Lower middle-income poverty rate ($3.65) a 85.8 derdeveloped financial markets and limit- cent), which are also the two most impor- Upper middle-income poverty rate ($6.85) Gini index a 41.1 ed market contestability have contributed tant electoral districts. In the industrial sec- Life expectancy at birth, years b 63.7 to a large informal economy, limiting do- tor (-5.2 percent yoy), construction and Total GHG emissions (mtCO2e) 11.0 mestic resource mobilization and fiscal electricity and water production registered space. Disaster risk management and re- their twentieth consecutive quarterly de- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2012), 2017 PPPs. sponse systems are inadequate to address cline, weakening growth prospects. Man- b/ Most recent WDI value (2022). vulnerability to natural hazards and cli- ufacturing receded by 4.5 percent yoy as mate change, which disproportionately the textile sector, Haiti’s main export sec- impacts the poor. tor and first formal private sector employ- Haiti faces a deepening fragility trap, as er, started shedding jobs from a peak of structural challenges, institutional crisis, around 60,000 in Q12022 to 32,084 in April and persistent gang violence have com- 2024, owing to the deteriorating business GDP is expected to contract in 2024 amid pounded the poverty cycle. Living stan- environment. The service sector declined gang violence and a protracted political dards are estimated to have deteriorated, 3.0 percent yoy, with hospitality impacted and institutional crisis. Agriculture will with 36.4 percent of Haitians living in ex- most (-6.2 percent yoy). Externally, the cur- be the most impacted sector. Persistent treme poverty (less than US$2.15/day 2017 rent account deficit (CAD) narrowed to 0.2 PPP) in 2024 (up from 29.9 percent in 2020). percent of GDP in H12024 on higher remit- high food prices further compound the ef- tance inflows and lower imports improv- fects of declining agricultural sector pro- ing the trade balance. ductivity on the poor and vulnerable, Sluggish economic activity led tax rev- making fighting poverty elusive. Addi- Recent developments enues to decline 3.0 percent in H1FY24. However, violence has impaired the im- tionally, the shutdown of schools due to An unresolved political crisis and escalat- plementation of capital expenditures, insecurity has further eroded the stock of ing gang violence led to Prime Minister which declined by about two-thirds yoy human capital, limiting social mobility Ariel Henry’s resignation in April 2024. A and prompted a 5.0 percent drop in total and poverty reduction prospects. nine-member transitional presidential expenditure, improving the fiscal position council and a new Prime Minister were in- with a 0.3 percent of GDP primary sur- stalled to lead a government tasked with plus in H12024. FIGURE 1 Haiti / Change in economic activity by sector, FIGURE 2 Haiti / Actual and projected poverty rates and real FY24 Q2 (y-o-y) GDP per capita Percent change Poverty rate (%) Real GDP per capita (constant LCU) Non-market services 100 70000 Other market services 90 Financial institutions 60000 80 Transport and communication 70 50000 Hotel and restaurants Commerce 60 40000 Electricity and Water 50 40 30000 Construction Manufacturing 30 20000 Mining and quarrying 20 10000 Agriculture 10 ICAE 0 0 2012 2014 2016 2018 2020 2022 2024 2026 -20 -15 -10 -5 0 5 International poverty rate Lower middle-income pov. rate Tertiary = -3.0 Secondary = -5.2 Primary = -6.6 ICAE = -4.0 Upper middle-income pov. rate Real GDP pc Sources: Haiti Statistical Office (IHSI) and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 118 Oct 24 CPI inflation declined from 31.9 percent at out of the crisis. The RCIA provides a around 1.0 percent of GDP as pent-up the end of 2023 to 28.3 percent by end-May platform for coordinated aid from the investment demand increases imports. 2024. However, food inflation has been ris- World Bank, United Nations, European The restrictive monetary policy stance, al- ing (29.3 percent at end-2023 to 40.5 per- Union, and Inter-American Development beit with limited effectiveness because of cent end-May 2024), driven by the com- Bank, and alignment with broader inter- high dollarization (55 percent in H12024), bined effect of higher global cereal prices, national humanitarian, development, and is expected to further strengthen the low agricultural productivity, and supply security efforts. gourde and support price stability. Infla- chain disruption caused by violent gangs’ tion is forecast to average 26.1 percent over blockages. As of June 2024, 50 percent of 2024. Despite an expected decline in tax the population faced acute food insecurity, revenue, the fiscal deficit should narrow with the South, West, and North-East be- Outlook from 2.3 percent of GDP in FY23 to 0.6 per- ing the most affected departments. cent of GDP in 2024 owing to retrenchment The central bank (BRH) has maintained a Private investment is expected to remain of capex, containment of non-priority ex- restrictive monetary policy stance with depressed amid persistent insecurity and penditures, and lower debt service thanks sterilized forex interventions, bond sales, private consumption is forecast to recede to debt cancellation from Venezuela. The and unchanged policy rate at 11.5 percent owing to weak agricultural wage income debt relief will improve Haiti’s debt indi- since the 120 basis points hike in August and persistent inflation. All sectors of the cators from 24.2 percent of GDP in 2023 to 2022. For the first time in many years, mon- economy are expected to decline, trig- 15.2 percent in 2024. etary financing remained within statutory gering a 4.2 percent GDP contraction in The outlook is fraught with downside limits of 20 percent of previous fiscal year’s 2024. Modest GDP growth is expected in risks and depends heavily on an effective tax revenues. This bodes well for BRH’s 2025 and 2026, assuming improvements political transition and improvements in objective of anchoring inflation expecta- in political stability and security ahead security. Prudent economic policies, sup- tions and favors exchange rate stability, of expected elections before the end of ported by a credible budgetary frame- with the gourde appreciating by 15.1 per- 2025. Albeit growth is stabilizing, pover- work and an appropriate mix of fiscal cent in H12024. ty is expected to remain elevated, with and monetary policy will remain key to As per the Government's request, the 36.6 percent of the population project- reducing inflation, strengthening growth World Bank, with support from other de- ed to live on less than US$2.15/day 2017 prospects, and fighting poverty. Long- velopment partners, is leading a Rapid Cri- PPP in 2026. term inclusive growth will require sis Impact Assessment (RCIA) to estimate The CAD is forecast to narrow due to strengthening the business environment the crisis’ impact on the economy and the declining imports and increasing remit- and the institutional framework for dis- population to help develop a short-term tance inflows. It is expected to widen aster risk management, including better Crisis Recovery Framework to transition modestly over the medium term to preparedness and response systems. TABLE 2 Haiti / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020/21 2021/22 2022/23 2023/24e 2024/25f 2025/26f Real GDP growth, at constant market prices -1.8 -1.7 -1.9 -4.2 0.5 1.5 Private consumption 1.2 -0.7 0.1 -0.3 0.4 1.0 Government consumption 9.7 17.6 3.3 -15.1 57.6 9.2 Gross fixed capital investment -28.8 -9.9 -17.6 -31.5 -74.8 52.9 Exports, goods and services 23.5 2.4 -9.6 -4.4 2.0 2.5 Imports, goods and services 2.3 4.9 -0.4 -3.1 6.0 5.5 Real GDP growth, at constant factor prices -2.8 -1.8 -3.6 -4.2 0.5 1.5 Agriculture -4.1 -4.5 -5.6 -4.5 1.0 2.5 Industry -2.5 -0.4 -3.7 -4.0 1.5 2.0 Services -2.5 -1.6 -3.0 -4.2 -0.2 1.0 Inflation (consumer price index) 15.9 27.6 44.2 26.1 30.6 14.7 Current account balance (% of GDP) 0.4 -2.4 -3.3 -0.2 -0.4 -2.0 Net foreign direct investment inflow (% of GDP) 0.2 0.2 0.1 0.2 0.2 0.2 Fiscal balance (% of GDP) -2.7 -3.2 -2.3 -0.6 -2.5 -1.9 Revenues (% of GDP) 6.9 6.6 7.4 7.4 7.3 7.2 Debt (% of GDP) 28.4 27.6 24.2 15.2 16.5 17.1 Primary balance (% of GDP) -2.4 -2.9 -2.0 -0.3 -2.2 -1.6 a,b International poverty rate ($2.15 in 2017 PPP) 31.3 32.3 34.2 36.3 36.8 36.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 60.1 61.6 62.8 65.5 66.0 65.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 87.5 88.0 88.6 89.6 89.7 89.6 GHG emissions growth (mtCO2e) 0.4 0.5 -0.4 -0.4 1.0 1.5 Energy related GHG emissions (% of total) 35.5 35.0 34.0 33.1 32.7 32.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations using 2012-ECVMAS. Actual data: 2012. Nowcast: 2013-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 119 Oct 24 HONDURAS Key conditions and Recent developments challenges In 2023, real GDP growth slowed to 3.6 percent from 4.1 percent in 2022, driven Table 1 2023 Honduras, a lower middle-income country, by a reduced demand for textiles that Population, million 10.6 grew in average 3.7 percent between led to a 7.2 percent contraction in man- GDP, current US$ billion 34.2 2010-2019, driven by remittance-fueled ufacturing. Sustained credit growth and GDP per capita, current US$ 3231.1 households’ consumption and supported steady remittances supported household a 12.7 International poverty rate ($2.15) by prudent macroeconomic management consumption and investment during a 26.4 underpinned by the Fiscal Responsibility 2023. In 2024Q1, the economy grew 3.3 Lower middle-income poverty rate ($3.65) a 49.5 Law, a stable exchange rate with sufficient percent y-o-y, primarily driven by remit- Upper middle-income poverty rate ($6.85) Gini index a 48.2 foreign reserves, and a sound financial sec- tance-fueled consumption. A robust ser- School enrollment, primary (% gross) b 83.8 tor. Nevertheless, production capacity is vices sector helped offset declines in agri- b 70.7 limited, with agriculture and light manufac- culture and manufacturing. Life expectancy at birth, years turing, mainly textiles, serving as main Headline inflation stood at 5 percent in Au- Total GHG emissions (mtCO2e) 29.0 sources of employment and exports, pri- gust 2024, 0.7 percentage points lower than Source: WDI, Macro Poverty Outlook, and official data. marily destined to the US. Weak institutions, the previous year and within the central a/ Most recent value (2019), 2017 PPPs. b/ Most recent WDI value (2022). a challenging business environment, and bank’s tolerance range. The decrease was high crime deter investment and tourism, driven by declining international food and hindering growth and fueling migration. fuel prices and supported by government Honduras remains one of the poorest and liquidity absorption measures. To continue most unequal countries in the region, managing inflation and to bolster the ex- Real GDP grew 3.6 percent in 2023, with over half of the population living ternal position, the central bank raised the driven by robust remittance-fueled con- in poverty (US$6.85/day, upper middle- Monetary Policy Rate to 4 percent on Au- sumption and strong private invest- income country poverty line, 2017 PPP). gust 16, 2024, after maintaining it at 3 per- ment. Growth is expected to slow down Poverty stagnation is partly explained by cent since November 2020. the weak creation of quality jobs and Official poverty numbers for 2023 esti- slightly to 3.5 percent in 2024, hin- by declines in agricultural incomes. Non- mate that 64 percent of households were dered by a deceleration in US growth monetary poverty is also concerning. poor, a decline from 73.6 percent in 2021 and lower agricultural exports. Despite Food insecurity is high, at 56.1 percent. (no official estimate for 2022). While moderate growth and lower inflation, a A child born in Honduras in 2020 is ex- poverty under the US$6.85/day line slow labor market recovery has hindered pected to reach just 48 percent of their slightly decreased from 2022, poverty un- potential earnings with complete educa- der the US$ S2.15 line increased and re- improvements in poverty and inequali- tion and healthcare. Stark gender and ge- mains high. Inequality (Gini index) ty. Reforms to bolster job creation and ographic disparities persist. Honduras is reached 47.8, which is lower than pre- productivity will be key to sustaining highly vulnerable to the impacts of cli- pandemic levels. Unemployment declined long-term growth. mate change, with poverty and climate from 8.9 percent in 2022 to 6.4 percent in risks often overlapping geographically. 2023 but remains above the 2019 level. FIGURE 1 Honduras / Real GDP growth and contributions to FIGURE 2 Honduras / Actual and projected poverty rates real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 35 60 30000 25 50 25000 15 40 20000 5 30 15000 -5 20 10000 -15 10 5000 -25 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0 Gov. cons. Exports GFCF 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 120 Oct 24 A narrowing trade deficit and robust re- reforms to create fiscal space for prior- the tax base and enhanced collection and mittances (5.7 percent growth y-o-y) re- ity investments while anchoring macro- spending efficiency. The CAD is expected duced the current account deficit (CAD) economic stability, had a review mission to widen to 4.8 percent in the near term, from 6.7 percent of GDP in 2022 to 4.1 per- announced on September 10, 2024, sched- narrowing thereafter as exports and re- cent in 2023. It was mainly financed by uled for October. mittances strengthen. Pressures on inter- multilateral loans and foreign direct in- national reserves will likely persist due vestment (FDI), which rose 17 percent dri- to growing FX market uncertainty, which ven by reinvestment of profits. In 2024Q1, could deter FDI. the merchandise trade deficit widened fol- Outlook Driven by these forces, poverty is expected lowing declines in key exports like coffee, to decline to 50.5 percent in 2025 and in- bananas, and shrimp, while the services GDP growth is projected to slow to 3.5 equality is projected to remain at the same trade deficit narrowed as a result of lower percent in 2024 and 3.4 percent in 2025, level over the medium run. Weak structur- transportation and travel costs. Substantial due to a global slowdown and reduced al labor market conditions, especially for remittance inflows, at 23.5 percent of GDP, yield on key crops hindering exports. Re- women, will continue to slow progress on partially offset the negative overall result. mittances are expected to be less dynam- both indicators. The CAD widened to -4.1 percent, from ic, slowing households’ consumption de- Downside risks include persistent -3.8 percent in 2023Q1. International re- spite expected lower food inflation. weakness in exports, short-term transi- serves fell from 5 months of non-maquila Growth should gradually strengthen tion costs of the Honduras-China FTA, imports by end-2023 to around 4.4 months thereafter, supported by dynamic invest- and risks to key agricultural commodi- by end-August 2024, affected by a net re- ment, improved budget execution, and ties following the full implementation payment of public debt and rigidities in deeper financial markets. of the EU Zero Deforestation Regu- monetary and FX frameworks. Inflation is expected to stay within the lation in January 2025. Delays to im- The fiscal deficit widened to 1.3 percent central bank's 4±1 percent target in 2024 provements in FX management could of GDP in 2023 from 0.2 percent in 2022 due to declining international prices and lead to further reserve losses. Financing due to higher execution of public invest- tighter monetary policy, remaining sub- needs could rise due to slower fiscal ments in infrastructure (75.1 percent by dued in the medium term. The fiscal consolidation or adverse weather events. year-end). The public debt decreased to deficit is projected to widen to 1.5 percent As presidential elections near, legislative 49.6 percent of GDP by end-2023, due to in 2024 and 1.6 percent in 2025 with im- gridlock could halt social and structural net capital repayments. The IMF program proving execution, before narrowing to reforms, hindering investment, growth, approved in September 2023, supporting 1 percent supported by broadening of and poverty reduction. TABLE 2 Honduras / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 12.6 4.1 3.6 3.5 3.4 3.7 Private consumption 16.8 5.7 4.3 3.6 3.5 3.8 Government consumption 12.6 -4.1 6.0 4.4 4.3 4.6 Gross fixed capital investment 41.5 2.6 12.9 3.3 3.2 3.8 Exports, goods and services 23.2 6.6 -7.5 3.7 3.6 3.9 Imports, goods and services 32.6 8.5 -9.3 3.9 3.7 4.1 Real GDP growth, at constant factor prices 12.6 4.1 3.6 3.5 3.4 3.7 Agriculture -1.6 0.3 4.0 2.9 3.0 3.6 Industry 19.7 7.0 -2.0 2.9 3.7 4.1 Services 13.3 3.8 6.1 3.8 3.4 3.6 Inflation (consumer price index) 4.5 9.1 6.7 4.6 4.1 4.2 Current account balance (% of GDP) -5.5 -6.7 -4.1 -4.8 -4.8 -4.2 Net foreign direct investment inflow (% of GDP) 2.6 2.9 3.1 2.9 2.9 3.1 a Fiscal balance (% of GDP) -3.7 -0.2 -1.3 -1.5 -1.6 -1.0 Revenues (% of GDP) 30.4 29.9 29.4 29.4 29.3 29.6 a Debt (% of GDP) 61.3 53.6 49.6 45.4 45.4 45.0 a Primary balance (% of GDP) -2.4 1.2 0.2 -0.1 -0.1 0.5 b,c International poverty rate ($2.15 in 2017 PPP) 14.5 13.3 14.1 14.0 13.6 13.2 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 29.6 28.2 27.0 26.8 26.1 25.5 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 53.3 52.4 51.9 51.3 50.5 49.5 GHG emissions growth (mtCO2e) 4.3 -0.1 0.6 1.3 1.5 1.7 Energy related GHG emissions (% of total) 33.4 31.7 30.6 30.2 29.9 29.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal data refers to non-financial public sector. b/ Calculations based on SEDLAC harmonization, using 2019-EPHPM for 2021-2022 and 2023-EPHPM for 2024-2026. Actual data: 2023 (preliminary). Nowcast: 2021-2022. Forecasts are from 2024 to 2026. c/ Projections using microsimulation methodology. MPO 121 Oct 24 Jamaica is highly vulnerable to external shocks. Agriculture and tourism, which JAMAICA Key conditions and account for more than half of the jobs, are particularly vulnerable to climate-related challenges events. The financial sector is stable, well- capitalized, and profitable but also sus- Table 1 2023 Jamaica has been burdened by a high level ceptible to shocks, including tighter glob- Population, million 2.8 of debt for decades. Since 2013, the Gov- al financial conditions. To strengthen fis- GDP, current US$ billion 19.3 ernment (GOJ) has successfully imple- cal, financial, and social resilience to cli- GDP per capita, current US$ 6835.7 mented fiscal consolidation measures, re- matic shocks, Jamaica has been gradual- a 0.3 International poverty rate ($2.15) ducing the public debt-to-GDP ratio by ly integrating climate change adaptation a 2.4 more than 60 percentage points to 74.2 per- into its policy framework. Further im- Lower middle-income poverty rate ($3.65) a 13.9 cent of GDP in FY23/24—the lowest level proving the Anti-Money Laundering and Upper middle-income poverty rate ($6.85) Gini index a 40.2 in 25 years. Prudent macroeconomic man- Combatting the Financing of Terrorism School enrollment, primary (% gross) b 90.7 agement, anchored in debt reduction and (AML/CFT) framework and enhancing fi- b 70.6 inflation-targeting monetary policy, en- nancial supervision are necessary to Life expectancy at birth, years abled the country to weather successive strengthen financial stability and attract Total GHG emissions (mtCO2e) 9.1 economic shocks. The GOJ sustained ef- private investment. Source: WDI, Macro Poverty Outlook, and official data. forts in fiscal consolidation while provid- a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). ing temporary assistance to vulnerable households and businesses. However, Jamaica has been among the Recent developments slowest growing economies in the Latin America and Caribbean region with per- The economy expanded at a solid 2.6 per- Sound macroeconomic management has sistently low productivity growth due to cent in 2023, driven by mining, particularly enabled Jamaica to respond to a series of a weak business environment, limited in- alumina production, and a continued re- economic shocks without significantly im- novation, and human capital constraints. bound in tourism. However, agricultural pairing fiscal sustainability and poverty The economy has limited diversification, output declined in 2023 due to an extended with a concentration on low-productivity drought. In 2024Q1, GDP grew by 1.4 per- reduction. Real GDP growth is expected services, geared towards tourism. High cent, due to sustained mineral production to converge to its low potential in the connectivity costs, inadequate digital in- and tourist arrivals, while data for 2024Q2 medium term, while poverty reduction to frastructure, and pervasive crime hamper point to a growth deceleration. Hurricane continue but at a slower pace. While the private investment, while ongoing fiscal Beryl, which hit Jamaica in July 2024, in- country managed the impacts of Hurri- consolidation and relatively high debt duced damages estimated at around $67 service costs constrain public capital in- million (Source: PIOJ) and negatively im- cane Beryl, a potentially worsening on- vestment. Learning disruptions caused by pacted agriculture, utilities, construction, slaught of weather events and global eco- the pandemic could lead to corrosive ef- and tourism sectors. nomic conditions pose downside risks. fects on growth, human capital, and the While inflation eased in 2024, it spiked in future earnings potential of students if August 2024 to 6.4 percent yoy, driven by not addressed adequately. Hurricane Beryl’s temporary impact on FIGURE 1 Jamaica / Real GDP growth and sectoral FIGURE 2 Jamaica / Actual and projected poverty rates and contributions to real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 16 350000 4 14 340000 2 12 330000 320000 0 10 310000 -2 8 Agriculture 300000 -4 6 290000 Industry -6 4 280000 Services -8 2 270000 Net taxes on production -10 0 260000 Real GDP 2018 2020 2022 2024 2026 -12 International poverty rate Lower middle-income pov. rate 2018 2019 2020 2021 2022 2023 2024 2025 2026 Upper middle-income pov. rate Real GDP pc Sources: Statistical Institute of Jamaica and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 122 Oct 24 food and utility prices. Food insecurity re- 13.9 percent in 2021 to 12.3 percent in than 6.85 USD 2017 PPP per day project- mains an issue, with around one-third of 2023. This likely reflects continued em- ed to drop to 11.1 percent in 2026. respondents to the Caribbean Food Secu- ployment growth, as poverty and unem- The fiscal account is expected to remain in rity and Livelihoods Survey reporting that ployment have moved in tandem surplus over the medium term given high- they went an entire day, out of the last 30 throughout the last two decades. The un- er tax mobilization and prudent spending. days, without eating in April 2024. With employment rate stood at 5.4 percent in Spending is projected to decline marginal- anchored inflation expectations, the Bank 2024Q1. Yet job quality remains a con- ly, in part due to lower interest payments. of Jamaica (BOJ) reduced the key policy cern: around half of non-agricultural jobs The public debt is expected to remain on rate by 25 basis points to 6.75 percent in are informal. a downward trajectory towards the target August 2024. set in the Fiscal Responsibility law, reach- The fiscal stance in FY23/24 was bol- ing 62 percent of GDP by FY 26/27. The stered by robust tax revenues, mostly external account balance is anticipated to consumption and personal income taxes. Outlook reach 0.2 percent of GDP in 2024 but to The fiscal balance is estimated to have turn into a deficit in 2026, as tourism re- decreased by nearly 0.3 percentage Growth is expected to decelerate to 0.8 ceipts and remittances ease and the econo- points, due to the wage bill reform. In percent in 2024 and gradually converge my returns to the pre-pandemic trend. For- the context of prudent fiscal management to its potential at an average of 1.6 per- eign direct investment (percent of GDP) is and macroeconomic stability, Jamaica’s cent over the medium term. Mining, con- expected to recover but remains below credit worthiness continued to improve. struction, and tourism are expected to pre-pandemic levels. Gross reserves are to The external position remained strong, drive the recovery. Damages to the agri- remain at healthy levels. supported by tourism and remittances. cultural sector from Hurricane Beryl may Downside risks to the outlook include The current account surplus amounted to create price pressures. Inflation is expect- a deeper-than-expected global economic 3.0 percent of GDP in 2023. Reserves re- ed to stay within the BOJ’s target range slowdown and worsening climatic events. main adequate at about 6.6 months of (5 ±1 percent) in 2024 and gradually de- Further financial market tightening could imports in June, contributing to exchange cline by 2025. Subject to a continued an- raise the cost of borrowing, and curtail rate stability. choring of inflation, the BOJ is expected private investments, it could also derail The share of Jamaicans living below the to further ease its monetary policy stance. longer-term growth, climate change adap- upper-middle income international Poverty is set to continue declining grad- tation, and debt objectives. Worsening poverty line of 6.85 USD 2017 PPP per ually as per capita real income improves, crime could also impair growth and day is estimated to have dropped from with the share of Jamaicans living on less poverty reduction. TABLE 2 Jamaica / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.6 5.2 2.6 0.8 2.2 1.6 Real GDP growth, at constant factor prices 4.6 5.2 2.6 0.8 2.2 1.6 Agriculture 8.3 9.0 -5.7 -0.5 1.8 0.9 Industry 2.4 -0.4 5.0 1.0 2.0 1.4 Services 4.9 6.5 2.9 0.8 2.3 1.7 Inflation (consumer price index) 5.9 10.3 6.5 6.0 5.6 5.0 Current account balance (% of GDP) 1.0 -0.8 3.0 0.2 0.1 -0.1 Net foreign direct investment inflow (% of GDP) 1.8 1.5 2.0 2.1 2.5 2.7 Fiscal balance (% of GDP) 0.8 0.3 0.0 0.2 0.1 0.2 Revenues (% of GDP) 32.4 31.6 30.9 32.3 31.6 31.5 Debt (% of GDP) 99.0 80.9 74.2 68.5 64.9 62.0 Primary balance (% of GDP) 7.0 6.1 5.8 5.9 5.7 5.7 a International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.3 0.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.4 2.0 1.7 1.7 1.6 1.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 13.9 12.7 12.3 12.1 11.7 11.1 GHG emissions growth (mtCO2e) 8.1 6.8 4.3 2.1 2.3 1.8 Energy related GHG emissions (% of total) 74.6 76.0 76.7 77.0 77.5 77.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on CONLAC harmonization, using 2021-JSLC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 123 Oct 24 Mexicans out of poverty. However, over the same period, two social deprivations MEXICO Key conditions and worsened: access to health, and to a lesser extent, educational gap. challenges Mexico has a strong track record of macro- economic stability, supported by an inde- Table 1 2023 Mexico is one of the most open pendent central bank and a sound finan- Population, million 128.5 economies in the world, thanks to its cial sector, even though credit depth re- GDP, current US$ billion 1791.6 macroeconomic policy framework, prox- mains low. However, there are challenges GDP per capita, current US$ 13947.4 imity to major consumer markets, a net- for public finances, including: the shift to- a 1.2 International poverty rate ($2.15) work of free trade agreements (partic- wards higher state participation in growth; a 21.8 ularly the United States-Mexico-Canada the expansion of social programs; efforts to Upper middle-income poverty rate ($6.85) a 43.5 Agreement, USMCA), and its diversified enhance access and quality of public ser- Gini index School enrollment, primary (% gross) b 102.0 economy. Mexico's growth during vices and meet infrastructure investment Life expectancy at birth, years b 74.8 2021-2023 exceeded its regional peers, but needs; and fiscal support to PEMEX. Ad- Total GHG emissions (mtCO2e) 659.4 after years of growing above potential, the dressing these spending needs will require economy started adjusting, explaining the medium-term revenue-boosting reforms to Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2022), 2017 PPPs. recent deceleration. The nearshoring trend preserve debt sustainability. b/ Most recent WDI value (2022). has provided opportunities, particularly in manufacturing and related services such as logistics, utilities, and finance. Despite these strengths, Mexico faces sig- Recent developments nificant challenges, including decreasing Mexico’s real GDP growth is expected productivity, crime and violence, and per- Real GDP grew 3.2 percent in 2023 and 1.8 to moderate to 1.7 percent in 2024 and vasive informality. To reach its full poten- percent y-o-y during the first half of 2024. 1.5 in 2025 before converging to its po- tial, Mexico must boost its infrastructure, The economy started to weaken in 2023Q4 tential by 2026. Poverty is projected to improve the business environment, facili- and continued its slowdown in 2024, re- decline slowly through 2026. The coun- tate access to finance, especially to small flecting weaker demand. Consumption and medium enterprises, address insecu- and investment contributed to the decel- try needs structural reforms to boost rity and regulatory uncertainty, improve eration, going from growing 5.4 and 15.5 productivity, competitiveness, and inclu- public services provision, and strengthen percent y-o-y, respectively, in 2023H1 to sion. Persistent inflation and sharp de- the competition framework. Addressing growing 3.5 and 7.7 percent in 2024H1. On celeration in the US economy are down- these issues is imperative to bolster com- the supply side, growth was driven by the petitiveness, revitalize stagnant productiv- construction, wholesale, retail, transport, side risks to growth. Slower than antici- ity, and foster inclusive growth. and manufacturing sectors. pated fiscal consolidation and uncertain- The official multidimensional poverty rate The current account deficit was 1.8 percent ty around the ongoing constitutional re- in Mexico, which measures income pover- of GDP in the first half of 2024, primarily forms may weigh on investment. ty and six indicators of social deprivation, financed by net foreign direct investment decreased from 43.2 percent in 2016 to (FDI), which reached 1.5 percent of GDP 36.3 percent in 2022, lifting 5.4 million during the same period. Net exports FIGURE 1 Mexico / Headline inflation, and contributions to FIGURE 2 Mexico / Actual and projected poverty rates and headline inflation real GDP per capita Percentage (y/y) Poverty rate (%) Real GDP per capita (constant LCU) 10 45 205000 40 200000 8 35 195000 6 190000 30 185000 25 4 180000 20 175000 2 15 170000 10 165000 0 5 160000 -2 0 155000 Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Jan-24 May-24 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Core Tradables Core Services Non-Core Food International poverty rate Upper middle-income pov. rate Non-Core Energy Non-Core Utilities Inflation Real GDP pc Source: National Institute of Statistics and Geography (INEGI). Source: World Bank. Notes: see Table 2. MPO 124 Oct 24 reached -1.2 percent of GDP in 2023 and y-o-y, due to higher fuel tax and oil rev- program spending, sizeable public invest- -0.9 percent in the first half of 2024. The pe- enues. Expenditures increased by 12.1 per- ment projects, and worse-than-expected so depreciated 12.8 percent (y-o-y) in Au- cent in real terms, explained by the rise growth. As these projects are completed gust 2024, driven by domestic uncertainty. in investment expenditure and financial and interest rates normalize, the fiscal During the first half of 2024, remittances costs. Mexico maintains its investment deficit is expected to decrease to 2.8 per- grew by 3.7 percent y-o-y, while reserves grade. However, rating agencies closely cent of GDP by 2026. reached 11.4 percent of GDP. monitor fiscal pressures and the political The monetary poverty rate at the upper- Inflation spiked in 2024 due to non-core risk due to the judicial reform. middle-income threshold ($6.85/day, 2017 food components, such as fruits and veg- PPP) is expected to decrease from 20.5 etables. Core inflation has continued to de- percent in 2024 to 20.1 in 2025 and 19.8 crease since early 2022. Since late March, percent in 2026, driven by decelerating the Central Bank has reduced the policy Outlook GDP growth. rate by 75 bps but remains at a historical Mexico's macroeconomic risks are tilted level of 10.5 percent. Mexico’s economic growth is projected to the downside as the global economy, The share of the population with family to moderate to 1.7 percent in 2024 and particularly the US, slows down. Factors labor earnings per capita below the food 1.5 percent in 2025. The primary growth such as persistent high interest rates poverty line, known as labor poverty, de- drivers will be services and, to a lesser and high volatility in financial markets creased from 37.8 to 35.0 percent between extent, manufacturing. This slowdown could dampen investment and con- 2023Q2 and 2024Q2, driven by an 8.9 stems from a tight monetary policy, the sumption, add fiscal pressures, and di- percent increase in real labor incomes deceleration of the US economy, and re- minish exports and FDI. The revision of per capita (deflated by the official food duced domestic demand slack due to the USMCA in 2026 and the constitu- basket), and the addition of more than years of growth above its potential. As tional reforms in Mexico may introduce 800,000 jobs mostly in large firms. The la- private and public investment projects are policy uncertainty, potentially slowing bor force participation rate remained sta- finalized, Mexico is anticipated to return down investment and financial flows. ble at 60.2 percent, while unemployment to its potential growth rate of 2 percent A solid macroeconomic framework and and informality rates declined from 2.8 to over the medium term. Inflation is expect- a nearshoring expansion could mitigate 2.7 and from 55.2 to 54.3, respectively, in ed to reach Banxico’s target range of 3±1 these risks. Improvements in the busi- the same period. percent in 2025H1. ness climate, strategic investments in In the first half of 2024, the overall fiscal An overall fiscal deficit of 6.0 percent of human capital and infrastructure, and deficit was 5.1 percent of GDP. Public sec- GDP is expected for 2024. This reflects policy stability are essential for attract- tor revenues rose 5.3 percent in real terms higher financial costs, increased social ing high levels of FDI. TABLE 2 Mexico / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.0 3.7 3.2 1.7 1.5 1.6 Private consumption 8.4 4.9 5.0 1.9 1.6 1.8 Government consumption -0.5 1.7 2.1 2.3 -0.4 -0.1 Gross fixed capital investment 10.5 7.5 18.0 2.4 1.1 2.5 Exports, goods and services 7.1 8.9 -7.4 0.0 2.1 2.9 Imports, goods and services 15.7 7.6 5.0 0.9 1.5 3.0 Real GDP growth, at constant factor prices 5.8 3.5 3.1 1.7 1.5 1.6 Agriculture 2.3 1.6 -1.5 -2.0 1.2 1.6 Industry 6.4 4.7 3.5 1.8 1.3 1.7 Services 5.6 3.1 3.2 1.9 1.6 1.5 Inflation (consumer price index) 5.7 7.9 5.5 4.8 3.8 3.5 Current account balance (% of GDP) -0.3 -1.2 -0.3 -0.4 -0.6 -0.7 Net foreign direct investment inflow (% of GDP) -2.7 -1.5 -1.7 -1.5 -1.2 -1.2 Fiscal balance (% of GDP) -3.7 -4.3 -4.3 -6.0 -3.5 -2.8 Revenues (% of GDP) 22.3 22.4 22.2 21.8 21.5 21.4 Debt (% of GDP) 49.1 47.7 46.8 50.2 50.2 50.2 Primary balance (% of GDP) -1.2 -1.6 -1.0 -2.1 -0.1 0.4 a,b International poverty rate ($2.15 in 2017 PPP) .. 1.2 1.1 1.1 1.1 1.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 21.8 20.8 20.5 20.1 19.8 GHG emissions growth (mtCO2e) 3.7 2.8 0.5 0.3 -0.5 -0.2 Energy related GHG emissions (% of total) 59.8 60.2 59.9 59.7 59.1 58.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-ENIGHNS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 125 Oct 24 in human capital, infrastructure, and gov- ernance. Improving fiscal management, NICARAGUA Key conditions and government effectiveness, and strength- ening the fiscal position are crucial for challenges reducing poverty and enhancing human capital. Investment in human capital and Table 1 2023 In recent years, Nicaragua has demonstrat- fostering productivity in manufacturing Population, million 7.0 ed strong macroeconomic management and services will support Nicaragua’s po- GDP, current US$ billion 17.8 with a prudent fiscal approach that sup- tential to sustainably lift growth and gen- GDP per capita, current US$ 2530.3 ported the accumulation of gross interna- erate productive jobs. a 3.9 International poverty rate ($2.15) tional reserves. GDP grew at an average a 14.4 rate of 5.1 percent from 2010 to 2017, fu- Lower middle-income poverty rate ($3.65) a 42.1 eled by strong domestic private demand Upper middle-income poverty rate ($6.85) Gini index a 46.2 and export performance. During this time, Recent developments School enrollment, primary (% gross) b 107.2 Nicaragua has benefited from high foreign b 74.6 direct investment (FDI) and remittances, The economy grew by 4.6 percent in Life expectancy at birth, years which accounted for an average of 7.3 and 2023, surpassing expectations (3.8 percent Total GHG emissions (mtCO2e) 39.6 9.6 percent of GDP, respectively. in 2022), fueled by vigorous growth in Source: WDI, Macro Poverty Outlook, and official data. Nicaragua has made notable progress in the services sector, particularly hotels, a/ Most recent value (2014), 2017 PPPs. b/ Most recent WDI value (2022). reducing the poverty rate, defined as liv- restaurants, and retail. Despite a slow- ing on less than US$3.65 per day, drop- down in net external demand, remit- ping from approximately 29 percent in tances buoyed private consumption while 2005 to 12 percent in 2018. However, improved economic expectations boosted socio-political unrest, the pandemic, and investment. Growth slowed in 2024, with Nicaragua's economy grew by 4.6 per- hurricanes contributed to a renewed in- the monthly economic activity index cent in 2023, primarily driven by the ser- crease in poverty rate to 15 percent by growing 1.7 percent in June 2024, due to vices sector. Prudent fiscal and macroeco- 2020. Despite challenges, the economy re- reduced production in fishing, livestock, nomic policies have supported growth and bounded in 2021, supported by public in- agriculture, and manufacturing. vestment, export demand, and external Poverty (US$3.65/day 2017 PPP) is estimat- lowered inflation to 4.8 percent by aid pushing GDP above pre-crisis levels. ed to have declined to 12.5 percent in 2023 mid-2024, aided by stable exchange rates However, post-2014 survey data, based from 13.1 percent in 2022 reflecting the and subsidies. Poverty was reduced to on simulation, shows improvements in sustained growth in the service sector. The 12.5 percent in 2023 but remains a chal- housing conditions and education from employment rate for women (54.9 percent lenge. GDP is projected to grow 3.6 per- 2015 to 2022, but no economic progress. in June 2024) has increased in recent years Public debt climbed from 48.2 percent but remains well below that for men (75.9). cent in 2024, with stable inflation and de- of GDP to 65.9 percent of GDP between After inflation surged to 10.5 percent in clining debt. Risks, including financial 2017 and 2021. 2022, Nicaragua’s Central Bank main- conditions, economic downturns, and Nicaragua, largely reliant on agriculture, tained steady policy rates and a crawling natural disasters, persist. faces vulnerability from external shocks, peg exchange rate system to stabilize natural disasters, and systemic weaknesses prices. This, combined with declining FIGURE 1 Nicaragua / Real GDP growth and contributions FIGURE 2 Nicaragua / Actual and projected poverty rates to real GDP growth 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 2003 2006 2009 2012 2015 2018 2021 2024 0 0 Gov. cons. Exports GFCF 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 126 Oct 24 global prices and subsidies for energy, by December 2023. Financing needs, in- external demand and robust domestic de- public transport, and fuel, helped reduce cluding external donations, concessional mand for imports, as well as anticipated inflation from 9.9 percent in June 2023 to loans, and bond issuance, remain heavily slowdown in FDI flows, amid the global 4.8 percent by June 2024. dependent on global financial conditions. slowdown. International reserves are pro- Despite low demand for free zone ex- jected to remain sufficient, ensuring the sta- ports from key trading partners, a surge bility of the current exchange rate regime. in remittances, improved terms of trade, The 2024-2027 budget framework aims and an upturn in tourism revenues led Outlook to stabilize public finances by containing to a current account balance (CAB) sur- current expenditures and enhancing tax plus in 2023. In the first half of 2024, Nicaragua is projected to grow around 3.6 revenue through the modernization of the total exports fell by 0.9 percent y-o-y, percent over the next three years, amid an tax system and improved tax compliance. mainly due to a 2.2 percent drop in free expected global economic deceleration This is expected to reduce the fiscal zone exports, while imports rose by 9 that could persist until 2025, limiting ex- deficit from -0.4 percent of GDP in 2024 percent, driven by a 12.9 percent increase port opportunities and foreign investment. to -0.1 percent by 2026. Additionally, the in merchandise imports. In Q1-2024 com- Remittances, however, are expected to con- framework prioritizes capital spending pared to Q1-2023, remittances rose by tinue supporting private consumption at a and job-creating investment projects to 11.8 percent, while FDI, primarily rein- moderate pace. promote economic and social develop- vested earnings, fell by 7.4 percent. As of Inflation is expected to decrease to 5.2 per- ment. Debt is projected to decline to 55.5 August 2024, gross international reserves cent in 2024 from 8.4 percent in 2023 and percent by 2026 through the government's continue strong, covering more than 6 stabilize around 4.5 percent thereafter, prudent fiscal policy. months of imports. amid declining commodity prices, com- The macroeconomic outlook faces down- Fiscal consolidation was bolstered by ro- bined with a stable exchange rate and pru- side risks, such as natural disasters, geopo- bust tax collection following higher dent monetary policies. Poverty (US$3.65/ litical uncertainty that pushes up food and growth in 2023, which extended into the day 2017 PPP) is projected to be 11.7 per- oil prices, economic downturns in key first half of 2024. By H1-2024, the gov- cent in 2024 and gradually decline to 10.8 trading partners, and tighter financial con- ernment executed over 40 percent of the by 2026, based on simulations using the ditions. These factors could disrupt trade budget, driven by wage adjustments, debt 2014 household survey data. and external flows, leading to inflation that interest, transfers, and infrastructure in- The CAB surplus is expected to narrow reduces purchasing power, higher unem- vestments. Public debt decreased by 4 in 2024 and 2025, due to the projected ployment, and poverty, as well as chal- percentage points to 56.6 percent of GDP decrease in net exports, linked to weaker lenges for refinancing public debt. TABLE 2 Nicaragua / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 10.3 3.8 4.6 3.6 3.5 3.6 Private consumption 8.9 6.0 7.3 3.8 3.4 3.7 Government consumption 9.4 -6.5 -3.2 2.0 2.0 2.2 Gross fixed capital investment 25.7 -3.0 20.3 3.8 3.6 3.9 Exports, goods and services 18.1 8.6 1.3 2.8 2.7 3.2 Imports, goods and services 21.2 5.0 8.9 2.9 2.5 3.1 Real GDP growth, at constant factor prices 10.3 3.8 4.6 3.6 3.5 3.6 Agriculture 6.4 1.7 -2.6 3.4 3.2 5.4 Industry 18.8 2.8 4.1 3.9 2.8 4.4 Services 8.6 4.7 6.7 3.6 3.9 2.9 Inflation (consumer price index) 4.9 10.5 8.4 5.2 4.5 4.4 Current account balance (% of GDP) -3.8 -2.5 7.7 2.8 1.6 0.1 Net foreign direct investment inflow (% of GDP) 8.5 8.1 6.7 6.5 6.0 6.3 a Fiscal balance (% of GDP) -1.5 0.6 2.7 -0.4 -0.2 -0.1 Revenues (% of GDP) 31.4 31.7 31.0 31.2 31.1 31.5 b Debt (% of GDP) 65.9 61.1 56.7 56.3 56.2 55.5 a Primary balance (% of GDP) -0.3 2.0 4.3 1.6 1.5 1.4 c,d International poverty rate ($2.15 in 2017 PPP) 6.4 5.8 5.1 5.0 4.7 4.6 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.2 13.1 12.5 11.7 11.3 10.8 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 38.6 36.1 34.8 32.0 31.2 30.5 GHG emissions growth (mtCO2e) 0.9 0.8 0.9 1.0 0.9 1.0 Energy related GHG emissions (% of total) 13.5 13.5 13.3 13.2 13.1 13.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal and Primary Balance correspond to the non-financial public sector. b/ Debt is total public debt. c/ Calculations based on SEDLAC harmonization, using 2014-EMNV. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. d/ Projections using microsimulation methodology. MPO 127 Oct 24 ownership information, which led Pana- ma to exit the International Financial PANAMA Key conditions and Action Task Force’s list of jurisdictions in October 2023 and the EU’s list for challenges non-cooperative jurisdictions in March 2024. Comprehensive reforms in Public Table 1 2023 Panama is an important logistical and Private Partnerships (PPP) and procure- Population, million 4.5 financial hub in Central America, given ment helped increase PPP financing for GDP, current US$ billion 83.4 its strategic location, the criticality of critical infrastructure. GDP per capita, current US$ 18700.8 the Panama Canal to global trade, and Despite high growth, poverty reduction, a 1.3 International poverty rate ($2.15) its dollarized economy. Panama has and reform progress, new challenges a 4.4 grown robustly over the past 30 years, have emerged. A legal challenge to the Lower middle-income poverty rate ($3.65) a 12.9 supported by capital and labor accumu- contract of the largest mine (Cobre Upper middle-income poverty rate ($6.85) Gini index a 48.9 lation, leading to strong job creation and Panama) triggered street protests and School enrollment, primary (% gross) b 101.5 a sharp decrease in poverty (from 48.2 social unrest. Ultimately the Supreme b 76.8 percent in 1991 to 12.9 percent in 2023 Court declared the contract unconstitu- Life expectancy at birth, years at $6.85/day 2017 PPP). However, Pana- tional, stopping all extraction activities. Total GHG emissions (mtCO2e) 27.4 ma remains one of the most unequal Additionally, a prolonged drought lim- Source: WDI, Macro Poverty Outlook, and official data. countries in the world, with pockets of ited the number of vessels that could a/ Most recent value (2023), 2017 PPPs. b/ Most recent WDI value (2022). high poverty in rural areas and among cross the Panama Canal. These events indigenous communities. This reflects have large economic impacts com- unequal labor market opportunities and pounding the fiscal risks associated with Growth reached 7.3 percent in 2023 fu- limited fiscal redistribution. Slower Panama’s low tax revenues. growth before and during the pandemic eled by strong construction, commerce, led to increases in unemployment and tourism, and financial activities. Im- informality. While the labor market is proving labor market conditions offset yet to fully recover, the government’s Recent developments the rollback of emergency transfers keep- emergency transfer (Nuevo Programa Panama Solidario—NPPS) has helped GDP grew a robust 7.3 percent in 2023, ing the poverty rate at around 13 per- contain poverty. driven by construction, transport and cent. However, developments in the final Panama has long dealt with anti-money storage, wholesale and retail, utilities, quarter of 2023 (draught affecting the laundering and counter-terrorism financ- business services, and hotels and restau- Canal traffic, protests, and the closure of ing (AML/CFT) issues, which affected its rants; these six sectors collectively em- a copper mine) are expected to temper attractiveness as an offshore center, but it ploy 45 percent of workers. However, has made solid progress in recent years. economic activity has decelerated sharply the economic and fiscal outlooks. A Authorities implemented important re- since Q42023 and expanded only 2.1 per- quick implementation of structural re- forms to promote governance and trans- cent in the first half of 2024. Inflation de- forms by the new administration could parency. These include modification of creased to 1.5 percent in 2023 and 0.5 help offset these adverse impacts. the AML/CFT prevention regulation and percent in the first half of 2024, led by significant improvements in beneficial lower transport and food prices. FIGURE 1 Panama / Economic activity index (seasonally FIGURE 2 Panama / Actual and projected poverty rates and adjusted and trend cycle) real GDP per capita Yearly variation Poverty rate (%) Real GDP per capita (constant LCU) 80 35 20000 18000 60 30 16000 25 14000 40 20 12000 20 10000 15 8000 0 10 6000 -20 4000 5 EAI (TC, 2007=100) 2000 -40 0 0 EAI (SA, 2007=100) 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 -60 International poverty rate Lower middle-income pov. rate Jan-19 Sep-19 May-20 Jan-21 Sep-21 May-22 Jan-23 Sep-23 May-24 Upper middle-income pov. rate Real GDP pc Sources: National Institute of Statistics and Census of Panama, Haver Analytics, Source: World Bank. Notes: see Table 2. and World Bank staff calculations. MPO 128 Oct 24 Progress in poverty reduction stalled in structural fiscal reforms, especially on 2023 (Figure 2). Although the unem- revenue mobilization, could accelerate ployment rate improved from 9.9 per- Outlook this decline. Despite downward pres- cent in April 2022 to 7.4 percent in Au- sures on the sovereign ratings following gust 2023, declining support from the Growth is expected to sharply decline the closure of Cobre Panama, the country NPPS counteracted gains in the labor to 2.4 percent in 2024 as copper pro- still has good access to financing as a markets. While rural poverty remained duction comes to a halt; however, the stable dollarized economy. steady, urban poverty increased by 1 dynamism in the services sector should The current account deficit is projected to p.p. over the same period. help gradually lift growth over the medi- widen to 4.7 percent of GDP in 2024 and The fiscal and primary deficit declined in um term. Inflation is expected to stabilize narrow gradually afterward. Merchandise 2023, reaching 3.3 percent and 0.1 per- at around 2 percent during the fore- exports are expected to remain subdued cent of GDP, respectively. This was at- casting period. Despite these, poverty while service exports expand, supported tributed to restrained government spend- (US$6.85 a day per capita, 2017 PPP) is by transport and tourism. FDI is estimat- ing and one-off revenues, including roy- projected to stagnate over the medium ed to recover gradually to 3.8 percent alties and taxes paid by the copper mine run as the loss in non-labor income due of GDP by 2026, continuing to finance and proceeds from land sale to the Canal to the discontinuation of NPPS is unlike- most of the current account deficit, sup- Authority. The fiscal position deteriorated ly to be compensated with labor income plemented by portfolio investment and sharply in early 2024 due to spending gains, especially in rural areas, where 74 public financing. International reserves pressures associated with the electoral cy- percent of the poor reside and still lack are expected to stay around 13 percent of cle and lower-than-expected revenues. A opportunities to benefit from the coun- GDP for 2024-2026. new administration took power in July try’s growth process. Panama’s macro-outlook is subject to 2024 and made fiscal rebalancing and set- The fiscal deficit is expected to widen to risks. The next administration will need tling arrears priorities. 4.6 percent of GDP in 2024, impacted by to address structural fiscal challenges, The current account deficit increased to 4.5 lower revenues and higher expenditure, address socio-economic disparities percent of GDP, due to a decline in copper before gradually declining to around 3 through an improved social protection exports, a temporary increase in the Colon percent by 2026. This fiscal consolidation system, and make progress in climate Free Trade Zone imports, and income out- process relies on further containing adaptation, which poses additional social flows. Foreign direct investment (FDI) de- spending and improving tax administra- and economic risks, as droughts affect creased from 3.8 percent of GDP in 2022 to tion. Public debt is forecast to peak at canal activities. Tight international fi- 1.8 percent in 2023, partially reflecting low- 60.9 percent of GDP in 2025 and de- nancing markets could further increase er investment in extractives. cline gradually there. Implementing new Panama's borrowing costs. TABLE 2 Panama / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 15.8 10.8 7.3 2.4 3.0 4.0 Private consumption 5.3 -1.2 2.1 2.1 3.1 3.7 Government consumption 6.0 3.6 2.9 4.3 -1.9 2.2 Gross fixed capital investment 31.0 20.7 28.8 -9.0 5.5 6.8 Exports, goods and services 29.6 26.2 -1.4 -0.7 3.5 4.3 Imports, goods and services 34.0 34.8 23.1 -9.3 2.6 4.0 Real GDP growth, at constant factor prices 15.8 10.8 7.3 2.4 3.1 4.0 Agriculture 4.7 5.2 0.2 1.5 1.4 1.3 Industry 30.2 12.3 12.7 -1.5 0.1 1.5 Services 11.9 10.5 5.6 3.9 4.2 4.9 Inflation (consumer price index) 1.6 2.9 1.5 1.5 2.0 2.0 Current account balance (% of GDP) -1.2 -0.6 -4.5 -4.7 -2.3 -1.7 Net foreign direct investment inflow (% of GDP) -2.0 -3.8 -1.8 -3.4 -3.7 -3.8 Fiscal balance (% of GDP) -6.4 -4.1 -3.3 -4.6 -3.8 -3.1 Revenues (% of GDP) 17.8 17.7 18.2 17.2 17.5 17.6 Debt (% of GDP) 60.1 57.9 56.4 59.1 60.9 60.8 Primary balance (% of GDP) -3.7 -1.9 -0.1 -1.5 -0.6 0.0 a,b International poverty rate ($2.15 in 2017 PPP) 1.1 1.4 1.3 1.4 1.4 1.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.3 4.4 4.4 4.7 4.8 4.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 12.9 12.1 12.9 13.3 13.3 13.2 GHG emissions growth (mtCO2e) 7.0 9.8 8.1 5.0 3.9 3.3 Energy related GHG emissions (% of total) 46.7 50.7 53.8 55.7 57.1 58.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2023-EH. Actual data: 2023. Forecasts are from 2024 to 2026. Estimated for 2022 using EPM data. b/ Projections using microsimulation methodology. MPO 129 Oct 24 PARAGUAY Key conditions and Recent developments challenges Real GDP expanded 4.3 percent y-o-y in Q1 2024, driven by the services and Table 1 2023 Real GDP growth averaged 3.6 percent an- manufacturing sectors. Private con- a 6.6 Population, million nually between 2003 and 2023, faster than sumption and exports contributed the GDP, current US$ billion 43.0 most countries in the region. This achieve- most to growth. Fixed investment also GDP per capita, current US$ 6508.5 ment reflects prudent macroeconomic man- began to pick up, although construc- b 1.3 International poverty rate ($2.15) agement, favorable demographics, and a tion activity remained soft. The eco- b 5.6 period of high commodity prices. nomic activity index showed momen- Lower middle-income poverty rate ($3.65) b 19.9 Growth has cut the poverty rate in half over tum in Q2, rising 7 percent on average Upper middle-income poverty rate ($6.85) Gini index b 45.1 the last two decades. In 2023, an estimated from the previous quarter on a sea- School enrollment, primary (% gross) c 90.6 17.6 percent of the population lived below sonally adjusted, annualized basis. c 70.5 the upper-middle income poverty line of Growth would have been faster if not Life expectancy at birth, years US$6.85/day per capita (2017 PPP). How- for low river levels of the Paraguay- Total GHG emissions (mtCO2e) 98.0 ever, progress has slowed since 2013 partly Paraná waterway, which reduced hy- Source: WDI, Macro Poverty Outlook, and official data. due to external shocks such as droughts. dropower generation by 18 percent y- a/ Does not reflect preliminary 2022 Census results. b/ Most recent value (2022), 2017 PPPs. The World Bank Poverty Assessment re- o-y in H1 2024. c/ Most recent WDI value (2022). ports that 36 percent of Paraguayans re- The national unemployment rate was 6.4 main vulnerable to poverty, underscoring percent in Q2 2024, rising 0.6 percentage the need for policies that build resilience to points from Q2 2023. Rural areas saw shocks. Inequality remains high, with a Gi- a 1.3 percentage point increase, with ni coefficient of 45.1 points. women facing higher increases (3.7 to Accelerating social progress not only 7.3 percent) than men. In contrast, the Paraguay’s economy is expected to grow hinges on sustaining growth and stability underemployment rate due to insuf- by 3.9 percent in 2024, supported by a but also on creating more good quality ficient working hours decreased from healthy soybean harvest. Growth would jobs. Attracting more private investment in 4.0 to 3.4 percent compared to Q2 be faster if not for uneven rainfall, which labor-intensive industries could help 2023. This reduction was primarily dri- Paraguay achieve this, but additional ef- ven by a lower proportion of women has dampened hydropower production. forts are needed to forge linkages with lo- reporting underemployment. Poverty is estimated to have decreased to cal suppliers and improve the quality of From January to August 2024, the goods 17.6 percent in 2023 and is expected to education and skills. More efficient public trade balance recorded a surplus 64 per- fall to 16.8 percent in 2024. Building re- spending on education, health, infrastruc- cent smaller than that recorded over the silience to climate shocks is essential as ture, and social assistance can help reduce same period last year. Growth of im- poverty and inequality more significantly. ports outpaced that of exports as fuel these remain the main risk to the forecast. More spending in these areas will eventu- and capital goods imports increased, ally be needed, which in turn requires mo- while hydropower export volumes bilizing more domestic revenues. halved. Soybean export volumes rose by FIGURE 1 Paraguay / Real GDP growth and contributions to FIGURE 2 Paraguay / Actual and projected poverty rates real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 15 45 40.0 40 35.0 10 35 30.0 5 30 25.0 25 20.0 0 20 15.0 15 -5 10.0 10 5 5.0 -10 2022Q1 2022Q3 2023Q1 2023Q3 2024Q1 0 0.0 Net exports Changes in inventories 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Gross fixed capital formation Government consumption International poverty rate Lower middle-income pov. rate Private consumption GDP (y/y growth, %) Upper middle-income pov. rate Real GDP pc Source: Central Bank of Paraguay. Source: World Bank. Notes: see Table 2. MPO 130 Oct 24 40 percent, but average prices were 24 of GDP in additional annual revenues percent lower. The nominal exchange from higher negotiated prices of electric- rate depreciated by 4.3 percent against Outlook ity exports from the Itaipú dam to Brazil the US dollar in this period. Net inter- over 2024-2026, the government has an- national reserves stood at 6.9 months of Given the high statistical carryover from nounced that these will be spent off-bud- imports at end-August. Q1 and robust activity data in Q2, get on social and infrastructure invest- Headline inflation rose from 3.7 percent in growth is forecast at 3.9 percent in 2024 ments. Public debt is expected to stabilize December 2023 to 4.3 percent y-o-y in Au- and at 3.6 percent in 2025-2026. Private at 40-41 percent of GDP. gust 2024, driven by fresh fruit and veg- fixed investment growth is expected to The current account is expected to post a etables. Core inflation fell from 4.7 to 4.2 accelerate as financing conditions ease. small deficit as import growth, particularly percent y-o-y over the same period. The Paraguay recently secured an investment of machinery and capital goods, gradually overnight policy rate has remained at 6 grade rating (Baa3) from Moody’s, which accelerates as large private investments are percent since March 2024. could reduce borrowing costs for the sov- implemented. Export growth is expected The annualized fiscal deficit declined from ereign and for corporates. to remain buoyant, assuming normal 4.1 percent at end-2023 to an estimated 3.4 Annual inflation is expected to remain weather conditions. percent of 2024 GDP at end-August. Tax at an average of 4 percent, the midpoint Climatic conditions remain a threat to collections rose 17 percent y-o-y in real of the target range, from 2024 to 2026. the outlook. If abnormally low pre- terms from January to August 2024, reflect- With buoyant growth and inflation under cipitation persists, soybean and hy- ing higher corporate profits from robust control, poverty is expected to decline to dropower production would decline, growth in 2023 and higher VAT receipts, 16.8 percent in 2024 and to 15.5 percent and overall trade would slow. Such reportedly due to fewer Paraguayans in 2026, driven by rising incomes in the challenges could aggravate inflationary shopping in Argentina as price differen- services and agriculture sectors. Non-la- pressures and reverse poverty reduc- tials narrowed. Merging the tax and cus- bor incomes are projected to see a mod- tion gains. Geopolitical tensions also toms authorities may also have yielded ef- est increase in 2024. pose risks through the trade and fi- ficiency gains. Real spending rose by 7.2 The central government fiscal deficit is nancial market channels (89 percent of percent y-o-y, driven by material expenses expected to continue to narrow towards Paraguay’s debt is denominated in for- and interest payments. Public debt re- the fiscal rule’s target of 1.5 percent of eign currency). Faster progress on struc- mained stable at 38.2 percent of GDP as of GDP in 2026. Although Paraguay is ex- tural reforms could accelerate growth the end of July. pected to receive an estimated 0.6 percent and poverty reduction. TABLE 2 Paraguay / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.0 0.2 4.7 3.9 3.6 3.6 Private consumption 6.1 2.3 2.7 3.9 3.6 3.6 Government consumption 2.6 -2.2 3.6 1.3 0.3 0.0 Gross fixed capital investment 18.2 -1.8 -3.5 3.3 3.9 5.6 Exports, goods and services 2.1 -1.1 36.7 2.5 4.0 4.0 Imports, goods and services 21.8 9.4 14.1 1.2 3.1 3.8 Real GDP growth, at constant factor prices 3.6 0.1 4.8 3.9 3.6 3.6 Agriculture -11.6 -8.6 16.5 5.0 5.0 5.0 Industry 5.0 0.7 3.4 2.1 2.5 2.5 Services 6.5 1.5 3.6 4.9 4.0 4.0 Inflation (consumer price index) 4.8 9.8 4.6 4.0 4.0 4.0 Current account balance (% of GDP) -0.9 -7.1 0.2 -0.6 -0.9 -1.2 Net foreign direct investment inflow (% of GDP) 0.2 1.7 0.8 1.7 1.7 1.7 Fiscal balance (% of GDP) -3.6 -2.9 -4.1 -2.6 -1.9 -1.5 Revenues (% of GDP) 13.7 14.0 14.0 14.4 14.3 14.3 Debt (% of GDP) 34.1 35.9 38.6 41.0 40.7 40.2 Primary balance (% of GDP) -2.5 -1.7 -2.4 -0.8 -0.1 0.2 a,b International poverty rate ($2.15 in 2017 PPP) 0.7 1.3 1.1 1.1 1.1 1.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.1 5.6 4.6 4.2 3.8 3.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 20.8 19.9 17.6 16.8 16.0 15.5 GHG emissions growth (mtCO2e) 0.4 -0.7 1.0 1.4 1.4 1.3 Energy related GHG emissions (% of total) 9.2 9.4 9.8 10.1 10.5 11.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-EPH. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 131 Oct 24 labor market are needed steps to make growth inclusive. PERU Key conditions and challenges Table 1 2023 Recent developments Peru has recently concluded a decade of Population, million 34.4 low growth (2014-2023), marked by limit- In 2024, the Peruvian economy is recover- GDP, current US$ billion 266.9 ed advancements in creating quality jobs ing from the previous year's recession. The GDP per capita, current US$ 7768.5 and reducing poverty. This contrasts cumulative annual growth rate for the first a 2.7 International poverty rate ($2.15) sharply with the preceding decade half of 2024 was 2.5 percent. The econom- a 9.5 (2004-2013), which saw rapid growth and ic bounce-back reached most sectors, es- Lower middle-income poverty rate ($3.65) a 32.2 consistent poverty reduction. The macro- pecially those severely affected by the ad- Upper middle-income poverty rate ($6.85) Gini index a 40.3 economic environment is characterized by verse weather shocks of 2023 (agriculture School enrollment, primary (% gross) b 107.4 low public debt, ample international re- and fisheries, the latter adding around 0.3 b 73.4 serves, a credible Central Bank, and the fi- percentage points to the first-semester y-o- Life expectancy at birth, years nancial system is well-capitalized and re- y growth). In addition to dissipating sup- Total GHG emissions (mtCO2e) 185.9 silient to liquidity shocks. However, the ply shocks, the recovery reflects higher Source: WDI, Macro Poverty Outlook, and official data. economy is susceptible to commodity business confidence, a strong expansion in a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). price fluctuations. Additionally, Peru’s public investment, the gradual easing of vulnerability to climate change is high due monetary conditions, and better export to its exposure to natural hazards and de- commodity prices. pendence on glacial freshwater. The fiscal deficit widened in 2024, from 2.8 Structural constraints limit formal job cre- percent of GDP in 2023, to 4.0 percent of GDP growth is expected to reach 3.1 ation and the pace of poverty and inequal- GDP in the first eight months of the year, percent in 2024, after a mild recession ity reduction. Informality affects 71.1 per- due to stagnating tax revenues and accel- in 2023, which together with lower in- cent of workers and gender disparities are erating non-financial expenditures. Real flation is expected to drive down poverty stark: women’s monthly earnings are on growth in expenditure up to August re- average 25.7 percent lower than men’s. By flects higher growth in public investment rates to 33.1 percent in 2024. Risks in- 2023, more than one in three Peruvians (27.4 percent y-o-y), but also non-negligi- clude heightened political uncertainty, subsisted on less than US$6.85 daily (2017 ble increases in wages (6.3 percent y-o-y). which could affect the well-established PPP), largely due to low-productivity jobs Unlike 2023, when the government did not fiscal credibility. Overcoming structural and inadequate social protection. Over half adhere to the fiscal rule, this year, it challenges related to low-productivity of the population faced food insecurity. amended the rule to allow a higher fiscal Improving the quality of public services deficit for 2024, raising it from 2 percent to jobs and low-quality public services is and infrastructure, governance and the 2.8 percent of GDP. Public debt (32.7 per- critical to boosting long-term growth business environment, while ensuring po- cent of GDP in the second quarter of 2024) and poverty reduction. litical stability, is crucial to achieving high- and sovereign spreads (166 basis points at er growth. Improving job quality, labor the beginning of September) remain at his- formalization, and gender equality in the torically low levels. FIGURE 1 Peru / Real GDP growth and contributions to real FIGURE 2 Peru / Actual and projected poverty rates and real GDP growth GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 24 60 20000 20 18000 16 50 16000 12 8 14000 40 4 12000 0 30 10000 -4 8000 -8 20 6000 -12 4000 -16 10 -20 2000 2019 2020 2021 2022 2023 2024f 2025f 2026f 0 0 Private consumption Government consumption 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Gross investment Exports International poverty rate Lower middle-income pov. rate 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 Table 2. MPO 132 Oct 24 Inflation reached 2.0 percent in August the withdrawal of private pension in 2026. The medium-term baseline sce- 2024 (within the Central Bank's target funds (accumulated numbers until nario reflects this new consolidation path, range of 1-3 percent). Core inflation re- mid-August represent 2.4 percent of exceeding the ceiling by a small margin. mained closer to 3 percent due to higher GDP) will boost consumers' real dis- Regularization of income tax in 2025, inflation in some service sectors. The Cen- posable income in a context of de- supported by higher commodity prices tral Bank lowered its policy rate by 1.5 per- clining inflation rates. GDP growth is of 2024, and conservative growth pro- centage points since last December, to 5.25 projected to moderate to around 2.5 jection of the 2025 budget, would con- percent in September. The labor market percent thereafter. New investments in tribute the consolidation. Public debt showed improvements in July 2024, with the mining sector (Zafranal, Corani, would follow a stable path in the coming employment rising 2.8 percent year-over- Reposición Antamina, and possibly Tía years. Inflation is expected to remain year. The services, commerce, and con- María) and the opening of the port within the Central Bank’s target of 1-3 struction sectors added the most jobs dur- of Chancay at the end of 2024 would percent. The Central Bank is expected ing the month. help support medium-term growth. to continue lowering its policy rate. The The current account recorded a surplus of Moderate poverty (US$6.85/day, 2017 current account will improve in 2024, 0.8 percent and 2.3 percent of GDP in the PPP) is projected to decline to 31.3 mainly because of better terms of trade first two quarters of the year, largely due percent by 2026 driven by economic observed since the second quarter. to better export prices and higher earnings growth and lower inflation. Domestic risks related to political un- on assets held abroad by Peruvians cou- Despite the fiscal rule amendment, the certainty will continue to drag on eco- pled with a reduction in the profits of for- fiscal deficit is expected to close at 3.3 nomic growth and the presidential elec- eign companies based in Peru. The ex- percent in 2024, exceeding the revised tion in 2026 will add another layer of change rate has remained broadly stable ceiling. Revenues are expected to ac- uncertainty. If the government fails to and net international reserves stood at 27 celerate in the second half of the year adjust its fiscal accounts promptly, it percent of GDP in July 2024. due to higher commodity export prices could weaken the credibility of fiscal and improved economic activity, and policy, with potential implications for expenditures are expected to grow at a the market outlook for debt. Increased similar pace to early-2024. The recent threats from climate change could con- Outlook revision of the fiscal rule also raised tinue to impact medium-term growth. the fiscal deficit ceiling from 1.5 per- External risks include a faster-than-ex- Growth is expected to reach 3.1 percent cent to 2.2 percent of GDP in 2025 and pected slowdown in US growth and a in 2024. The approval by Congress of from 1.0 percent to 1.8 percent of GDP deterioration in commodity prices. TABLE 2 Peru / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 13.4 2.7 -0.6 3.1 2.5 2.5 Private consumption 12.4 3.6 0.1 2.4 2.1 2.2 Government consumption 4.8 -0.2 4.6 4.1 2.2 2.2 Gross fixed capital investment 34.6 0.7 -5.4 6.4 2.9 2.9 Exports, goods and services 13.3 5.2 4.9 1.5 3.2 3.2 Imports, goods and services 17.9 3.9 -1.4 4.0 3.1 3.1 Real GDP growth, at constant factor prices 13.1 2.7 -0.4 3.1 2.5 2.5 Agriculture 5.3 3.1 -3.9 4.1 2.8 2.4 Industry 17.2 1.5 -1.3 2.6 2.3 2.1 Services 11.6 3.5 0.6 3.3 2.6 2.8 Inflation (consumer price index) 6.4 8.5 3.2 2.2 2.0 2.0 Current account balance (% of GDP) -2.1 -4.0 0.8 1.8 0.6 0.4 Net foreign direct investment inflow (% of GDP) 2.3 4.8 0.9 2.5 2.5 2.5 Fiscal balance (% of GDP) -2.5 -1.7 -2.8 -3.3 -2.3 -1.9 Revenues (% of GDP) 20.9 22.1 19.8 19.2 20.4 20.4 Debt (% of GDP) 35.8 33.9 32.9 33.6 34.7 35.0 Primary balance (% of GDP) -1.0 -0.1 -1.1 -1.7 -0.6 -0.3 a,b International poverty rate ($2.15 in 2017 PPP) 2.8 2.7 4.3 4.3 3.6 3.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 10.0 9.5 11.5 11.2 10.3 9.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 33.4 32.2 34.2 33.1 32.2 31.3 GHG emissions growth (mtCO2e) 3.5 1.2 -1.2 0.2 0.0 0.1 Energy related GHG emissions (% of total) 25.8 25.9 25.0 25.1 25.1 24.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-ENAHO. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 133 Oct 24 public debt is expected to stabilize in the medium term, the high debt service limits SAINT LUCIA Key conditions and the government's ability to finance impor- tant development projects in the short to challenges medium term. The government has imple- mented various measures to increase rev- Table 1 2023 Saint Lucia relies heavily on tourism and enue, but additional reforms should be Population, million 0.2 was significantly impacted by the pan- considered to reduce distortions and create GDP, current US$ billion 2.4 demic, along with rising prices for im- a more progressive tax system. The coun- GDP per capita, current US$ 13482.0 ported food and fuel. As a small open try would benefit from a credible and a 0.1 International poverty rate ($2.15) economy, Saint Lucia experienced volatile growth-friendly fiscal consolidation a 0.6 and relatively low economic growth even framework, including the implementation Lower middle-income poverty rate ($3.65) a 8.4 before the pandemic, averaging 1.3 per- of a fiscal rule, and from reforms to stimu- Upper middle-income poverty rate ($6.85) Gini index a 43.7 cent between 2010 and 2019. The country late private sector growth. School enrollment, primary (% gross) b 103.7 suffers significant economic losses due to The financial sector remained stable dur- b 71.3 frequent natural disasters and the effects ing the pandemic, and there was sub- Life expectancy at birth, years of climate change. stantial liquidity in the banking sector. Total GHG emissions (mtCO2e) 0.9 In 2015, fewer than 1 in 10 Saint Lucians However, the accumulation of non-per- Source: WDI, Macro Poverty Outlook, and official data. lived below the poverty line (US$6.85/day forming loans and deficiencies in compli- a/ Most recent value (2015), 2017 PPPs. b/ Most recent WDI value (2022). 2017 PPP). St. Lucia had a Gini index above ance with Anti-Money Laundering/Coun- 40, which is high by international stan- tering the Financing of Terrorism have dards. Estimates suggest that monetary hindered credit intermediation. The Saint Lucia's economy, which is reliant poverty declined slowly in the following pegged exchange rate under the Eastern years but increased rapidly during the Caribbean Currency Union helped en- on tourism, faces ongoing challenges from pandemic and due to high food and fuel sure price stability. the pandemic's impact, high import prices. The recent census points to a prices, and natural disasters. Economic longer-term decline in multidimensional growth was modest before the pandemic, poverty. The share of households without and recent price hikes have likely wors- toilet facilities decreased from 6.2 percent Recent developments in 2010 to 1.9 percent in 2022, the share ened poverty. Emergency-related spend- of households relying on coal or wood as Real output growth reached 2.2 percent ing has limited development funding and cooking fuel declined from 5.6 percent to in 2023 and accelerated in the first half of increased the public debt. While recovery 1.6 percent, while the share of households 2024. The number of stayover tourist ar- is underway with tourism and inflation with internet access increased from 26.5 rivals during the first six months of 2024 percent to 89.1 percent. increased by 14.6 percent compared to the improving, overall fiscal deficits continue The government's spending related to the same period of 2023. Agricultural exports to grow. Fiscal reforms and better condi- pandemic, low revenues, and substantial declined due to unfavorable weather con- tions for private investment are crucial public investment led to a rapid increase ditions in 2023, but are now recovering. for future growth. in public debt from 62.2 percent of GDP in A labor market recovery also continues, 2019 to 95.8 percent of GDP in 2020. While with the unemployment rate falling from FIGURE 1 Saint Lucia / Key macroeconomic variables FIGURE 2 Saint Lucia / 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 -15 20 10000 2 -20 10 5000 -25 0 0 0 2021 2022 2023e 2024f 2025f 2026f 2015 2017 2019 2021 2023 2025 PPG Debt-to-GDP (rhs) Primary balance (% 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 Table 2. MPO 134 Oct 24 16.3 percent in Q1 2023 to 11.6 percent in government’s new tax policies including The primary fiscal surplus is projected Q1 2024. This helps to bring down poverty. a health and citizen security levy and an to increase to 1.3 percent of GDP in The current account deficit is narrowing increase in cigarette excise tax helped to 2025-2026. The government is expected to from 1.9 percent of GDP in 2023 due to the boost annual revenues. The public debt undertake some modest fiscal consolida- recovery in tourism, somewhat lower fuel has stabilized at around 75 percent of tion. Revenue to GDP ratios are anticipat- prices, and stable remittances. Foreign di- GDP since 2022. ed to remain relatively stable at 2023 lev- rect investments are estimated around 5.8 els in the medium term. Total spending percent of GDP in 2023, helping to fund in the medium term (on average 24.5 per- the current account deficit. International cent of GDP) is 0.2 percent of GDP low- reserves stood at 3.9 months of imports at Outlook er than the 2010-2019 average, as current the end of 2023. expenditures are anticipated to stabilize Inflation started to slow from 4.1 percent Real output growth is projected to acceler- around 21.7 percent of GDP. Interest pay- in 2023, reflecting in a large part the global ate to 3.4 percent in 2024 and then mod- ments are projected to remain stable at trend. The pressure on food security, erate gradually over the medium term. In- around 3.4 percent of GDP over the pro- which had previously worsened because vestments in major construction projects, jection period. The public debt to GDP ra- of the successive pandemic and food price such as the airport renovation and con- tio will also remain steady. shocks, is now easing. The financial sector struction of several major hotels, are ex- The risk outlook is skewed towards remains profitable, though the level of pected to peak in 2025. Agriculture is like- the downside, with potential chal- non-performing loans is elevated. ly to expand at a slower pace for some lenges including delays in fiscal con- The overall and primary fiscal balances are time. Poverty is projected to continue de- solidation, economic slowdown in key expected to deteriorate, from 1.4 of GDP in clining in the medium term. Inflation will tourist-origin countries, escalating geopo- 2023 to 1.0 percent in 2024. This deterio- gradually stabilize from 1.4 percent of litical tensions, tightening financial condi- ration is mostly driven by higher primary GDP in 2024 to its long-term average of 2.0 tions, natural disasters, and the impacts expenditures and interest payments. The percent in 2026. of climate change. TABLE 2 Saint Lucia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 11.6 20.4 2.2 3.4 2.6 2.3 Real GDP growth, at constant factor prices 10.7 19.7 2.1 3.3 2.6 2.3 Agriculture 9.2 4.4 -16.9 0.5 2.5 1.1 Industry 9.4 1.8 12.4 6.5 2.6 2.6 Services 11.0 23.5 0.9 2.8 2.6 2.3 Inflation (consumer price index) 2.4 6.4 4.1 1.5 1.8 2.0 Current account balance (% of GDP) -11.9 -2.9 -1.9 -1.4 -1.2 -0.9 a Fiscal balance (% of GDP) -5.8 -1.5 -1.9 -2.4 -2.1 -2.1 a Revenues (% of GDP) 22.3 21.7 22.2 22.3 22.3 22.2 a,b Debt (% of GDP) 87.2 74.1 75.5 74.9 75.0 75.0 a Primary balance (% of GDP) -2.4 1.4 1.4 1.0 1.3 1.3 c,d International poverty rate ($2.15 in 2017 PPP) 0.1 0.0 0.0 0.0 0.0 0.0 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.9 0.4 0.4 0.4 0.4 0.3 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 8.6 7.8 7.4 7.3 6.8 6.7 GHG emissions growth (mtCO2e) 3.0 16.2 6.9 2.8 2.2 1.8 Energy related GHG emissions (% of total) 70.9 73.1 71.5 71.0 70.7 70.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (April 1st -March 31st). b/ Public debt includes payables and overdrafts/Eastern Caribbean Central Bank advances. c/ Calculations based on CONLAC harmonization, using 2015-SLCHBS. Poverty estimates and projections not comparable to pre-2024 MPOs due to methodological changes. For details, see March/April 2024 Update to the Poverty and Inequality Platform (PIP) at https://pip. worldbank. org/publication. Actual data: 2015. Estimates: 2016-2023. Forecasts: 2024-2026. d/ Projection using neutral distribution (2015) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 135 Oct 24 ST. VINCENT AND Key conditions and Recent developments challenges THEGRENADINES With tourism recovering and agriculture rebounding after the volcanic eruptions, SVG is a small island developing state growth reached 6 percent in 2023 (7.2 per- (SIDS) that is highly integrated into the cent in 2022). The overall fiscal deficit in- Table 1 2023 global economy and particularly vulnera- creased to 8.3 percent of GDP in 2023 Population, million 0.1 ble to climate change, external economic from 7.0 percent in 2022, largely in re- GDP, current US$ billion 1.1 shocks, and natural disasters. The econo- sponse to the fiscal demands imposed by GDP per capita, current US$ 10279.5 my is driven primarily by tourism, agri- the volcanic eruption, ongoing exception- School enrollment, primary (% gross) a 110.6 culture, and construction. Ongoing in- al COVID-19 related expenditures, high- a 69.0 vestments in upgrading infrastruc- er capital expenditure, and lower tax rev- Life expectancy at birth, years ture—such as a new port, an international enue. Low tax revenue was primarily due Total GHG emissions (mtCO2e) 0.4 airport, roads, hotels, the hospital, water to changes in income tax, delayed CIT Source: WDI, Macro Poverty Outlook, and official data. supply, and digitalization—support arrears and fuel import duty collection, a/ Most recent WDI value (2022). growth and foster economic diversifica- VAT refunds, temporary import tax con- tion. The country seeks to diversify its cessions for Sandals Resort, and a 50 per- economy through the promotion of high- cent duty reduction on new tires. This end tourism, international financial ser- adds to measures to cushion the impact vices, agroprocessing, light manufactur- of rising food and fuel prices, including St. Vincent and the Grenadines (SVG) ing, renewable energy, and information the expansion of existing social programs, is projected to grow at 5 percent in and communication technologies. subsidies on electricity, social safety net The deterioration of the primary fiscal bal- payments to food-vulnerable households, 2024, supported by a robust perfor- ance, caused by the pandemic and the sub- and agricultural incentives. mance in tourism, recovery in agricul- sequent volcanic eruption in April 2021, Following the port modernization project ture, and implementation of large-scale was compounded by Hurricane Beryl, (total investment of 22 percent of GDP infrastructure projects. Despite a de- which caused significant infrastructure in 2023), public investment reached 9.5 damage in July 2024 and led to an increase percent of GDP in 2023. Fiscal rule tar- crease in the fiscal deficit, public debt in public debt. The challenge will be to re- gets, which have been suspended due remains high, in part due to debt defer- duce fiscal deficits while directing limited to the pandemic and the volcanic erup- ral/new borrowing undertaken to ad- fiscal resources toward recovery and high- tion, are to be reintroduced in 2025. Total dress the impact of Hurricane Beryl. priority public investment projects. In ad- public debt was 88.5 percent of GDP at The fiscal responsibility framework re- dition, there is no up-to-date poverty data end-2023, of which 61.7 percent of GDP available. According to the latest data from was external debt. Government gross fi- mains suspended. Economic growth and 2008, 30.2 percent of the population was nancing needs are covered primarily by Hurricane Beryl are expected to have living below the national poverty line. Eco- official external financing and by some had offsetting impacts on poverty. nomic growth in subsequent years should recourse to domestic financing through have contributed to declining poverty. T-Bill and bond issuances. FIGURE 1 St. Vincent and the Grenadines / Overall and FIGURE 2 St. Vincent and the Grenadines / Public debt primary fiscal balances Percent of GDP Percent of GDP 4 100 90 2 80 0 70 60 -2 50 -4 40 -6 30 Overall fiscal balance 20 -8 Public debt Primary balance 10 Public external debt -10 0 2016 2018 2020 2022 2024 2026 2016 2018 2020 2022 2024 2026 Sources: Ministry of Finance and World Bank staff calculations. Sources: Ministry of Finance and World Bank staff calculations. Note: See Table 2. Note: See Table 2. MPO 136 Oct 24 The current account deficit (CAD), driven 4.4 percent in 2026. A primary surplus by major capital investments in hospitals, is anticipated by 2026, supported by the ports, hotels, and infrastructure, narrowed Outlook gradual completion of major projects, slightly due to increased tourist arrivals. contained current expenditure, increased However, imports rose as a result of vol- Growth is expected to remain strong at revenues, and robust growth, which will canic eruptions and the port project, along 5 percent in 2024 as tourism and agri- enable public debt to decline to 84.4 with higher food and fuel costs. The CAD culture continue to rebound. Poverty is percent of GDP. is mainly financed by foreign direct invest- expected to follow a similar trajectory. SVG needs to fully operationalize the Fis- ment, external borrowing on concessional Tourism growth over the medium term is cal Responsibility Framework to sustain terms, and limited domestic financing. In- projected to be further facilitated by the debt reduction and enhance resilience to ternational reserves remain above 5 new airport and Sandals Resort. Inflation shocks. Additionally, it should increase the months of imports. is to slow to 3.5 percent in 2024 and re- share of public investments financed Annual inflation in 2023 was 4.6 percent, a turn to more typical rates of around 2 through concessional loans and public-pri- decrease from 5.7 percent in 2022, and con- percent thereafter. vate partnerships, enhance revenue mobi- tinued to moderate in the first part of 2024. The fiscal deficit will likely remain high lization efforts, and further develop con- Over the past two years, rising food prices at 5.8 percent of GDP in 2024 due to tingency plans for natural disasters. have contributed the most to overall infla- ongoing public investment spending on The baseline scenario projections are tion. Data from a (non-representative) sur- the port modernization project and ho- primarily subject to downside risks giv- vey indicated that high food prices had re- tel construction as well as reconstruc- en the uncertainty in global economic duced food security. While food prices re- tion related to Hurricane Beryl, despite conditions, heightened global geo-politi- main elevated, declining inflation appears a decrease in emergency spending re- cal pressures, and the ever-present risk to have lowered food security concerns, lated to the pandemic and volcanic ac- of natural disasters. On the upside, con- with the share of the population reporting tivity. Public investment is expected to tinued strength within the tourism sec- severe food shortages (going a whole day decline slightly to 8.3 percent of GDP tor and completion of the new port without eating or skipping meals) declin- in 2024 and to 6.3 percent in 2025, re- could further boost growth over the ing over the past year. turning to its long-term trend of around short- to medium-term. TABLE 2 St. Vincent and the Grenadines / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 0.8 7.2 6.0 5.0 3.5 2.9 Real GDP growth, at constant factor prices -1.7 8.0 5.3 5.0 3.5 2.9 Agriculture -29.4 -6.2 -2.9 7.1 2.1 2.0 Industry 6.1 7.9 3.9 3.5 2.2 2.1 Services -0.1 9.1 6.2 5.2 3.9 3.1 Inflation (consumer price index) 1.6 5.7 4.6 3.5 2.0 2.0 Current account balance (% of GDP) -22.6 -19.3 -13.4 -13.0 -11.9 -10.3 a Fiscal balance (% of GDP) -6.4 -7.0 -8.3 -5.8 -3.2 -0.2 Revenues (% of GDP) 32.9 28.1 26.8 27.9 28.2 28.3 a Debt (% of GDP) 89.9 86.7 88.5 90.3 88.8 84.4 a Primary balance (% of GDP) -3.8 -4.6 -5.7 -3.3 -0.9 1.9 GHG emissions growth (mtCO2e) 2.8 4.9 2.3 1.8 1.1 1.4 Energy related GHG emissions (% of total) 76.0 76.9 77.3 77.5 77.7 77.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Budget balances and public debt are for the central government. MPO 137 Oct 24 (floods and droughts). Water management is a high priority, especially in the more SURINAME Key conditions and vulnerable interior. Recent discoveries of several offshore oil deposits should im- challenges prove Suriname’s economic prospects in the medium term. A final investment deci- Table 1 2023 Macroeconomic indicators have improved sion by an oil major is expected before the Population, million 0.6 under a comprehensive package of fiscal, end of 2024, with production potentially GDP, current US$ billion 3.5 monetary, and financial sector reforms, starting in 2028. Sustaining inclusive eco- GDP per capita, current US$ 5528.0 supported by an IMF program. Debt re- nomic growth will require strengthening a 1.1 International poverty rate ($2.15) structuring, subsidy reform, and improve- the governance and institutional frame- a 4.2 ments in tax policy and administration work to enhance fiscal management, deliv- Lower middle-income poverty rate ($3.65) a 17.5 have supported fiscal consolidation and er public services, and implement climate Upper middle-income poverty rate ($6.85) Gini index a 39.2 improved debt sustainability. Tighter change adaptation measures. School enrollment, primary (% gross) b 98.0 monetary policy has helped contain infla- b 70.3 tion, while greater exchange rate flexibility Life expectancy at birth, years has supported foreign exchange reserve Total GHG emissions (mtCO2e) 13.8 accumulation. Reducing financial sector Recent developments Source: WDI, Macro Poverty Outlook, and official data. vulnerabilities relies on the completion of a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). a program of ongoing reforms. Growth accelerated modestly to an esti- Poverty rates are gradually declining. Ap- mated 2.5 percent in 2023, up from 2.4 per- proximately 17.5 percent of the population cent in 2022, as monetary and fiscal policy lived below the upper middle-income remained restrictive. Services led the ex- poverty line of US$6.85 (2017 PPP) per day pansion (transportation, hospitality, and Suriname's economy has stabilized under in 2022, with 46.5 percent of the population utilities), supported by a modest recovery a program to restructure debt, modernize in multidimensional poverty—a broader in industry. Inflation moderated to 16.2 monetary and exchange rate policies, and measure devised by Suriname’s Multidis- percent (y-o-y) by June 2024, a significant address financial sector vulnerabilities. ciplinary Poverty Committee that includes decline from 54.6 percent (y-o-y) one year chronic illness, education and ICT skill lev- earlier as a result of tight monetary policy Tighter monetary policy has gradually re- el, and access to medical insurance. Mon- and fiscal consolidation. Decelerating in- duced inflation. Debt sustainability has etary and multidimensional poverty are flation is lowering pressure on household improved, but managing the fiscal deficit markedly higher in the country’s interior, purchasing power, especially among the remains a priority ahead of the 2025 elec- where households have more children and poorest households. tions. Improved social protection systems people have lower levels of education. Re- A narrower service account deficit and a forms to social protection and education stable trade deficit helped boost the cur- would support faster poverty reduction, programs, as well as enhanced participa- rent account to an estimated 4.3 percent while a framework to manage prospective tion of women in the labor market, will be surplus in 2023, up from 2.0 percent in oil revenues would help sustain inclusive key for accelerating poverty reduction. 2022. External financing supported gross growth over the medium term. Suriname is exposed to natural disaster international reserve accumulation to an hazards due to irregular precipitation estimated 7 months of prospective imports FIGURE 1 Suriname / Sectoral real output, index 2000=1 FIGURE 2 Suriname / Actual and projected poverty rates and real GDP per capita Index, 2000=1 Poverty rate (%) Real GDP per capita (constant LCU) 2.2 20 26500 Agriculture 18 2.0 26000 Services 16 1.8 25500 Industry 14 1.6 12 25000 10 1.4 24500 8 1.2 6 24000 4 1.0 23500 2 0.8 0 23000 2022 2024 2026 0.6 International poverty rate Lower middle-income pov. rate 2000 2003 2006 2009 2012 2015 2018 2021 2024 Upper middle-income pov. rate Real GDP pc Sources: Suriname General Bureau of Statistics (2000-23) and World Bank (2024). Source: World Bank. Notes: see Table 2. MPO 138 Oct 24 in 2023, up from 6.5 months in 2022. The which will require timely implementation Over the medium term, public investment Surinamese dollar appreciated to SRD 29/ of recapitalization plans. in oil infrastructure is expected to modest- USD by July 2024 partially reversing a ly increase the fiscal deficit. The current ac- sharp depreciation that began in 2020. count surplus will narrow as capital im- Fiscal policy focused on debt sustainabili- ports for investment projects rise, and ty, improving the quality of public spend- Outlook compression measures end. ing, and social assistance programs to pro- The government aims to expand cov- tect the vulnerable. A series of revenue and Real GDP growth is projected to accel- erage of social assistance programs, in- expenditure measures contributed to an erate to 2.9 percent in 2024, driven by a troduce digital payments, and regularly estimated primary surplus of 1.4 percent of gradual recovery of services and indus- update payment amounts in line with GDP in 2023, including a phaseout of en- try, supported by higher public invest- inflation. The 2024 budget allocates 3.1 ergy subsidies, expanded VAT coverage of ment spending in non-oil sectors. Growth percent of GDP for social protection. A goods and services, and the removal of un- is expected to continue over the medium new cash transfer program aims to sup- registered workers from public payrolls. term supported by infrastructure invest- port the elderly and low-income house- Cash transfers helped mitigate the impact ment for the oil and gas sector. Inflation holds, covering approximately one-fifth of higher energy prices on the vulnerable, is anticipated to continue decelerating of the population. Data on the effec- as social assistance spending increased to over the medium term, supported by re- tiveness and impact of this program are 2.3 percent of GDP in 2023 (from 1.9 per- strictive monetary and fiscal policy. Dri- currently not available. cent in 2022). ven by economic growth and lower infla- Over the long term, offshore oil revenues Debt restructuring negotiations with most tion, poverty is projected to decline to 16 are expected to further increase fiscal official and private creditors have been percent in 2026. space. A robust institutional and fiscal completed. Standard and Poor raised Suri- The fiscal deficit is expected to narrow, framework will be essential to manage the name’s credit rating to CCC+ with a stable supported by a broader VAT, new fuel tax- potential impact of Dutch Disease (declin- outlook in December 2023 following the es, and increased non-tax revenues sup- ing competitiveness of other sectors of the successful exchange with private bond- ported by lease rates and fees. Subsidy ex- economy), vulnerability to commodity holders. Adherence to prudent fiscal re- penditure is expected to continue declin- price shocks, and environmental impacts. forms and policies will be critical ahead of ing, driven by electricity and gas price ad- Enhancing macroeconomic institutions, upcoming elections. justments. Fiscal consolidation will create governance, and human capital is critical Financial sector indicators highlight chron- space to scale up social spending and to mitigating risk and creating a founda- ic vulnerabilities in the banking system re- growth-enhancing infrastructure invest- tion for efficient and equitable manage- lated to capital adequacy and asset quality, ments, including for climate adaptation. ment of future revenues. TABLE 2 Suriname / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -2.4 2.4 2.5 2.9 3.0 3.1 Real GDP growth, at constant factor prices -2.4 2.4 2.5 2.9 3.0 3.1 Agriculture -7.5 -3.9 -1.8 4.3 2.3 2.4 Industry -10.9 2.5 2.1 2.8 3.0 3.5 Services 2.2 3.1 3.2 2.8 3.1 3.0 Inflation (consumer price index) 59.1 67.8 36.7 17.2 14.5 9.5 Current account balance (% of GDP) 5.4 2.0 4.3 1.2 1.0 0.8 Net foreign direct investment inflow (% of GDP) -3.8 0.1 -1.8 -0.5 0.2 0.3 a Fiscal balance (% of GDP) -5.6 -2.6 -1.9 -1.0 -0.1 -0.5 Revenues (% of GDP) 26.1 25.6 27.4 25.4 25.7 26.0 a Debt (% of GDP) 114.9 113.2 98.2 87.2 82.0 78.0 a Primary balance (% of GDP) -0.5 1.0 1.4 2.7 3.7 3.3 a,b International poverty rate ($2.15 in 2017 PPP) .. 1.1 1.1 1.1 1.1 0.8 a,b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 4.2 4.2 4.0 3.8 3.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 17.5 17.5 17.3 16.6 16.0 GHG emissions growth (mtCO2e) -0.2 1.0 1.1 1.8 1.9 2.0 Energy related GHG emissions (% of total) 19.4 20.1 20.8 21.8 22.9 24.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Budget balances and public debt are for the central government. b/ Calculations based on CONLAC harmonization, using 2022-SSLC. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 139 Oct 24 Recent data are not available to assess developments in poverty and inequality. TRINIDAD AND Key conditions and Trinidad and Tobago’s Human Develop- ment Index (HDI), which tracks its per- challenges TOBAGO formance against several Sustainable De- velopment Goals, corresponds with its Trinidad and Tobago exhibits several status as a high-income country. The economic strengths, including solid country is grouped in the category of Table 1 2023 human development and robust finan- countries with high gender equality in Population, million 1.5 cial buffers. The country's human cap- terms of HDI achievements. Yet, some no- GDP, current US$ billion 27.4 ital indicators compare favorably to table gender gaps remain. Despite their GDP per capita, current US$ 17847.9 those of the rest of Latin America and comparatively strong performance in School enrollment, primary (% gross) a 97.6 the Caribbean and are bolstered by sub- school, women’s labor force participation a 74.7 stantial government investments, foster- (47.6 percent) lags that of men by about Life expectancy at birth, years ing a knowledge-based economy essen- 15 percentage points. In addition, the Total GHG emissions (mtCO2e) 23.6 tial for adaptation to globalization and adolescent fertility rate is high compared Source: WDI, Macro Poverty Outlook, and official data. technological advancements. to other high-income countries. a/ Most recent WDI value (2022). However, Trinidad and Tobago’s economy The government is committed to attracting remains heavily dependent on the energy investment, promoting private sector en- sector, which accounts for only 2.4 percent gagement, and increasing trade integra- of workers, but over one-third of GDP and tion to foster diversification. Advancing over two-thirds of exports. This reliance structural reforms to enhance the business Trinidad and Tobago is a high-income makes the country vulnerable to global en- environment, improve trade logistics, and country, with a corresponding level of ergy price fluctuations and production is- tackle insecurity is crucial for fostering pri- sues. To balance its maturing energy sector vate sector growth and economic diversifi- human development. Substantial finan- with the shift toward a low-carbon econ- cation. Improving governance, infrastruc- cial reserves maintain stability amid en- omy, efforts are being made to cut green- ture, and public service delivery are essen- ergy sector fluctuations. The govern- house gas emissions and increase renew- tial for creating a conducive environment ment aims to diversify the economy, en- able energy use. for investment and growth. The economy is supported by significant hance the business environment, and reserves and the Heritage and Stabilization improve public services. In 2023, GDP Fund, which buffer against economic grew by 1.3 percent, driven by the non- shocks. These reserves, as well as political Recent developments energy sector. The medium-term outlook stability, help stabilize the economy dur- is cautiously optimistic, but risks in- ing periods of fluctuating oil and gas In 2023, the energy sector experienced prices, crucial for the nation's fiscal health. challenges due to lower global energy clude global energy price volatility and Prudent management of natural resource prices and weaker production. As a re- potential delays with internal reforms revenues and a focus on diversification of sult, the economy’s post-pandemic recov- and energy sector investments. its economic base are also essential for ad- ery continued at a slower pace, with an vancing economic development. estimated real GDP growth of 1.3 percent FIGURE 1 Trinidad and Tobago / Real GDP growth and FIGURE 2 Trinidad and Tobago / Fiscal balance and public contributions to real GDP growth debt Percent, percentage points Percent of GDP Percent of GDP 6 90 6 4 80 4 2 70 2 0 0 60 -2 -2 50 -4 -4 40 -6 -6 30 -8 -8 20 -10 -10 10 -12 2020 2021 2022 2023 e 2024 f 2025 f 2026f 0 -14 Agriculture Industry 2020 2021 2022 2023 e 2024 f 2025 f 2026 f Services Net taxes on production Real GDP growth Debt (lhs) Fiscal balance Primary balance Sources: Government of Trinidad and Tobago and World Bank staff calculations. Sources: Government of Trinidad and Tobago and World Bank staff calculations. MPO 140 Oct 24 driven by the non-energy sector. The labor tourism sector, both of which account for by stable energy prices and gradual im- market remained relatively stable with un- a substantial share of workers. provements in domestic production employment at 5.4 percent in 2024Q1, According to the government’s estimates, helped by investment incentives that will while inflation saw a decline from 5.8 per- current account surplus declined to an es- see increased total amounts as capacity cent in 2022 to 4.7 percent. In 2024, eco- timated 12.4 percent of GDP in 2023 from expands. However, the GDP growth rate nomic growth is projected to gain momen- 17.4 percent in 2022, driven by weaker ex- may be moderated by both external and tum with an expected real GDP expansion ports and reduced domestic energy pro- internal challenges. of 2.2 percent. This growth will be support- duction. Nonetheless, lower imports be- Externally, the country is vulnerable to ed by the services sector, which employs cause of lower global food and energy changes in global energy prices, which sig- the largest share of workers (35.4 percent). prices helped maintain a significant sur- nificantly affect export revenues and over- Inflation has continued to decline. plus. The value of remittances declined by all economic stability. A prolonged decline In 2023, fiscal position improved, with 4.7 percent in real terms and represented in energy prices could hurt the current ac- a better-than-budgeted fiscal deficit. Fis- only 1.2 percent of GDP. The primary in- count balance and fiscal health. Addition- cal measures included enhancing revenue come account deficit also narrowed due to ally, global uncertainties like geopolitical mobilization, streamlining transfers to reduced profit repatriation by non-resi- tensions and shifts in trade policies could state-owned enterprises, and phasing out dent energy companies. In 2024, the sur- further strain the economy by affecting en- subsidies on fuel, electricity, and water. plus is projected to narrow further to 5.7 ergy exports and disrupting trade flows. Expenditure on transfers to households percent of GDP due to continued declines Internally, key risks include potential de- increased to a substantial 5.9 percent of in energy exports. However, international lays in structural reforms and invest- GDP, but targeting to those most in need reserves are expected to remain adequate, ments in the energy sector. Effective man- remains a priority. In FY2024, the fiscal supported by the Heritage and Stabiliza- agement of public finances, especially deficit is projected to widen to 5.2 per- tion Fund, which holds assets of about controlling wage expenses and capital cent of GDP from 1.7 percent in FY2023 one-fifth of GDP. spending, and continued efforts to reduce due to a public sector wage settlement, crime will be crucial. The country also lower energy revenues, and higher capi- faces environmental risks, such as natural tal spending. The FY2024 budget includ- disasters and climate change impacts, ed reforms to enhance the fiscal regime Outlook which could disrupt economic activities for the energy sector, promote non-ener- and infrastructure. gy economic activity, and support vul- Trinidad and Tobago's medium-term eco- To sustain growth and mitigate risks, the nerable groups. These include adjust- nomic outlook is cautiously optimistic, government's focus on fiscal discipline, ments to the Supplementary Petroleum though it faces several risks. The economy structural reforms, and climate resilience Tax and incentives for SMEs and the is expected to keep recovering, supported will be essential. TABLE 2 Trinidad and Tobago / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -1.0 1.5 1.3 2.2 2.3 0.9 Real GDP growth, at constant factor prices -1.8 4.0 0.1 2.1 2.4 1.2 Agriculture -3.5 -11.5 0.2 6.0 2.6 7.8 Industry -0.8 3.2 -1.6 1.6 2.1 -0.5 Services -2.5 5.0 1.4 2.4 2.6 2.3 Inflation (consumer price index) 2.0 5.8 4.7 1.2 1.8 1.9 Current account balance (% of GDP) 10.8 17.4 12.4 5.7 6.5 6.1 Net foreign direct investment inflow (% of GDP) -7.0 -6.9 -7.6 -2.8 -2.9 -2.7 a Fiscal balance (% of GDP) -7.8 0.7 -1.7 -5.2 -4.2 -1.3 Revenues (% of GDP) 23.4 28.2 28.9 27.5 27.5 28.5 a Debt (% of GDP) 79.6 66.6 72.0 75.5 76.7 71.3 a Primary balance (% of GDP) -4.7 3.2 1.4 -1.5 -0.9 2.2 GHG emissions growth (mtCO2e) -10.1 -1.3 -0.8 0.2 0.5 0.0 Energy related GHG emissions (% of total) 53.5 52.7 51.1 49.4 47.8 46.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Budget balances and public debt are for the central government. MPO 141 Oct 24 a competency-based curriculum, have al- so begun to take shape. Decisive imple- URUGUAY Key conditions and mentation of these and other reforms to reignite growth will be crucial to drive challenges Uruguay’s social progress. Table 1 2023 Uruguay has the highest income per Population, million 3.4 capita and the largest share of the mid- GDP, current US$ billion 77.2 dle class in Latin America, but it faces Recent developments GDP per capita, current US$ 22564.5 challenges in accelerating growth. The a 0.2 International poverty rate ($2.15) economy grew 5.3 percent annually be- The economy continued to recover from a 0.8 tween 2003 and 2014 but then only 1 the drought that began in late 2023. Real Lower middle-income poverty rate ($3.65) a 6.4 percent over 2014-2019, and 0.7 percent GDP grew 2.2 percent y-o-y in the first Upper middle-income poverty rate ($6.85) Gini index a 40.6 between 2019-2023. While the poverty half of the year, driven by higher exports School enrollment, primary (% gross) b 105.5 rate is low at 6.7 percent (under the in- of soy, cellulose, beef, and hydropower. b 78.0 ternational poverty line of US$6.85 per Fixed investment remained tepid, reduc- Life expectancy at birth, years day, 2017 PPP) compared to the rest ing growth by 0.5 percentage points, Total GHG emissions (mtCO2e) 37.9 of the region, poverty reduction has while the destocking associated with agri- Source: WDI, Macro Poverty Outlook, and official data. stalled. Income inequality, as measured culture exports erased 2.4 percentage a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). by the Gini coefficient, rose slightly to points from growth. 40.9 points in 2023. Labor demand increased as the economy The recent slowdown reflects a com- recovered. The employment rate stood at bination of exogenous factors, notably 58.8 percent in July 2024, and unemploy- the severe drought that caused agri- ment was at 8.3 percent. The labor partici- cultural losses of nearly 3 percent of pation rate reached 64.2 percent, 1 percent- After experiencing a once-in-a-century GDP in 2023, and structural challenges age point (pp) above the previous year, drought in 2023, Uruguay’s growth is such as low productivity growth and and the highest since 2016. However, infor- projected to rebound to 3.2 percent in gaps in human capital quality. Despite mality grew by 1.5 pp, reaching 21.7 per- structural transformation, approximately cent nationally, with the northeastern de- 2024, driven by agricultural exports. 70 percent of exports still depend on partamentos showing an average increase Cellulose production is also expected to natural resources. Limited competition of 5pp. This exacerbates existing regional increase as the new pulp mill reaches and low trade integration have prevent- disparities in poverty and access to good full capacity. Despite a 3.7 percent in- ed faster diversification. quality jobs. crease in average real wages in 2023, Some structural reforms have advanced. On a 4-quarter rolling sum basis, the Important parametric pension reforms seasonally adjusted current account the lack of growth in sectors employing were enacted in May 2023, although deficit narrowed from an estimated 3.7 low-income workers has kept the poverty Uruguayans will vote during the Presi- percent of GDP at the end of 2023 to rate stable at 6.7 percent. dential elections this October on whether an estimated 3.4 percent of estimat- to repeal its implementation. Reforms in ed GDP in Q1 2024. This improvement education, including the introduction of mostly reflected a larger trade surplus FIGURE 1 Uruguay / Annual inflation and inflation FIGURE 2 Uruguay / Actual and projected poverty rates and expectations real GDP per capita Annual inflation (percent) Poverty rate (%) Real GDP per capita (constant LCU) 12 25 700000 11 600000 10 20 9 500000 8 15 400000 7 10 300000 6 Target 200000 5 Range 5 4 100000 3 0 0 2 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2014 2015 2016 2017 2018 2019 2021 2022 2023 2024 International poverty rate Lower middle-income pov. rate Annual Inflation Two-year ahead inflation expectation Upper middle-income pov. rate Real GDP pc Source: Central Bank of Uruguay. Source: World Bank. Notes: see Table 2. MPO 142 Oct 24 in Q1 2024, driven by lower volumes 2.7 percent of GDP as consolidation efforts of imported capital goods. continue. Net indebtedness is expected to Headline inflation rose 5.6 percent y-o-y Outlook adhere to the legal ceiling, with public sec- in August 2024, up from 5.4 percent in tor debt projected at 64-65 percent of GDP the previous month, as the prices of food The economy is forecasted to rebound to over the forecast period. and household items increased. However, 3.2 percent in 2024. Agricultural exports Average inflation is expected to subside both headline and core inflation remained are expected to keep the post-drought mo- in 2024 and remain within the target within the Banco Central del Uruguay's mentum, while cellulose production is ex- range over 2025-2026. Despite lower infla- (BCU) target range of 3 to 6 percent. pected to increase as the new UPM-II pulp tion, the poverty rate is projected to re- After easing rates by a cumulative 275 ba- mill reaches full capacity. Growth is ex- main stable at 6.4 percent in 2024. Sec- sis points between April 2023 and April pected to stabilize around 2.6 percent in tors that tend to employ low-skilled la- 2024, the BCU has held policy rates 2025-2026, converging towards potential. bor, such as construction and retail, have steady at 8.5 percent. Private consumption is expected to remain not shown steady improvements. Growth The non-financial public sector fiscal robust as inflation pressures continue to and labor demand in these sectors are key deficit reached an estimated 3.2 percent abate, while fixed investment is projected to improving income for the poor and of GDP in the twelve months ending to pick up as global financial conditions vulnerable population. in July 2024, unchanged from the same gradually improve. The recovery may be constrained by period a year ago. In the first half Due to the faster-than-expected disinfla- weaker external demand, particularly of 2024, public revenues rose by 4.2 tion in 2023, the government expects de- from China, alongside commodity price percent y-o-y in real terms, driven by viations from the structural fiscal deficit volatility, heightened geopolitical ten- higher transfers from public enterprises, and real primary spending cap of the fiscal sions, and growing trade fragmentation. while expenditures rose 5.8 percent over rule in 2024, following four years of com- Additionally, Uruguay's high dollariza- the same period, led by pensions. Gross pliance. The fiscal deficit is expected to de- tion levels pose a risk in the face of a public debt increased to 64.2 percent of cline marginally to 3.1 percent of GDP this strong dollar and tighter-for-longer global GDP in 2023, partly reflecting the recap- year as tax revenues rebound from the financial conditions. While a transition to italization of the central bank. Uruguay drought and relative price differences with the La Niña phenomenon later this year continues to enjoy the lowest sovereign Argentina normalize. By 2026, the fiscal is expected to be benign, unexpected ex- spreads in the region. deficit is projected to further decrease to treme weather remains a risk. TABLE 2 Uruguay / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.6 4.7 0.4 3.2 2.6 2.6 Private consumption 3.2 5.7 3.6 3.7 3.3 3.3 Government consumption 5.2 2.5 -0.2 0.4 0.8 0.3 Gross fixed capital investment 19.3 11.8 -7.0 4.5 2.6 2.6 Exports, goods and services 13.5 9.8 0.7 4.7 4.0 4.0 Imports, goods and services 17.9 12.4 6.0 5.0 4.5 4.5 Real GDP growth, at constant factor prices 5.3 4.5 0.4 3.2 2.6 2.6 Agriculture 12.6 -9.5 5.0 3.0 2.7 2.5 Industry 5.7 3.5 -3.8 3.0 1.8 1.8 Services 4.5 6.2 1.1 3.3 2.9 2.8 Inflation (consumer price index) 7.7 9.1 5.9 5.5 5.9 5.6 Current account balance (% of GDP) -2.5 -3.9 -3.8 -3.2 -2.9 -2.7 Net foreign direct investment inflow (% of GDP) 2.5 4.2 5.6 4.5 4.1 3.6 a Fiscal balance (% of GDP) -3.1 -2.8 -3.2 -3.1 -2.9 -2.7 Revenues (% of GDP) 29.2 29.6 29.9 29.8 29.8 29.7 Debt (% of GDP) 62.4 62.0 64.2 64.3 64.4 64.5 a Primary balance (% of GDP) -0.9 -0.6 -0.9 -0.8 -0.6 -0.5 b,c International poverty rate ($2.15 in 2017 PPP) 0.1 0.2 0.1 0.1 0.1 0.1 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.8 0.8 0.9 1.0 1.0 1.0 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 6.7 6.4 6.7 6.4 6.1 6.0 GHG emissions growth (mtCO2e) 8.8 1.3 0.4 1.8 1.7 1.9 Energy related GHG emissions (% of total) 21.3 22.6 22.3 23.1 23.9 24.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Non-Financial Public Sector. Excluding revenues associated with the "cincuentones". b/ Calculations based on SEDLAC harmonization, using 2023-ECH. Actual data: 2022 and 2023 (Preliminary). Nowcast: 2024. Forecasts are from 2025 to 2026. c/ Projections using microsimulation methodology. MPO 143 Oct 24 Middle East and North Africa Algeria Kuwait Saudi Arabia Bahrain Lebanon Syrian Arab Republic Djibouti Libya Tunisia Egypt, Arab Republic Morocco United Arab Emirates Iran, Islamic Republic Oman Yemen, Republic Iraq, Republic Palestinian Territories Jordan Qatar MPO 145 Oct 24 Algerian authorities notably enacted an Investment Law (2022), a Banking and ALGERIA Key conditions and Monetary Law (2023), and a law to ease access to land for investors (2023). challenges Deepening these reforms is critical to re- new Algeria’s growth and jobs strategy Table 1 2023 Algeria’s economy is driven by the oil towards a more private sector-led eco- Population, million 45.6 and gas sector and public sector spend- nomic diversification model. GDP, current US$ billion 239.9 ing. Oil and natural gas accounted for 14 GDP per capita, current US$ 5260.2 percent of GDP, 86 percent of exports, a 5.5 National poverty rate and 47 percent of budget revenues be- International poverty rate ($2.15) a 0.5 tween 2019 and 2023. Recent developments a 4.0 Following the pandemic-induced reces- Lower middle-income poverty rate ($3.65) Gini index a 27.6 sion in 2020, Algeria’s economy recovered Economic activity remained robust in School enrollment, primary (% gross) b 108.8 rapidly, and economic output surpassed Q1-2024 (+3.8 percent y-o-y), as broad- b 77.1 its pre-pandemic level by 2022 helped by based growth in the non-extractive sectors Life expectancy at birth, years surging hydrocarbon prices and higher compensated for OPEC-mandated crude Total GHG emissions (mtCO2e) 286.5 European demand for Algerian gas. The oil production cuts. Strong private con- Source: WDI, Macro Poverty Outlook, and official data. current account deficit turned into a sur- sumption growth (+4.2 percent y-o-y) a/ Most recent value (2011). b/ WDI for School enrollment (2023); Life expectancy plus and the fiscal deficit narrowed in pulled the services sector (+ 4.3 percent y- (2022). 2022, but they both started to deteriorate o-y). Industrial growth was more moder- in 2023 amid declining global oil and gas ate because the demand from stronger in- prices, OPEC quota cuts, larger imports, vestment (+14.8 percent y-o-y) was largely Algeria’s growth remained dynamic, and and higher public spending. met through imports. inflation decelerated in early 2024, amid Significant improvements in living stan- Satellite data suggest that non-hydro- dards, education, and health took place carbon growth remained robust in OPEC quota reductions but resilient prior to the pandemic and inequality is rel- Q2-2024 and that agricultural output agricultural output, higher public spend- atively low, but estimated poverty remains growth was stable as more rainfall in the ing, and strong investment. Declining oil high for Algeria’s level of development. Eastern regions compensated for a drier and gas exports and revenues and higher The government responded to high infla- season in the West. tion in 2021-2023 and to persistent unem- The trade surplus decreased from US$6.3 public spending on wages, pension, and ployment challenges by increasing pub- billion in H1-2023 (2.8 percent of 2023 subsidies are expected to increase pres- lic sector wages and pensions, introduc- GDP) to US$3.4 billion in H1-2024 (1.5 per- sures on the fiscal and external balances. ing unemployment benefits, as well as ex- cent of 2023 GDP), as hydrocarbon prices Continued modernization of the public panding food subsidies. and exports moderated, and imports con- sector, improvements to the business en- Since the pandemic, the government has tinued to rebound. The higher imports also adopted policies to boost export were driven by machinery, equipment, vironment, and digitalization are critical and vehicles as investment grew and some diversification, private investment, dig- to diversify the economy and promote italization, and financial sector devel- car import restrictions were temporarily more private sector investment and jobs. opment. Over the past two years, the removed. The estimated current account FIGURE 1 Algeria / Real GDP and selected components, FIGURE 2 Algeria / Hydrocarbon and fertilizer export prices indices (2019=100) Index, 2019=100 Price in US$, indices (Q1-2019=100) 130 350 Imports Consumption 300 120 Natural gas Investment GDP Weighted price 250 110 Crude oil Fertilizer price 200 100 150 90 100 80 50 70 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 2021 2022 2023 2024 2019 2020 2021 2022 2023 2024 Sources: Algerian authorities and World Bank staff estimates. Sources: Algerian authorities and World Bank staff estimates. MPO 146 Oct 24 was nearly balanced in H1-2024 down H1-2024 while credit growth remained current spending, the budget deficit would from a surplus of US$2.4 billion a year ear- moderate. The Central Bank has kept its stabilize in 2025 and narrow somewhat in lier. Official reserves as of end-2023 stood key interest rate unchanged at 3 percent 2026, in line with the consolidation plan in at 16 months of imports. since May 2020 and increased the reserve the medium-term budget framework. The After reaching 5.2 percent of GDP in requirements slightly in April 2023. public debt-to-GDP ratio would stabilize 2023, the budget deficit is expected to in 2024 as the government uses hydrocar- widen in 2024, driven by lower hydrocar- bon savings to finance the deficit but then bon revenues, higher public investment, increase to 59 percent of GDP by 2026 as and the third and last wave of public sec- Outlook they are exhausted. tor wage increases. Public debt remains Hydrocarbon price and market fluctua- relatively low and is almost completely GDP growth is expected to moderate in tions represent the most important risk for domestically owned with long-term ma- 2024 driven by lower oil production in line Algeria’s macroeconomic prospects. Re- turities and low interest rates. with Algeria’s OPEC quota and despite cent drought episodes and forest fires also Inflation decelerated to 4.1 percent over higher public spending. It would acceler- underscore Algeria’s vulnerability to cli- H1-2024, down from 9.3 percent in 2022 ate in 2025 as agricultural output fully re- mate change. Accelerating structural re- and 2023, driven by stabilizing fresh food covers, non-hydrocarbon dynamism con- forms to improve the business environ- prices, moderating import prices, and a tinues, and oil production rebounds. ment and diversify the economy are crit- stable exchange rate. As in many compara- The current account balance is expected to ical to spur more private sector-led ble countries, lower inflation—particular- post a modest deficit in 2024 and widen growth and job creation. Though hard ly in food prices—has likely improved in 2025-2026 due to moderating oil prices, to quantify without data, such policies household purchasing power, especially and higher imports driven by investment. would likely reduce poverty and vulnera- for the most vulnerable. Money supply After widening in 2024 due to lower hy- bility, both estimated to be relatively high growth decelerated through 2023 and drocarbon receipts, higher investment, and for the country’s income level. TABLE 2 Algeria / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.8 3.6 4.1 3.1 3.8 3.3 Private consumption 1.6 3.5 3.8 3.6 3.4 3.2 Government consumption 1.2 2.8 2.6 2.4 2.2 2.0 Gross fixed capital investment 0.4 2.6 8.4 7.0 5.8 5.2 Exports, goods and services 11.5 0.2 3.1 -2.8 2.5 1.2 Imports, goods and services -4.5 -0.2 19.4 4.9 4.2 3.9 Real GDP growth, at constant factor prices 4.3 3.8 3.8 3.1 3.8 3.3 Agriculture -2.2 5.2 2.8 2.7 3.0 2.6 Industry 10.3 2.9 3.6 2.5 4.1 3.4 Services 1.9 4.1 4.2 3.7 3.8 3.3 Inflation (consumer price index) 7.2 9.3 9.3 4.0 4.9 4.4 Current account balance (% of GDP) -2.4 8.6 2.3 -1.2 -3.1 -4.2 Fiscal balance (% of GDP) -6.3 -3.0 -5.2 -9.8 -9.9 -8.7 Revenues (% of GDP) 26.2 29.7 32.9 29.9 28.4 27.4 Debt (% of GDP) 55.2 48.1 49.2 49.5 55.2 58.9 Primary balance (% of GDP) -5.7 -1.8 -3.9 -8.6 -8.6 -7.3 GHG emissions growth (mtCO2e) 3.1 2.3 2.6 2.1 2.7 2.4 Energy related GHG emissions (% of total) 52.9 54.0 55.1 56.1 57.1 58.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 147 Oct 24 energy strategy, adopted in November 2023, supports the Kingdom’s sustainabil- BAHRAIN Key conditions and ity goals and aims for a 30 percent reduc- tion in emissions by 2035 and net-zero challenges emissions by 2060 while ensuring reliable and affordable access to energy. Table 1 2023 Despite the limited oil wealth, Bahrain has However, fiscal challenges remain as pub- Population, million 1.5 one of the most diversified economies in lic debt stays stubbornly high and the re- GDP, current US$ billion 46.1 the GCC region, led by construction and serves low, highlighting the remaining fis- GDP per capita, current US$ 31019.6 manufacturing activities, and robust ser- cal and external vulnerabilities over the a 92.3 School enrollment, primary (% gross) vices sector. The non-oil sector remains the medium term. Absent additional fiscal re- a 79.2 driving force of the economy. The four- forms and amid expected low commodity Life expectancy at birth, years Total GHG emissions (mtCO2e) 59.8 year (2023-26) government plan prioritizes prices and monetary tightening, fiscal and Source: WDI, Macro Poverty Outlook, and official data. several objectives that aim to raise stan- external accounts will remain under pres- a/ Most recent WDI value (2022). dards of living, improve infrastructure, sure. Lack of reporting high frequency da- and accelerate digital transformation, ta regarding the fiscal stance is another among others. On the fiscal side, efforts challenge considering its importance for under the Fiscal Balance Program (FBP) macroeconomic monitoring and trans- have focused on revenue mobilization, in parency. More ambitious fiscal reforms addition to controlling government spend- would boost external buffers and ensure Diversification efforts are well under- ing. Key reforms include the doubling of an adequate level of reserves to support way, with a robust performance of the VAT rate to 10 percent in 2022, and most the exchange rate peg. Climate challenges, non-hydrocarbon sector. Sustained fiscal recently the adoption in September 2024 of including the depletion of underground reforms have helped improving fiscal the domestic minimum top-up tax (DMTT) water resources as the only natural water to levy a minimum 15 percent rate of tax source, amid, rising population and high and current account balances in 2024, on the profits of multinational enterprises consumption patterns, could have serious yet Bahrain continues to face fiscal chal- with global revenue exceeding €750 long-term growth implications. lenges, notably the elevated debt levels (US$828 million), effective January 1, 2025. and gross financing needs. Under cur- The new law marks a significant mile- stone, with Bahrain being the first Gulf rent commodity price projections, addi- Cooperation Council (GCC) country to Recent developments tional consolidation measures are needed legislate the implementation of a DMTT to ensure a sustainable fiscal position in line with its commitment to the OECD/ Having moderated to 3 percent last year over the medium term. Downside risks G20's Inclusive Framework on BEPS 2.0 amid tighter financial conditions and neg- project. Efforts are also underway to ad- ative oil sector growth, preliminary data to the outlook include oil market volatil- dress labor market frictions, supported by reveals that the economy grew by 3.3 per- ity, climate change risks, and the impact the National Labor Market Plan approved cent y-o-y in Q1-2024. Oil sector picked of heightened geopolitical tensions. in 2023, aiming at encouraging employ- up by 3.4 percent y-o-y supported by the ment in the private sector and reducing return online of the offshore Abu Safah public sector fiscal pressures. The national oil field. Non-oil sector maintained its FIGURE 1 Bahrain / Real annual GDP growth FIGURE 2 Bahrain / General government operations Percent change Percent of GDP 8 40 6 30 4 20 2 10 0 0 -2 -10 -4 -20 2021 2022 2023e 2024f 2025f 2026f 2021 2022 2023e 2024f 2025f 2026f 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. MPO 148 Oct 24 strong expansion, growing by 3.3 per- women estimated at 3.7 percent and Limited spending growth under the FBP cent and driven by ongoing diversifica- among men at 0.4 percent. Young women and higher oil revenues are expected to tion efforts. Services, manufacturing, gov- ages 15-24 continue to face more chal- result in a lower fiscal deficit of 9 percent ernment services, and construction, are lenges in securing a job relative to young of GDP in 2024, down from over 10 per- the largest contributors to overall growth. men: the unemployment rate is projected cent of GDP in 2023, while achieving fis- Inflation remains contained at 1.2 percent at 12.3 percent among young women and cal balance would likely require higher in H1-2024, despite a slight acceleration at 2.6 percent among young men. oil prices. Non-hydrocarbon revenues are owing to higher food prices. expected to increase in 2025-26 along with Official fiscal data for 2024 have not been the implementation of the newly an- released yet. However, the fiscal deficit is nounced corporate tax and the expanding estimated to slightly narrow in 2024, amid Outlook capacity of Sitra oil refinery. However, de- fiscal consolidation efforts. clining oil prices and high interest burden Despite higher imports in Q1-2024, the Bahrain’s economic outlook hangs on oil will continue to pressure fiscal balances current account balance posted a surplus prospects developments and accelerated and public debt in 2025-26. of US$0.6 billion (4.9 percent of GDP), re- implementation of structural reforms. The current account surplus is forecast to flecting higher oil and non-oil exports (up Growth is estimated to pick up to 3.5 per- expand to over 7 percent of GDP in 2024, by 14.2 and 2.8 percent y-o-y), respectively. cent in 2024 largely driven by a diverse helped by higher oil export prices, but In addition, the value of non-oil exports range of non-oil activity. The hydrocarbon would narrow down during 2025-26, in (national origin excluding re-exports) in- sector is expected to witness a marginal line with the oil price outlook. This will creased by 4 percent in July 2024 y-o-y. improvement in 2024 attributed to higher boost foreign reserves and strengthen re- This helped boosting official reserves oil production in Abu Safah oilfield. A silience against future external shocks. which reached US$4 billion in stronger expansion of 3.8 percent in the Key downside risks to the outlook stem Q1-2024—an increase of US$476 million non-oil sector is underpinned by tourism from oil price volatility and elevated compared to Q1-2023. and the service sectors, in addition to the spending which could undermine ongoing Employment increased by about 1.4 per- continuation of infrastructure projects. fiscal consolidation, and lead to higher ex- cent in 2023 relative to 2022 and is project- Growth is expected to moderate, hover- ternal financing costs. Pressing ahead with ed to continue increasing at roughly the ing around 3 percent in the medium- climate mitigation is crucial to address cli- same rate in 2024, according to ILO esti- term, impacted by the still elevated in- mate risks and the needed energy transi- mates. Employment growth continues to terest rates and fiscal consolidation. Infla- tion. Spillover from escalating conflict in be twice as fast among women compared tion is estimated to remain low at 1.3 per- the Middle East could undermine investor to men, possibly thanks to the Riyadat pro- cent in 2024 and to converge to less than confidence, disrupt trade, and impede gram aimed at providing access to financ- 2 percent in the medium term on strong growth. However, more ambitious fiscal ing for Bahraini women entrepreneurs to domestic demand, but the positive impact reforms to boost external buffers and sup- grow their businesses. The unemployment of tighter monetary policy in line with the port the exchange rate peg, higher oil prices rate is expected to decrease to around 1.1 currency peg to the U.S. dollar will contain and a stronger than expected payoff from percent in 2024, with the rate among a higher price surge. economic reforms are key upside risks. TABLE 2 Bahrain / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.4 6.0 3.0 3.5 3.3 3.3 Private consumption 5.8 6.9 4.9 5.1 5.3 4.1 Government consumption 7.0 2.1 7.3 4.4 4.1 3.5 Gross fixed capital investment -3.3 18.7 2.1 4.1 5.0 5.5 Exports, goods and services 29.5 9.2 -9.1 -6.0 4.2 4.2 Imports, goods and services 15.2 11.9 2.6 2.4 3.1 2.7 Real GDP growth, at constant factor prices 4.2 4.5 3.0 3.5 3.3 3.3 Agriculture 7.2 4.4 4.7 2.2 3.1 2.8 Industry 3.9 1.7 -0.4 2.4 3.9 4.1 Services 4.5 6.7 5.4 4.3 2.8 2.8 Inflation (consumer price index) -0.6 3.6 0.1 1.3 1.5 2.0 Current account balance (% of GDP) 6.4 14.6 5.9 7.3 6.7 5.5 Net foreign direct investment inflow (% of GDP) -4.2 0.0 -12.4 -2.6 -2.7 -2.7 Fiscal balance (% of GDP) -10.6 -5.4 -10.4 -9.1 -9.4 -9.6 Revenues (% of GDP) 20.1 22.5 22.1 22.4 21.6 21.0 Debt (% of GDP) 127.0 117.4 123.2 128.4 130.0 130.9 Primary balance (% of GDP) -6.0 -1.2 -4.1 -4.5 -4.5 -4.9 GHG emissions growth (mtCO2e) 1.7 4.9 2.9 3.9 4.3 3.1 Energy related GHG emissions (% of total) 59.4 60.1 60.2 60.5 60.9 60.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 149 Oct 24 Ethiopia, and the Russian invasion of Ukraine worsened economic and fiscal DJIBOUTI Key conditions and pressures. These events triggered trade disruptions, financial instability, and com- challenges modity price fluctuations, rendering the country's debt unsustainable. While Dji- Table 1 2023 Despite experiencing rapid economic bouti aims to leverage its strategic location Population, million 1.1 growth over the past decade, Djibouti con- at the entrance of the Red Sea to emerge as GDP, current US$ billion 4.1 tinues to grapple with macro-social chal- a major transport and logistics hub, it faces GDP per capita, current US$ 3606.4 lenges. Economic growth, averaged over considerable hurdles in achieving this goal a 19.1 International poverty rate ($2.15) 6.2 percent annually from 2011-19, largely amidst the current economic pressures. a 43.8 driven by substantial investments (largely The economy's heavy reliance on imports Lower middle-income poverty rate ($3.65) a 21.1 debt-financed) in transport and port infra- makes it vulnerable to global price volatil- National poverty rate Gini index a 41.6 structure. However, this growth, fueled by ity. Additionally, the government’s fuel School enrollment, primary (% gross) b 64.4 increasingly costly borrowing, has height- subsidy strains public finances without b 62.9 ened debt vulnerabilities, constraining fis- effectively addressing poverty, as the ben- Life expectancy at birth, years cal space for critical social spending. High efits are mainly enjoyed by wealthier Total GHG emissions (mtCO2e) 1.4 electricity costs continue to hamper private households. The Red Sea disruptions have Source: WDI, Macro Poverty Outlook, and official data. sector development, while weak economic led to a surge in transshipment services, a/ Most recent value (2017), 2017 PPPs. b/ Most recent WDI value (2022). fundamentals, including limited TFP, re- straining the port's capacity. main a significant concern for long-term growth. Human capital remains low. A Djibouti's economic activity showed mod- large proportion of the population is poor: est improvement in 2024H1, leading to in 2017, 19.1 and 43.8 percent lived on less Recent developments than the international poverty thresholds an upward revision of real GDP growth of $2.15 and $3.65 per person per day (in Djibouti's economic activity regained to 5.9 percent in 2024—0.8 percentage 2017 PPP), respectively. Djibouti is among strength in 2024H1, mainly thanks to a sig- points higher than in the spring forecast. the most unequal countries in the region nificant increase in port activity, particu- (Gini of 41.6). This reflects regional dispar- larly container traffic. The port's activity This improvement in economic activity ities with significantly higher poverty and grew by an impressive 70.3 percent year- and growth in real GDP per capita are poorer access to basic services outside of on-year during this period, due to the expected to contribute to a reduction in the urban core as well as disparities in liv- growing transshipment sector. This poverty. Risks to the outlook are skewed ing standards within the capital city. Rel- growth reflects the strategic shifts in re- to the downside, with heightened chances ative to its small population size, Djibouti gional shipping patterns, as shipping com- hosts a large number of migrants, dis- panies increasingly opted to continue of a hard landing. Real GDP growth is placed, and undocumented people. The la- avoiding the conflict zones in the Red Sea. projected to 5.1 percent in 2025-26, sup- bor market is marked by low participation, Energy production also experienced a sub- ported by increased transshipment as high unemployment, and a small formal stantial 17 percent y-o-y increase in Ethiopia's imports rise. private sector. Overlapping crises includ- 2024Q1, reflecting a significant boost in ing the COVID-19 pandemic, conflict in output. In contrast, the construction sector FIGURE 1 Djibouti / Real GDP growth, fiscal, and current FIGURE 2 Djibouti / Actual and projected poverty rates and account balances 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 10 0 -10 2019 2020 2021 2022 2023 2024 2025 2026 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 Table 2. MPO 150 Oct 24 contracted by 10 percent in the same peri- totaled US$311.34 million (7.74 percent of in 2025-26 as global prices stabilize. Pover- od, mainly due to disruptions in the sup- GDP). While the country secured a tem- ty in 2024 is estimated at 14.5 percent (in- ply chain. The rise in freight costs—soar- porary moratorium on debt servicing from ternational poverty line) and 35.5 percent ing to US$4,500 per trip in June 2024, up Exim Bank of China, negotiations with In- (lower middle-income poverty line), sub- from US$1,400 a year earlier amid the on- dia are ongoing, and discussions with the ject to substantial risks given the high pub- going Red Sea crisis—contributed to do- Paris Club remain on hold. External sector lic debt and ongoing regional tensions. mestic price increases in 2024H1. CPI infla- developments were mixed in 2024H1. The Debt-restructuring agreements expected tion rose by 3.2 percent, y-o-y, in the first trade balance registered a deficit of 2.3 per- by late 2024 will allow for fiscal consolida- half of 2024, driven by higher food prices cent, driven by a rise in imports related to tion, with the fiscal balance moving from (3.6 percent) and energy costs (3.2 percent). ongoing major developments in the DDID a deficit of 0.5 percent of GDP in 2024 to The international poverty rate (living on FTZ. However, net foreign exchange re- a surplus of 1.0 percent in 2025-26. Public below US$2.15/person/day in 2017 PPP) is serves remained strong, covering four debt is projected to decrease to 58.4 per- estimated to have declined from 19.1 per- months of projected imports. cent of GDP by 2026 as external financing cent in 2017 to around 15.5 percent in 2023 remains limited, while the robust imple- thanks to continued economic growth. mentation of the new public finance re- Similarly, poverty at the lower-middle-in- forms strategy is expected to enhance fiscal come threshold is also estimated to have Outlook sustainability. The current account is ex- fallen, from 43.8 percent in 2017 to around pected to maintain a surplus, at 14.4 percent 36.9 percent in 2023, but this poverty level The medium-term outlook remains cau- of GDP in 2024 and 12.4 percent in 2025-26, remains high. These positive trends are ex- tiously optimistic. Real GDP growth is now as IMF and World Bank funding to pected to continue into 2024. On the fiscal projected to reach 5.9 percent in 2024, a 0.8 Ethiopia is likely to restore some degree of front, limited domestic resource mobiliza- percentage point increase from the spring financial stability to the country, boosting tion coupled with the ongoing develop- forecast. This upward revision reflects Ethiopian imports through Djibouti. ments in the Djibouti Duty-Free Zone stronger growth in transshipment activi- Risks to the outlook are tilted to the down- (DDID FTZ), in which the government ties and expectations of increased Ethiopi- side and include potential escalations in holds a stake, have further strained fiscal an demand following the IMF's approval Red Sea tensions, an influx of refugees, buffers in the first half of 2024. These fac- of a new funded program for Ethiopia in and delays in implementing macro-fiscal tors have contributed to keeping public July. Growth is expected to moderate to reforms. Additionally, shifts in regional debt at a high level. As of March 31, 2024, 5.1 percent in 2025-26, supported by export trade—particularly if Ethiopia redirects public debt remains above 63 percent of earnings from logistics and re-exports to imports through Somaliland’s Berbera GDP, with 76.1 percent of this debt attribut- Ethiopia. Inflation is projected to rise to 3.0 port—and the normalization of the Red able to state-owned enterprises (SOEs). As percent in 2024 due to higher freight costs, Sea shipping corridor could divert traffic of December 2023, Djibouti's debt arrears before easing to an average of 1.7 percent to alternative routes or competing ports. TABLE 2 Djibouti / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.5 3.7 6.7 5.9 5.3 4.9 Private consumption 9.6 -0.6 4.4 4.4 5.0 5.5 Government consumption -2.5 -14.3 8.1 3.3 1.7 4.4 Gross fixed capital investment 4.9 2.7 12.4 7.9 6.8 7.1 Exports, goods and services 29.5 -12.5 8.4 7.4 8.0 8.0 Imports, goods and services 18.2 -6.2 10.4 8.0 9.0 10.0 Real GDP growth, at constant factor prices 4.1 4.0 6.7 5.9 5.3 4.9 Agriculture 16.5 -0.5 5.9 5.9 5.9 5.9 Industry 11.4 7.2 10.0 9.7 9.2 8.7 Services 2.5 3.4 6.0 5.1 4.4 3.9 Inflation (consumer price index) 1.5 5.1 1.4 3.0 1.8 1.5 Current account balance (% of GDP) 31.2 17.9 15.6 14.4 13.5 11.2 Fiscal balance (% of GDP) -2.4 0.2 0.2 -0.5 0.6 1.3 Revenues (% of GDP) 20.1 19.1 19.1 19.1 19.5 20.1 Debt (% of GDP) 71.3 66.5 69.4 63.8 59.9 58.4 Primary balance (% of GDP) -2.2 1.0 1.0 0.2 0.9 1.0 a,b International poverty rate ($2.15 in 2017 PPP) 16.9 16.5 15.5 14.5 14.0 13.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 39.9 39.1 36.9 35.5 34.1 32.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 75.2 74.2 72.5 70.6 69.3 67.9 GHG emissions growth (mtCO2e) 4.5 0.2 0.3 0.2 0.3 0.4 Energy related GHG emissions (% of total) 21.5 20.8 20.5 19.6 18.7 17.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2017-EDAM. Actual data: 2017. Nowcast: 2018-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2017) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 151 Oct 24 Poverty is expected to have increased sub- stantially from the last officially reported ARAB REPUBLIC Key conditions and poverty rate of 29.7 percent in 2019 at the national poverty line, due to the inflation challenges OF EGYPT spike over the past two years. Measured by the international poverty line for lower Amidst rising geopolitical tensions, Egypt middle-income countries ($3.65/day in is pursuing macroeconomic stabilization 2017 PPP), the poverty rate is estimated Table 1 2023 and structural reforms, underpinned by to have increased to 23.5 percent in 2024; a 112.7 the IMF Extended Fund Facility (EFF), about 4 percentage-points higher than its Population, million GDP, current US$ billion 395.9 large-scale UAE investment deal in Ras El- estimated level in 2022. GDP per capita, current US$ 3512.6 hekma, and development partners’ financ- Key factors to unlock productivity Lower middle-income poverty rate ($3.65) b 17.6 ing including the World Bank and the Eu- growth, exports, and job-creation include: b 29.7 ropean Union. Sovereign ratings and mar- (i) Reorienting the role of the state as an National poverty rate b ket sentiment have started to improve, enabler of private activity. This is critical Gini index 31.9 c contributing to a rebound of portfolio in- for fiscal and external sustainability, and School enrollment, primary (% gross) 91.6 flows, remittances, and gradually recover- to reverse the trend favoring non-trad- c 70.2 Life expectancy at birth, years ing non-oil private sector activity. ables; (ii) creating a conducive business Total GHG emissions (mtCO2e) 310.3 Notwithstanding the monetary tightening environment; and (iii) addressing human Source: WDI, Macro Poverty Outlook, and official data. and exchange rate adjustment of March development needs. a/ Reflects the UN data. 2024 that helped ease the two-year-long b/ Most recent value (2019), 2017 PPPs. c/ Most recent WDI value (2022). foreign currency crisis, the escalation of the Middle East conflict continues to im- pact foreign income sources, especially the Recent developments With the ongoing macroeconomic adjust- Suez Canal revenues. Scarring effects of the longstanding challenges that intersect- Growth declined to a projected 2.5 percent ment, growth is projected to recover to ed with global shocks continue to manifest in FY24 (July 2023-June 2024) from 3.8 per- 3.5 percent in FY25 from an estimated in key sectors. Notably, electricity genera- cent in FY23. The Industrial Production In- 2.5 percent in FY24. Inflation remains in tion and supply suffer from legacy energy dex points to improved growth in recent double digits with disproportionate impli- sector inefficiencies, delayed price adjust- months, although shockwaves from the ments, as well as domestic gas production Middle East conflict, as well as the scarring cations for the poor. External financing shortfalls (partly) due to the foreign cur- effects of the March 2022—2024 foreign ex- provides near-term relief. Ensuring long- rency arrears to International Oil Compa- change crisis, continue to soften the term stability (notably through wider fis- nies (IOC) accumulated over the past two nascent recovery. Despite the recent drop in cal consolidation, consistent with exter- years. Similarly, shortages in medicines unemployment to 6.5 percent in Q4-FY24 nal sector sustainability) remains crucial persist, as the domestic pharmaceuticals (compared to 7 percent in Q4-FY23), labor sector grapples with the spike in costs and market indicators reflect key challenges, in- to addressing human development needs, price controls. More broadly, productivity cluding low quality job-creation and below- social protection, and enabling private ac- growth remains sluggish, reflecting ongo- potential female labor force participation tivity for better growth, jobs, and exports. ing business environment constraints. (15.9 percent in Q4-FY24). FIGURE 1 Arab Republic of Egypt / Real GDP growth, FIGURE 2 Arab Republic of Egypt / Inflation rates employment and labor force participation rates Percent Percent of working-age population Percent change, (y/y) 12 50 80 Headline CPI 10 70 40 Core CPI 8 60 30 Food & Beverage 6 50 4 20 40 2 30 10 0 20 -2 0 10 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 0 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 -10 GDP growth (lhs) Au 0 Au 1 Au 2 Au 3 Au 4 Au 5 Au 6 Au 7 Au 8 Au 9 Au 0 Au 1 Au 2 Au 3 24 Employment rate (rhs) 1 1 1 1 1 1 1 1 1 1 2 2 2 2 g- g- g- g- g- g- g- g- g- g- g- g- g- g- g- Au Labor force participation rate (rhs) Sources: World Bank estimates based on Central Agency for Public Mobilization Sources: Central Bank of Egypt (CBE) and CAPMAS. and Statistics (CAPMAS) and Ministry of Planning, Economic Development and International Cooperation (MoPEDIC). MPO 152 Oct 24 After averaging 33.6 percent in FY24 (from witnessed a downtick; affected by the out- The budget deficit is forecast to widen to 24.1 percent in FY23), headline urban infla- flows with the temporary turbulence in 7.0 percent of GDP in FY25, mainly due to tion declined somewhat but remained high global financial markets and the flare up of the higher interest payments and the van- at 26.2 percent in August 2024. Food infla- the Middle East conflict. ishing impact of the (one-off) Ras Elhek- tion (54.7 percent in FY24), as well as re- The budget deficit declined sharply to an ma transaction, before starting to decline visions to administered prices—including estimated 3.6 percent of GDP in FY24, from thereafter, supported by fiscal consolida- energy tariffs, transport, and quadrupling 6.0 percent of GDP in FY23, due to the one- tion stemming from declining energy sub- the price of subsidized bread—are espe- off US$12 billion that was recorded as gov- sidies (due to tariff adjustments and the cially constraining the purchasing powers, ernment revenues (half the fresh inflows decline in international oil prices), as well notably among the poor, which thus un- from Ras Elhekma investments deposited as improving revenues. Off-budget bor- derscores the importance of well-targeted in the CBE, with an equivalent amount rowing is expected to be contained fol- social assistance. The CBE continues to transferred to the Treasury). This one-off lowing the Prime Ministerial Decree cap- tighten monetary policy through deposit transaction overcompensated for the in- ping public investments. auctions. With policy rates at 27.25 percent crease in interest payments, estimated at The government debt-to-GDP ratio is pro- and 28.25 percent for overnight deposit and 9.8 percent of GDP in FY24 (54.4 percent of jected to reach 94.5 percent and 91.6 percent lending transactions, respectively (1,900 bps government revenues). at end-FY24 and end-FY25, respectively. above the levels prevailing prior to March External financing requirements remain 2022), real interest rates turned positive in substantial, but the financing gap is ex- July 2024 for the first time in over two years. pected to be closed in the short-term. Prin- External account buffers improved with Outlook cipal external debt maturing during July- the inflows received in March–July 2024. December 2024 is estimated at around Of these, US$14.1 billion was used to re- Growth is expected to start a gradual re- US$20 billion and IOC arrears are estimat- plenish reserves, and the rest was used covery—to 3.5 percent and 4.2 percent in ed at US$5 billion. Further, the widened to repay debt, clear import backlogs, and FY25 and FY26, respectively—driven by current account deficit may put pressure start repaying arrears to IOC. As such, of- favorable base effects, as well as invest- on foreign currency resources, if the Mid- ficial (Tier 1) reserves and other foreign ment, notably that financed by the UAE dle East conflict continues to cast a shadow currency assets (Tier 2 reserves) jointly deal, in addition to improved private con- on the economy. reached a historical high of US$59.4 bil- sumption with the gradually abating infla- Meanwhile, soft per capita growth and lion at end-July 2024. The banking sys- tion and projected pickup in remittances, still high inflation constrain poverty-re- tem’s net foreign assets position surged in- although the latter may be moderated by duction; emphasizing the importance of to a surplus (LE626.6 billion or US$13.1 bil- the decline in international oil prices (as growth-enhancing reforms and advancing lion at end-June 2024). It however recently Egypt’s diaspora is largely in the GCC). the human capital agenda. TABLE 2 Arab Republic of Egypt / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.3 6.6 3.8 2.5 3.5 4.2 Private consumption 6.2 2.8 3.8 4.6 4.8 4.5 Government consumption 3.4 4.9 -2.8 3.3 3.0 2.5 Gross fixed capital investment -3.2 18.5 -21.7 -11.9 6.5 9.7 Exports, goods and services -13.9 57.4 31.4 7.0 13.5 11.5 Imports, goods and services 0.5 24.3 1.1 0.5 19.5 13.7 Real GDP growth, at constant factor prices 2.0 6.2 3.6 2.5 3.5 4.2 Agriculture 3.8 4.0 4.1 4.4 4.0 4.0 Industry -1.2 6.9 -0.6 -2.2 2.0 4.0 Services 3.7 6.2 6.2 4.9 4.2 4.4 Inflation (consumer price index) 4.5 8.5 24.1 33.6 17.2 13.6 Current account balance (% of GDP) -4.3 -3.5 -1.2 -5.3 -3.9 -4.3 Net foreign direct investment inflow (% of GDP) 1.1 1.8 2.5 11.7 2.8 2.3 Fiscal balance (% of GDP) -7.1 -6.2 -6.0 -3.6 -7.0 -6.9 Revenues (% of GDP) 16.6 17.2 15.4 18.0 16.0 16.4 Debt (% of GDP) 87.9 88.3 95.2 94.5 91.6 87.0 External government debt (% of GDP) 19.0 19.5 25.1 29.6 28.3 25.3 Primary balance (% of GDP) 1.4 1.3 1.6 6.2 4.0 3.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 19.9 19.7 21.9 23.5 23.4 23.2 GHG emissions growth (mtCO2e) 2.3 1.9 0.9 0.4 0.8 1.4 Energy related GHG emissions (% of total) 63.3 63.3 63.8 64.4 66.1 67.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2010-HIECS, 2015-HIECS, and 2019-HIECS. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. b/ Projection using annualized elasticity (2010-2015) with pass-through = 0.02 based on GDP per capita in constant LCU. Poverty estimates for 2020, 2023, and 2024 are based on microsimulations of the impacts of Covid, high inflation, and government mitigating measures. MPO 153 Oct 24 vehicles, reducing electricity loss in the distribution network, water-efficient irri- IRAN, ISLAMIC Key conditions and gation, and transition to a more resilient crop mix. Energy and water price rational- challenges REPUBLIC ization, complemented by adequate social protection measures would also help re- Iran’s economy is on track to grow for the duce wasteful consumption and moderate fifth consecutive year, buoyed by the re- the growing supply-demand mismatch. Table 1 2023 covery in the oil sector and the positive Reducing the structural fiscal deficit Population, million 89.2 spillover to the rest of the economy. How- through rightsizing and improved targeting GDP, current US$ billion 478.4 ever, oil GDP growth has started to slow of transfers can help reverse the inflationary GDP per capita, current US$ 5364.7 in 2024/25 (the Iranian calendar year end- cycle and free up fiscal space for pro-growth Upper middle-income poverty rate ($6.85) a 21.9 ing March 20) with easing global de- expenditures. In the medium term, struc- a 34.8 mand. Despite a recent acceleration, non- tural reforms aimed at improving the busi- Gini index b oil growth also remains constrained in ness environment by minimizing price in- School enrollment, primary (% gross) 104.5 b the medium term due to economic sanc- terventions and other market distortions Life expectancy at birth, years 74.6 tions and consecutive years of stagnating can help foster private sector growth, in- Total GHG emissions (mtCO2e) 991.9 capital stock. The labor market is recover- centivize investment, and create jobs. Source: WDI, Macro Poverty Outlook, and official data. ing, but challenges persist, with only 37.9 a/ Most recent value (2022), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy percent of the working-age population em- (2022). ployed and just 12.1 percent of women in the workforce in 2023/24. A gradually ag- Recent developments ing population and human capital flight pose additional constraints to economic In 2023/24, GDP growth accelerated to 5 growth and fiscal stability. percent, driven by the oil sector and ser- Discretionaryfiscalpolicy,includingviacash vices. Oil GDP surged by 14.7 percent Economic growth is moderating after the transfers, has supported vulnerable house- due to tighter global oil markets and im- rebound in the oil sector in 2023, but re- holdsandaconsumption-ledgrowthbuthas proved crude oil export volumes, partly cent growth in the non-oil sector has re- also added to the budget deficit and exacer- facilitated through price discounts. The duced unemployment to a record low and bated inflation and procyclical fiscal policy. non-oil sector grew by 3.6 percent, led These fiscal pressures have prompted plans by services. Economic activity has con- tighter monetary policy has aided a decel- foracontractionarybudgetin2024/25. tinued upward in 2024/25 with employ- eration in inflation. The outlook remains A comprehensive and well-sequenced ment increasing by 1.8 percent in Q1-24/ subject to significant risks, including a package of reforms is needed to put the 25 (April-June) year-over-year (Y-o-Y). potential expansion of the conflict in the economy on a more sustainable path. Re- While employment growth helped reduce forms need to prioritize the urgent chal- unemployment to 7.7 percent, more jobs Middle East, global oil demand weaken- lenge of energy and water shortages are needed to boost labor force participa- ing, and the impact of climate change. through a combination of demand and sup- tion, which remained low at 41.2 percent, ply management such as upgrading to ener- with only 14.3 percent of working age gy-efficient machinery and transportation women participating in the workforce. FIGURE 1 Islamic Republic of Iran / Real GDP growth and FIGURE 2 Islamic Republic of Iran / Selected labor supply-side contributions to real GDP growth market indicators Percent, percentage points Percent Percent 6 42 10 4 41 9 40 2 8 39 0 7 38 -2 6 37 -4 36 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -6 2021/22 2022/23 2023/24 2024/25 2017/18 2019/20 2021/22 2023/24 2025/26f Labor force participation rate (lhs) Oil Agriculture Industry Employment - Population ratio (lhs) Services Net taxes GDP growth Unemployment rate (rhs) Sources: Central Bank of Iran and World Bank staff calculations. Sources: Statistical Center of Iran and World Bank staff calculations. MPO 154 Oct 24 Inflation decelerated in the first five GDP in 9M-23/24. External account pres- to weigh on real sector growth, given that months of 2024/25 (5M-24/25) with head- sures were further exacerbated by a capital 90 percent of firms rely on the banking line and core inflation reaching 31.6 per- account deficit of US$15.3 billion, marking system for financing. cent and 34.7 percent (Y-o-Y) in August the seventh consecutive year of net capital Several downside risks to the economic 2024, respectively, down by 23.9 and 12.2 outflows. Trade dynamics improved in outlook are present, including geopolitical percentage points from the recent peak in 5M-24/25 (April-August 2024), with non- tensions. More severe water and energy April 2023. Price pressures eased due to oil exports and imports growing by 10 per- shortages, in part due to climate change, lower global commodity prices, moderat- cent and 5.5 percent (Y-o-Y), respectively, would weigh on growth and livelihoods. ing inflationary expectations, and tighter leading to a 13 percent reduction in the Further sanctions and their stricter en- monetary policy, including restrictions on non-oil trade deficit. forcement could disrupt trade and reignite the growth in banks’ balance sheets, inflationary pressures. A global slow- stricter reserve requirements for riskier down, notably in China—Iran’s key trad- banks, and higher interbank interest rates. ing partner—would also negatively impact Government finances in 2023/24 were con- Outlook trade and growth. On the upside, signifi- strained as oil revenues fell short of cant sanctions relief or a favorable interim planned targets. Despite the realization of GDP growth is projected to moderate in agreement as part of the nuclear negotia- planned tax revenues, the budget deficit the medium term. Growth in 2024/25 is ex- tions could spur a new growth momentum increased by 0.6 percentage points (Y-o-Y) pected to ease due to tighter fiscal and and curtail economic uncertainties. to an estimated 3.4 percent of GDP. This monetary policy and the transitory effect The pace of poverty reduction is project- deficit was further exacerbated by sig- of the oil-based rebound in 2023/24, influ- ed to slow considerably as the bottom nificant off-budget expenditures, includ- enced by global demand slowdown. Non- 20 percent of households are expected to ing cash transfers from the Targeted Sub- oil growth is forecast to be constrained by benefit the least from the recent econom- sidies Program. The 2024/25 budget law ongoing sanctions, energy shortages, and ic expansion. Poverty is projected to de- adopts a more prudent fiscal stance with economic uncertainty. Extreme weather crease only slightly, from 21.9 percent in restrained expenditure growth and conser- events and water scarcity will impact the 2022/23 to 20 percent in 2023/24 and 19 vative revenue projections. As budget ex- agriculture sector, disproportionately af- percent in 2024/25. Poor households are penditures are expected to grow by 21 per- fecting the poor. The current account bal- disproportionally rural, un-educated and cent in nominal terms, which is below the ance is forecast to moderate in line with female-headed, and historically have not anticipated inflation rate, this seems to sig- a projected decline in oil prices in 2025/ benefited from periods of economic ex- nal contractionary policy. 26 and 2026/27. Inflation is expected to pansion. More narrowly targeted assis- Lower export prices and rising imports led decelerate but remain elevated, adversely tance, coupled with measures to reduce to an almost halving of the current account impacting low-income households. their vulnerability, would help accelerate surplus to US$6.3 billion or 1.6 percent of Tighter monetary policy is also expected poverty reduction. TABLE 2 Islamic Republic of Iran / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021/22 2022/23 2023/24 2024/25e 2025/26f 2026/27f Real GDP growth, at constant market prices 4.7 3.8 5.0 3.7 2.9 2.4 Private consumption 3.9 8.7 4.1 3.1 2.5 2.1 Government consumption 8.3 -3.6 -1.7 -0.2 1.7 2.0 Gross fixed capital investment 0.0 6.7 7.2 5.8 5.0 4.2 Exports, goods and services 5.2 8.2 17.1 7.9 4.2 3.1 Imports, goods and services 24.1 7.5 3.0 2.8 3.0 3.0 Real GDP growth, at constant factor prices 4.4 4.0 4.5 3.7 2.9 2.4 Agriculture -2.6 1.1 0.2 1.3 1.1 0.8 Industry 3.2 7.4 7.1 4.7 3.7 3.0 Services 6.5 2.7 3.8 3.4 2.7 2.3 Inflation (consumer price index) 46.2 46.5 52.3 31.9 30.0 28.0 Current account balance (% of GDP) 3.1 3.4 2.0 1.2 1.0 0.8 Fiscal balance (% of GDP) -3.2 -2.8 -3.4 -2.1 -2.5 -2.6 Revenues (% of GDP) 11.0 11.0 10.4 10.7 10.7 10.8 Gross public debt (% of GDP) 42.4 30.1 29.5 30.1 31.5 33.6 Primary balance (% of GDP) -2.6 -2.4 -3.0 -1.7 -2.1 -2.1 a,b International poverty rate ($2.15 in 2017 PPP) 0.7 0.5 0.4 0.4 0.4 0.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 5.0 3.8 3.3 3.1 2.9 2.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 24.8 21.9 20.0 19.0 18.2 17.6 GHG emissions growth (mtCO2e) 4.8 1.7 2.5 1.9 1.7 1.7 Energy related GHG emissions (% of total) 68.0 67.8 67.9 67.6 67.2 66.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2019-HEIS and 2022-HEIS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using annualized elasticity (2019-2022) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 155 Oct 24 of recent infrastructure projects in the en- ergy and transport sectors can help create REPUBLIC OF Key conditions and jobs, address key growth bottlenecks, and lay the foundations for a more diversified challenges IRAQ economy. By anchoring these projects in a well-designed medium-term plan, such as Iraq’s oil-dependent economy is contract- elaboration in the National Development ing for a second consecutive year due to Plan (2024-2029) with prioritization, coor- Table 1 2023 constrained crude oil production. The con- dination, and accurate budgeting, these Population, million 45.5 traction in GDP reflects the OPEC+ pro- projects can achieve more optimal out- GDP, current US$ billion 250.8 duction agreement from June 2024 that ex- comes. Implementation can also be im- GDP per capita, current US$ 5512.5 tends initial production cuts until proved with greater oversight mechanisms Lower middle-income poverty rate ($3.65) a 2.4 end-2025 and prolongs additional volun- to ensure minimizing inefficiencies. Cru- a 24.7 tary cuts of 2.2 mbpd by selected countries, cially, these measures need to be further Upper middle-income poverty rate ($6.85) a including Iraq, until end-November 2024. complemented with policy reforms in key National poverty rate 18.9 a Oil exports through the oil pipeline in the areas including the harmonization of the Gini index 29.5 Kurdistan Region of Iraq have further re- pension system, rightsizing the wage bill, b 103.7 School enrollment, primary (% gross) mained on hold since late March 2023. Ex- improving targeting of social transfers, b 71.3 Life expectancy at birth, years pansionary fiscal policy has buoyed non- and policies that enable women to partic- Total GHG emissions (mtCO2e) 246.7 oil sector activity which has partially offset ipate in the labor force. Banking sector re- Source: WDI, Macro Poverty Outlook, and official data. the contraction in the oil sector. Looser fis- forms to improve credit intermediation a/ Most recent value (2012), 2017 PPPs. cal policy and dependence on volatile oil and streamlining legal and administrative b/ Most recent WDI value (2022). revenue have raised vulnerabilities to ex- procedures for business registration and ternal shocks, amid the risks of spillover operations would create a more enabling from the recent conflict in the Middle East. business environment for private sector- The 2024 budget law introduces further led growth and much needed jobs. As the economy is stagnating due to ex- fiscal easing while the high wage bill tended OPEC+ production quotas, an ex- and large social transfers of the 2023-2025 budget law have been maintained; this pansionary fiscal stance and strong im- increases fiscal risks and exposure to oil Recent developments ports are expected to transform the sur- sector developments. The lack of automat- pluses of fiscal and external accounts into ic adjustment mechanisms, such as fiscal The oil-driven GDP contraction of 2023 has deficits. Recent large infrastructure pro- rules, exposes public finances and the started to moderate in 2024. New OPEC+ jects could help overcome some growth economy to significant fluctuations. The production agreements, including Iraq’s potential spillovers from a widening con- voluntary cuts and the halting of oil ex- bottlenecks. Risks to the outlook have in- flict in the Middle East could worsen pre- ports from the northern oil pipeline led creased with heightened tensions in the existing security and welfare vulnerabili- GDP and oil GDP to contract by 2.9 per- Middle East which are exacerbated by the ties. Implementing deeper reforms would cent and 7.7 percent, respectively, in 2023. economy’s overreliance on oil. be key for economic diversification and The 5.6 percent y/y bounce back in the addressing structural challenges. A series non-oil sector partly offset the full impact FIGURE 1 Republic of Iraq / Real GDP growth and supply- FIGURE 2 Republic of Iraq / Fiscal account outlook side contributions to real GDP growth Percent, percentage points Percent of GDP US$ per barrel 10 50 100 40 30 80 5 20 10 60 0 0 -10 40 -5 -20 -30 20 Oil Agriculture -40 -10 Non-oil industry Services -50 0 2021 2022 2023 2024 2025 2026 GDP growth Oil revenues (lhs) Non-Oil revenues (lhs) -15 Wages and pension (lhs) Other expenditures (lhs) 2020 2021 2022 2023 2024 2025 2026 Fiscal balance (lhs) Oil price (rhs) Sources: Iraq’s Authority of Statistics and Geographic Information Systems Sources: Ministry of Finance, Ministry of Oil, and World Bank staff calculations. (ASGIS), Central Bank of Iraq, and World Bank staff calculations. MPO 156 Oct 24 of the oil sector-induced contraction but y/y rise in tax revenues until early August lower execution relative to the planned was driven by public services growth and 2024, a significant improvement in non-oil budget, the fiscal easing is projected to improved agricultural production. These revenue mobilization. Total expenditures lead to a widening fiscal deficit and an up- growth dynamics have continued into the rose by 20.3 percent y/y but remained sig- ward trend in the debt-to-GDP ratio. Ris- first quarter of 2024 (Q1-24) where real nificantly below the planned target. As a ing imports are expected to push the cur- GDP contracted by 2.4 percent year-on- result, the fiscal account recorded a sur- rent account to a sustained deficit over the year (y/y). Inflationary pressures have plus of 3.6 percent of GDP (on a cash ba- medium term. The recovery in economic eased due to lower international food sis). The current account also registered a growth in tandem with increased fiscal prices, an upward revaluation of the dinar deficit of 0.6 percent of GDP in Q1-24 given pressures is not expected to translate into in February 2023, and tighter monetary a surge in imports following the fiscal ex- sustained poverty reduction and equitable policy. Recent Central Bank of Iraq (CBI) pansion. These trade dynamics reversed outcomes. Disparities in resource distribu- measures, including raising the policy rate the recent accumulation in official re- tion continue to persist, with poverty and by 3.5 percentage points to 7.5 percent, serves, although reserves have remained limited access to services concentrated in helped curb inflationary pressures. As a re- sizeable at US$98.5 billion or 10.7 months rural and southern governorates of Iraq. sult, headline and core inflation have eased of imports in Q1-24. The country is gradually turning a corner to 2 and 2.4 percent y/y, respectively, in from a legacy of fragility and recent con- the first half of 2024 (H1-24). Securing FX flict towards reconstruction and stability, supply and improved due diligence in CBI while risks to the outlook remain. Domes- auctions helped reduce the gap between Outlook tically, the upcoming elections (planned the official rate to 13 percent in June 2024 for October 2025) could soften the drive (from over 23 percent in November 2023); Economic prospects in the medium-term for implementing reforms, while a return the gap, however, remains elevated com- are expected to be closely intertwined of political tensions and factionalism could pared to pre-November 2023 levels. Fluc- with global oil demand dynamics and the set back ongoing infrastructure projects tuations in food prices, driven by global government’s discretionary fiscal policy and the economy. Domestic revenue-shar- supply-chain and climate shocks, highlight stance. Over 2024-2026, real GDP growth ing disputes between the federal govern- the importance of maintaining nutritional is expected to recover to an average of ment and the Kurdistan Regional Govern- adequacy and eliminating poverty. Higher 2.9 percent, driven by the oil sector and ment (KRG) could destabilize the KRG revenues resulted in a fiscal surplus in under the assumption of compliance with economy and could put on hold collabora- H1-24 while rising imports pushed the cur- the September 2024 OPEC+ agreement in tion on key issues including customs inte- rent account into a deficit. Government September 2024 until end-2025, and grow- gration. External shocks such as the ongo- revenues, 89 percent coming from oil rev- ing production capacity in 2026. Non-oil ing conflict in the Middle East and a sharp- enues, increased by 21.4 percent y/y in GDP is forecast to ease with the moder- er slowdown in the global economy and H1-24 due to higher oil prices and mar- ation in government expenditure growth oil demand could significantly impact the ginally higher export volumes. Efforts on and other growth bottlenecks. Inflation is economic outlook. Climate change shocks customs automation and streamlining tax expected to remain in check partly due to further pose significant risks to the agri- procedure have contributed to a 22 percent subsidized imports. Even at substantially culture sector and the rural poor. TABLE 2 Republic of Iraq / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -0.9 4.7 -2.9 -0.9 4.0 5.7 Private consumption 2.6 2.7 6.0 9.5 2.1 4.0 Government consumption 4.6 15.1 7.6 12.2 1.1 2.0 Gross fixed capital investment 32.2 3.3 13.8 6.8 3.6 4.0 Exports, goods and services -15.0 7.2 -7.7 -4.1 4.8 7.8 Imports, goods and services 7.7 27.9 11.3 16.0 1.2 3.6 Real GDP growth, at constant factor prices 1.5 7.6 -2.9 -0.9 4.0 5.7 Agriculture -20.6 -33.3 28.9 5.0 3.0 2.0 Industry -0.1 12.7 -6.3 -3.4 4.6 7.3 Services 8.4 2.7 1.9 3.5 3.0 3.2 Inflation (consumer price index) 6.0 5.0 4.4 3.7 3.3 3.1 a Current account balance (% of GDP) 11.9 19.1 10.4 -1.5 -4.7 -5.3 a Net foreign direct investment inflow (% of GDP) -1.3 -0.8 -2.3 -2.2 -2.2 -2.2 a Fiscal balance (% of GDP) 4.0 12.7 0.9 -5.6 -8.4 -8.7 Revenues (% of GDP) 35.9 38.9 41.1 39.3 37.1 37.0 a Debt (% of GDP) 58.0 39.5 45.5 50.4 57.3 62.9 a Primary balance (% of GDP) 4.4 13.2 1.8 -4.5 -7.0 -7.1 GHG emissions growth (mtCO2e) 2.0 -6.7 4.5 4.0 5.0 6.1 Energy related GHG emissions (% of total) 49.8 48.1 47.3 47.2 47.5 48.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Share of factor cost GDP. MPO 157 Oct 24 productivity, in turn, suppresses the real income growth of households. JORDAN Key conditions and Jordan's limited natural resources, partic- ularly water scarcity, present acute chal- challenges lenges, which have been exacerbated by a population that has doubled in the past 20 Table 1 2023 Prudent fiscal and monetary policies have years including due to refugee influx. The Population, million 11.3 allowed Jordan to maintain resilience and Government of Jordan has begun imple- GDP, current US$ billion 51.0 stability despite a volatile regional and ex- menting a multi-year plan to reduce water GDP per capita, current US$ 4502.0 ternal environment. From 1992 to 2003, losses, expand water supply, and reform a 15.7 National poverty rate Jordan's economy grew at an average an- tariffs to address Jordan’s high levels of b 87.6 nual rate of 5.1 percent, accelerating to 7.5 non-revenue water losses, overconsump- School enrollment, primary (% gross) b 74.2 percent between 2004 and 2009. However, tion, and to promote water sector efficien- Life expectancy at birth, years Total GHG emissions (mtCO2e) 36.7 external shocks, including the collapse of cy and sustainability. Climate change is oil prices, the war in Iraq, the Arab projected to further affect per capita wa- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2017/8). Spring, the Syrian conflict and subse- ter availability, leading to broader detri- b/ Most recent WDI value (2022). quent refugee crisis, the COVID-19 pan- mental effects. The increasing frequency demic, the repercussions of Russia’s in- of natural hazards, coupled with concerns vasion of Ukraine, and the ongoing con- over food and energy security, under- flict in the Middle East, have adversely scores the urgent need to enhance do- Jordan has maintained macroeconomic impacted the economy, leading to in- mestic water, energy, and food security creased risks and logistical disruptions. through key policy reforms. stability despite regional turmoil. Growth These challenges, coupled with domestic According to estimates from 2017-2018, slowed to 2.0 percent in the first quarter constraints on investment and exports, approximately one-third of Jordan's pop- of 2024, while headline inflation averaged have suppressed growth, with the econo- ulation is at risk of falling into poverty 1.7 percent over the first seven months. my expanding by only 2.2 percent between if exposed to adverse shocks. The refugee 2012 and 2022. In response, the govern- population remains particularly vulnera- The fiscal deficit widened slightly due to ment launched the Economic Moderniza- ble, with the latest estimates from the higher interest payments and reduced tax tion Vision (EMV) in 2022, aiming to im- World Bank and UNHCR indicating that revenue from imports and corporate in- prove economic performance, enhance the poverty rate among refugees has in- come. Growth is projected to average 2.6 quality of life, and strengthen government creased from 57 percent in 2021 to 67 percent over the medium term. To reduce effectiveness and accountability. percent in 2023. Prolonged periods of low growth have poverty and promote shared prosperity, adversely impacted job creation, straining Jordan needs to enhance productivity, fos- the labor market where employment op- ter investment, and encourage private portunities are scarce amid a rapidly Recent developments sector-led and export-driven growth. growing population. The limited capacity of the private sector to generate jobs, The impact on economic growth from combined with segmented labor markets, the ongoing conflict in the Middle East high levels of informality, and low labor has been relatively contained, with the FIGURE 1 Jordan / Tourist arrivals have rebounded to pre- FIGURE 2 Jordan / Fiscal consolidation slowed slightly in the conflict average level first half of 2024, impacted by the conflict Index, avg Jan-Sep 2023=100 Percent of full year GDP 130 1 Overnight 120 Same Day 0 110 100 -1 90 -2 80 70 -3 60 -4 50 6M-2020 6M-2021 6M-2022 6M-2023 6M-2024 Jan-Sep-23 Nov-23 Jan-24 Mar-24 May-24 Jul-24 Primary Balance, excl. grants Overall Balance Sources: Ministry of Tourism and Antiquities and World Bank staff calculations. Sources: Ministry of Finance and World Bank staff calculations. MPO 158 Oct 24 economy expanding by 2.0 percent in the participation has surpassed 15 percent to elevated interest payments. Persistent first quarter of 2024, down from 3.0 per- since Q1-2019. fiscal pressures from the water and elec- cent in the same quarter of 2023 and 2.3 The central government's fiscal deficit tricity sectors are likely to keep unconsoli- percent in the fourth quarter of 2023. The widened by 10.3 percent year-on-year in dated general government debt elevated in slowdown was driven by reduced contri- the first half of 2024, driven by higher in- the short to medium term, while consoli- butions from sectors more exposed to the terest payments and lower tax revenues dated debt is projected to decrease due to conflict and trade disruptions in the Red from imports and corporates income. The surpluses in the Social Security Investment Sea. Transport, communication, manufac- conflict’s impact on trade through Aqaba Fund. The government has also committed turing, and tourism were particularly af- port reduced tax collections, as the Gov- to expanding social protection through the fected, with tourism experiencing a 7.2 ernment granted temporary exemptions National Aid Fund. percent annual decline in arrivals from Oc- on customs duties and sales taxes. Howev- The current account deficit is expected to tober 2023 to July 2024. However, by July er, stable primary expenditure and reduced widen in 2024, driven by reduced tourism 2024, tourist arrivals recovered to pre-con- capital spending led to the highest primary receipts and declining international phos- flict levels, largely due to increased visitors surplus (excluding grants) since 2008. phates prices, but it should gradually nar- from Gulf Cooperation Council countries. row as imports are contained and foreign Inflationary pressures eased in the first tourist arrivals recover. The external sec- seven months of 2024, with headline in- tor outlook remains sensitive to the on- flation falling to 1.7 percent, from 2.7 per- Outlook going Middle East conflict, posing sig- cent in 2023. The Central Bank of Jordan nificant risks to Jordan's economy and maintained its policy rate at 7.25 percent, The economy is expected to grow by 2.4 adding uncertainty to an otherwise following a cumulative increase of 525 ba- percent in 2024, with an average growth broadly positive outlook. sis points since March 2022. The real ef- of 2.6 percent expected over the medium To reduce poverty and promote shared fective exchange rate appreciated in the term. Inflation is projected to stay con- prosperity, focus should be on develop- first five months of 2024, driven by the tained, supported by the lagged effects of ing sectors that support inclusive, private US dollar's strength. monetary policy tightening, with annual sector-driven job creation. Investing in Efforts to expand economic opportunities headline inflation at 2.0 percent in 2024 green infrastructure is crucial for securing have shown results, albeit from a low base. and 2.1 percent in 2025, stabilizing at 2.4 water and energy resources while creat- The Department of Statistics reported that percent thereafter. ing employment opportunities for high- 34.1 percent of the working-age popula- Fiscal consolidation is anticipated to and low-skilled workers. Maintaining tion was economically active in the progress, with revenue-enhancing mea- macroeconomic stability and effective debt Q1-2024, up from 33.1 percent during the sures and potential monetary easing bol- management is essential for sustainable same period last year. Women's labor force stering domestic revenues. The primary growth and resilience. Additionally, a ro- participation rose by almost two percent- fiscal deficit is expected to narrow in 2024, bust safety net is necessary to protect the age points, from 13.7 percent to 15.5 per- shifting to a small surplus by 2025, al- poorest and most vulnerable populations cent, marking the first time that female though the overall deficit may widen due from potential economic shocks. TABLE 2 Jordan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.7 2.6 2.7 2.4 2.6 2.6 Real GDP growth, at constant factor prices 3.7 3.0 2.9 2.4 2.7 2.7 Agriculture 6.6 3.9 5.9 3.8 2.4 2.4 Industry 2.7 4.4 3.5 3.0 2.5 2.4 Services 4.0 2.3 2.4 2.0 2.8 2.8 Inflation (consumer price index) 1.3 4.2 2.1 2.0 2.2 2.4 Current account balance (% of GDP) -8.0 -7.8 -3.7 -4.8 -4.6 -4.3 Net foreign direct investment inflow (% of GDP) 1.3 2.6 1.5 1.4 1.6 1.9 a Fiscal balance (% of GDP) -6.2 -5.6 -5.1 -5.3 -5.0 -4.6 Revenues (% of GDP) 24.7 25.7 25.3 25.9 26.2 26.5 a Expenditures (% of GDP) 30.9 31.4 30.4 31.2 31.2 31.1 b Consolidated Debt (% of GDP) 87.5 88.6 89.2 89.1 88.4 87.1 b Unconsolidated Debt (% of GDP) 108.8 111.2 113.8 113.9 114.9 115.0 a Primary balance (% of GDP) -1.9 -1.5 -0.4 -0.1 0.4 0.9 GHG emissions growth (mtCO2e) 3.8 3.1 0.8 0.9 1.8 2.0 Energy related GHG emissions (% of total) 59.1 58.5 57.2 57.1 56.6 56.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Including the Adjustment on receivables and payables (use of cash) as per IMF Country Report No. 23/49. b/ 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. MPO 159 Oct 24 renewable energy. Although favorable oil receipts may provide short-term fiscal relief. KUWAIT Key conditions and challenges Table 1 2023 Recent developments Kuwait's long-term economic outlook re- Population, million 4.3 mains heavily reliant on hydrocarbon Economic activity contracted moderately, GDP, current US$ billion 149.9 revenues. While the Kuwait Investment with GDP declining by 2.7 percent year- GDP per capita, current US$ 34770.0 Authority’s (KIA) substantial foreign as- on-year in Q1-2024, following a 4.4 percent a 101.9 School enrollment, primary (% gross) sets safeguard macroeconomic stability, contraction in the previous quarter. The oil a 80.3 they are insufficient to fully mitigate the sector has further contracted by 9.8 percent Life expectancy at birth, years Total GHG emissions (mtCO2e) 155.0 impact of global oil market volatility and year-on-year, compared to a 6.8 percent Source: WDI, Macro Poverty Outlook, and official data. the expected decline in long-term oil de- decline in Q4-2023, largely due to OPEC+ a/ WDI for School enrollment (2015); Life expectancy mand. Key challenges include the risks production cuts implemented in January (2022). from fluctuating oil production and 2024. In contrast, the non-oil sector demon- prices, potential global economic slow- strated a robust rebound, growing at 4.7 down, and increasing climate-related percent in Q1-2024 after a contraction of As one of the world’s smallest yet richest shocks. Historically, frequent governmen- 2.3 percent in the previous quarter driven countries, a comprehensive fiscal and eco- tal changes and tensions between by recoveries in key sectors such as manu- Kuwait’s executive and legislative branch- facturing, transport, and services. The S&P nomic reform is necessary to support sus- es weighed on the investment environ- Global Kuwait PMI indicates improve- tainable growth and address structural ment and hindered the reform process. ment in non-oil private-sector activities, challenges. With oil and gas comprising With the appointment of a new govern- reaching 52.2 in Q2-2024, up from an aver- over 90 percent of exports and government ment in May 2024, resolving the political age of 50.8 in 2023, driven by increases in revenue, Kuwait’s economy is lagging in gridlock will be crucial for advancing eco- output and new orders. nomic diversification and reform efforts. Oil revenue fluctuations also influenced diversification and FDI attraction. A fur- Kuwait’s government is navigating those the fiscal position, with the deficit reaching ther moderation in economic activity is an- challenges amid oil receipts fluctuations 1.56 billion dinars in March 2024 (12.6 per- ticipated in 2024, with stabilization expect- and increasing expenditures, with ongo- cent of Q1 2024 GDP), highlighting the fis- ed over the medium term. OPEC+ produc- ing non-oil revenue generation playing a cal challenges linked to reduced oil re- critical role. Prudent fiscal management ceipts. Rising government expenditures tion cuts, weaker global conditions, and remains crucial in navigating the uncer- across various sectors have also con- subdued domestic demand weigh on tainties of the global economic environ- tributed to the deterioration. The reliance growth. Key risks to the outlook include ment, and in achieving a resilient and on oil revenues remains a key vulnerability global uncertainties, oil market volatility, diversified economic structure. Environ- in the fiscal framework, exposing it to ex- and the ongoing political deliberations on mental priorities, including water re- ternal shocks. Proceeding with the intro- source management and energy efficien- duction of a Value Added Tax (VAT), in critical reforms, where progress is antici- cy, are being addressed through invest- line with GCC practices, alongside other pated as efforts toward resolution continue. ments in sustainable infrastructure and fiscal measures, is essential to broadening FIGURE 1 Kuwait / Annual real GDP growth FIGURE 2 Kuwait / Public finances Percent change Percent of GDP 15 70 Oil GDP 60 12 Non-Oil GDP GDP 50 9 40 6 30 3 20 10 0 0 -3 -10 -6 2021 2022 2023 2024 2025 2026 2021 2022 2023 2024 2025 2026 Expenditure Revenue Fiscal Balance Sources: Kuwait CSB, IMF WEO, and World Bank staff estimates. Sources: World Bank and IMF WEO. Notes: Exclude investment income and FGF transfers. MPO 160 Oct 24 the revenue base and addressing current projected at 2.1 percent overall, and at 0.9 expected to keep credit growth subdued, fiscal risks. Structural reforms, particularly percent among men and 5.8 percent while the CBK’s robust regulatory frame- in public financial management and pri- among women. Youth are projected to face work will safeguard financial stability vate sector development, are crucial to re- the highest unemployment rates at 9.1 per- and ensure the persistence of financial duce the dependence on hydrocarbons. cent among men ages 15-24 and 29.8 per- sector resilience within evolving global Inflationary pressures are easing to 2.8 per- cent among their female counterparts. monetary conditions. Inflation is expected cent In June 2024 down from 3.6 percent in The external sector continues to face pres- to moderate to an average of 3.1 percent 2023, reflecting the impact of tighter mon- sures, with, the trade balance contracted in 2024, supported by prudent monetary etary policy. The deceleration is further by 12 percent year-on-year in Q1 2024. policy measures and moderate further to supported by a slower pace of increases in Consequently, the current account surplus 2.7 and 2.5 percent in 2025 and 2026 re- food and housing prices, marking the low- continued to moderate, following its de- spectively. Credit growth is expected to est rate in the past three years. cline to 32.9 percent of GDP in the previous remain subdued, reflecting these policies, Sound macroprudential policies and strong year. In contrast, refined fuel production is while the CBK's strong regulatory frame- financial sector oversight by the Central increasing, supported by the full commis- work will continue to uphold financial Bank of Kuwait (CBK) have ensured contin- sioning of the Al-Zour refinery, which be- stability and reinforce the resilience of ued financial stability. The CBK maintains came fully operational in late 2023. the financial sector amid shifting global a discount rate of 4.25 percent, ensuring fi- monetary conditions. nancial sector stability through strong cap- The fiscal deficit is estimated to reach 5.8 ital and liquidity buffers. Nonperforming percent of GDP in 2024 and continue to loans remain low at 1.7 percent as of Q2 Outlook widen over the medium term as current 2024, reflecting sound banking sector fun- policies lead to an expansionary fiscal damentals. Reserves remained at a com- In 2024, GDP is projected to contract by 1 stance. The reliance on oil as the primary fortable level, equivalent to 4.6 months of percent, reflecting a 2.4 percent reduction revenue source challenges fiscal pre- imports as of Q1 2024. in oil production due to extended OPEC+ dictability. Targeted policies to diversify The labor market posted a strong perfor- output cuts, with a gradual phase-out ex- the economic base and increase non-oil mance in 2023 relative to 2022: total em- pected after September. With the gradual revenues are essential for strengthening ployment increased by 9 percent, corre- recovery of oil output and stable external fiscal resilience. Long-term fiscal stability sponding to a net addition of about 173,000 conditions, overall GDP is projected to depends on the timely and effective im- employed. The positive trends are driven grow by 2.5 percent in 2025 and 2.7 percent plementation of these reforms to mitigate by the employment of non-Kuwaiti nation- in 2026. The non-oil sector is expected to risks from oil price volatility. als in the private sector which posted an grow by 0.4 percent, underpinned by ris- In 2024, the current account surplus is pro- employment growth by almost 17 percent. ing domestic demand and supported by jected to reach 21.6 percent of GDP, pri- By contrast, Kuwaiti nationals were largely infrastructure development and (assumed marily affected by lower oil exports and is absorbed by the government sector, implementation of) structural reforms, expected to further narrow to 17.8 percent whereas their employment declined in the while risks associated with power supply of GDP by 2026. Oil production is expected private sector, particularly among Kuwaiti disruptions remain. to decline through the remainder of 2024 women (-2.5 percent). The ILO projects a Inflation is projected to further moderate due to the extension of OPEC+ production virtually stable employment-to-population to an average of 3.1 percent in 2024 cuts until end-September, but a recovery ratio and unemployment rate in 2024 rel- helped by continued monetary policy is anticipated from 2025 as these cuts are ative to 2023. The unemployment rate is tightening. Monetary tightening is also gradually lifted. TABLE 2 Kuwait / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.8 6.3 -3.6 -1.0 2.5 2.7 Private consumption 3.2 1.8 1.1 1.8 2.5 2.4 Government consumption 2.9 3.9 1.2 1.5 2.4 2.5 Gross fixed capital investment 3.9 2.2 0.6 2.9 2.6 2.6 Exports, goods and services 2.2 12.0 -3.6 -2.5 2.9 3.0 Imports, goods and services 5.7 6.3 5.7 2.8 2.9 2.6 Real GDP growth, at constant factor prices 1.8 6.3 -3.6 -1.0 2.5 2.7 Agriculture 0.5 1.1 0.1 0.5 1.2 1.2 Industry 2.2 7.9 0.1 0.7 2.9 2.6 Services 1.4 4.2 -8.8 -3.6 2.1 3.0 Inflation (consumer price index) 3.4 4.0 3.6 3.1 2.7 2.5 Current account balance (% of GDP) 23.9 32.4 26.2 21.6 20.2 17.8 a Fiscal balance (% of GDP) -7.2 12.5 -4.8 -5.8 -8.1 -7.9 GHG emissions growth (mtCO2e) 6.4 3.9 0.4 3.4 6.2 6.8 Energy related GHG emissions (% of total) 66.7 66.5 64.8 64.1 64.3 64.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Based on fiscal year cycle (April to March 31). Fiscal balances exclude investment income and FGF transfers. MPO 161 Oct 24 Lebanon, and most of Mount Lebanon). The poverty gap—measuring how far the LEBANON Key conditions and poor are below the poverty line—has also widened. Since 2019, rampant inflation and challenges a depreciating currency have severely erod- ed purchasing power, leading to increased Table 1 2023 Military confrontation between Lebanon food insecurity and changing consumption Population, million 5.8 and Israel has been steadily escalating in habits. Income inequality has deepened, GDP, current US$ billion 20.1 South Lebanon since October 2023, result- with wealthier households often shielded GDP per capita, current US$ 3477.7 ing in hundreds of deaths and thousands by dollarized incomes, while poorer fam- a 27.4 National poverty rate of injuries. By August 2024, 102,523 in- ilies struggle to cope by cutting expenses, a 31.8 dividuals were displaced from Southern particularly on food, and relying on sav- Gini index b 74.4 Lebanon. Tens of thousands of house- ings, borrowing, and external assistance. Life expectancy at birth, years Total GHG emissions (mtCO2e) 23.2 holds in South Lebanon have lost their livelihoods, and hundreds of houses have Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2011). been destroyed amid massive destruction b/ Most recent WDI value (2022). to local infrastructure. Recent developments The conflict has introduced another shock to Lebanon’s already crisis-ridden econo- The conflict has led to a substantive shock to Since October 2023, and as a direct my. While the economic contraction was tourism receipts in 2023 Q4, following nine spillover of the conflict in the Middle anticipated to bottom out in 2023, follow- months of an upward trajectory, driving an ing five years of sustained sharp contrac- estimated economic contraction of 0.8 per- East, military confrontation on the south- tion totaling 34 percent of real GDP, the cent in 2023. The conflict has caused sig- ern border with Israel has been escalating, conflict and its spillovers have had nega- nificant destruction and internal displace- adding strain to Lebanon's crisis-ridden tive knock-on effects on economic growth ment from South Lebanon and El Nabatieh economy. The conflict has damaged key sec- in 2023, continuing into 2024. The primary governorates, which have weighed on con- channel of impact in 2023 and 2024 H1 has sumption and economic activity. tors like tourism and agriculture, caused been the fall in receipts from tourism ser- The fiscal surplus of 2023 is expected to infrastructure destruction, and triggered a vices due to a sharp decrease in tourist ar- extend into 2024. Increased revenues, re- consumption shock from mass displace- rivals, the main remaining pillar of eco- sulting from the correction of exchange ment, driving a GDP contraction of 0.8 per- nomic growth. The prolonged economic rate mis-valuations for customs and taxes, cent in 2023. Before the significant escala- contraction undermines Lebanon’s and expenditure restraints in part driven prospects for economic recovery, amidst by the lack of a ratified budget in 2023, tion of conflict in September 2024, real continued institutional and political paral- resulted in an estimated fiscal surplus of GDP was projected to contract by 1 per- ysis, and lack of political will for reforms. 0.5 percent in 2023, with revenues and ex- cent in 2024. The ongoing conflict is in- According to the 2024 Lebanon Poverty penditures at 13.7 percent and 13.2 percent flicting a heavy human toll and wide- and Equity Assessment, monetary poverty of GDP, respectively. In addition, mone- among Lebanese households has tripled tary financing of the budget has been halt- spread destruction, leaving its impact on (from 11 percent in 2012 to 33 percent in ed since July 2023, further supporting the Lebanon’s economy severe and uncertain. 2022 across Akkar, Beirut, Bekaa, North overall fiscal and primary surplus. The 2024 FIGURE 1 Lebanon / Exchange rate depreciation drives the FIGURE 2 Lebanon / Inflation of basic items propelled surge in consumer prices overall inflation, hurting the poor and the middle class Index (Aug 2019=100) Contributions to overall inflation in 7M-2024, percent 7,000 75 World Bank average exchange rate 60 6,000 Cunsumer Price Index 45 5,000 30 Currency in circulation 4,000 15 0 3,000 -15 2,000 -30 Headline inflation growth Education 1,000 Owner occupied Food & non-alcoholic beverages Water,electricity,gas,& other fuels Health 0 Transportation Actual rent Clothing & footwear Communication 20 21 22 23 24 19 20 21 22 23 Alcoholic beverages & tobacco Furnishings, household equipment b- b- b- b- b- g- g- g- g- g- Au Au Au Au Au Fe Fe Fe Fe Fe Other Sources: Lebanese authorities and World Bank staff calculations. Sources: Lebanese authorities and World Bank staff calculations. MPO 162 Oct 24 government budget, ratified in February of State-Owned Enterprises, curbed mon- current account deficit slightly decreased 2024, projected a zero fiscal balance with ey supply and the demand for $US. Cen- to 28.1 percent of GDP in 2023. Although revenues and expenditures at 13.6 percent tral bank gross reserves (liquid reserves) the trade-in-services balance remained of GDP (based on World Bank GDP esti- have increased by US$546 million in the positive, its contribution to reducing the mates for 2024). 2024 revenues are expect- first five months of 2024, reaching US$10.2 current account deficit diminished due to ed to exceed estimations of the ratified billion. The increase in liquid reserves has the shock to tourism receipts in 2023 Q4. government budget and reach about 15 been primarily driven by the halt of the That being said, historically weak BOP percent of GDP. This is in part due to bet- Sayrafa platform and monetary financing data and the prevalence of a pervasive ter-than-expected tax collection rates in of the government budget since July 2023, dollarized cash economy are likely to 2024 H1. As expenditures are expected to and BdL purchases of US$ supply from skew official estimates of hard currency remain below collected revenues, a fiscal foreign currency inflows. inflows to Lebanon, potentially overstat- surplus (on a cash basis) of 0.2 percent is Exchange rate stabilization since the sec- ing the current account deficit. projected for 2024. However, the fiscal bal- ond half of 2023 has driven a steady de- ance does not take into account past ac- celeration in monthly inflation. The accel- cumulated arrears (including overdue in- eration of inflation to 221.3 percent in 2023, voices from certain line ministries and was primarily on account of the steep de- Outlook public institutions, arrears owed to bilat- preciation of the LBP in the first half of eral and multilateral organizations, and 2023. Since then, the exchange rate stabi- In 2024, the impact of the ongoing conflict more recently Iraqi fuel import dues). lization has led to a steady decrease in has intensified, marked by escalating mil- The Lebanese pound has been stable at month-to-month inflation, to an average of itary confrontation, widespread destruc- 89,500 LBP/US$ since July 2023, following 1.2 percent between August and December tion, displacement, and shocks to tourism years of rapid depreciation. The stabiliza- 2023 (excluding October which witnessed and consumption. Before the significant tion of the exchange rate is primarily sup- a six-fold increase in the education CPI escalation in September 2024, real GDP ported by higher fiscal revenue from tax- component). Year-on-year inflation has al- was projected to contract by 1 percent. es and fees in LBP cash. Increased fiscal so started to decelerate in 2024, registering However, this escalation, which has result- revenues coupled with the lack of need a double-digit figure for the first time in ed in a severe human toll, further mass dis- for monetary financing of the budget, has March after recording triple-digit figures placement, and substantial physical dam- led to a decrease in currency in circulation since July 2020; annualized inflation has age, is likely to drive a significantly steeper by 31.2 percent in 2023, easing exchange decreased to 35.4 percent in July 2024. contraction that remains difficult to assess. rate pressures. Furthermore, the termina- Despite the ongoing economic crisis and As more components of the CPI basket be- tion of the Sayrafa platform, coupled with sovereign default, Lebanon continued to come increasingly dollarized, and assum- caps on spending by line ministries—de- post a significant current account (CA) ing exchange rate stability is maintained spite such spending being below the deficit in 2023, driven primarily by a trade- for the remainder of 2024, inflation is pro- (monthly) spending ceiling approved in in-goods deficit. Following a dramatic in- jected to decline to double digits, with an the budget—and exchange rate operations crease to 34.6 percent of GDP in 2022, the expected yearly average of 45 percent. TABLE 2 Lebanon / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e Real GDP growth, at constant market prices -7.0 -0.6 -0.8 -1.0 Private consumption 2.1 2.3 0.2 -0.6 Government consumption -76.0 34.9 -18.4 16.6 Gross fixed capital investment -67.6 -88.6 4.5 -31.6 Exports, goods and services 13.1 0.3 -1.1 -3.7 Imports, goods and services -12.2 3.5 -0.3 -0.1 Real GDP growth, at constant factor prices -5.3 -0.6 -0.8 -1.0 Agriculture -7.1 -0.8 -0.2 -1.0 Industry -6.9 -0.6 0.1 -1.0 Services -4.9 -0.6 -1.0 -1.0 Inflation (consumer price index) 150.0 171.2 221.3 45.7 Current account balance (% of GDP) -14.7 -34.6 -28.1 -20.0 Net foreign direct investment inflow (% of GDP) 8.5 2.2 2.9 1.2 Fiscal balance (% of GDP) 0.9 -2.9 0.5 0.2 Revenues (% of GDP) 7.5 6.1 13.7 15.0 Debt (% of GDP) 172.5 179.7 179.7 142.0 Primary balance (% of GDP) 1.8 -2.5 1.4 0.6 GHG emissions growth (mtCO2e) -16.6 -6.1 2.7 -4.8 Energy related GHG emissions (% of total) 68.5 68.6 73.1 72.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 163 Oct 24 and well-functioning Board of Directors. Efforts to prepare a unified 2024 Budget LIBYA Key conditions and for the entire territory stalled. The Libyan economy is driven by the oil challenges and gas sector and remains undiversified with a large public sector. In 2023, the oil Table 1 2023 Libya is embroiled in a political dispute and gas sector represented 60 percent of Population, million 6.9 over the management and governance of GDP, 94 percent of exports, and 97 percent GDP, current US$ billion 45.1 the Central Bank of Libya (CBL). In August of government revenues. The private sec- GDP per capita, current US$ 6544.3 2024, the Presidential Council issued a de- tor is underdeveloped and employs less a 106.9 School enrollment, primary (% gross) cision to change the Governor and renew than 14 percent of the workforce. a 72.2 the Board of Directors which was rejected Social conditions have deteriorated over Life expectancy at birth, years Total GHG emissions (mtCO2e) 99.2 by other political forces. In response to the the past years due to high unemploy- Source: WDI, Macro Poverty Outlook, and official data. heightening tensions, the United Nations ment, income disparities, and poor public a/ WDI for School enrollment (2006); Life expectancy Mission in Libya started to mediate be- infrastructure and services. The unem- (2022). tween the parties in the search for peaceful ployment rate is estimated at 15.3 percent solution to the CBL crisis. (National Labor Force Survey 2022) with On top of its monetary policy functions, higher rates among women and youth, the CBL plays a pivotal role in the coun- estimated at 18.4 and 23.1 percent, respec- try’s oil wealth and fiscal management. It tively. Access to basic services, such as receives the oil revenues from the Nation- water, is becoming more challenging, par- Libya continues to suffer from political al Oil Company and pays the salaries of ticularly in the aftermath of the floods in divisions over the transparency, control, civil servants in the entire territory, which Derna (2023) and Ghat and Tahala (2024), and benefits of the oil wealth. Tensions is controlled by the two parallel govern- and the groundwater upsurge in Zliten. recently escalated over the appointment ments, the Tripoli-based Government of of the Governor and Board of Directors National Unity and the Benghazi-based Government of National Stability. Polit- for the recently unified Central Bank af- ical tensions over the transparency and Recent developments ter efforts to prepare a single Budget sharing of the oil wealth have been com- stalled. A prolonged or escalated crisis mon since 2021 due to the alleged mis- Oil production during the first seven could disrupt oil and gas production appropriation of oil revenues, large fu- months of 2024 hovered around the el imports and contraband to neighbor- same level of the previous year or 1.2 and exports, fuel and food import, ing countries, high public spending on million barrels per day (mbpd). With salary payments, and the security con- wages and energy subsidies, and invest- the closure of major oil fields an- ditions. The key medium-term challenge ment spending in the Eastern part of the nounced by the East-based Government for Libya is to peacefully rebuild and country financed by unauthorized print- of National Stability on August 28 in the diversify the economy. ing of money. Progress was made over wake of the CBL crisis, oil production the past years to reunify the Benghazi plummeted to 0.5 mbpd creating ripples and Tripoli branches of the CBL, but crit- in international oil markets. According icism remained over the absence of a full to the National Oil Corporation, Libya FIGURE 1 Libya / Crude oil production FIGURE 2 Libya / LYD/USD exchange rate in the official and parallel markets bpd, million LYD/USD 1.4 8 1.2 6 1.0 0.8 4 0.6 Oil production 0.4 Official 2 Average (yearly) Parallel 0.2 0.0 0 20 21 22 23 24 0 1 2 3 4 24 0 1 2 3 24 0 1 2 3 2 2 2 2 2 l-2 l-2 l-2 l-2 l-2 l-2 l-2 l-2 n- n- n- n- n- n- n- n- n- n- g- g- Ju Ju Ju Ju Ju Ju Ju Ju Au Au Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Sources: Libyan authorities and World Bank staff calculations. Sources: Libyan authorities and World Bank staff calculations. MPO 164 Oct 24 lost US$120 million of oil receipts dur- same period in 2023 driven by the higher of non-oil GDP is expected to average 1.3 ing the first 3 days of the blockades. demand for foreign exchange fueled by percent during the forecast period driven Oil revenues were already declining prior high public spending, the reported mon- primarily by consumption. As oil output to the CBL crisis due to lower energy ey printing in the East to finance recon- recovers in 2025 and 2026, GDP growth prices. They reached US$10.5 billion in struction projects, and higher fuel imports is anticipated to rebound to 12 percent in January-July 2024 or 5.4 percent lower than and contraband. The gap widened fur- the medium term. in 2023. Consequently, the fiscal surplus ther to 53 percent during early September Using official data, inflation in Tripoli is narrowed from 4.6 to 1.7 percent of GDP 2024 amid the CBL crisis. likely to stay controlled at 2.5 percent in during the first seven months of 2023 and The inflation rate, which is compiled for 2024 and 2025 assuming the CBL crisis is 2024 as spending also increased. Accord- Tripoli region only, averaged 1.9 percent resolved promptly and reflecting moderat- ing to official data, public spending in- during the first seven months of 2024 com- ing global commodity prices, as well as a creased by 9.7 percent during this period pared to 2.7 percent during the same peri- generous subsidy system in Libya. driven by higher wages and subsidies. od in 2023 driven by lower food and hous- Furthermore, with the fall of oil receipts Although oil prices declined, the trade sur- ing prices. While not yet visible in the of- and relaxing foreign currency constraints plus widened during the first seven ficial data, the import financing constraints by the CBL, both fiscal and external bal- months of 2024 because Libyan firms discussed above have likely increased in- ances are expected to deteriorate in 2024 found it more difficult to import. The trade flationary pressures since Libya imports registering a deficit of 5.7 and 21 percent surplus widened to 16 percent of GDP dur- about 80 percent of its food consumption. of GDP, respectively. Both balances ing the first five months of 2024, compared should improve in the medium term as to 9 percent of GDP during the same peri- oil output recovers. od in 2023 due to a 12 percent contraction A prompt and effective resolution of the in imports. The latter is driven by the Outlook CBL crisis is critical for Libya’s economic tighter access to foreign currencies and the prospects and citizens’ welfare. A pro- implementation of foreign currency trans- Assuming the opposing political forces longed or escalated crisis could disrupt action fees in early March 2024. While the agree to appoint a new central bank gov- the ability of institutions to manage the Libyan Dinar (LYD) was overall stable in ernor and a Board of Directors and end economy and maintain basic services nominal terms, the LYD to USD exchange the ongoing dispute, oil production is ex- such as oil and gas production and ex- rate gap between the official and parallel pected to resume and average 1 mbpd for ports, fuel and food import and distrib- markets widened. During the first seven 2024. As a result, oil GDP will contract by ution, salary payments, and in the worst months of 2024, the gap averaged 43 per- 15 percent driving overall GDP to shrink scenario, it could lead to a deterioration cent compared to 7.2 percent during the by 10 percent during this year. Growth in the security conditions. TABLE 2 Libya / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 28.3 -8.3 10.2 -10.1 10.7 13.1 Private consumption -0.3 -1.3 5.3 0.7 2.9 2.8 Government consumption -2.0 -1.1 5.5 1.0 1.1 1.1 Gross fixed capital investment -6.9 -1.3 -10.7 -23.9 -24.9 16.7 Exports, goods and services 126.1 -19.9 7.1 -16.8 23.1 18.8 Imports, goods and services 46.6 -13.9 -16.5 -2.4 2.0 2.0 Real GDP growth, at constant factor prices 30.6 -11.8 11.7 -10.1 10.8 13.0 Agriculture 6.0 10.0 6.8 4.0 6.0 4.0 Industry 45.0 -17.0 17.8 -13.8 18.0 15.2 Services 9.2 -1.9 1.2 -3.4 -2.1 8.9 Inflation (consumer price index) 2.8 4.6 2.3 2.5 2.4 2.9 Current account balance (% of GDP) 16.1 21.2 3.0 -21.8 -5.7 4.8 Fiscal balance (% of GDP) 12.5 2.7 -0.1 -5.7 1.9 5.3 Revenues (% of GDP) 66.5 64.1 57.9 71.1 71.2 67.0 Debt (% of GDP) 98.3 74.5 61.0 90.4 83.2 64.3 Primary balance (% of GDP) 12.5 2.7 -0.1 -5.7 1.9 5.3 GHG emissions growth (mtCO2e) 51.0 -4.9 -4.0 -5.6 4.0 3.9 Energy related GHG emissions (% of total) 38.5 37.3 36.9 28.8 30.1 31.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 165 Oct 24 inactivity rates have increased by over 8 percentage points over the past two MOROCCO Key conditions and decades and the unemployment rate re- mains 4 percentage points higher than challenges its pre-pandemic level. Durably address- ing this challenge would require a com- Table 1 2023 Despite a confluence of severe shocks (the prehensive strategy to improve the dy- Population, million 37.8 COVID-19 pandemic, a prolonged drought, namism of the private sector and bolster GDP, current US$ billion 144.4 a high commodity prices-led inflationary productivity, address informality, over- GDP per capita, current US$ 3817.1 surge, and a devastating earthquake) Mo- come the low female labor force partici- a 3.9 National poverty rate rocco has demonstrated remarkable eco- pation (19 percent in 2023), and raise the b 9.8 nomic resilience thanks to a strong skills of the workforce. Lower middle-income poverty rate ($3.65) a 40.5 macroeconomic policy framework and Gini index School enrollment, primary (% gross) c 114.2 proactive government response. Life expectancy at birth, years c 75.0 The Moroccan authorities have also re- Total GHG emissions (mtCO2e) 93.0 sponded to this turbulent period by ad- Recent developments vancing reforms that hold the potential Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2022). to set the economy on a stronger and After expanding by 3.4 percent in 2023, b/ Most recent value (2013). more inclusive long-term development real GDP growth moderated to 2.5 per- c/ Most recent WDI value (2022). trajectory. In the human capital sphere, cent in Q1 2024 due to a 5 percent con- Morocco is expanding health insurance traction of agriculture as cereal produc- coverage, deploying a wide-ranging tion fell by 43 percent amid the drought. Morocco weathered overall well the recent cash transfer program, and implement- At 3.5 percent, non-agricultural growth overlapping economic and climate shocks ing an education reform to improve stayed more robust. Domestic demand is learning outcomes. On the fiscal and regaining momentum, with private con- thanks to a strong macroeconomic policy economic management front, the gov- sumption and gross capital formation ex- framework and government response. Al- ernment is advancing a tax reform pro- panding by 3 and 3.6 percent respective- though a prolonged drought will decelerate gram to bolster domestic revenue mo- ly in Q1 2024, facilitated by a sharp drop the economy in 2024, non-agricultural bilization, reducing butane gas subsi- in annual inflation from a peak of 10.1 GDP is expected to strengthen, driven by dies, and implementing an SOE reform percent in early 2023 to 1.3 percent in to improve their governance, competi- July 2024. Inflation expectations have al- export-oriented sectors, construction, and tive neutrality, and performance. On cli- so declined, prompting the central bank domestic demand amid easing inflation. mate adaptation and mitigation, Moroc- to reduce the policy rate by 0.25 ppts to Ongoing reforms promise significant de- co is deploying large infrastructure in- 2.75 percent in July. velopment gains, but additional structural vestments to cope with water scarcity Morocco’s external position continues to and has committed to ambitious decar- strengthen. The current account deficit changes are needed to create more good jobs bonization targets in energy generation. narrowed from 3.5 to 0.6 percent of GDP in the private sector and enhance economic The government recently pledged to prior- in 2023 and recorded a surplus in Q1 2024 opportunities for youth and women. itize job creation in the years to come as driven by lower energy prices, robust the labor market remained weak. Reported growth of phosphates and manufacturing FIGURE 1 Morocco / Real GDP growth and contributions to FIGURE 2 Morocco / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 16 45 40000 12 40 35000 35 30000 8 30 4 25000 25 20000 0 20 15000 -4 15 10 10000 -8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 5 5000 2021 2022 2023 2024 0 0 Private consumption Government consumption 2013 2015 2017 2019 2021 2023 2025 Gross capital formation Net exports International poverty rate Lower middle-income pov. rate GDP Upper middle-income pov. rate Real GDP pc Sources: Haut Commissariat au Plan (HCP) and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 166 Oct 24 exports, rebounding tourism inflows and are estimated to have resulted in a modest The ongoing recovery of domestic demand strong remittances. After a weak 2023, net reduction of poverty in 2023. and higher agricultural imports are expect- FDI flows have more than doubled in the ed to widen the current account deficit to first five months of 2024, and new large 1 and 1.4 percent of GDP in 2024 and 2025, greenfield projects have been announced, still significantly below historical averages. especially in green hydrogen and the pro- Outlook FDI inflows are expected to accelerate as duction of battery components for electric announced greenfield projects continue to vehicles. The exchange rate was overall Real GDP growth is projected to decline to materialize. Spending pressures are ex- stable, and the dollar value of reserves in- 2.9 percent in 2024, before accelerating to pected to slow the ongoing fiscal consol- creased by 3 percent in 2024, covering 3.9 percent in 2025. This fluctuation stems idation process in 2024, but the budget more than five months of imports. primarily from the agricultural sector, ex- deficit should fall over the medium-term, Morocco has made gradual progress in im- pected to contract by 4.6 percent in 2024 resulting in a moderate decline in the debt proving its budgetary situation since the and rebound by 8.2 percent in 2025, as- to GDP ratio by 2026. pandemic, and the fiscal deficit declined suming climatic conditions normalize. Poverty is projected to continue declining from 5.4 to 4.4 percent of GDP in Non-agricultural growth is anticipated to in 2024-26 as the economy gains dy- 2022-2023. However, despite robust tax moderately accelerate to 3.7 percent in namism, inflation stabilizes and the gov- revenues, spending pressures have in- 2024, driven by the strong performance of ernment deploys the new cash transfer creased the budget deficit during the first phosphates, export-oriented manufactur- program, which could mitigate the impact seven months of 2024. The government has ing, and a revitalized construction sector, of the drought in rural areas. However, en- passed an additional budget appropriation supported by a new homebuyer assistance rollment of informal workers in the com- of 0.9 percent of GDP to finance a salary in- program and declining interest rates, on- pulsory health insurance scheme is pro- crease for civil servants and support SOEs. going post-earthquake reconstruction ef- gressing slowly. As the government aims Recent shocks have had large welfare im- forts, and preparation for major sport to enforce contributions to the system, pacts, especially for poorer rural house- events (2025 African Cup of Nations and some workers (particularly farmers) might holds. Official statistics indicate that, in 2030 World Cup). Domestic demand be encouraged to misreport their employ- 2022, poverty measured by the national should strengthen, as FDI and public infra- ment status, further hindering formaliza- line was only marginally lower than in structure projects provide additional mo- tion. The ability of Morocco to reduce 2014 (3.9 vs. 4.8 percent), while social and mentum for investment while private con- poverty and inequality in the longer-term spatial welfare disparities increased. Nev- sumption continues to recover despite a rests heavily on addressing the structural ertheless, the rise in per capita GDP and temporary increase in inflation due to the constraints to private sector dynamism the fall in inflation (particularly for food) butane gas subsidy reform. and job creation. TABLE 2 Morocco / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 8.2 1.5 3.4 2.9 3.9 3.4 Private consumption 6.8 0.0 3.7 2.6 3.1 2.8 Government consumption 7.2 3.0 4.1 4.5 4.1 3.6 Gross fixed capital investment 7.5 -4.0 1.9 3.9 3.8 4.5 Exports, goods and services 7.9 20.5 8.8 8.7 7.9 8.3 Imports, goods and services 10.4 9.5 7.4 8.2 6.3 7.4 Real GDP growth, at constant factor prices 7.9 1.6 3.2 2.9 3.9 3.4 Agriculture 19.0 -11.8 1.6 -4.6 8.2 0.7 Industry 7.8 -2.7 1.3 3.8 3.3 3.4 Services 5.7 6.8 4.4 3.6 3.4 3.7 Inflation (consumer price index) 1.4 6.6 6.1 1.5 2.7 2.4 Current account balance (% of GDP) -2.3 -3.6 -0.6 -1.0 -1.3 -1.9 Net foreign direct investment inflow (% of GDP) 1.1 1.2 0.2 1.5 1.6 1.7 Fiscal balance (% of GDP) -6.0 -5.4 -4.4 -4.2 -3.8 -3.4 Revenues (% of GDP) 25.3 28.7 28.3 28.8 27.0 26.3 Debt (% of GDP) 69.4 71.5 70.0 68.6 68.2 67.6 Primary balance (% of GDP) -3.7 -3.2 -2.3 -2.1 -1.7 -1.4 a,b International poverty rate ($2.15 in 2017 PPP) 1.0 0.9 0.9 0.8 0.7 0.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 7.7 7.5 7.1 6.7 6.1 5.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 36.9 36.7 35.3 34.1 32.6 31.2 GHG emissions growth (mtCO2e) 7.8 -0.4 0.3 2.3 2.5 2.9 Energy related GHG emissions (% of total) 73.5 73.6 73.5 74.1 74.6 75.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2013-ENCDM. Actual data: 2013. Nowcast: 2014-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2013) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 167 Oct 24 list of jobs reserved for Omani citizens and providing financial incentives to compa- OMAN Key conditions and nies hiring Omanis, with potential govern- ment contributions to salaries. This is ex- challenges pected to help contain the public wage bill, alleviate budgetary pressures, and address Table 1 2023 Under its Vision 2040 development plan, the high youth unemployment challenge. Population, million 4.6 Oman is determined to diversify its in- GDP, current US$ billion 108.8 come sources and achieve sustainable de- GDP per capita, current US$ 23428.5 velopment. The expansion of nonhydro- School enrollment, primary (% gross) a 90.1 carbon activities has helped supporting Recent developments a 73.9 economic activity despite OPEC+ oil pro- Life expectancy at birth, years Total GHG emissions (mtCO2e) 114.6 duction cuts, notably in construction, man- Real GDP growth reached 1.7 percent y- Source: WDI, Macro Poverty Outlook, and official data. ufacturing, and services. o-y during Q1 2024 supported by non- a/ Most recent WDI value (2022). The utilization of windfall savings to re- oil activities, which grew by 4.5 percent, duce public debt in 2023 was an impor- reflecting strong performance of agricul- tant step to bring it down by almost a ture, refined petroleum products, and Economic activity continues to perform half of its peak of nearly 68 percent of services sector (particularly transporta- GDP in 2020, thereby improving Oman’s tion and storage). However, oil activity well despite OPEC+ oil production cuts, credit rating, but more efforts are needed contracted by 3.3 percent reflecting the driven by the expansion of nonhydrocar- to decouple fiscal revenue from oil pro- adjustment to OPEC+ quotas. Average bon activities, notably in construction, ceeds. In January 2024, Oman Investment headline inflation slightly inched up by manufacturing, and services, but fiscal Authority (OIA) launched the “Future an average of 1.6 percent y-o-y during revenues and exports proceeds remain Fund Oman”, worth of US$5.2 billion, to the first seven months of 2024, signaling invest in a wide range of industries, at- higher prices of food and non-alcoholic tied to oil market developments. However, tract foreign investments, and support the beverages groups and miscellaneous a commitment to economic diversification private sector over the next five years, goods and services, up by 3 and 3.2 per- continues to shore up fiscal and external mainly in tourism, manufacturing, green cent y-o-y, respectively. positions, keeping them in surplus over energy, and logistics, among other. Fiscal revenues declined by 0.4 percent in The new social protection law, which has July-2024 y-o-y, largely attributed to the the medium term. Employment growth is become effective in January 2024, intro- decline in gas revenue (down by 18 per- driven by female employment, which is duced a range of non-contributory social cent). The latter is due to the adopted estimated to increase twice the rate ob- benefits, underscoring Oman's commit- for collecting gas revenue starting from served among men. Downside risks to the ment to supporting its vulnerable popula- 2023. It is now reported net of the cost of tion despite its increased fiscal burden. In gas purchase and transportation, as gas- outlook include oil market volatility, cli- addition, a series of new measures were related operations were hived off to In- mate change risks, and potential announced in July 2024 to regulate the la- tegrated Gas Company. This contraction spillovers from the escalating of conflict bor market and boost private-sector em- in gas activity was partially offset by a in the Middle East. ployment among nationals. Key measures 9 percent rise in oil revenues. On the include adding 30 new professions to the other hand, public spending increased by FIGURE 1 Oman / Real annual GDP growth FIGURE 2 Oman / General government operations Percent change Percent of GDP 12 45 40 Hydrocarbon GDP 9 35 Non-Hydrocarbon GDP 30 Real GDP 25 6 20 15 3 10 5 0 0 -5 -3 2021 2022 2023 2024e 2025f 2026f 2021 2022 2023 2024e 2025f 2026f Revenues Expenditures Budget balance Sources: Oman authorities, World Bank staff projections, and IMF projections. Sources: Oman authorities and World Bank staff projections. MPO 168 Oct 24 4.3 percent during the same period, re- in May 2023. Although the rate among GDP in 2024, marking a decline from flecting a 33 percent and 46 percent y- women ages 25-29 was the highest at the previous year due to higher social o-y increase in development expenditures 22.2 percent in May 2024, it posted a spending. The fiscal surplus will remain and other expenses, respectively. Accord- reduction of almost 4 percentage points around 4 percent of GDP during 2025-26, ingly, Oman’s overall fiscal surplus nar- relative to the same month of 2023. in line with oil prices projections. Accord- rowed to 0.9 percent of GDP in July-2024, ingly, public debt is expected to continue down from 1.7 percent of GDP during the its downward trajectory over the medium same period of 2023. Public debt stood term with continued net repayments. at RO14.4 billion (US$37.5 billion) by end Outlook Similarly, the current account is estimated of June-2024, declining from 36.5 percent to register a surplus of 1.7 percent of of GDP by end 2023 to 33.9 percent of Oman’s economic growth is expected to GDP in 2024, mainly supported by non- GDP during the first half of 2024, and un- decelerate in the short-term but later accel- hydrocarbon export revenues. It is expect- derscoring the authorities’ commitment to erate. More specifically, real GDP growth ed to remain in surplus in 2025-26 sup- containing public debt. is projected to reach 0.7 percent in 2024, ported by solid nonhydrocarbon exports. The trade balance recorded a surplus of impacted by the extension of oil produc- This will help Oman rebuild its foreign US$9.5 billion (8.6 percent of GDP) during tion cuts. Nonhydrocarbon growth will reserves and improve the country’s re- H1-24, as hydrocarbon and non-hydrocar- remain robust expanding at an estimated silience against external shocks. bon exports increased by 5.3 and 8.1 per- 2.6 percent on continued reforms and in- Downside risks for Oman stem from the cent y-o-y, respectively. Gross foreign as- vestment projects but remains insufficient volatility of oil prices, and global energy sets remain sizable at US$18.2 billion by to drive an overall acceleration in GDP transition which could pose significant end-June 2024 (up by US$1.1 billion y-o-y). growth. Growth is however expected to challenges to fiscal and external balances, Overall, employment increased by about accelerate during 2025-26 (to 2.7 and 3.2 increase gross financing needs, and dis- 2.5 percent in 2023 y-o-y, and is pro- percent, respectively), driven by a recov- rupt the government’s reform program. jected to increase at about the same rate ery in oil and gas production as Duqm The implementation of the new social (2.4 percent) in 2024. Past and projected refinery reaches its full capacity, and sup- protection law which includes large ben- employment growth is driven by female ported by a rebound in agricultural and efits of some programs, will entail a fiscal employment that is estimated to increase construction activities and a robust ser- burden on the budget in 2024. Geopo- at twice the rate observed among men. vices sector. Inflation will remain con- litical risks associated with a potential es- The National Strategy for the Advance- tained at an average of 1.3 percent over calation of the conflict in the Middle East ment of Omani Women aims to support 2024-26, reflecting the peg to a strong U.S. add new uncertainties related to oil price women in the workforce and includes dollar, and the cap on fuel prices. volatility and disruptions in supply chains. measures to promote women’s education, Comfortable hydrocarbon revenues, in- On the upside, additional fiscal and diver- skills training, and career development, creased nonhydrocarbon revenues, and sification measures, accelerating produc- as well as initiatives to support women prudent fiscal discipline are expected to tion at the Duqm refinery project, and in- entrepreneurs and business owners. The keep fiscal balance in surplus in the medi- creased foreign direct investments from re- rate of job seekers is estimated at 3.1 per- um-term. Overall fiscal balance is expect- gional partners, would spur growth and cent in May 2024, down from 3.6 percent ed to record a surplus of 4.5 percent of strengthen fiscal and external positions. TABLE 2 Oman / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.6 9.6 1.3 0.7 2.7 3.2 Private consumption 1.7 9.0 2.8 2.4 3.3 3.1 Government consumption 5.3 4.0 1.7 2.1 2.3 2.1 Gross fixed capital investment -15.7 2.5 3.1 3.7 4.2 4.4 Exports, goods and services 12.2 16.5 1.1 0.7 3.3 3.0 Imports, goods and services 13.3 19.6 3.8 3.3 3.7 3.3 Real GDP growth, at constant factor prices 2.7 9.6 1.7 0.7 2.7 3.2 Agriculture 9.5 -8.5 6.9 -4.5 1.5 1.4 Industry 1.2 9.4 0.1 -2.3 2.1 2.3 Services 4.2 10.8 3.4 4.5 3.5 4.2 Inflation (consumer price index) 1.7 2.5 0.9 1.0 1.4 1.6 Current account balance (% of GDP) -5.5 5.1 1.4 1.7 2.7 2.3 Net foreign direct investment inflow (% of GDP) 4.2 3.9 5.6 3.5 3.6 3.8 Fiscal balance (% of GDP) -3.2 10.1 6.6 4.5 3.8 4.0 Revenues (% of GDP) 33.3 40.5 32.9 32.3 31.3 30.7 Debt (% of GDP) 61.3 40.1 36.5 35.6 35.0 34.7 Primary balance (% of GDP) 0.0 12.6 9.1 7.1 6.4 6.6 GHG emissions growth (mtCO2e) 6.6 6.3 4.7 3.4 4.3 0.5 Energy related GHG emissions (% of total) 68.1 69.3 70.2 70.7 71.5 71.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 169 Oct 24 income poverty line ($6.85 2017 PPP a day), compared to less than 10 percent PALESTINIAN Key conditions and in the West Bank. challenges TERRITORIES Between 2017 and 2022, the Palestinian Recent developments real GDP grew by a mere 0.6 percent Table 1 2023 annually. Economic potential has been Since the conflict’s outbreak, the Pales- Population, million 5.2 heavily curtailed by the restrictions relat- tinian economy has dramatically plum- GDP, current US$ billion 17.4 ing to the Israeli occupation of the West meted. According to the Palestinian GDP per capita, current US$ 3372.3 Bank and a near-blockade of Gaza. Ac- Central Bureau of Statistics (PCBS), after National poverty rate a 32.8 cording to the Government of Israel, re- a 29 percent year-on-year (y-o-y) con- a 32.5 strictions are in place to enhance the se- traction in Q4 of 2023, the territories Gini index b curity of Israel and its citizens. A com- registered their largest decline on record School enrollment, primary (% gross) 91.8 b bination of depressed aid inflows, in Q1 of 2024, with real GDP declining Life expectancy at birth, years 73.4 COVID-19, low private capital attraction, by 35 percent. Source: WDI, Macro Poverty Outlook, and official data. incomplete reform efforts by the PA, In Gaza, an almost complete halt to eco- a/ Most recent value (2023). b/ Most recent WDI value (2022). and the divide between the West Bank nomic activity is reflected in a stagger- and Gaza, further stifled the economy. ing 86 percent GDP drop in Q1 2024. Amid sluggish growth, high unemploy- Consequently, the share of the Strip’s ment, dwindling aid, and lack of tradi- economy in the Palestinian economy has One year since the outbreak of the Middle tional economic policy instruments, the fallen from 17 percent (prior to the con- East conflict, centered in Gaza, the Pales- fiscal situation in the Palestinian territo- flict) to less than 5 percent currently. In tinian territories have experienced a his- ries has progressively deteriorated. parallel, the shock in the West Bank was toric economic decline. In Gaza, the econ- The conflict has worsened income per largely triggered by tighter restrictions omy has plunged into the deepest reces- capita disparities across the territories. on movement within cities and denied In 2023, GDP per capita in Gaza was access for Palestinian commuters to the sion ever recorded for the Strip, as the US$1,087–a fifth of the West Bank's at Israeli labor market and more recent- conflict has led to a near complete halt of US$5,081. Recent World Bank data show ly an Israeli military operation in the economic activity. The knock-on effects an 11 percent drop in the Palestinian North of the West Bank. This, coupled in the West Bank have been severe due Gross National Income (GNI) per capita with increased withholdings by Israel in 2023, which shifted the territories’ in- on clearance revenues payable to the to massive job losses, shrinking con- come classification from higher-middle PA, escalated an already dire fiscal cri- sumption, and a deepening fiscal crisis income status–prior to the conflict–to sis, and contributed to causing a 25 per- for the Palestinian Authority (PA). The lower-middle income. Poverty has fol- cent GDP contraction in the West Bank outlook heavily hinges on the conflict's lowed a similar trend as according to in Q1 2024 (y-o-y). evolution and extent of movement and the national household survey from In August 2024, prices in Gaza almost 2016/17, almost half of the Gaza pop- stabilized with the consumer price infla- access restrictions imposed by Israel. ulation lived below the upper-middle tion (CPI) increasing by 2.0 percent only, FIGURE 1 Palestinian territories / Real GDP growth and FIGURE 2 Palestinian territories / Actual and projected contributions to real GDP growth poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 20 45 4000 15 40 3500 10 35 3000 5 30 2500 0 25 -5 2000 20 -10 1500 15 -15 1000 10 -20 500 5 15 16 17 18 19 20 21 22 23 f f f 24 25 26 0 0 20 20 20 20 20 20 20 20 20 20 20 20 Private consumption Government consumption 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Gross capital formation Net exports International poverty rate Lower middle-income pov. rate Statistical discrepancy GDP Upper middle-income pov. rate Real GDP pc Sources: Palestinian Central Bureau of Statistics and World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 170 Oct 24 month-on-month, due to larger aid pro- public employees, and the pension fund. visions. But, on a yearly basis, it soared On the upside, various development part- by 248 percent, reflecting major supply ners–especially the EU and the World Outlook chain disruptions. In the context of wide- Bank–recently signaled large increases in spread essential goods shortages, most financial aid flows, over the short term, Fixed asset losses will limit economic ac- Gazan households have experienced a which could help cover a portion of the tivity in Gaza at least for the medium term. massive crunch in their purchasing abili- fiscal deficit. Workers’ mobility within the West Bank ty, regardless of their financial means. In The ongoing conflict in Gaza and the and to the Israeli market will largely shape the West Bank, price trends continue to economic contraction in the West Bank growth outcomes in the West Bank. The be relatively stable, with the CPI for Au- have had a severe impact on an already Palestinian economy is expected to con- gust 2024 being only 1.6 percent higher weak labor market. Based on a recent tract by 17 percent in 2024. Assuming that than the previous month. report by the PCBS and the Internation- reconstruction efforts start in 2025, growth The PA’s fiscal crises escalated in 2024, as al Labor Organization (ILO), it is esti- should start its rebound, while GDP levels Israel increased deductions from revenues mated that unemployment in the Pales- are not anticipated to recover to the pre-con- that are payable to the PA (clearance rev- tinian territories exceeded 50 percent flict baseline any time soon. Consequently, enues), which represent the PA’s main in June 2024–the highest on record. In the poverty rate is expected to remain source of income. Since October 2023, Gaza, unemployment soared to 79 per- high, exceeding 30 percent, in the outlook. these transfers have roughly halved, and cent, while in the West Bank it was es- On the fiscal front, an increase in clearance were fully halted for a couple of months timated at 35 percent due to the abrupt revenue transfers to pre-conflict levels is as- in mid-2024 until being resumed on June loss of commuters’ jobs in Israel and the sumed, as well as a gradual uptick in domes- 30, 2024. This, on top of the natural de- settlements as well as job losses in the tically managed taxes, reflecting rebound- cline in revenues given the economic con- local economy. ing economic activity. This will drive rev- traction and the low levels of aid, forced The sharp contraction of GDP per capita enues up, improving the fiscal deficit over the PA to further delay and reduce salary will result in a rapid increase in the the medium term. However, these assump- payments to an average of 60-70 percent, poverty rate. The national poverty rate tions are subject to extreme uncertainty. since October 2023. Official data by the at the international line of $6.85 a day is Downside risks remain elevated. The PA Ministry of Finance (MoF) for the first estimated to have stood at around 25.5 severity of the economic contraction will six months of 2024 indicate that their fi- percent in 2022. The conflict pushed this hinge on the evolution of the conflict and nancing need, after aid and considering up to almost 30 percent in 2023, with the resolution of the clearance revenues clearance revenue deductions, reached the expectation that this will have in- dispute. Absent a cessation of the hostili- US$803 million. This gap was mostly creased further to around 35.5 percent ties and a substantial increase in external filled with borrowing from domestic in 2024–by far the highest it has been in aid, the risks of disorderly fiscal adjust- banks and arrears to the private sector, at least 20 years. ments cannot be excluded. TABLE 2 Palestinian territories / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.0 4.1 -5.4 -17.1 5.5 4.2 Private consumption 7.5 17.7 -3.8 -7.0 4.6 3.7 Government consumption 10.3 -9.3 -7.0 -22.4 6.5 4.3 Gross fixed capital investment 13.7 12.2 -3.4 5.0 7.0 2.7 Exports, goods and services 17.3 5.9 5.7 4.6 5.0 2.7 Imports, goods and services 14.8 19.7 3.0 12.4 5.0 2.7 Real GDP growth, at constant factor prices 6.2 1.4 -6.0 -17.1 5.5 4.2 Agriculture -0.7 -5.6 -11.5 -15.0 7.0 8.0 Industry 4.5 3.5 -8.6 -13.0 2.8 2.7 Services 7.5 1.6 -4.7 -18.4 6.1 4.2 Inflation (consumer price index) 1.2 3.7 5.9 35.8 2.5 2.2 Current account balance (% of GDP) -9.8 -10.6 -16.6 -18.1 -17.9 -16.7 Net foreign direct investment inflow (% of GDP) 1.6 2.0 0.6 -1.5 -1.2 -1.2 Fiscal balance (% of GDP) -5.8 -1.8 -3.9 -12.0 -8.7 -8.5 Revenues (% of GDP) 25.0 27.2 26.9 17.9 21.2 21.5 Debt (% of GDP) 56.0 53.1 58.4 68.8 72.7 76.9 Primary balance (% of GDP) -5.1 -1.1 -3.3 -11.2 -7.9 -7.6 a,b International poverty rate ($2.15 in 2017 PPP) 0.8 0.8 1.0 1.5 1.4 1.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.5 4.5 5.7 9.4 8.8 8.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 26.1 25.4 29.1 39.6 38.6 37.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2016-PECS. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 171 Oct 24 QATAR Key conditions and Recent developments challenges Economic growth in Qatar has remained muted following the fading impact of the Table 1 2023 A rapidly expanding non-hydrocar- 2022 FIFA World Cup, with a 1.2 percent Population, million 3.1 bons sector underscores Qatar’s com- increase in 2023. The hydrocarbon sector GDP, current US$ billion 213.0 mitment to long-term economic di- expanded by 1.4 percent, while the non- GDP per capita, current US$ 69542.5 versification, supported by the Third hydrocarbon sector grew by 1.1 percent, a 102.1 School enrollment, primary (% gross) National Development Strategy with notable gains in transportation, ac- a 81.6 (NDS3) launched in January 2024 to commodation, and food services, high- Life expectancy at birth, years Total GHG emissions (mtCO2e) 125.4 accelerate progress toward Qatar Na- lighting the lasting benefits of the World Source: WDI, Macro Poverty Outlook, and official data. tional Vision 2030. Tourism plays a Cup on tourism. High-frequency data in- a/ WDI for School enrollment (2020); Life expectancy pivotal role in this diversification, dicates a strong start for non-hydrocarbon (2022). with a rapid annual increase in vis- activities in 2024, with the PMI reaching itor numbers. Additionally, Qatar is 55.9 in June—the highest since July prioritizing the information technol- 2022—underpinned by a thriving tourism ogy sector, targeting a 50 percent sector. Bolstered by the AFC Asian Cup, Qatar’s non-hydrocarbons sector contin- growth by 2024, supported by near- visitor numbers surged by 28 percent in comprehensive broadband and 5G the first half of 2024, reaching 2.6 million in ues to spearhead diversification efforts, coverage. The imminent launch of H1-2024. A simplified visa regime and di- bolstered by the implementation of the the National Health Strategy verse offerings also contributed to Qatar’s Third National Development Strategy 2024-2030 will further reinforce the record-high tourist numbers. Additionally, (NDS3) and the promotion of services, goals of NDS3. The Qatar Investment Qatar has expressed its intention to bid for including tourism and knowledge-based Authority (QIA), the world’s eighth- the 2036 Summer Olympic Games, rein- largest sovereign wealth fund, is ex- forcing its global sporting ambitions. In the sectors. Nevertheless, economic growth is panding investments in technology, hydrocarbon sector, despite global chal- expected to be modest in 2024-25, affected healthcare, aerospace, and energy lenges in the natural gas market due to dis- by the hydrocarbon output that is expect- transition while shifting focus to In- ruptions from shipping attacks in the Red ed to remain stagnant until a significant dia, China, and Southeast Asia, dri- Sea and the ongoing Russia-Ukraine con- ven by Asia's strong growth projec- flict, Qatar's LNG production expansion is liquefied natural gas (LNG) expansion in tions for 2024. expected to yield long-term benefits. Qatar 2026. External and fiscal surpluses are However, challenges persist, including has secured offtake agreements with firms projected to persist in the medium term, volatile hydrocarbon prices, geopolitical in Germany, France, and Italy, with several supported by the North Field LNG ex- tensions, and risks associated with contracts extending to mid-century. Addi- pansion. Key challenges emanate from the growing reliance on China as a princi- tionally, Qatar is forging new trade rela- pal trade partner, which could expose tions with growth markets in East and escalating geopolitical tensions and Qatar to economic disruptions if China’s South Asia, exemplified by two new volatile energy prices. economy weakens. 10-year naphtha supply agreements with FIGURE 1 Qatar / Annual real GDP growth FIGURE 2 Qatar / Fiscal balance Percent, percentage points Percent of GDP 8 40 6 30 4 20 2 0 10 -2 0 Oil GDP growth Non-oil growth -4 Real GDP growth -10 -6 2020 2021 2022 2023 2024 2025 2026 2020 2021 2022 2023 2024 2025 2026 Fiscal balance Revenue Expenditure Source: World Bank. Source: World Bank. MPO 172 Oct 24 Japan and India signed in June 2024. In- average, with the largest growth expected at 2.3 percent in 2024, supported by new flation has decelerated to 1.5 percent in to take place among women (2.4 percent infrastructure projects, an expanding man- H1-2024, the lowest since 2020, supported compared with 0.8 percent among men). ufacturing sector, and a rapidly growing by government subsidies, the delayed im- The total number of unemployed is also tourism industry. The hydrocarbon sector pact of past interest rate hikes, and lower expected to rise by 4.5 percent in 2024 and is expected to remain at 1.5 percent in 2024 global food prices. to reach 0.134 percent as a share of the la- due to capacity constraints, but a signifi- Lower global LNG prices resulted in a bor force. The overall increase is ascribable cant boost is anticipated between Q4 2025 shrinking fiscal surplus as oil and gas to the dynamic projected for women that and 2027 with the North Field expansion. revenue dropped by 15 percent y-o-y in will further contribute to widen the gender Inflation is expected to remain stable at H1-2024, coupled with lower non-oil re- gap, particularly among the youth. around 1.6 percent in 2024-25, contained ceipts. However, the large influx of by generous fuel and food subsidies, tourists continues to boost services export cheaper imports, and monetary tightening. revenues, resulting in a slightly wider Despite further moderation in global en- current account balance from US$7 billion Outlook ergy prices, Qatar’s fiscal and current ac- in Q4 2023 to US$9.4 billion in Q1 2024. count balances are expected to remain in International reserves and foreign curren- Economic growth in Qatar is expected to surplus over the coming years. The fiscal cy liquidity remain robust, reaching QAR be subdued in 2024-25 as output in the hy- surplus is projected to narrow to 4.4 per- 252.3 billion (US$69.3 billion) in August drocarbons sector remains flat ahead of a cent of GDP in 2024-25, influenced by ca- 2024—covering 15.5 months of imports planned major (85 percent) expansion in pacity constraints in LNG production and and growing by 4 percent compared to LNG production by 2026. This expansion declining energy prices. The long-delayed August 2023. is set to reestablish Qatar as the world’s implementation of value-added tax (VAT), Key labor market indicators remained sta- leading LNG producer, making the energy anticipated in 2025, can help mitigate some ble in 2023 relative to 2022: the unem- sector a key long-term growth driver. Real reductions in hydrocarbon revenues and ployment rate was stable at 0.13 percent GDP growth in Qatar is expected to support fiscal stability. Similarly, the cur- and the employment-to-population ratio strengthen slightly, to an average of 2.4 rent account surplus is expected to narrow at 88.7 percent with modest improvement percent in 2024-25, until it jumps to 5.5 in the short to medium term but should among both men and women (ILO). In percent in 2026, primarily on account of remain robust at 14.5 percent in 2024, 2024, total employment is projected to in- the increased gas capacity. Non-hydrocar- buoyed by strong energy and services crease by 1 percent relative to 2023 on bon growth is projected to stay strong (tourism) exports. TABLE 2 Qatar / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.6 4.2 1.2 2.0 2.7 5.5 Private consumption 3.4 5.2 1.8 3.5 3.5 4.3 Government consumption 2.8 4.1 1.2 1.2 1.8 2.3 Gross fixed capital investment 2.3 3.1 1.4 2.2 2.1 2.4 Exports, goods and services 2.4 4.7 2.0 2.7 3.6 7.2 Imports, goods and services 4.7 6.5 4.1 4.7 3.9 3.8 Real GDP growth, at constant factor prices 1.6 4.2 1.2 2.0 2.7 5.5 Agriculture 0.5 6.7 1.5 2.1 2.4 2.9 Industry 0.7 4.2 1.2 2.0 3.3 7.0 Services 3.5 4.1 1.3 2.0 1.3 2.4 Inflation (consumer price index) 2.3 5.0 3.1 1.3 1.9 1.9 Current account balance (% of GDP) 14.6 26.8 17.1 14.5 14.1 15.5 Net foreign direct investment inflow (% of GDP) -0.7 -1.0 -0.1 -0.7 -0.6 -0.5 Fiscal balance (% of GDP) 0.2 10.4 5.6 4.2 4.6 6.0 Revenues (% of GDP) 29.7 34.7 32.8 27.8 28.5 29.5 Debt (% of GDP) 58.6 42.5 44.2 37.1 35.7 32.2 Primary balance (% of GDP) 1.5 11.7 6.9 5.3 5.7 7.1 GHG emissions growth (mtCO2e) 1.4 3.3 0.9 1.9 2.2 4.0 Energy related GHG emissions (% of total) 71.1 71.9 72.1 72.6 73.2 74.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 173 Oct 24 (FDI) inflows, it introduces fiscal risks in the form of (i) undermining the SWF SAUDI ARABIA Key conditions and core macro-stabilization function, and (ii) a potential misallocation of capital to- challenges wards projects that may not yield an ade- quate risk-adjusted return on investment. Table 1 2023 Saudi Arabia is implementing a bold eco- Finally, the uncertain regional context Population, million 36.9 nomic diversification agenda of Vision with the conflict in the Middle East, car- GDP, current US$ billion 1069.0 2030 to reduce its dependence on oil. As ries a risk of spillover into a broader re- GDP per capita, current US$ 28934.7 a result, the share of non-oil activities in gional conflict. While a broader conflict a 102.7 School enrollment, primary (% gross) GDP has increased from around 65 to could drive up oil prices and generate a 77.9 67 percent between 2016 and 2023. How- fiscal windfalls, a negative impact could Life expectancy at birth, years Total GHG emissions (mtCO2e) 790.4 ever, this improvement has been partly materialize through other channels in- Source: WDI, Macro Poverty Outlook, and official data. driven by reduced oil production rather cluding a likely increase in logistics costs, a/ Most recent WDI value (2022). than exceptional non-oil growth. Since economic downturn in trading partners, 2016, the oil sector has not grown on av- and deterred foreign investment. erage while the non-oil sector grew by an average of 2.2 percent. Three key challenges can impede the coun- try’s goals of economic diversification. Recent developments First, Saudi Arabia witnessed a decline in Economic growth continues to be sup- economic productivity levels in recent Economic activity contracted in real terms pressed by the extended oil output cuts years, implying a decline in the efficiency by 0.4 percent (y/y) in Q2-2024, driven by a but is projected to gradually pick up in of using factors of production (labor and contraction of the oil sector by 8.5 percent. capital) for production. Since 2016, Total Oil production averaged at 8.9 million FY2025 given a likely increase in oil Factor Productivity has declined by 1.6 per bpd during January-July, driving down production starting in 2025. The non-oil annum on average. Firm-level data from overall growth forecasts. Conversely, and sector is estimated to grow at a stable the World Bank Enterprise Survey reveals a testament to the diversification efforts rate. The fiscal, monetary, and external even larger productivity gaps, underscor- undertaken over the past few years, the ing a substantial drag on growth. non-oil private sector experienced strong sectors are healthy with low fiscal deficit Second, the economic diversification growth of 4.4 percent (y/y), driven pri- and inflation, and a current account sur- agenda relies heavily on domestic financ- marily by a robust service sector growth plus. Geopolitical uncertainty (and the ing through its US$925 billion Sovereign (+5 percent). The wholesale, restaurant, impact on oil demand and prices), lack of Wealth Fund (SWF)—the Public Invest- and hotel sector led with 5.9 percent (y/ ment Fund (PIF)—which has seen a y) growth, reflecting robust tourism, fol- productivity growth, and fiscal risks of sharp increase in domestic investments lowed by the transport and communica- domestically financed megaprojects are from 67 to 76 percent of total assets be- tion sector at 4.9 percent (y/y). the main downside risks. tween 2022 and 2023. While utilizing the On the fiscal side, ample fiscal buffers PIF to finance development helps offset- exist despite a widening deficit during ting the weak foreign direct investment Q1 and Q2-2024, respectively. The deficit FIGURE 1 Saudi Arabia / Annual real GDP growth FIGURE 2 Saudi Arabia / Central government operations Percent change Percent of GDP 20 40 15 30 10 20 5 10 0 0 -5 -10 -10 Budget Balance Revenues Expenditures 2020 2021 2022 2023 2024e 2025f 2026f Oil GDP Non-Oil Private GDP -20 Government Activities Real GDP 2020 2021 2022 2023e 2024f 2025f 2026f Sources: GASTAT Saudi Arabia and World Bank staff estimates. Source: World Bank. MPO 174 Oct 24 expansion is primarily due to increased participation rate. The unemployment rate The oil production quota is expected to government spending, with municipal declined to 3.5 percent in Q1-2024 (relative increase from the current cap of 8.9 mil- services seeing the largest rise at 116 per- to 4.2 percent in Q1-2023). The overall la- lion bpd to 9.98 million bpd during 2025 cent in H1 2024, driven by Saudi Ara- bor force participation rate declined to 66 as announced by OPEC+. This is forecast bia’s enhanced financial support for lo- percent in Q1-2024, down from 66.9 per- to boost oil GDP growth by 6.6 and 5.1 cal services and infrastructure. Public ad- cent in Q1-2023, with the decline largely percent for 2025 and 2026 respectively, ministration followed with a 30 percent ascribable to non-Saudi women. The de- reversing an estimated contraction of 4.5 increase in spending. cline among non-Saudi women is also ex- percent in 2024. On the monetary side, CPI inflation re- plaining the lower employment-to-popu- The non-oil sector is estimated to main- mains contained at 1.5 percent in July 2024 lation ratio between Q1-2023 and Q1-2024, tain steady growth in the coming years. (down from 2.5 percent in 2022), support- while the ratio among Saudi women in- The services sector, critical to Saudi Ara- ed by the local currency peg to the U.S. creased to 30.7 percent (+1 percentage bia’s economic diversification agenda, is dollar and despite large public spending. point) over the same period. The number expected to grow at a stable average rate However, while overall inflation is sub- of Saudis working in the private sector in of 5.8 percent in 2024-2026. The anticipat- dued, the housing sector witnessed much Q1-2024 is estimated at 2.3 million up from ed increase in oil production is also ex- higher inflation at 9.3 percent in July. The 2.2 million in Q1-2023, while employment pected to strengthen the external sector food and beverage sector recorded a mod- of non-Saudi nationals increased to 8.5 in 2025-2026. The current account surplus est increase of 0.4 percent, and the trans- million relative to 7.7 million a year before. is projected to increase from 3.0 percent port sector experienced the largest defla- of GDP in 2024 to 4.8 and 6.7 percent of tion, at 3.5 percent. GDP in 2025 and 2026, respectively. The The trade balance deteriorated owing to fiscal and monetary sectors are estimat- investment-driven increases in imports. Outlook ed to stay stable over the next two years, This, in addition to lower proceeds and assuming no significant external shocks. heightened volatility in oil exports result- GDP growth forecast for 2024 has been The planned increase in oil production in ed in a narrower current account surplus revised downward to 1.6 percent due to 2025-26 is likely to keep the fiscal deficit of 2.8 percent of GDP in Q1-2024, down lower-than-expected oil production but is within reasonable bounds between -1.8 from 5.6 percent of GDP in Q1-2023. still an improvement from the contraction and -2.2 percent of GDP and a low av- Labor market outcomes remain stable of 0.8 percent in 2023. Growth is expected erage debt-to-GDP ratio of 28.1 percent but mixed, with a decline in both the to rebound to an average of 4.9 percent over the period. Inflation is also projected unemployment rate and the labor force in 2025-2026 as oil production increases. to remain stable in the coming years. TABLE 2 Saudi Arabia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.1 7.5 -0.8 1.6 4.9 4.8 Private consumption 9.5 4.9 5.3 3.3 3.0 3.1 Government consumption 0.8 9.3 5.7 0.7 4.9 3.5 Gross fixed capital investment 10.5 21.3 5.3 5.0 5.0 5.0 Exports, goods and services 5.6 20.5 -6.5 -3.8 7.0 6.7 Imports, goods and services 8.3 12.4 9.9 4.3 5.0 4.0 Real GDP growth, at constant factor prices 4.6 8.2 -1.4 1.7 5.0 4.9 Agriculture 2.2 4.0 4.1 2.0 2.0 2.0 Industry 1.7 12.4 -6.0 -2.3 3.7 3.5 Services 7.6 4.5 2.9 5.3 6.1 6.1 Inflation (consumer price index) 3.1 2.5 2.3 2.1 2.3 2.2 Current account balance (% of GDP) 4.8 13.7 4.0 3.0 4.8 6.7 Net foreign direct investment inflow (% of GDP) -0.2 0.1 -1.2 -1.1 -1.1 -1.1 Fiscal balance (% of GDP) -2.2 2.5 -2.0 -2.0 -1.8 -2.2 Revenues (% of GDP) 29.5 30.5 30.2 30.3 30.3 30.2 Debt (% of GDP) 26.9 23.8 26.2 27.7 27.6 29.1 Primary balance (% of GDP) -1.4 3.2 -1.1 -1.1 -0.9 -1.2 GHG emissions growth (mtCO2e) 3.1 3.6 4.4 -1.7 0.2 3.2 Energy related GHG emissions (% of total) 68.6 68.5 68.6 66.8 65.4 65.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 175 Oct 24 global commodity prices following the war in Ukraine; the February 2023 earth- SYRIAN ARAB Key conditions and quakes in Syria and Turkiye; and more recently, the increased attacks and trade challenges REPUBLIC disruptions related to the ongoing Mid- dle East conflict since October 2023. The Syrian Conflict continues to be the In 2022, almost 25 percent of the Syrian deadliest conflict of this century. Between population lived in extreme poverty. This Table 1 2023 2011 and 2023, Uppsala Conflict Data increase in extreme poverty, which was Population, million 23.2 Program (UCDP) recorded more than almost non-existent before the war, has GDP, current US$ billion 17.5 409,000 battle-related deaths in Syr- been driven by significant increases in GDP per capita, current US$ 753.6 ia—more than any other conflict of the the cost of living coupled with continued International poverty rate ($2.15) a 24.8 past three decades. With no prospects of deterioration in economic conditions. A a 67.0 an imminent political settlement, the Syr- full two-thirds of the population (67 per- Lower middle-income poverty rate ($3.65) b ian conflict has become one of the most cent) lived under the lower middle-in- School enrollment, primary (% gross) 79.6 b protracted conflicts in recent history. come poverty line in 2022, equivalent to Life expectancy at birth, years 72.3 A decade of conflict has had devastating approximately 14.5 million Syrians. Total GHG emissions (mtCO2e) 48.6 economic and social consequences for Syr- Source: WDI, Macro Poverty Outlook, and official data. ia. According to official statistics, Syria’s a/ Most recent value (2022), 2017 PPPs. gross domestic product (GDP) shrank by b/ Most recent WDI value (2022). 53 percent between 2010 and 2022. Night- Recent developments time light (NTL) data, a proxy of economic activity, suggests a significantly larger im- The conflict in Syria has intensified further. pact from the conflict: an 84 percent con- The Armed Conflict Location and Event Macroeconomic conditions in Syria have traction in economic activity from 2010 to Data Project (ACLED) recorded 3,429 con- worsened further due to prolonged armed 2023. The Syrian conflict has further trig- flict-related deaths and 8,065 violent conflict, low crop production, soaring gered one of the largest waves of displace- events in the first seven months of 2024, ment since World War II. By the end of an increase of 7 and 38 percent, respective- food prices, and diminished humanitarian 2023, more than half of Syria’s pre-conflict ly, compared to the same period in 2023. aid and fiscal subsidies. Subject to extra- population remains displaced, including The intensified conflict in Syria includes an ordinarily high uncertainty, real GDP is 7.2 million internally displaced persons escalation of military operations in north- projected to contract by 1.5 percent in (IDPs) and 6.5 million refugees abroad. east Syria that have targeted critical infra- 2024 and 1.0 percent in 2025, extending The conflict has weakened Syria’s capaci- structure, as well as increased attacks and ty to absorb external economic shocks. In airstrikes in the Syrian desert, southern the 1.2 percent decline in 2023. Consis- recent years, the economy has faced mul- Syria, and the Damascus region. tent with a continued decline in per-capi- tiple external shocks, including spillover Macroeconomic conditions in Syria contin- ta GDP, extreme poverty is forecast to in- effects from economic crises in neighbor- ue to deteriorate. Wheat and olive crop crease to 28.8 percent in 2023, 33.1 per- ing Lebanon and Turkiye starting in late production, two of Syria’s most vital agri- 2019; the COVID-19 pandemic and sub- cultural products, has fallen by around a cent in 2024 and 37.4 percent in 2025. sequent cholera outbreak; the spike in quarter in 2024, driven by heatwaves, FIGURE 1 Syrian Arab Republic / Inflation and exchange FIGURE 2 Syrian Arab Republic / Actual and projected rate poverty rates and real GDP per capita Percent, y/y growth Poverty rate (%) Real GDP per capita (constant LCU) 350 120 32000 CPI inflation 300 31000 CPI inflation: food 100 WFP minimum food basket prices 30000 250 SYP to US$ market exchange rate 80 29000 200 60 28000 150 27000 40 100 26000 50 20 25000 0 0 24000 2022 2023 2024 2025 -50 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: Central Bureau of Statistics of Syria, WFP Market Price Watch Bulletin, Source: World Bank. Notes: see Table 2. and World Bank estimates. MPO 176 Oct 24 droughts, and shortages of agricultural in- 26 percent funded, falling far short of the continued decline in per-capita GDP, ex- puts. Although the Syrian pound has sta- required US$4 billion. According to the treme poverty is forecast to increase to 28.8 bilized somewhat after years of sharp de- REACH Humanitarian Situation percent in 2023, 33.1 percent in 2024, and preciation, by June 2024, it had lost nearly Overview in Syria (HSOS) surveys, by 37.4 percent in 2025, pushing over a third 69 percent of its value in the parallel mar- June 2024, humanitarian aid access, espe- of the population into extreme poverty. ket compared to one year ago. Over the cially for food, has notably declined in Heightened regional tensions pose con- same period, food prices, as proxied by northern Syria compared to a year ago. siderable downside risks to the economy. the World Food Programme’s (WFP) min- Escalating cross-border attacks and the imum food basket price index, were 82 growing threat of a resurgence of the percent higher than in the previous year, Islamic State, marked by increased as- reflecting the combined impact of local Outlook saults in Syria, could severely damage currency devaluation and cuts in food infrastructure, further disrupting supply and fuel subsidies. Syria’s protracted economic contraction is chains and driving up logistics costs. A Aid flows to Syria have declined, and ac- projected to extend into 2025 due to a mul- broader regional conflict could elevate cess to humanitarian assistance has be- titude of challenges stemming from con- commodity prices, negatively affecting come more challenging. According to the flicts both within Syria and across the re- Syria as a net food and fuel importer. Syr- UN Financial Tracking Service (FTS), only gion. Subject to extraordinarily high uncer- ia may also face further challenges in se- US$767 million in funding was received tainty, real GDP is projected to contract by curing international assistance due to in- for humanitarian assistance within Syria 1.5 percent in 2024 and 1.0 percent in 2025, creased humanitarian disasters in the re- during the first eight months of 2024—a 66 extending the 1.2 percent decline in 2023; gion, which may divert resources from percent drop compared to the same peri- this projection assumes that the region- donors, potentially worsening malnutri- od last year. As of August 2024, the Hu- al conflict will remain largely contained tion, exacerbating poverty, and increasing manitarian Response Plan for Syria is just over the coming year. Consistent with a the likelihood of disease outbreaks. TABLE 2 Syrian Arab Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f a Real GDP growth, at constant market prices 1.9 0.7 -1.2 -1.5 -1.0 Inflation (consumer price index) 118.8 63.7 92.5 37.7 11.3 Fiscal balance (% of GDP) -6.0 -4.6 -4.3 -4.1 -3.8 b,c International poverty rate ($2.15 in 2017 PPP) .. 24.8 28.8 33.1 37.4 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 67.0 71.4 75.1 78.6 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 96.0 97.1 97.6 97.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Notes: e = estimate, f = forecast. a/ Projections based on nighttime light data. b/ Calculations based on 2022-HNAP. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2022) with pass-through = 1 (High (1)) based on GDP per capita in constant LCU. MPO 177 Oct 24 TUNISIA Key conditions and Recent developments challenges Tunisia’s growth has been modest and volatile since the sharp COVID-related Table 1 2023 Tunisia faces challenging economic contraction in 2020 (-8.6 percent). That is Population, million 12.5 conditions and slow reform implemen- due to a drought, uncertain external fi- GDP, current US$ billion 51.1 tation. As growth and private job cre- nancing conditions, the low domestic and GDP per capita, current US$ 4103.6 ation stagnated after the 2011 revolu- external demand, and the slow pace of a 16.6 National poverty rate tion, the State stepped in as an em- economic reforms. After a moderate re- a 2.2 ployer of last resort and price stabi- bound in 2021 (4.3 percent) and in 2022 Lower middle-income poverty rate ($3.65) a 16.2 lizer through subsidies. This caused (2.7 percent), the economy stalled in 2023 Upper middle-income poverty rate ($6.85) Gini index a 33.7 a deterioration of the fiscal and the (0 percent growth) and failed to gain mo- School enrollment, primary (% gross) b 103.9 current account deficits, public debt, mentum in the first half of 2024 (+0.6 per- b 74.3 and contingent liabilities. The cent on an annual basis). Life expectancy at birth, years COVID-19 pandemic, inflation, and The merchandise trade deficit narrowed to Total GHG emissions (mtCO2e) 40.0 the ongoing drought have exacerbat- 6.4 percent of GDP in the first 7 months Source: WDI, Macro Poverty Outlook, and official data. ed these longstanding vulnerabilities. of 2024, down 5.6 percent a year before, a/ Most recent value (2021). b/ Most recent WDI value (2022). While the current account has recent- amidst more benign global prices and ro- ly improved, the authorities have re- bust olive oil exports. As a result, the cur- lied more on domestic borrowing to rent account deficit in the first semester Tunisia’s economic outlook remains chal- finance the Budget in recent years, declined to 1.4 percent of GDP between including Central Bank financing in 2023 and 2024, also aided by the moderate lenging and uncertain. Economic growth 2020 and 2024. growth in tourism receipts (+6.7 percent in and job creation stagnated in 2024 amid a Tunisia’s growth prospects hinge on the first 8 months of 2024). persistent drought and low demand. With decisive structural reforms to address While the decline in commodity prices and tighter external financing, the govern- economic distortions and fiscal pres- the energy and food subsidy bill provide sures. The priority reforms include ra- some respite, the pressure on public fi- ment has increasingly relied on domestic tionalizing public expenditures, mak- nances remains elevated as public expen- borrowing from the Central Bank and ing the tax system fairer, improving diture reforms continue to falter amid low commercial banks. Containing the infla- the public administration and state- growth. The fiscal deficit continues to be tion and raising capital inflows are im- owned enterprises, and reducing the considerably higher than in the pre- portant near-term challenges. Stabilizing barriers to the entry of new firms COVID period (6.7 percent of GDP in 2023 and foreign direct investment (FDI). up from 2.9 percent in 2019). This con- the economy and accelerating its recovery Progress in these reforms is critical tributes to the challenges in financing the will require the implementation of ambi- to stabilize the macroeconomic situa- public debt, which between 2019 and 2023 tious fiscal policy, state-owned enterpris- tion, accelerate the recovery, and lay increased from 67.8 to 80.1 percent of GDP es, and pro-competition reforms. the foundation for a more sustain- (excluding government guarantees and able economic growth. SOE debts). Gross financing needs have FIGURE 1 Tunisia / Real GDP: Actual, forecast and pre- FIGURE 2 Tunisia / Actual and projected poverty rates and COVID-19 trend real GDP per capita Millions of real TND (2015 prices) Poverty rate (%) Real GDP per capita (constant LCU) 115 000 35 8200 110 000 30 8000 Pre-COVID-19 trend 25 7800 105 000 20 7600 100 000 15 7400 95 000 10 7200 AM24 90 000 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 2026 Upper middle-income pov. rate Real GDP pc Sources: World Bank estimates and National Institute of Statistics. Source: World Bank. Notes: see Table 2. MPO 178 Oct 24 also increased from 7.9 percent of GDP in to 16 percent in Q2 2024 from 15.6 per- The current account deficit is projected to 2019 to 11.9 percent of GDP in 2023 with cent a year before as the labor force par- decline slightly to 2.3 percent of GDP in four-fifths due to debt amortization, up. ticipation rate also declined, hovering 1.5 2024 with moderate growth in tourism and Tunisia’s access to international financing percentage points below the pre-COVID improving terms of trade. With FDI pro- remains limited and FDI—while increas- rate, which suggests a higher number of jected to increase, albeit from a low base, ing by 26.7 percent in the first half of discouraged workers. and minimal portfolio investments, exter- 2024—covers less than a quarter of the cur- nal borrowing would remain an important rent account deficit and external debt re- source of financing of the current account imbursement combined. As a result, the as well as of debt reimbursement. authorities have increasingly relied on do- Outlook The 2024-26 growth forecast is subject mestic sources to cover the external financ- to significant downside risks. In the ing needs. These include a TND 7 billion Given the underperformance of key sec- near term, more persistent or severe (US$ 2.3 billion) from the Central Bank fi- tors, including agriculture, oil and gas drought, weak demand in Europe, el- nancing facility established in February and garments, the economy in 2024 is evated inflation, and tight external fi- 2024 (equivalent to 4 percent of GDP and a expected to grow by 1.2 percent, half nancing conditions would significantly quarter of 2024 financing needs) and a syn- the rate forecast at the beginning of the raise growth and macroeconomic sta- dicated loan from domestic banks for US$ year. If financing conditions and external bility challenges for Tunisia. Medium- 185 million (in both US$ and Euro). demand eventually improve, growth is term prospects would improve marked- Inflation continued to moderate since the expected to reach 2.2 and 2.3 percent ly should Tunisia implement fiscal and peaks of February 2023 (10.4 percent), de- in 2025 and 2026 respectively. With this pro-competition reforms. clining to 6.7 percent in August 2024 (from growth rate, real GDP in 2024 would still Poverty using the Lower Middle Income 7 percent in July). The decline appears to be below its pre-COVID-19 level, a full Poverty Line (US$3.65/person/day line in be driven by both lower global prices and four years after the pandemic. 2017 PPP term) is projected to continue its weak domestic demand. However, while The budget deficit is expected to decline gradual decline, reaching 2.0 percent in the economy is operating below potential, somewhat to 6.0 percent of GDP in 2024 2024, 1.9 percent in 2025 and further de- supply-side issues continue to keep infla- (compared to 6.7 percent of GDP in 2023) creasing to 1.8 percent in 2026. Similarly, tion above both the pre-COVID average as subsidies and the wage bill are con- poverty at the Upper-Middle Income (5.3 percent) and food inflation is higher tained in real terms and tax revenues in- Poverty Line (US$6.85 per person per day (9.4 percent), which presents a particular crease moderately. Gross financing needs in 2017 PPP terms) is projected to decrease challenge for lower-income households. are expected to rise to 16.1 percent of GDP to 15.7 percent in 2024 (down from 15.9 With the current rate of economic in 2024 (from 13.8 percent in 2023) due to percent in 2023) and is expected to decline growth, the unemployment rate increased significant external debt service. to 14.9 percent by 2026. TABLE 2 Tunisia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.3 2.7 0.0 1.2 2.2 2.3 Private consumption 2.4 2.2 -0.6 2.4 3.8 3.5 Government consumption 1.5 -1.2 -2.4 1.9 1.9 -1.8 Gross fixed capital investment 3.2 1.8 -7.7 6.0 -0.5 3.4 Exports, goods and services 11.9 17.3 10.4 0.0 4.0 4.0 Imports, goods and services 10.9 11.5 5.7 3.7 5.0 4.5 Real GDP growth, at constant factor prices 4.3 2.6 -0.1 1.2 2.2 2.3 Agriculture -2.3 1.9 -16.1 8.5 5.9 5.9 Industry 9.8 0.7 -1.0 -3.5 -0.2 -0.3 Services 3.5 3.4 2.7 1.9 2.6 2.6 Inflation (consumer price index) 5.7 8.3 9.3 7.0 6.0 5.0 Current account balance (% of GDP) -6.0 -8.7 -2.6 -2.3 -2.0 -1.8 Net foreign direct investment inflow (% of GDP) -1.1 -1.3 -1.3 -1.5 -1.5 -1.5 Fiscal balance (% of GDP) -7.6 -6.7 -6.8 -6.0 -4.3 -2.5 Revenues (% of GDP) 25.7 28.5 27.2 28.6 27.8 28.1 Debt (% of GDP) 79.9 79.9 79.6 80.2 79.9 79.2 Primary balance (% of GDP) -4.7 -3.5 -3.1 -2.3 -0.3 1.3 a,b International poverty rate ($2.15 in 2017 PPP) 0.3 0.2 0.2 0.2 0.2 0.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.0 2.0 2.0 2.0 1.9 1.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 16.2 15.6 15.9 15.7 15.4 14.9 GHG emissions growth (mtCO2e) 8.2 0.1 0.0 0.5 2.1 2.3 Energy related GHG emissions (% of total) 68.5 68.0 68.3 67.9 68.1 68.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-NSHBCSL. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 179 Oct 24 poses substantial downside risks to the transport and logistics sectors, with the UNITED ARAB Key conditions and potential to negatively impact overall eco- nomic growth through the heightened challenges EMIRATES supply chain cost and inefficiencies. UAE's macroeconomic conditions are shaped by a robust non-oil sector, support- Table 1 2023 ed by prudent fiscal and monetary poli- Recent developments Population, million 9.5 cies. Despite the recent contraction in oil GDP, current US$ billion 477.6 production and the anticipated subdued Following a deceleration in real GDP GDP per capita, current US$ 50185.0 output in 2024, the OPEC+ agreement to growth to 3.2 percent in 2023, driven by School enrollment, primary (% gross) a 115.8 raise the UAE’s quota signals a gradual subdued global demand and OPEC+ pro- a 79.2 shift, with voluntary production cuts being duction adjustments, the UAE economy Life expectancy at birth, years reversed over time. A phased increase in remains nonetheless resilient, supported Total GHG emissions (mtCO2e) 256.9 oil output is set to occur between January by a strong non-oil sector performance. Source: WDI, Macro Poverty Outlook, and official data. and September 2025, reinforcing external Overall, the non-oil private sector re- a/ WDI for School enrollment (2020); Life expectancy (2022). buffers and sustaining fiscal stability. Hy- mained robust, as indicated by a rise in drocarbon revenues continue to underpin the PMI to 54 in August 2024, driven by the fiscal framework, while ongoing struc- increases in output, new orders, and em- tural reforms—including the introduction ployment. In particular, financial services, of Corporate Income Tax and the gradual hospitality, and transportation sectors are phase-out of the business fee regime—are witnessing significant growth. Tourism al- The United Arab Emirates (UAE) main- enhancing fiscal resilience and broadening so expanded, with tourist arrivals increas- tains its status as a key regional hub for the economic base. These reforms, along- ing by 11 percent year-on-year in Q1 2024. trade, finance, and tourism, supported side strong non-oil sector performance, Passenger traffic at Abu Dhabi’s Zayed In- provide a stable foundation for continued ternational Airport surged by 36 percent. by significant progress in economic di- economic strength. In contrast, the oil sector saw a 4 percent versification and reduced reliance on hy- Key risks to growth are primarily linked decline in production compared to the drocarbon revenues. Economic growth to potential OPEC+ decisions to extend same period in 2023, averaging 2.9 million remains positive in 2024, although con- production quotas cuts, as well as the barrels per day over the first four months strained by OPEC+ production adjust- extension or escalation of the conflict in of 2024. However, gas production grew by the Middle East conflict, given its adverse 14.3 percent in Q1 2024, helping to offset ments, with a stronger recovery project- impact on oil price volatility and dis- the lower oil output. ed for 2025. Major risks to the outlook ruption in key sectors notably tourism National inflation averaged 2.3 percent include heightened geopolitical tensions, and trade. Specifically, the disruption of in H1 2024, with Dubai's inflation, con- substantial oil price fluctuations, and Red Sea trade routes would lead to fur- sistent with the national trend, reaching ther increase in shipping costs and rerout- 3.9 percent. This was primarily driven continued global financial tightening. ing, particularly affecting the Asia-Europe by elevated transport costs, while hous- trade corridor. This situation particularly ing and utilities prices continued to FIGURE 1 United Arab Emirates / Annual real GDP growth FIGURE 2 United Arab Emirates / Public finances Percent change Percent of GDP 15 40 10 30 5 20 0 10 -5 0 2021 2022 2023 2024 2025 2026 2021 2022 2023 2024 2025 2026 Oil GDP Non-Oil GDP GDP Balance Revenues Expenditures Sources: UAE authorities, IMF WEO, and World Bank staff estimates. Sources: UAE authorities, IMF WEO, and World Bank staff estimates. MPO 180 Oct 24 rise, reflecting rapid population growth stable y-o-y at about 2.7 percent in 2024. output, and the adverse economic effects linked to recent visa reforms. Youth unemployment rates remain sub- of ongoing geopolitical tensions in the The banking sector remains robust, with stantially high, though on a downward tra- Middle East, which could weigh on non-performing loans ratio falling to 5 per- jectory since 2022. The gap in unemploy- UAE's overall economic outlook. cent in Q1-2024, down from 6.4 percent in ment rates between youth and the whole In 2024, inflation is projected to reach 2.2, Q1-2023, and private sector credit growth labor force (15+) is especially wide among supported by earlier interest rate hikes sustained at 6.7 percent. women, with projected rates of 21.7 per- and base effects, and is expected to re- Public finances remain strong. The net fis- cent among young women and 7.6 percent main contained at approximately 2.1 per- cal balance remained positive at approxi- among women ages 15+ for 2024. cent through 2025-26. mately 6 percent of GDP in Q1 2024, de- The fiscal surplus, while still supported by spite a narrowing of the fiscal surplus due oil revenues and robust non-oil economic to lower oil-related revenues. Total rev- growth, is projected to continue its declin- enues contracted by 23 percent to 25,4 per- Outlook ing trajectory to 4.9 and 4.7 percent of GDP cent of Q1 2024 GDP. Government expen- in 2024 and 2025 respectively. The expan- diture decreased by 20 percent to 19,3 per- Real GDP growth is expected to accelerate sion of non-oil revenues and the broaden- cent of GDP, driven by declines in both in the short- to medium-term, with overall ing of the tax base, driven by the intro- current and capital spending. Overall, the GDP projected to grow by 4.1 percent in duction of a federal corporate tax, continue fiscal accounts remain sustainable and 2025 and 2026, supported by the recovery to play a central role. The ongoing imple- have been further bolstered by the recent in oil production and stable external con- mentation of fiscal revenue reforms, along introduction of corporate income taxation. ditions. Economic activity is estimated to with the maintenance of prudent and well- The current account continues to main- reach 3.3 percent in 2024, driven by a sus- coordinated fiscal policies tailored to indi- tain a surplus, driven by oil exports rev- tained expansion of 4.1 percent in the non- vidual emirates, is expected to continue to enues and rising non-oil exports, helped oil sector, which remains a key driver of support overall fiscal sustainability. by Free trade agreements with key Asian economic growth, underpinned by robust The current account surplus, estimated and African markets. performance across sectors such as at 7.5 percent of GDP for 2024, is ex- Employment growth remains robust in tourism, real estate, construction, trans- pected to decline further to 7.4 and 2024, similar to 2023 trends (ILO esti- portation, and manufacturing, and sup- 7.3 percent in 2025 and 2026 respec- mates). The employment-to-population ra- ported by the recovery in global economic tively, indicating a deterioration, despite tio is expected to reach 80.3 percent on av- activity. Oil output growth is forecast at continued efforts to diversify the external erage in 2024, with a stronger growth pro- 1.2 percent in 2024, with voluntary pro- sector. Expansion into non-oil sectors and jected to be seen among women. This is duction cuts expected to be gradually re- emerging markets in South Asia and East possibly an effect of the gender balance versed, leading to a phased increase in out- Africa is, however, expected to strengthen strategy 2026 the country adopted to put between January and September 2025. non-oil export revenues. However, export achieve gender balance by fostering, Despite this positive outlook, risks re- performance remains subject to fluctua- among other things, economic participa- main elevated, including potential delays tions in the oil production level and price tion, financial inclusion. Total unemploy- in OPEC+ production increases, decisions and is dependent on the re-establishment ment rate is projected to remain roughly by other member countries regarding oil of secure trade corridors. TABLE 2 United Arab Emirates / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.4 7.9 3.2 3.3 4.1 4.1 Private consumption 5.0 9.0 5.1 5.5 3.9 4.0 Government consumption 1.4 3.5 3.0 3.5 3.0 2.8 Gross fixed capital investment 9.6 6.0 5.9 4.3 3.5 3.3 Exports, goods and services 6.8 8.4 3.6 3.5 4.6 4.6 Imports, goods and services 8.8 7.4 5.3 4.8 4.1 4.1 Real GDP growth, at constant factor prices 4.4 7.9 3.2 3.3 4.1 4.1 Agriculture 3.8 3.4 3.5 3.5 3.0 3.0 Industry 1.3 8.8 1.2 1.2 4.6 4.5 Services 7.4 7.1 5.1 5.2 3.7 3.8 Inflation (consumer price index) -0.1 4.8 1.6 2.2 2.1 2.0 Current account balance (% of GDP) 11.5 11.7 9.2 7.5 7.4 7.3 a Fiscal balance (% of GDP) 3.5 10.8 5.1 4.9 4.7 4.5 Revenues (% of GDP) 30.2 33.6 30.8 30.8 30.0 29.7 Debt (% of GDP) 35.1 31.4 29.6 27.9 26.5 25.3 Primary balance (% of GDP) 3.7 11.1 5.3 5.1 4.8 4.7 GHG emissions growth (mtCO2e) 2.5 3.7 -0.8 0.7 0.6 1.0 Energy related GHG emissions (% of total) 72.9 73.6 72.9 72.7 72.4 72.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Consolidated fiscal balance. MPO 181 Oct 24 As a result, the volume of traffic through the strategic Suez Canal and Bab El-Man- REPUBLIC OF Key conditions and deb Strait—carrying 30 percent of world container shipping—has dropped by half. challenges YEMEN At the same time, Yemen continues to face deep structural challenges. Growth Yemen's humanitarian crisis is deeply root- prospects in the oil sector depend on ed in its ongoing conflict and the highly durable peace and financial and technical Table 1 2023 fragmented political and economic land- resources to restart oil production. Non- Population, million 34.1 scape that has developed over the years. oil activity—mainly trade and agricul- GDP, current US$ billion 18.8 Since the onset of the conflict in 2015, ture—continues to be severely con- GDP per capita, current US$ 552.0 the country has witnessed a staggering 54 strained by the conflict conditions, inter- School enrollment, primary (% gross) a 83.9 percent contraction in real GDP per capi- ruptions in essential service delivery, and a 63.7 ta, plunging most Yemenis into poverty acute input shortages. While remittances Life expectancy at birth, years and severely eroding human capital. This and aid help alleviate social conditions, Total GHG emissions (mtCO2e) 25.0 is reflected in Yemen’s precipitous drop these flows, too, are affected by conflict Source: WDI, Macro Poverty Outlook, and official data. in its score on the Human Development conditions. Critically, Yemen remains one a/ WDI for School enrollment (2016); Life expectancy (2022). Index, where it ranked 186 out of 192 of the most vulnerable countries to cli- countries as of 2024. Indicators of wast- mate change impacts. ing, stunting, and being underweight, col- Living conditions for most Yemenis have Amid the continued blockade of the IRG’s lected in 2023, are also some of the high- become increasingly dire. In July 2024, 62 est in the world. The conflict has also in- percent of households reported inade- oil exports by the Houthis and the escalat- tensified the country's fragmentation in- quate food consumption, representing a ing conflict in the Middle East, Yemen to two distinct economic zones, each gov- dramatic increase of 24 percent in IRG ar- faces an increasingly grim reality. The erned by its unique set of institutions, re- eas and 30 percent in Houthi areas since modest economic rebound in 2022 was sulting in increasing disparities. last year. In some governorates, severe Following some economic recovery in 2022 food deprivation more than doubled. This short-lived, with 2023 and 2024 witnessing driven by the UN-sponsored truce, is due to further depreciation of the new, sharp declines in GDP per capita. Yemen's economy contracted again in 2023 Yemeni Riyal (YER) and reduced human- Food insecurity has reached a historic high, and 2024. The oil blockade has dampened itarian food assistance. Phone surveys re- and poverty is more severe and widespread. growth and exacerbated IRG’s fiscal and veal that many households have resorted The outlook remains bleak as stalled peace monetary challenges. Additionally, since to extreme measures, with 19 percent turn- October 2023, the escalation of the conflict ing to child labor or engaging in high-risk negotiations and regional conflicts contin- in the Middle East and related Houthi work. Those with poor food consumption ue to hinder immediate prospects for lasting involvement in the Red Sea has further are grappling with compounding vulner- peace and recovery. Yemen’s future hinges undermined Yemen’s economic and social abilities, including higher levels of acute on resolving these conflicts, securing conditions. As of end-August 2024, the and chronic health conditions, and symp- ACLED Dashboard for Red Sea Attacks toms of mental health disorders. These fac- donor support, and committing to peace, recorded around 355 incidents of violence tors reinforce a vicious cycle of poverty reconstruction, and reforms. linked to Houthi actions in the Red Sea. and eroding human capital. FIGURE 1 Republic of Yemen / Real GDP per capita FIGURE 2 Republic of Yemen / Exchange rate trend: Sana’a and Aden Base 100 in 2014 YER per US$1 100 2000 Aden 1800 90 Sana'a 1600 80 1400 70 1200 1000 60 800 50 600 40 400 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Source: World Bank staff calculations. Sources: Telegram Exchange Market Group and World Bank staff calculations. MPO 182 Oct 24 disbursements totaling US$550 million in tensions, our forecast assumes that there is the first half of 2024. no resumption of oil exports in 2025. Con- Recent developments External pressures continued to mount, sequently, real GDP is projected to grow at leading to a depreciation of the YER in the a modest 1.5 percent, reflecting only mar- The ongoing Houthi blockade on IRG’s oil Aden market. The suspension of IRG oil ex- ginal improvements in the non-oil sector. exports, escalating tensions in the Red Sea, ports, combined with continued depen- The services sector, particularly trans- and domestic unrest have negatively im- dance on imports, intensified external pres- portation, may see slight gains due ex- pacted Yemen’s economy in 2024. Oil-GDP sures, causing the YER to depreciate in the panded operations of Yemenia Airways has remained stagnant after a sharp 60 per- Aden market from 1,531 per US dollar at under the UN-mediated agreement. cent drop in 2023. Meanwhile, the non-oil the end of 2023 to 1,915 by August 20, 2024. Significant downside risks could further sector faces mounting challenges due to destabilize Yemen's economy. This is at- rising uncertainty, hostile actions, and tributed to the potential escalation of widespread protests. Particularly concern- Houthi attacks in the Red Sea. While ing is the escalating tension between the Outlook Yemen's imports and prices have re- Houthis and the IRG over the regulation mained relatively stable so far, the on- of the banking sector. On April 2, 2024, Overall, the economy is expected to de- going conflict increases risks of broader the CBY-Aden issued a mandate requiring teriorate further in 2024. National GDP is supply shortages and rising import costs banks in Sana’a to relocate to Aden or risk projected to contract by 1.0 percent in real due to increased shipping expenses, war disconnection from SWIFT. This directive terms, following a 2.0 percent decline in premiums, and insurance costs. On the escalated tensions until July 23rd, when 2023. Oil-GDP is likely to remain stagnant, domestic front, tensions as those seen the IRG and Houthis agreed to de-escalate assuming the current conflict conditions in 2024 within the banking sector could by reversing recent actions against banks continue and preclude oil exports in IRG- reemerge, posing serious threats to the and expanding Yemenia Airways’ interna- controlled areas from resuming. The ongo- economy by disrupting humanitarian aid, tional flights. This followed a dire warning ing blockade on IRG oil exports, coupled essential imports, remittances, and key from the World Food Programme about with persistent dependence on imported sources of livelihood. a looming liquidity crisis and threat of goods and services, is expected to widen However, if a lasting truce or peace agree- hunger in Yemen. the current account deficit to 25 percent of ment is achieved, Yemen could experience The IRG’s fiscal revenues, excluding GDP, putting additional pressure on the large and sustained growth within grants, continued to decline in the first YER. As a result, consumer prices across months. Achieving a lasting truce or peace half of 2024, although donor support Yemen are anticipated to rise by 16.3 per- agreement could pave the way for rapid helped decrease the fiscal deficit. Ac- cent. However, donor support to the IRG economic recovery, driven initially by the cording to the Ministry of Finance in and a reduction in expenditures are ex- recovery of internal transport and trade, Aden, IRG revenues, excluding grants, pected to decrease the IRG’s fiscal deficit resulting in lower costs and increased em- fell by 42 percent in H1-2024, following from 6.1 percent of GDP in 2023 to approx- ployment and incomes. With additional ex- a sharp 50 percent drop in 2023. Mean- imately 3.5 percent in 2024, despite the de- ternal financial assistance and reconstruc- while, fiscal expenditures continued to cline in revenues excluding grants. tion efforts supported by development rise. However, external emergency sup- The economic outlook for 2025 also re- partners, and post-conflict reforms, Yemen port provided some relief, with Saudi Ara- mains grim. With stalled peace negotia- could achieve accelerated and sustained bia extending budget support, including tions and ongoing regional and domestic growth within a short to medium time. TABLE 2 Republic of Yemen / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f Real GDP growth, at constant market prices -1.0 1.5 -2.0 -1.0 1.5 a Inflation (consumper price index) 31.5 29.5 0.9 16.3 20.7 Current account balance (% of GDP) -14.2 -17.7 -20.3 -25.0 -25.7 Fiscal balance (% of GDP) -0.9 -2.7 -6.1 -3.5 -4.0 Revenues (% of GDP) 7.3 9.5 6.0 7.4 6.6 Debt (% of GDP) 93.6 77.9 100.4 106.4 102.1 Primary balance (% of GDP) 0.2 -1.7 -4.4 -1.6 -2.1 GHG emissions growth (mtCO2e) -0.1 -2.6 -3.4 -1.5 -0.3 Energy related GHG emissions (% of total) 32.0 31.3 30.3 29.7 29.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Notes: e = estimate, f = forecast. a/ Inflation rates refer to end-of-period figures. MPO 183 Oct 24 South Asia Afghanistan Maldives Bangladesh Nepal Bhutan Pakistan India Sri Lanka MPO 185 Oct 24 wholesale and retail trade and trans- portation. However, the education sub- AFGHANISTAN Key conditions and sector declined by 9.4 percent, and the health and social services sub-sector de- challenges clined by 3.1 percent. On the demand side, private consumption increased by Afghanistan faces numerous socio-eco- 6.2 percent, with government consump- nomic challenges since the Taliban's re- tion contributing modestly at 1.1 percent. turn to power, including a sharp decline However, overall growth in aggregate de- Afghanistan's economy grew by 2.7 per- in international aid, frozen foreign re- mand was constrained by the decline in cent in FY2023-24, partially recovering serves, persistent deflation, growing trade investment and exports. deficit, restrictive laws particularly affect- Headline inflation fell in April 2023 and from a 27 percent contraction following ing women’s rights, and persistently low remained negative throughout the Afghan the Taliban's takeover. Growth in agricul- levels of human capital. Private consump- fiscal year. Domestic prices declined by 7.7 ture, industry, and services contributed tion remains constrained, and nearly half percent on average in FY2023-24. Core in- to the recovery. Humanitarian aid and in- of the population lives in poverty with flation, excluding volatile food and energy ward remittances supported aggregate de- fewer quality jobs and increased unem- prices, was also negative, falling by about 3 ployment, particularly affecting youth percent by the end of the FY in March 2024. mand. However, the outlook remains sub- and women. The Interim Taliban Admin- Declining prices, notably in food, have dued, with high downside risks due to istration (ITA) has strengthened domestic supported a progressive improvement in persistent deflation, a trade deficit, and revenue mobilization efforts, but progress Afghan households’ self-reported welfare. restrictive laws, particularly affecting is insufficient to offset the reduction in According to the latest estimates (Spring external support. Afghanistan's underde- 2023), monetary poverty is at 48.3 percent, women's rights. Afghanistan's long-term veloped infrastructure, particularly in en- a 4-percentage point decline compared to economic prospects depend on internal ergy and transportation, hinders industri- the same period in 2020. Poverty in urban policy reforms and external aid. al and commercial productivity, especial- areas remains on an upward trend, reflect- ly in rural areas. ing the lack of quality job opportunities while improvement in the security situa- tion, better access to markets, and a good agriculture season supported a decline in Recent developments poverty in rural areas. Afghan households have coped with the crisis by increasing In FY2023-24, Afghanistan's GDP began their labor supply. However, a weak labor to expand. Agriculture expanded by 2.1 demand has caused a doubling of unem- percent and the industrial sector by 2.6 ployment and a 25 percent increase in un- percent, supported by a halving of the deremployment between 2020 and 2023. business receipt tax (BRT) for industries Afghan women continue to suffer the conse- and lower tariffs on raw and semi-raw quences of restrictive policies. Between 2022 materials. The services sector grew by 2.3 and 2023, girls’ secondary school enroll- percent, with notable contributions from ment collapsed from 14 percent to 3 percent FIGURE 1 Afghanistan / Real GDP growth and contributions FIGURE 2 Afghanistan / The country is facing deflation to real GDP growth Percent, percentage points Percent 10 20 5 15 0 10 -5 5 -10 0 -15 -5 -20 Headline inflation -25 -10 Core inflation 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Agriculture Industry Services -15 Taxes on G&S Real GDP Aug-21 Feb-22 Aug-22 Feb-23 Aug-23 Feb-24 Sources: National Statistic and Information Authority (NSIA) and World Bank staff. Sources: NSIA and World Bank staff projections. MPO 186 Oct 24 due to the ban on secondary education. The fiscal deficit is expected to narrow While more women have entered the labor to 0.7 percent in FY2024-25, with a bal- force to support their households' liveli- Outlook anced budget projected for FY2025-26 hoods compared to 2020, limited mobility and FY2026-27. Revenue collection has and other restrictions largely reduce their Economic activity is expected to grow mod- improved during the first four months employment opportunities to home pro- estly over the medium term, averaging 2.75 of FY2024-25, totaling AFN 69.7 billion, duction in the manufacturing sector. The percent annually from 2024 to 2026, with marking an 11 percent increase from Morality Law recently promulgated, if ful- agriculture growing faster than the rest of the previous year, primarily driven by ly enforced, could further restrict women's the economy Domestic prices are expected higher non-tax revenues. With borrowing socio-economic inclusion and the coun- to stabilize in the second half of FY2023-24, constraints, the revenue increase is ex- try’s development prospects. with inflation turning positive. pected to be matched by a corresponding Afghanistan's current account deficit in- With projected GDP growth barely at par rise in expenditure. creased to 13.5 percent of GDP in with that of the population, per capita Afghanistan’s economic outlook faces FY2023-24, driven by a growing trade GDP is expected to stagnate and poverty major risks, including political instability deficit and declining foreign aid. Despite to remain above 40 percent. Moreover, vul- that weakens investor confidence and increased remittance inflows, total income nerability to falling into poverty because of long-term planning. The country's isola- from abroad declined by approximately shocks remains a concern, as does unem- tion and lack of international recogni- two percentage points of GDP, falling to ployment and job quality challenges. tion limit access to foreign aid, invest- 33.7 percent. Financing the current ac- The current account deficit in Afghanistan ment, and trade, slowing its economic count deficit has been challenging due to is projected to increase to 17.7 percent of recovery. A high current account deficit limited foreign direct investment and lim- GDP in the forecast period, up from 13.5 strains foreign reserves, and with limited ited borrowing capacity. percent in FY2023-24 driven by a high financial options, the central bank strug- Despite improvements in domestic rev- trade deficit accounting for 40 percent of gles to manage currency stability, which enue mobilization, the fiscal deficit GDP. Exports of goods and services are could lead to inflation. The ITA relies (cash-basis) widened to 1.4 percent of expected to decline by two percentage heavily on customs duties and non-tax GDP in FY2023-24. Operating expendi- points, stabilizing around 10 percent of revenues but falling exports and lower tures increased by 0.3 percentage points GDP, while imports are expected to tax income make it harder to balance to 15.6 percent of GDP, while develop- slightly exceed 50 percent of GDP. Total the budget. The agriculture sector, which ment expenditures grew from 0.8 per- income from abroad is expected to de- provides a livelihood for 40 percent of cent of GDP in FY2022-23 to 1.3 percent cline to around 22 percent of GDP, and fi- the population, remains vulnerable to cli- in FY2023-24. The fiscal deficit was po- nancing of the current account deficit will mate change and weather shocks, leading tentially financed by a reduction in de- remain a challenge, even more so in a to potentially severe impacts on poverty posits at the central bank. context of declining aid. and food security. MPO 187 Oct 24 from UN Least Developed Country (LDC) status in 2026. BANGLADESH Key conditions and challenges Table 1 2023 Recent developments On August 8, 2024, an interim gov- Population, million 169.4 ernment took office following the res- Prior to the interim government taking GDP, current US$ billion 414.4 ignation of the former Prime Minister. office, the turmoil disrupted economic GDP per capita, current US$ 2445.6 The timing of the next election remains activity, particularly in the industrial and a 5.0 International poverty rate ($2.15) uncertain. The interim government will service sectors. a 30.0 need to address persistent high infla- Before the transition, real GDP grew by Lower middle-income poverty rate ($3.65) a 74.1 tion, declining reserves, and elevated fi- 5.2 percent in FY24. On the supply side, Upper middle-income poverty rate ($6.85) Gini index a 33.4 nancial sector vulnerabilities to stabi- GDP growth was primarily driven by School enrollment, primary (% gross) b 117.7 lize the economy. Despite disruptions in industry, which expanded by 5.8 per- b 73.7 economic activity, the transition is an cent—lower than the decadal average of Life expectancy at birth, years opportunity to implement a wide-rang- 9.5 percent, impacted by energy short- Total GHG emissions (mtCO2e) 260.7 ing reform agenda. ages, import restrictions, and monetary Source: WDI, Macro Poverty Outlook, and official data. Deterioration in labor market conditions tightening. Services growth also slowed a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). may have contributed to people’s discon- to 5.3 percent as domestic purchasing tent. Labor force participation declined power declined due to persistent in- from 61.2 in 2022 to 60.9 in 2023 and flation. Agricultural growth remained Real GDP growth is expected to slow reached 59.9 percent in the first half of modest at 3.3 percent. 2024. Employment has also reduced, par- The current account deficit almost halved from 5.2 percent in FY24 to 4.0 percent ticularly in 2024 (1.2 percentage points to US$6.5 billion (1.4 percent of GDP) in FY25, driven by subdued investment variation), and the unemployment rate in FY24 from US$11.6 billion in FY23, and industrial growth in the aftermath of remained almost stagnant at around 3.5 as the trade deficit improved, and remit- student-led protests and persistent social percent. This dynamic is mainly driven tance inflows grew by 10.7 percent. In by discouraged workers leaving the mar- May 2024, Bangladesh Bank adopted a grievances. Extreme poverty is projected ket as they cannot find jobs. crawling peg exchange rate system and to have increased to 6.1 percent in FY24, Comprehensive reforms to create more devalued the exchange rate. As of Sep- and inequality to increase over one Gini jobs, address financial sector vulnera- tember 8, foreign exchange reserves de- index point. Job creation, revenue mobi- bilities, strengthen public sector perfor- clined by US$2.3 billion since June 2024 lization, and financial sector reforms are mance, and improve revenue mobiliza- to reach US$19.4 billion, (3.2 months of tion will be critical to support growth. import coverage). key priorities for robust growth in the In the medium term, Bangladesh will Inflation remained elevated, averaging 9.7 medium to long term and to support the need to improve governance, boost hu- percent in FY24, due to high food and im- new poor to improve their welfare and be man capital, address climate risks and port prices. In response, the policy rate was lifted out of poverty. diversify exports to counter reduced raised by 100 basis points in FY25 to 9.5 market access following the graduation percent (cumulatively by 425 basis points FIGURE 1 Bangladesh / Real GDP growth and contributions FIGURE 2 Bangladesh / Actual and projected poverty rates to real GDP growth 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 50 0 40 100000 30 -5 20 50000 -10 10 2000 2003 2006 2009 2012 2015 2018 2021 2024 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 Table 2. MPO 188 Oct 24 since May 2022). The cap on bank lending The growth slowdown in FY25 will exac- rates was abolished to improve monetary erbate the situation for the most disadvan- transmission. The financial sector remains Outlook taged populations and increase disparities. vulnerable to high non-performing loans. Extreme poverty is expected to rise to 7.0 Higher inflation and reduced employ- Real GDP growth is projected to decline percent, pushing an additional 1.7 million ment opportunities impacted families' to 4.0 percent in FY25 but could range be- people into extreme poverty. According to welfare, who consume a much higher tween 3.2 and 5.2 percent. The wide range the upcoming Poverty Assessment, about percentage of income in food and goods of the projection reflects the unavailability 6 out of 10 individuals are estimated to affected by inflation. Workers in industry of credible data in recent months and sig- have used their savings to maintain house- and services were especially affected, fac- nificant uncertainties around the outlook. hold consumption. Conversely, house- ing job losses of around 4.8 percent and These uncertainties are expected to keep holds benefitting from robust remittance wage reductions (by 2.3 and 0.7 percent), investment and industrial growth sub- inflows will improve their welfare, but the likely pushing their families into extreme dued in the short term. Recent floods are contrasting effect will widen inequality by poverty. Consequently, extreme poverty expected to moderate agriculture growth. 1.4 Gini points. at the USD 2.15 (2017 PPP) threshold is Growth is expected to rise gradually, bene- Thefiscaldeficitisprojectedtoremainbelow projected to increase by 0.7 percentage fiting from critical financial sector reforms, 5.0 percent of GDP over the medium term. In points (or affect 1.2 million people) in increased revenue mobilization, improved theshortterm, total expenditure as a share of 2024. Some families—particularly in agri- business climate, and trade. GDP is expected to decline due to contrac- culture or receiving remittances—were Export growth is anticipated to remain tionary fiscal policy. Over the medium- to able to maintain their welfare. The op- positive, despite short-term challenges due long-term, strengthening revenue perfor- posing trends have likely exacerbated in- to high input costs, weak global demand, mance will be crucial to expand investments equality, with the Gini index increasing and uncertainties within the manufactur- in infrastructure and human capital. by 1.1 points over the year. ing sector. Remittances are projected to Downside risks to the outlook have in- The fiscal deficit was 4.5 percent of GDP stay robust in FY25, supported by the creased substantially. Increased political in- in FY24. Revenue growth was robust adoption of the crawling peg exchange stability, poor corporate governance, and but remained one of the lowest global- rate regime. The financial account will like- the potential insolvency of some banks ly at 8.5 percent of GDP. Expenditure ly remain in surplus, supported by budget could worsen an already weak financial sec- is estimated to have increased modest- assistance from development partners. tor. Persistently elevated inflation, weak ly to 13.0 percent of GDP, driven by Foreign exchange reserves are expected to global demand, energy shortages, and cli- current expenditure. The public debt to stabilize in FY25, albeit with some down- mate shocks could lower the growth out- GDP ratio increased to 38.8 percent but ward pressure due to external payment re- look further and exacerbate vulnerability remained sustainable. quirements to foreign energy suppliers. to falling into poverty. TABLE 2 Bangladesh / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020/21 2021/22 2022/23 2023/24e 2024/25f 2025/26f a Real GDP growth, at constant market prices 6.9 7.1 5.8 5.2 4.0 5.5 Private consumption 8.0 7.5 2.0 3.9 3.8 4.8 Government consumption 6.9 6.2 8.5 3.5 3.5 9.2 Gross fixed capital investment 8.1 11.7 2.2 4.8 3.1 6.4 Exports, goods and services 9.2 29.4 8.0 2.7 2.1 4.5 Imports, goods and services 15.3 31.2 -9.8 -2.5 0.4 5.1 a Real GDP growth, at constant factor prices 7.0 7.2 6.2 5.3 4.0 5.5 Agriculture 3.2 3.1 3.4 3.3 3.0 3.1 Industry 10.3 9.9 8.4 5.8 3.3 5.4 Services 5.7 6.3 5.4 5.3 4.7 6.0 Inflation (consumer price index) 5.6 6.1 9.0 9.7 9.5 9.0 Current account balance (% of GDP) -1.1 -4.2 -2.8 -1.4 -0.9 -0.5 Net foreign direct investment inflow (% of GDP) 0.3 0.4 0.4 0.4 0.3 0.4 Fiscal balance (% of GDP) -3.7 -4.6 -4.6 -4.5 -4.3 -4.6 Revenues (% of GDP) 9.4 8.5 8.2 8.5 8.3 8.7 Debt (% of GDP) 32.4 33.8 37.0 38.8 40.6 41.8 Primary balance (% of GDP) -1.7 -2.6 -2.5 -1.9 -1.4 -1.6 b,c International poverty rate ($2.15 in 2017 PPP) .. 5.0 5.4 6.1 7.0 5.5 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 30.0 29.8 29.0 29.0 25.9 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 74.1 73.7 71.8 70.2 68.0 GHG emissions growth (mtCO2e) 7.3 5.0 2.7 1.8 2.0 2.6 Energy related GHG emissions (% of total) 42.3 44.1 44.6 44.7 44.9 45.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ FY23 estimates based on BBS provisional estimates. b/ Calculations based on SAR-POV harmonization, using 2022-HIES. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. c/ Projections using microsimulation methodology. MPO 189 Oct 24 poor. Poverty reduction was more salient in rural areas. Non-monetary well-being BHUTAN Key conditions and dimensions such as education and sanita- tion also improved. However, vulnerabil- challenges ity to climate shocks and spatial inequali- ties persist, with the poverty rate ranging Table 1 2023 Bhutan’s real GDP growth is driven by the from 1.5 percent in Thimphu to 41 percent Population, million 0.8 public-led hydropower sector, resulting in in Zhemgang. As measured by the Gini in- GDP, current US$ billion 2.9 growth spikes during the construction and dex, monetary inequality improved from GDP per capita, current US$ 3717.8 completion of hydropower plants. How- 37 to 28, yet spatial disparities persist. a 0.0 International poverty rate ($2.15) ever, the hydropower sector employs less Downside risks to the economic outlook a 0.5 than one percent of the labor force while persist. Domestic risks include delays in Lower middle-income poverty rate ($3.65) a 8.4 the subsistence agriculture sector employs hydropower projects, which affect growth, Upper middle-income poverty rate ($6.85) Gini index a 28.5 over 40 percent. High youth unemploy- and fiscal and external balances. Delayed School enrollment, primary (% gross) b 103.8 ment rate (19.2 percent in 2024) and lim- fiscal consolidation and materialization of b 72.2 ited labor opportunities, especially for financial sector contingent liabilities could Life expectancy at birth, years skilled workers, increased emigration, further erode fiscal buffers. External risks Total GHG emissions (mtCO2e) -5.1 with 9 percent of Bhutanese living abroad. include rising and volatile commodity Source: WDI, Macro Poverty Outlook, and official data. Generous provision of public services and prices due to geopolitical tensions, natural a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). low tax revenue have led to persistent fis- disasters, and climate-related hazards, cal deficits. Major national investment in which could impact livelihoods and infra- cryptocurrency mining has further pres- structure development. Continued emigra- Economic growth rose to 5.3 percent in sured international reserves and worsened tion of skilled labor continues to weigh on CAD since FY21/22, already strained by the economy and is likely to have a nega- FY23/24 and is projected to increase fur- import reliance. The new government aims tive effect in the medium term. ther in the short to medium term due to to transform its economy through the 13th the commissioning of new hydropower Five-Year Plan (FYP) launched in July 2024 plants and recovery of the tourism sector. focusing on private sector development, Fiscal performance improved with a series job creation, infrastructure investments, Recent developments and public sector reforms. of consolidation measures. The current Economic growth contributed to poverty Real GDP grew by 5.3 percent in FY23/ account deficit (CAD) is expected to im- reduction during 2017-2022. Extreme 24 (July 2023 to June 2024), supported by prove with increased hydropower, non- poverty ($2.15/day) was nearly eliminated, the recovery of the tourism sector and hydropower (mining and forestry), and and those living below $3.65/day and growth of the non-hydropower industry $6.85/day dropped sharply. Remittances (base metals and ferro-silicon). The agri- tourism exports and reduced cryptocur- were crucial to improving welfare among culture sector returned to the pre-pandem- rency equipment imports. Despite signifi- recipient households. Without remittances, ic growth rate of 3.4 percent after stagnat- cant progress, 19 percent of Bhutanese re- the poverty rate would be substantially ing in previous years. Industry growth main vulnerable to falling into poverty. higher with an estimated 24,000 more peo- stalled at 0.2 percent, due to contraction in ple (3 percent of Bhutanese) classified as the hydropower and construction sectors, FIGURE 1 Bhutan / Real GDP growth and contributions to FIGURE 2 Bhutan / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 70 300000 20 60 250000 15 50 10 200000 5 40 150000 0 30 -5 100000 20 -10 50000 10 -15 2001 2006 2011 2016 2021 2026 0 0 Private cons. Public cons. GFCF 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Inventories Export Import International poverty rate Lower middle-income pov. rate GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Account Statistics and National Statistics Bureau (NSB). Source: World Bank. Notes: see Table 2 MPO 190 Oct 24 accounting for 72 percent of the industry for energy-intensive cryptocurrency min- landslides (forthcoming Bhutan Poverty sector, despite strong growth in mining ing operations. Gross international re- and Equity Assessment, 2024). and quarrying. The services sector grew by serves increased modestly to US$624 mil- The fiscal deficit is expected to widen be- a robust 8.7 percent, led by tourism-relat- lion in June 2024 (4.7 months of imports). fore improving in the medium term with ed services. Demand side growth was dri- consolidation and rising revenues. The fis- ven by non-hydropower exports and con- cal deficit is projected to increase to 4.4 sumption. Headline inflation decelerated percent in FY24/25, driven by increase in from 4.6 to 4.3 percent, due to lower food Outlook capital expenditure for the 13th FYP. and non-food inflation. Goods and Services Tax implementation The fiscal deficit narrowed by 3.9 percent- Real GDP growth is projected to rise to 7.2 and one-off profit transfers from commis- age points in FY23/24 to 0.8 percent of percent in FY24/25, led by commissioning sioning of Puna II in FY25/26, along with GDP, driven by improved domestic rev- of Puna-II hydropower plant and growth BTN 100 billion (US$1.2 billion) grant from enue and reduced capital expenditures de- in the non-hydropower industry and the Indian government will boost revenue. spite major increase in public sector wages. tourism sectors. On the demand side, Primary non-wage recurrent expenditure Current expenditures increased due to a growth is supported by non-hydropower is expected to moderate. Public debt will major salary hike for public servants rang- exports and 13th FYP-related public in- remain elevated, rising to 122 percent of ing from 55 to 74 percent, aimed at curbing vestments. Medium-term growth will be GDP in FY25/26 but considered sustain- the high attrition rate of public servants. driven by robust electricity production, able as most of it is linked to hydropower Capital expenditure remained low in construction, and services sectors on the loans. However, rising debt service may FY23/24, as most of the capital spending of supply side and growth of exports and limit the fiscal space for social spending. the 12th FYP was frontloaded in FY20/21 to public investment on the demand side. The The CAD is projected to decline to 17.5 and support pandemic recovery. lifting of housing construction loans mora- 9.3 percent of GDP in FY24/25 and FY25/ The CAD remains elevated at 22.7 percent torium and launching of the collateral-free 26, before moderating further in the medi- of GDP in FY23/24, albeit significantly nar- concessional credit line in FY24/25 is ex- um term. This is driven by continued re- rowed from a peak of 34 percent in the pre- pected to boost investments and growth. duction of cryptocurrency and hydropow- vious year despite lower hydropower ex- Poverty reduction is expected to continue, er plants construction related imports. Ex- ports, due to a reduction in cryptocurrency with the $6.85/day poverty rate falling to port is projected to grow with higher hy- mining related IT imports and continued 5.9 percent in FY24/25 and 5.0 percent in dropower exports from the commissioning recovery of the tourism sector. Hydropow- FY25/26. However, a substantial share of of Puna-II, increased non-hydropower er exports declined, despite the commis- the population (19 percent of the total pop- (mining and timber), and tourism exports. sioning of the Nikachhu hydropower ulation or 200,000) remains vulnerable to As a result, international reserves are pro- plant, due to increased domestic consump- poverty due to climate change hazards, jected to increase to US$717 million in tion, reflecting the higher electricity needs with nearly half of the poor exposed to FY24/25 (5.1 months of import coverage). TABLE 2 Bhutan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020/21 2021/22 2022/23 2023/24e 2024/25f 2025/26f Real GDP growth, at constant market prices -3.3 4.8 5.0 5.3 7.2 6.6 Private consumption 0.3 1.5 6.9 5.6 3.1 3.7 Government consumption 5.4 1.9 -0.5 6.4 5.2 0.3 Gross fixed capital investment -3.4 25.4 5.6 -7.6 5.9 7.3 Exports, goods and services -10.4 -3.6 9.8 19.1 12.0 12.3 Imports, goods and services -0.5 13.2 7.5 0.2 4.0 5.5 Real GDP growth, at constant factor prices -2.3 4.9 4.8 5.2 7.2 6.6 Agriculture 2.7 0.1 0.1 3.4 5.3 5.0 Industry -5.9 4.8 2.7 0.2 10.1 12.9 Services -1.2 6.3 7.4 8.7 6.1 3.3 Inflation (consumer price index) 8.2 5.9 4.6 4.3 1.1 4.0 Current account balance (% of GDP) -11.1 -28.1 -34.0 -22.7 -17.5 -9.3 Fiscal balance (% of GDP) -5.8 -7.0 -4.7 -0.8 -4.4 -2.5 Revenues (% of GDP) 30.9 25.1 25.3 26.4 26.5 29.6 Debt (% of GDP) 123.3 118.8 116.1 110.7 104.8 121.6 Primary balance (% of GDP) -4.8 -5.6 -3.0 1.1 -2.4 0.5 a,b International poverty rate ($2.15 in 2017 PPP) .. 0.0 .. .. .. .. a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 0.5 0.4 0.3 0.3 0.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 8.4 7.7 6.9 5.9 5.0 GHG emissions growth (mtCO2e) 0.1 -1.7 -1.8 -1.6 -1.6 -1.5 Energy related GHG emissions (% of total) -14.3 -15.6 -17.0 -18.3 -19.5 -20.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SAR-POV harmonization, using 2022-BLSS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 191 Oct 24 Risks to the medium-term outlook are manageable. Unexpected climatic shocks INDIA Key conditions and could delay agricultural recovery and heightened geopolitical tensions could af- challenges fect commodity prices. However, India’s large domestic market, diversified econo- Table 1 2023 Between 2000 and 2019, economic growth my, and adequate foreign exchange re- Population, million 1428.6 averaged 6.6 percent annually, per capita serves provide significant resilience GDP, current US$ billion 3567.1 GDP grew more than two-fold, and ex- against these shocks. GDP per capita, current US$ 2496.9 treme poverty was reduced by two-thirds. To sustain its robust growth trajectory, In- a 112.0 School enrollment, primary (% gross) The strong performance coincided with dia should deepen factor market reforms a 67.7 deeper global integration and improve- and improve the business environment to Life expectancy at birth, years Total GHG emissions (mtCO2e) 3672.3 ments in the business environment. The stimulate private investment; focus on skill Source: WDI, Macro Poverty Outlook, and official data. COVID shock caused a deep contraction development and improving educational a/ WDI for School enrollment (2023); Life expectancy (by 5.8 percent in FY20/21) but the econ- outcomes to maximize its demographic (2022). omy rebounded swiftly, averaging 8 per- dividend; and leverage global markets by cent growth over the following three fis- reducing trade barriers and costs. cal years. However, by the end of FY23/ 24, the economy was still 7 percent small- er than it would have been under its pre- pandemic growth trajectory. Recent developments Despite significant welfare gains, 44 per- Despite a subdued global backdrop, the cent of the population still lived below the India grew 8.2 percent in FY23/24, remain- Indian economy expanded by 8.2 per- lower middle-income poverty line and 12.9 ing the fastest-growing major economy. cent in FY23/24, reflecting strong percent below the extreme poverty line in After contracting in FY22/23, manufactur- growth in manufacturing and construc- FY21/22 (see footnote a/). Consumption- ing output expanded by 9.9 percent in based inequality has remained steady but FY23/24, reflecting increased demand from tion. This strong momentum is project- high (Gini index of 33). Access to services the construction sector. Service sector ed to continue over the medium term varies widely across states, with multidi- growth, while robust, moderated to 7.6 as a nascent private investment cycle is mensional poverty ranging from less than percent as the post-pandemic recovery expected to firm up. Employment and 1 percent in Kerala to 35 percent in Bihar. slowed and unfavorable monsoons muted New data shows that the compound an- agricultural growth. On the demand side, worker participation rates increased in nual growth in real per capita consump- increased investment, especially in public 2022-23, but high rates of tertiary tion averaged 3 percent between 2011-12 infrastructure and private real estate, offset youth unemployment, low rates of paid and 2022-23 (Inflation-adjusted; House- a slowdown in private consumption as employment for women, and poor job hold Consumption and Expenditure Sur- rural income growth moderated. quality remain a concern. veys), with wide variation within and Headline inflation slowed to 5.4 percent across states (8.5 percent in Sikkim versus in FY23/24, primarily thanks to lower fuel only 0.9 percent in rural Nagaland and prices. However, food price inflation con- 0.6 percent in urban West Bengal). tinued to be high and volatile, posing risks FIGURE 1 India / Real GDP growth and contributions to real FIGURE 2 India / Actual poverty rates and real GDP per capita GDP growth at factor cost Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 12 80 120000 Forecast 70 100000 8 60 80000 50 4 40 60000 30 0 40000 20 20000 Services 10 -4 Industry Agriculture 0 0 Real GDP growth, at constant factor prices 2009 2011 2013 2015 2017 2019 2021 -8 International poverty rate Lower middle-income pov. rate FY16/17 FY18/19 FY20/21 FY22/23 FY24/25 FY26/27 Real GDP pc Sources: National Statistics Office (NSO) and World Bank. Source: World Bank. Notes: see Table 2. Note: FY16/17 refers to the fiscal year 2016-17 (April 2016-March 2017) and so on. MPO 192 Oct 24 to welfare as about one-third of the pop- revenue growth and stable current spend- expected to rise with improved rural in- ulation is undernourished. Persistent food ing more than offset a 28 percent increase comes. Although public investment inflation can further worsen malnutrition in capital spending. However, public debt- growth may moderate, private corporate and stunting among vulnerable groups. As to-GDP rose to 83.9 percent in FY23/24 due investment growth is set to increase, dri- of August 2024, the Reserve Bank of India to slowed nominal GDP growth. ven by growing consumer demand. Ex- has kept the policy rate unchanged at 6.5 The current account deficit narrowed to ports are projected to grow faster amid percent since February 2023. 0.7 percent of GDP in FY23/24 from recovering global trade conditions and In 2022-23, net employment growth ex- 2.0 percent in FY22/23. The merchandise expected rate cuts by major central banks. ceeded the increase in the working-age balance improved, aided by declining Robust growth, particularly in rural in- population. The worker-population ratio global commodity prices, while services comes, should sustain poverty reduction, increased across all groups, with women trade maintained a surplus. Net foreign but more labor-intensive growth is needed experiencing a five percentage point rise direct investment dropped sharply due to accelerate this trend. to 30.8 percent. However, despite the im- to increased repatriation, but foreign Headline inflation continued to fall in Q1 provement, youth unemployment rates re- portfolio investment inflows increased FY24/25 and is projected to reach RBI’s 4 mained elevated and paid employment for ahead of India’s inclusion in global percent target over the medium term, bar- women is still low. Job quality also re- bond indices. India’s foreign exchange ring major climate shocks. Food price in- mained a concern; 74 percent of the added reserves rose to US$670 billion, provid- flation remains volatile but is expected to jobs were in self-employment, of which 43 ing an ample buffer. ease with favorable monsoon conditions. percent were unpaid. Over one-fifth of The overall fiscal deficit is projected to nar- workers are in low-skill, elementary occu- row thanks to continued strong revenue pations, and informality prevails in agri- growth (from improved compliance and a culture (where nearly all jobs are informal) Outlook broader tax base) and modest spending and paid non-farm employment (of which growth. Thus debt-to-GDP is projected to only 22 percent are formal). Two in five Growth is projected to remain strong at decline to around 82 percent by FY26/27. employed individuals earned incomes in- around 7 percent over the medium term. The current account deficit is projected to sufficient to keep an average family above Agricultural growth is expected to recov- widen to around 1.5 percent of GDP over the lower middle-income poverty line, and er to 4.1 percent in FY24/25, thanks to im- the medium term due to increased domes- a quarter of workers did not earn enough proved monsoon, and services and man- tic demand and is expected to be adequate- to lift a family out of extreme poverty. ufacturing sectors are projected to grow ly financed by gradually improved foreign The general government fiscal deficit nar- above 7 percent. On the demand side, (direct and portfolio) investment flows. In- rowed to 8.5 percent of GDP in FY23/24, government consumption will likely re- dia’s ample foreign exchange reserves are from 9.6 percent in FY22/23, thanks to con- main subdued due to continued fiscal expected to remain sufficient, covering solidation at the central level. Strong tax consolidation, but private consumption is about eight months of imports. TABLE 2 India / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021/22 2022/23 2023/24 2024/25e 2025/26f 2026/27f Real GDP growth, at constant market prices 9.7 7.0 8.2 7.0 6.7 6.7 Private consumption 11.7 6.8 4.0 5.7 6.0 6.1 Government consumption 0.0 9.0 2.5 4.3 5.0 5.0 Gross fixed capital investment 17.5 6.6 9.0 7.8 7.7 7.7 Exports, goods and services 29.6 13.4 2.6 7.2 7.2 7.9 Imports, goods and services 22.1 10.6 10.9 4.1 6.3 7.3 Real GDP growth, at constant factor prices 9.4 6.7 7.2 7.0 6.7 6.7 Agriculture 4.6 4.7 1.4 4.1 3.9 3.7 Industry 12.2 2.1 9.5 7.6 7.3 7.2 Services 9.2 10.0 7.6 7.4 7.1 7.1 Inflation (consumer price index) 5.5 6.7 5.4 4.5 4.1 4.0 Current account balance (% of GDP) -1.2 -2.0 -0.7 -1.1 -1.2 -1.6 Net foreign direct investment inflow (% of GDP) 1.2 0.8 0.3 1.0 1.2 1.5 Fiscal balance (% of GDP) -9.5 -9.6 -8.5 -7.8 -7.5 -7.3 Revenues (% of GDP) 20.6 21.5 21.9 21.9 21.9 21.7 Debt (% of GDP) 84.8 82.5 83.9 83.7 83.0 82.0 Primary balance (% of GDP) -4.3 -4.4 -3.1 -2.5 -2.2 -2.1 a International poverty rate ($2.15 in 2017 PPP) 12.9 .. .. .. .. .. a Lower middle-income poverty rate ($3.65 in 2017 PPP) 44.1 .. .. .. .. .. GHG emissions growth (mtCO2e) 7.7 4.4 2.8 2.8 2.8 3.2 Energy related GHG emissions (% of total) 68.5 69.5 70.3 70.9 71.2 71.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Estimates are based on the Uniform Recall Period using survey-to-survey imputation (Roy and van der Weide (2022)). These estimates will be revised based on the 2022-23 Household Consumption Expenditure Survey when finalized. Extreme poverty line is defined at $2.15 per capita per day, and lower middle-income poverty line at $3.65 per capita per day (2017 PPP). MPO 193 Oct 24 spending efficiency and rationalizing cap- ital expenditure. Overnight subsidy re- MALDIVES Key conditions and moval, if uncompensated, could cause poverty ($6.85 per person per day, 2017 challenges PPP) to almost double nationally and in the atolls. However, the implementation of Table 1 2023 Tourism, the key driver of economic these reforms has yet to commence, and it Population, million 0.5 growth, continues to support economic will also require candid and timely com- GDP, current US$ billion 6.6 activity and fiscal revenues with in- munication to the public. GDP per capita, current US$ 12678.3 creased arrivals from China, Russia, a 3.9 Upper middle-income poverty rate ($6.85) and the UK. However, a decline in a 29.3 spending per tourist has moderated Gini index School enrollment, primary (% gross) b 97.8 the impact of the sector’s strong per- Recent developments Life expectancy at birth, years b 80.8 formance on overall growth. Total GHG emissions (mtCO2e) 2.9 Large increases in government spending The economy grew by 4.1 percent (y-o-y) and reliance on external non-concession- in 2023 and 9.8 percent (y-o-y) in Q12024. Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2019), 2017 PPPs. al financing for infrastructure projects Tourist arrivals reached 1.3 million in Au- b/ Most recent WDI value (2022). in recent years have worsened external gust and are projected to reach a historical and fiscal vulnerabilities and significant- high of 2 million in 2024 (8.6 percent above ly increased public debt. Persistent large 2023). However, due to a continued de- current account and fiscal deficits have crease in spending per tourist, these higher Economic growth is projected to remain led to a major depletion in already lim- arrivals are not expected to significantly ited official reserves. Pressure on fiscal increase growth, with real GDP growth robust over the medium term, driven by accounts this year has been aggravat- projected at 4.7 percent in 2024. strong performance in the tourism sector. ed by the government’s continued pro- Domestic inflation remained low at an av- However, long-standing fiscal and exter- vision of blanket subsidies, capital in- erage of 0.5 percent (y-o-y) in H12024. nal imbalances, including a recent sharp jections to underperforming state-owned However, food inflation experienced a enterprises (SOEs), and high levels of sharp increase, reaching an average of 6.7 decline in official reserves, raise substan- public health spending. The unavailabil- percent (y-o-y) in the same period, increas- tial liquidity and solvency concerns. ity of finance has led to a notable re- ing costs of living for all, especially for less A major fiscal adjustment is urgently re- duction in capital spending, an accumu- well-off households (who spend 35.2 per- quired to address these vulnerabilities lation of expenditure arrears, and con- cent of their budget on food). cerns about the financial health of the A decline in fish exports of 45.5 percent (y- and ensure macroeconomic stability, construction industry. o-y) and growth in goods imports of 6.4 which could increase vulnerability to To tackle the economic difficulties, the percent (y-o-y) in H12024, widened the falling into poverty. Cushioning the im- government announced a homegrown fis- trade deficit to US$1.5 billion in H12024, pact on the poor and vulnerable from in- cal reform agenda in February 2024, in- from US$1.4 billion in H12023. Higher im- come and welfare losses will be critical. cluding reforms that phase out existing port costs and external debt repayments al- subsidies and replace them with a targeted so put significant pressure on official re- cash transfer scheme, improving health serves, which fell from US$590.5 million FIGURE 1 Maldives / Real GDP growth and contributions to FIGURE 2 Maldives / Actual and projected poverty rates real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 30 60 250000 Agri. and Fish. Manufacturing 25 50 Electricity and water 200000 Construction 20 Wholesale and retail trade 40 Tourism 150000 15 Transp. and comm. 30 Others Real GDP growth 100000 10 20 5 50000 10 0 0 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 -5 International poverty rate Lower middle-income pov. rate 2022Q1 2022Q3 2023Q1 2023Q3 2024Q1 Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 194 Oct 24 in December 2023 to US$395.4 million in absence of mitigating transfers, subsidy July 2024 (from 1.4 to 0.9 months of im- removal could double poverty rates. As- ports). Similarly, usable reserves declined Outlook suming a budget of MVR 1.2 billion, from US$179 million to an all-time low of a universal cash transfer would only US$43.7 million in the same period. Supported by tourism, the economy is pro- partly offset the welfare losses, but a While recurrent expenditure declined by jected to grow by 4.7 percent on average more generous targeted cash transfer to 7.2 percent (y-o-y) in H12024, lower than over the medium term—lower than the the bottom 60 percent of the population expected due to delayed subsidy reforms, pre-pandemic average of 7.4 percent. This could fully compensate. capital expenditure declined by 47.6 per- outlook is predicated on a major fiscal ad- The current account deficit is expected to cent (y-o-y) in H12024 due to infrastruc- justment—including the negative impacts narrow from 21.2 percent of GDP in 2023 ture project cuts. Overall, total expenditure on real household incomes and a reduction to 12.1 percent of GDP in 2026, supported is expected to moderate in 2024, yet this in government consumption and invest- by robust growth in service exports and will be overshadowed by the buildup of ment—and more moderate spending per slower growth in imports. High external fi- expenditure arrears. With lower revenue tourist. Inflation is projected to rise signif- nancing needs—including significant debt collections, which declined by 5.7 percent icantly over the medium term, due to the servicing—are expected to sustain pres- (y-o-y) in H12024 due to lower non-tax planned subsidy reform. sure on official reserves and threaten over- revenues, the estimated fiscal deficit at Assuming a timely implementation of all macroeconomic stability. end-June remained at 12.8 percent of the government’s fiscal reform package, Major downside risks exist. Any shock to GDP—similar to 2023. Given the author- including a meaningful spending reduc- the tourism sector could worsen the ities have not published monthly and tion, the fiscal deficit is expected to nar- growth outlook. Limited domestic and ex- weekly fiscal developments since end- row from 12.7 percent of GDP in 2023 ternal financing may exacerbate liquidity June, this has led to further concerns over to 6.1 percent of GDP in 2026. As a re- and solvency concerns, especially consid- the country’s fiscal situation. sult, public debt is projected to gradu- ering the approaching spike in external With the persistence in domestic and ex- ally decline from 122.8 percent of GDP debt servicing payments. A major fiscal ternal financing difficulties, the central in 2023 to 111.4 percent of GDP in 2026. adjustment is urgently required to ensure bank’s (MMA) exposure to government The poverty outlook remains uncertain, macroeconomic stability. Any delay in fis- securities rose further to 61.0 percent of depending on the timing and scope of cal reforms could lead to a further deterio- its total financial assets by mid-2024, from reforms, the impact on labor markets, ration of current vulnerabilities and an un- 58.2 percent in 2023. and the design of cash transfers. In the precedented economic shock. TABLE 2 Maldives / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 37.7 13.9 4.1 4.7 4.7 4.6 Real GDP growth, at constant factor prices 33.8 15.0 3.5 4.7 4.7 4.6 Agriculture -0.7 3.1 0.8 -7.5 3.4 2.9 Industry -4.6 25.2 7.6 2.3 1.6 0.9 Services 43.4 14.7 3.1 5.8 5.2 5.1 Inflation (consumer price index) 0.5 2.3 2.9 2.3 7.8 4.5 Current account balance (% of GDP) -8.6 -16.3 -21.2 -15.9 -13.7 -12.1 Net foreign direct investment inflow (% of GDP) 12.2 11.9 12.1 12.0 12.2 12.0 Fiscal balance (% of GDP) -14.2 -11.6 -12.7 -9.4 -7.8 -6.1 Revenues (% of GDP) 26.4 30.6 33.5 31.9 34.1 33.6 Debt (% of GDP) 116.4 112.3 122.8 119.3 114.9 111.4 Primary balance (% of GDP) -11.6 -8.0 -8.6 -4.1 -3.1 -1.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 5.8 2.7 2.3 .. .. .. GHG emissions growth (mtCO2e) 4.9 13.4 9.0 8.6 8.3 8.0 Energy related GHG emissions (% of total) 75.5 77.7 78.8 79.9 80.8 81.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SAR-POV harmonization, using 2019-HIES. Actual data 2019. Nowcast based on microsimulations using sectoral GDP growth rates, and food and non-food inflation separately: 2021-2023. b/ Nowcast and projections are not available. MPO 195 Oct 24 Poverty incidence varies significantly across provinces, with the poverty rate NEPAL Key conditions and (based on the national poverty line) as high as 34.2 percent in Sudurpashchim and as challenges low as 11.9 percent in Gandaki. Inequality (Gini index) in urban areas (30.3) is higher Table 1 2023 Nepal’s economy has demonstrated re- than in rural areas (28.7). Sluggish job cre- Population, million 30.9 markable resilience, growing at an aver- ation with a high youth unemployment GDP, current US$ billion 40.9 age of 4.5 percent over the past decade rate (22.7 percent in 2022/2023) makes em- GDP per capita, current US$ 1324.0 despite significant external shocks. Over igration a preferred option for Nepalis a 0.4 International poverty rate ($2.15) 20 percent of the population is classified across the income distribution (particular- a 7.5 as poor using the revised national ly the young male), contributing to a loss Lower middle-income poverty rate ($3.65) a 44.1 poverty line. However, welfare has sig- of skilled workforce. Upper middle-income poverty rate ($6.85) Gini index a 30.0 nificantly improved in the last decade, Despite these positive developments, School enrollment, primary (% gross) b 123.0 mainly due to increased remittances. As Nepal's per capita income level remains b 70.5 a result, extreme poverty, applying the below its peers. Persistent challenges such Life expectancy at birth, years international poverty line of $2.15 per as low productivity and weak internation- Total GHG emissions (mtCO2e) 50.6 day, has been nearly eliminated, and al competitiveness hinder sustained high Source: WDI, Macro Poverty Outlook, and official data. the percentage of Nepalis living on less growth rates. Additionally, challenges re- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). than $3.65/day and $6.85/day has signif- lated to the effective implementation of icantly reduced. Consumption inequality federalism and other governance issues has also decreased, with the Gini index constrain economic progress. Growth accelerated in FY24, driven by falling from 32.8 to 30.0 and the prosper- ity gap narrowing. Without remittances, tourism, hydropower, and remittance-dri- over 2.6 million more people would be ven private consumption. Reduced recur- classified as poor. Human capital has im- Recent developments rent spending lowered the fiscal deficit, proved, with 94 percent of households while lower imports and higher remit- gaining electricity access, up from 70 per- Growth accelerated to 3.9 percent in cent. Progress includes reduced distance FY24, from 2 percent in FY23. The ser- tances led to the first current account to public hospitals and increased avail- vices sector was a key driver, fueled by a surplus in years. Despite reduced mone- ability of paved roads. Spatial inequal- surge in tourist arrivals that boosted ac- tary poverty, 14.5 million Nepalis remain ities persist, with the poorest provinces tivities in transportation, accommodation, vulnerable to climate risks, and millions like Sudurpashchim and Karnali experi- and food services. Increased hydropow- may fall back into poverty due to climate encing longer distances to paved roads er and paddy productions also supported and lower electricity access compared to growth. On the demand side, high re- shocks and persistently weak local eco- national averages. mittances boosted private consumption, nomic opportunities. While medium-term Vulnerability to climate shocks also re- while low capital spending kept public growth is projected to be around 5 per- mains a challenge. Although poverty re- investment subdued. cent, risks remain, including political. duction is particularly salient in rural ar- Headline inflation fell to 5.4 percent in FY24 eas, poverty remains predominantly rural. from 7.7 percent in FY23, below the central FIGURE 1 Nepal / The current account balance turned FIGURE 2 Nepal / Actual and projected poverty rates and positive in FY24 real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 30 90 100000 20 80 90000 70 80000 10 70000 60 0 60000 50 50000 -10 40 40000 30 -20 30000 20 20000 -30 10 10000 -40 0 0 FY19 FY20 FY21 FY22 FY23 FY24 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: World Bank staff calculations and Nepal Rastra Bank. Source: World Bank. Notes: see Table 2. MPO 196 Oct 24 bank's 6.5 percent target, mainly due to re- following the peak migration in FY23. Un- duced non-food and services inflation. der the baseline scenario, foreign reserves The current account balance turned posi- Outlook are projected to remain sufficient to cover tive for the first time in eight years in FY24, imports for over nine months at end-FY26. driven by increased remittances from Growth is projected to accelerate to 5.1 A gradual reduction in the fiscal deficit is ex- record migration in FY23 and lower im- percent in FY25 and 5.5 percent in FY26. pected over the medium term, driven by de- ports of intermediate goods. Exports in- The wholesale, retail, construction, and creased recurrent expenditure and revenue creased due to record-high electricity ex- manufacturing, which together account for measures. New tax measures in the FY25 ports and growth in export services from over one-fifth of the GDP, are poised to budget and the implementation of the Do- higher tourist arrivals. Consequently, for- benefit from the central bank's loosening of mestic Revenue Mobilization Strategy are eign reserves grew, reaching 13 months of monetary policy and easing of regulatory anticipated to increase revenue collection. import cover at end-FY24. requirements. This is anticipated to stimu- While planned capital expenditure is pro- The fiscal deficit narrowed to a seven- late private investment, while remittance- jected to rise, its execution is likely to remain year low of 2.6 percent of GDP in FY24, driven private consumption, along with constrained by the slow implementation of largely due to reduced recurrent expen- hydropower and tourism exports, is ex- the national project bank. Public debt is also diture driven by austerity measures and pected to bolster growth. expected to decline due to smaller fiscal lower intergovernmental transfers. Do- Inflation is anticipated to remain moder- deficits and higher economic growth. mestic revenue collection improved ate due to declining global commodity While Nepal's medium-term outlook re- slightly, with increases in both trade and prices and increased agricultural produc- mains generally positive, it faces several non-trade revenues. The fiscal deficit was tion. As a result, the poverty ($3.65/day) downside risks. Increased financial sector financed through a combination of do- is expected to decline to 6 percent in vulnerabilities could curtail private sector mestic and external concessional borrow- 2025 and 5.4 percent in 2026. Howev- credit. Political instability might lead to ings. Public debt reached 42.7 percent of er, 14.5 million people are vulnerable inconsistent policies, deterring investors. GDP by end-FY24. However, Nepal re- to falling into poverty due to climate Delays in implementing capital expendi- mains at a low risk of debt distress due change hazards, particularly in the north- tures could negatively impact growth. Ex- to both external and overall public debt. ern mountainous areas. ternally, regional instability and trade dis- The central bank reduced the policy rate The current account surplus is expected to ruptions could reduce tourism and do- twice in FY24, from 7 percent to 5.5 per- moderate in FY25 in response to increased mestic demand. Emigration is crucial for cent, to stimulate private sector credit. imports. However, a projected increase in poverty reduction, but high vulnerability However, credit as a proportion of GDP net electricity exports is expected to par- persists due to a weak labor market and remained stagnant, while non-performing tially offset this. Remittances are expected reliance on inadequate and non-respon- loans rose to a record 4 percent. to stabilize at around 25 percent of GDP sive social assistance programs. TABLE 2 Nepal / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.8 5.6 2.0 3.9 5.1 5.5 Private consumption 8.0 6.8 0.7 1.1 1.8 2.9 Government consumption -1.7 9.6 -21.2 -11.1 5.8 5.5 Gross fixed capital investment 9.8 3.4 -10.0 18.4 16.5 13.1 Exports, goods and services -21.3 34.1 3.3 18.1 11.3 13.2 Imports, goods and services 18.8 16.4 -18.7 -2.3 10.4 9.7 Real GDP growth, at constant factor prices 4.5 5.3 2.3 3.5 5.1 5.5 Agriculture 2.8 2.4 2.8 3.0 3.3 3.4 Industry 6.9 10.7 1.4 1.3 4.9 7.5 Services 4.7 5.3 2.4 4.5 6.1 6.0 Inflation (consumer price index) 3.6 6.3 7.7 5.4 5.0 4.5 Current account balance (% of GDP) -7.7 -12.5 -0.9 3.9 2.6 1.7 Net foreign direct investment inflow (% of GDP) 0.4 0.4 0.1 0.1 0.2 0.2 Fiscal balance (% of GDP) -4.0 -3.6 -5.8 -2.6 -2.2 -1.9 Revenues (% of GDP) 23.3 22.9 19.3 19.4 20.0 20.3 Debt (% of GDP) 39.9 40.5 42.9 42.7 42.2 41.3 Primary balance (% of GDP) -3.2 -2.7 -4.5 -1.1 -0.8 -0.7 a,b International poverty rate ($2.15 in 2017 PPP) .. 0.4 0.3 0.3 0.2 0.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 7.5 7.3 6.8 6.1 5.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 44.1 43.6 42.3 39.6 37.4 GHG emissions growth (mtCO2e) 3.2 -1.1 -0.4 3.6 3.8 4.1 Energy related GHG emissions (% of total) 32.6 31.3 30.1 31.4 32.7 34.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SAR-POV harmonization, using 2022-LSS-IV. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 197 Oct 24 PAKISTAN Key conditions and Recent developments challenges After contracting by 0.2 percent y-o-y in FY23, real GDP growth at factor cost rose Table 1 2023 Pakistan faced an economic crisis at the to 2.4 percent in FY24. On favorable weath- Population, million 240.5 beginning of FY24 with heightened risks er conditions, agriculture growth reached GDP, current US$ billion 338.2 of debt default. Political uncertainty, fiscal a 19-year high of 6.3 percent (Figure 1), GDP per capita, current US$ 1406.1 and external imbalances, and global mone- real agricultural labor income grew by 5 a 4.9 International poverty rate ($2.15) tary tightening led to pressures on domes- percent and the sector’s share in GDP rose a 39.8 tic prices and foreign reserves. Measures to 22.7 percent. As easing external pres- Lower middle-income poverty rate ($3.65) a 84.5 to manage imports and capital outflows sures permitted the lifting of import and Upper middle-income poverty rate ($6.85) Gini index a 29.6 were introduced, disrupting local supply capital controls, the industry and services School enrollment, primary (% gross) b 84.4 chains, economic activity and exacerbating sectors grew by a modest 1.5 percent and b 66.4 inflationary pressures. 1.1 percent, respectively. Tepid growth in Life expectancy at birth, years The situation has improved significantly non-agricultural sectors led to falling real Total GHG emissions (mtCO2e) 520.3 since then, even if risks remain high. With wages for construction, trade, and trans- Source: WDI, Macro Poverty Outlook, and official data. the approval of the IMF Stand-By Arrange- portation, while employment and labor a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). ment in July 2023, exchange rate flexibility force participation rates and job quality in- was restored, import controls were re- dicators have not risen. These together laxed, and fiscal consolidation measures with fiscal consolidation and high inflation Pakistan's economy stabilized in FY24, were introduced. Political uncertainty also led to a poverty rate of 40.5 percent in FY24 lessened post-elections. Coupled with and an additional 2.6 million Pakistanis supported by strong agricultural growth, strong agricultural growth, the economy falling below the poverty line (Figure 2). improved macroeconomic policies, new began recovering in FY24. However, over- The current account deficit (CAD) nar- external financing, easing import con- all real labor income declined, and with el- rowed to 0.2 percent of GDP in FY24 from trols, and political uncertainty. Howev- evated inflation, poverty rose in FY24. 1.0 percent in FY23 due to a smaller trade Downside risks remain high, with the re- deficit on lower domestic demand and er, with policy tightening, elevated infla- covery expected to continue but predicat- global commodity prices. With fresh mul- tion, and so far limited structural re- ed on the new IMF-EFF program remain- tilateral and bilateral inflows, the balance forms, growth will remain below poten- ing on track and on additional external fi- of payments swung from a deficit in FY23 tial, and labor income, employment, and nancing inflows. Continued fiscal restraint to a surplus of 0.8 percent of GDP in FY24. human capital accumulation rates will will dampen aggregate demand, income, International reserves increased to US$10.6 employment, and poverty alleviation. billion at end-FY24, equivalent to 1.9 decrease. Monetary poverty will remain Heavy banking sector exposure to the sov- months of imports, while the Rupee appre- high. Policy uncertainty, limited policy ereign, domestic policy uncertainty, feder- ciated modestly against the U.S. dollar. buffers, and the financial sector pose al-provincial government political mis- Headline inflation decelerated to an aver- substantial risks to the outlook. alignments, and geopolitical instability age of 23.4 percent in FY24 from 29.2 per- pose significant risks. cent in FY23 owing to high base effects, FIGURE 1 Pakistan / Real GDP growth and sectoral FIGURE 2 Pakistan / Actual and projected poverty rates and contributions to real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 7 100 200000 5.8 6.2 6 90 180000 5 80 160000 4 70 140000 2.4 60 120000 3 2 50 100000 1 40 80000 30 60000 0 20 40000 -1 -0.2 10 20000 -2 -0.9 0 0 -3 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 FY2020 FY2021 FY2022 FY2023 FY2024 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 Table 2. MPO 198 Oct 24 currency appreciation, and slower food in- With higher direct taxes and hikes in the policy, elevated inflation, and policy uncer- flation, which lowered price pressures petroleum development levy, total rev- tainty continue to weigh on activity. Limited for the poor, vulnerable, and aspiring enues rose more than non-interest expen- growth in real wages and employment will middle-class households who allocate 42 ditures, contributing to a primary sur- keep the poverty rate near 40 percent to 48 percent of their budgets to food. plus of 0.9 percent of GDP. However, in- through FY26. However, with continued However, energy inflation rose to 65 terest spending rose, crowding out pub- progress on reforms and macroeconomic percent, while core inflation including lic investment. Social protection expen- stability, poverty reduction is expected to transportation remained elevated in rur- ditures increased while development ex- gradually resume. al areas. Higher indirect taxes have also penditures declined, weakening social With high base effects and lower com- driven further price increases for con- service delivery and delaying reductions modity prices, inflation will slow to 11.1 sumer goods and services. These have in alarmingly high stunting and learning percent in FY25 but remain elevated due adversely affected the poor, vulnerable, poverty rates. to higher domestic energy prices, ex- and aspiring middle-class households, pansionary open market operations, and who allocate 23 to 28 percent of their new taxation measures. These price con- budgets to energy, housing, and trans- ditions are likely to exert more pressure portation services. Official remittances Outlook on poor and vulnerable households by rose in nominal terms, but only 3.2 per- limiting real labor income growth to less cent of the poorest households receive The recovery is expected to continue, with than one percent in FY25. On the exter- these directly, while currency appreci- real GDP growth reaching 2.8 percent in nal front, the CAD is forecast to remain ation and high domestic inflation re- FY25, as the economy benefits from the low at 0.6 percent of GDP in FY25 but duced their real value. Depressed eco- availability of imported inputs, easing do- widen as domestic demand recovers. nomic activity in the construction, trade, mestic supply chain disruptions and lower The fiscal deficit is projected to increase to and manufacturing sectors has likely re- inflation. Business confidence will also im- 7.6 percent of GDP in FY25 due to higher duced internal remittance income. With prove with credit rating upgrades, reduced interest payments but gradually decrease slower inflation, the central bank re- political uncertainty, and fiscal tightening in fiscal tightening and falling interest pay- duced the policy rate by a cumulative measures, such as the devolvement of con- ments. Fiscal consolidation will lead to 450 bps to 17.5 percent. stitutionally mandated expenditures to the continued high energy inflation and high- The overall fiscal deficit narrowed by provinces and higher agricultural income er taxes on goods and services, which will 0.9 percentage point to 6.8 percent of taxes. However, output growth will remain worsen monetary poverty, welfare, and GDP in FY24 due to fiscal tightening. below potential as tight macroeconomic human development outcomes. TABLE 2 Pakistan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020/21 2021/22 2022/23 2023/24e 2024/25f 2025/26f Real GDP growth, at constant market prices 6.5 4.8 0.0 2.8 2.8 3.2 Private consumption 9.4 7.0 2.6 2.5 2.7 3.3 Government consumption 1.8 -1.3 -3.9 -4.2 6.8 5.8 Gross fixed capital investment 3.7 4.6 -14.9 -2.4 2.6 2.8 Exports, goods and services 6.5 5.9 3.2 2.0 1.3 3.2 Imports, goods and services 14.5 11.0 1.8 -4.0 3.4 4.6 Real GDP growth, at constant factor prices 5.8 6.2 -0.2 2.4 2.8 3.2 Agriculture 3.5 4.2 2.3 6.3 1.9 2.8 Industry 8.2 7.0 -3.7 1.5 3.1 3.2 Services 5.9 6.7 0.0 1.1 3.0 3.3 Inflation (consumer price index) 8.9 12.2 29.2 23.4 11.1 9.0 Current account balance (% of GDP) -0.8 -4.7 -1.0 -0.2 -0.6 -0.7 Net foreign direct investment inflow (% of GDP) 0.5 0.5 0.2 0.4 0.5 0.5 Fiscal balance, including grants (% of GDP) -6.0 -7.8 -7.7 -6.8 -7.6 -7.3 Revenues (% of GDP) 12.4 12.1 11.5 12.5 13.9 12.9 Debt (% of GDP) 77.6 80.6 81.6 72.4 73.8 74.7 Primary balance, including grants (% of GDP) -1.1 -3.1 -0.9 0.9 0.7 -0.1 a,b International poverty rate ($2.15 in 2017 PPP) 5.0 4.2 6.8 7.4 6.9 6.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 39.5 35.5 40.2 40.5 39.1 38.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 84.1 81.9 83.0 83.2 82.2 81.7 GHG emissions growth (mtCO2e) 4.6 4.1 2.4 4.1 4.4 4.4 Energy related GHG emissions (% of total) 44.3 44.5 44.0 44.4 45.0 45.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SAR-POV harmonization, using 2018-HIES. Actual data: 2018. Nowcast: 2019-2024. Forecasts are from 2024 to 2025. b/ Poverty projections based on microsimulations using 2018-HIES and aggregate macroeconomic indicators (see Barriga-Cabanillas et al (2024), forthcoming). MPO 199 Oct 24 with external creditors continue. House- hold budgets remain stretched due to tax SRI LANKA Key conditions and and price increases, as well as jobs and in- come losses. Real wages contracted by 16.9 challenges and 22 percent between 2021 and 2024, in the private and public sectors, respective- Table 1 2023 The economy has stabilized since late ly. Food insecurity remains high, and Population, million 22.2 2023 following the deep economic crisis. poverty has nearly doubled to 23.4 percent GDP, current US$ billion 84.4 Sri Lanka defaulted in 2022 amid unsus- in 2024. Sustained implementation of key GDP per capita, current US$ 3792.8 tainable debt and depleted reserves, dri- structural reforms—related to fiscal and a 1.0 International poverty rate ($2.15) ven by macroeconomic mismanagement debt management, the financial sector, so- a 11.3 and long-standing structural weaknesses, cial assistance, state-owned enterprises, Lower middle-income poverty rate ($3.65) a 49.3 and exacerbated by exogenous shocks. and trade and investment—will determine Upper middle-income poverty rate ($6.85) Gini index a 37.7 However, reforms implemented since the prospects for medium-term growth School enrollment, primary (% gross) b 96.9 2022, including cost-reflective utility pric- and poverty reduction. b 76.6 ing, new revenue measures, a return to Life expectancy at birth, years prudent monetary policy, and domestic Total GHG emissions (mtCO2e) 34.3 debt restructuring, have helped regain Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2019), 2017 PPPs. macroeconomic stability. Recent developments b/ Most recent WDI value (2022). After contracting by 7.3 percent (year-on- year, y-o-y) in 2022, the economy grew in The economy grew by 5 percent (y-o- the last two quarters of 2023, limiting the y) in H1 2024, driven by a rebound in annual contraction to 2.3 percent. Inflation the industrial sector—particularly in con- moderated to single digits in mid-2023, struction and food and beverage manu- The economy has stabilized with positive down from a peak of 69.8 percent (y-o-y) in facturing—as well as strong performance growth, low inflation, a steady exchange September 2022. The rupee appreciated by in tourism-related services. Private con- rate, and improved fiscal and external 10.8 percent (y-o-y) in 2023 after sharply sumption remained weak as household balances amid the debt service suspen- depreciating by 81.2 percent the year be- disposable incomes continued to be de- fore. Due to the recovery of tourism re- pressed. Labor force participation contin- sion. However, poverty and inequality re- ceipts and remittances and increased in- ued to decline (from 49.9 percent in Q1 main high. Continued macro stability flows from development partners, usable 2023 to 47.1 percent in Q1 2024). Food in- hinges on policy consistency and the suc- official reserves increased to US$3.0 billion security was widespread, with 23.7 per- cessful completion of the external debt re- (equivalent to 2.1 months of imports) by cent of households being food insecure structuring. Prospects for medium-term end-2023, compared to US$500 million at and 26 percent of households consuming end-2022. In June 2024, the International an inadequate diet in 2023. growth and poverty reduction depend on Monetary Fund successfully completed Headline inflation, measured by the Colom- the design and sustained implementation the second review of the Extended Fund bo Consumer Price Index, remained in the of key structural reforms. Facility program. low single digits throughout 2024 (0.5 per- Despite progress, external debt servicing cent, y-o-y, in August 2024), supported by remains suspended while negotiations downward adjustments in administered FIGURE 1 Sri Lanka / Real GDP growth and contributions to FIGURE 2 Sri Lanka / Actual and projected poverty rates real GDP growth (production side) and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 80 700000 4 70 600000 2 0 60 500000 -2 50 -4 400000 -6 40 -8 300000 30 -10 200000 -12 20 -14 10 100000 1Q 2022 3Q 2022 1Q 2023 3Q 2023 1Q 2024 0 0 Agriculture Construction Food & beverage mfg. Other industries 2009 2011 2013 2015 2017 2019 2021 2023 2025 Accommodation Other services International poverty rate Lower middle-income pov. rate Net taxes Overall growth Upper middle-income pov. rate Real GDP pc Sources: Department of Census and Statistics and World Bank calculations. Source: World Bank. Notes: see Table 2. Note: Food and beverage manufacturing includes production of tobacco products and accommodation includes food and beverage services. MPO 200 Oct 24 prices, currency appreciation, and im- The primary surplus, achieved in 2023, and continued fiscal consolidation are ex- proved supply conditions, whilst de- strengthened further in the first six months pected to reduce the overall fiscal balance mand remained subdued. With inflation of 2024, as new measures, including an in- in the medium term. well below target, the central bank main- crease in the VAT rate and removal of VAT While recent economic performance has tained an accommodative stance, cutting exemptions, led to a 42.6 percent increase been sound, macroeconomic stability re- policy rates by 75 basis points (bps) be- in tax revenues, while expenditures re- mains fragile and is predicated on the tween March and July 2024 (a cumula- mained tightly controlled. The overall fis- consistent implementation of key fiscal, tive 725 bps reduction since May 2023), cal deficit declined as the interest bill fell, financial, and monetary policies. Given pushing commercial bank lending and driven by lower borrowing costs. limited fiscal and external buffers, how- deposit rates downwards. Despite this, ever, downside risks remain high. These growth in credit to the private sector re- include a protracted or insufficiently deep mained sluggish at 6.9 percent in July debt restructuring, policy uncertainty (in- 2024 (y-o-y). Outlook cluding direction and pace of policy re- The merchandise trade deficit increased by form and the potential fiscal impact of 18.3 percent (y-o-y) in the first seven Faster-than-expected macroeconomic sta- electoral promises), and medium-term months of 2024 as import demand grad- bilization has improved the short-term scarring effects of the crisis. Financial sec- ually recovered. However, increased growth outlook to 4.4 percent (y-o-y) in tor risks need to be carefully monitored tourism receipts (66.1 percent, y-o-y) and 2024. Continued implementation of struc- as elevated non-performing loans and remittances (11 percent, y-o-y) in the first tural reforms will, however, be key to rais- high exposure to the sovereign hinder fi- eight months, the continued suspension of ing the medium to long-term growth po- nancial sector stability. Poverty outcomes debt servicing, and inflows from develop- tential. Poverty (below $3.65 per person will hinge on reform design and sequenc- ment partners contributed to a balance of per day, 2017 PPP) is expected to decline ing, as well as the adequacy and targeting payment surplus during this period. As gradually but remain above 20 percent un- of compensating transfers. Inequality is a result, usable official reserves increased til 2026. Inflation is likely to remain below estimated to remain high and increases to US$4.5 billion (equivalent to 3 months the central bank’s target of 5 percent in in stunting and malnutrition are expected of imports) by the end of August 2024, 2024, and gradually increase towards the to increase spatial and intergenerational and net foreign assets of the banking sys- medium-term target as demand picks up. inequalities in the absence of compensat- tem turned positive in May 2024 for the The current account is projected to remain ing mechanisms and sustained growth. first time in four years. With improved in surplus in 2024, driven by tourism and On the upside, a strong and sustained im- foreign exchange liquidity, the rupee ap- remittances, and with the restriction on im- plementation of the structural reform pro- preciated by 7.3 percent between January porting personal vehicles only being gram could boost confidence and attract and August 2024. phased out from 2025. Debt restructuring fresh capital inflows. TABLE 2 Sri Lanka / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.2 -7.3 -2.3 4.4 3.5 3.1 Private consumption 2.7 -0.5 -1.6 2.2 2.6 2.9 Government consumption -2.8 1.4 -5.4 -0.1 2.4 1.8 Gross fixed capital investment 6.5 -24.5 -8.4 14.0 7.0 4.6 Exports, goods and services 10.1 10.2 12.0 4.3 3.6 3.4 Imports, goods and services 4.1 -19.9 6.5 4.7 3.9 3.7 Real GDP growth, at constant factor prices 3.9 -7.0 -2.6 4.4 3.5 3.1 Agriculture 1.0 -4.2 2.6 1.5 1.5 1.5 Industry 5.7 -16.0 -9.2 10.4 6.4 4.1 Services 3.4 -2.6 -0.2 2.3 2.5 2.9 Inflation (consumer price index) 6.0 46.4 17.4 3.0 4.5 5.1 Current account balance (% of GDP) -3.7 -2.0 1.8 .. .. .. Net foreign direct investment inflow (% of GDP) 0.7 1.2 0.8 -0.9 -1.0 -1.0 a International poverty rate ($2.15 in 2017 PPP) 1.5 4.1 5.2 4.3 3.5 3.3 a Lower middle-income poverty rate ($3.65 in 2017 PPP) 13.1 22.7 25.9 23.4 21.3 20.1 a Upper middle-income poverty rate ($6.85 in 2017 PPP) 51.2 64.4 66.6 64.3 63.3 62.0 GHG emissions growth (mtCO2e) 1.2 -5.8 -2.4 6.2 6.1 5.9 Energy related GHG emissions (% of total) 59.7 57.8 56.2 58.5 60.7 62.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SAR-POV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. MPO 201 Oct 24 Sub-Saharan Africa Angola Côte d'Ivoire Liberia Seychelles Benin Equatorial Guinea Madagascar Sierra Leone Botswana Eritrea Malawi Somalia Burkina Faso Eswatini Mali South Africa Burundi Ethiopia Mauritania South Sudan Cabo Verde Gabon Mauritius Sudan Cameroon Gambia, The Mozambique Tanzania Central African Republic Ghana Namibia Togo Chad Guinea Niger Uganda Comoros Guinea-Bissau Nigeria Zambia Congo, Dem. Republic Kenya Rwanda Zimbabwe Congo, Republic Lesotho São Tomé and Príncipe MPO 203 Oct 24 60 percent of tax revenue, and 95 percent of exports. The country suffers from insti- ANGOLA Key conditions and tutional weaknesses, ranking in the lower 40 percentile on Worldwide Governance challenges Indicators, including the lower 20 per- centile on Government Effectiveness and Table 1 2023 Economic growth, built on an oil boom Rule of Law. Angola is also vulnerable to Population, million 36.7 from the mid-2000s, has been challenged droughts and floods. GDP, current US$ billion 90.5 since 2014 with declining and volatile Angola, a lower middle-income country, GDP per capita, current US$ 2462.5 global oil prices, shrinking oil production, grapples with human development chal- a 31.1 International poverty rate ($2.15) the COVID-19 pandemic, and tightening lenges, and ranks among the world's most a 52.9 global monetary conditions. Real GDP unequal economies, with a Gini index over Lower middle-income poverty rate ($3.65) a 78.0 contracted by 0.5 percent annually on av- 51. About 31.1 percent of the population Upper middle-income poverty rate ($6.85) Gini index a 51.3 erage over 2015-23, and real GDP per lived on less than US$2.15/day in 2018. The School enrollment, primary (% gross) b 88.6 capita fell back close to its 2004 level. labor market has a high share of informal b 61.9 Angola has mostly registered current ac- jobs, concentrated in low-productivity sec- Life expectancy at birth, years count surpluses since the 2000s, but the tors. High fertility rates (and adolescent Total GHG emissions (mtCO2e) 110.5 external sector is vulnerable to oil pro- pregnancies), maternal and neonatal Source: WDI, Macro Poverty Outlook, and official data. ceeds volatility, notably for foreign cur- deaths, and child stunting underscore the a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). rency supply. Around 80 percent of pub- need to develop human capital. With de- lic debt remains in foreign currencies, in- clining oil production and the global cli- creasing exchange rate risks. mate transition, Angola needs new drivers Angola's economy started to recover from With rising macroeconomic fragilities, for sustainable and inclusive growth and Angola has implemented reforms to re- to preserve macroeconomic stability. It has 2023’s shocks—extended maintenance duce its vulnerability to external shocks a high economic potential, with vast land shutdowns at major oil fields, exchange and reliance on oil. The Central Bank and natural resources, a young population, rate depreciation, and gasoline price of Angola’s (BNA) autonomy has been and a strategic location that can be used to hikes. Growth is projected at 3.2 percent enhanced and the exchange rate regime leverage global and regional value chains, has become more flexible and transpar- notably through the Lobito corridor. in 2024. Yet, broad-based structural con- ent. The government has increased gaso- straints limit economic diversification. line and diesel prices in June 2023 and Delivering on fiscal consolidation, espe- April 2024, respectively, to gradually re- cially through gradual fuel subsidy re- move fuel subsidies and reorient spend- Recent developments moval, is critical to preserve fiscal sus- ing, including towards social safety nets. Steps have also been taken to improve fis- After growing by 1 percent in 2023, be- tainability and increase development cal transparency, reform state-owned en- cause of lower oil production, an exchange spending. By 2026, about 36 percent of terprises, and combat corruption. rate and fuel price hikes shocks, real GDP the population is projected to continue to Structural constraints are hampering eco- grew by 4.1 percent on annual terms in the be living with less than US$2.15 per day. nomic potential and diversification. The first quarter of 2024 (Q1-24), the biggest oil sector accounts for 25 percent of GDP, expansion since Q1-15. This rebound was FIGURE 1 Angola / Gasoline and diesel prices and subsidies FIGURE 2 Angola / Actual and projected poverty rates and real GDP per capita Kwanzas per liter Poverty rate (%) Real GDP per capita (constant LCU) 900 90 70000 800 Kwanza 80 60000 depreciation 700 70 600 50000 60 500 50 40000 400 40 Subsidy 30000 300 30 20000 200 20 100 10 10000 0 0 0 Mar '23 Jun '23 Sep '23 Dec '23 Mar '24 Jun '24 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Gasoline, fixed price Diesel, fixed price International poverty rate Lower middle-income pov. rate Gasoline, market price Diesel, market price Upper middle-income pov. rate Real GDP pc Sources: IGAPE, Ministry of Finance of Angola, and World Bank. Source: World Bank. Notes: see Table 2. MPO 204 Oct 24 driven by recovery in oil production and year-on-year in H1, despite the BNA rais- help contain inflationary pressures, the services sector (domestic trade and ing the policy rate by 250 basis points to though inflation is still projected above transport and storage). Angola registered a 19.5 percent since November 2023. Rising 10 percent by 2026. High inflation, which stronger current account surplus in H1-24 inflation, and declining per capita income, adversely affects living standards and supported by higher oil exports. have strained household purchasing pow- limited fiscal space is expected to lead The fiscal situation remains constrained. er, especially for the less well-off. More to persistently high poverty, projected Higher global oil prices for the Angolan than a third of the population is projected to stay at around 36 percent by 2026, crude (US$84.2 per barrel over January-Ju- to be living on less than US$2.15/day in highlighting the importance of further ly 2024) and domestic production (1.12 2024. Significant progress has been made strengthening social safety nets and pre- million barrels per day over the first half of in building social safety nets through the serving development spending, especially the year—H1) than assumed in the budget Kwenda cash transfer program, which cur- in human capital. ($65 per barrel and 1.06 million oil barrels rently benefits about 1.5 million rural Angola’s fiscal situation is expected to re- per day) are supporting revenue, follow- households. However, urban households main sustainable provided the authorities ing a drop in 2023. However, the 40-per- remain unprotected and vulnerable to ris- successfully implement their consolidation cent currency depreciation in May-June ing food prices. program. The overall fiscal balance is pro- 2023 pushed up debt service costs and fuel jected to average 0.1 percent of GDP an- subsidies. This has constrained public nually over 2024-26. Public debt-to-GDP is spending, resulting in capital spending projected to decline to 57 percent by 2026, cuts and the acceleration of the fuel sub- Outlook down from about 89 percent in 2023. Ex- sidy reform, despite an escrow agreement ternal balances are expected to remain rel- with a Chinese creditor that helped ease Real GDP growth is expected to rebound to atively strong, with international reserves debt service pressure. 3.2 percent in 2024, driven by improvements coverage projected around 7 months of im- The exchange rate market has stabilized in maintenance-related oil production bot- ports over 2024-26. in 2024, with reduced parallel market pre- tlenecks. However, due to structural con- Risks to the outlook are high and titled to miums and a more gradual depreciation, straints, real GDP growth is projected to av- the downside. A shock to global oil prices around 10 percent up to mid-September. erage 2.9 percent over 2025-26, and real per could affect economic growth and further Increasing food prices, and last year’s ex- capita GDP is expected to stagnate. constrain fiscal policy. Prolonged elevated change rate shock and fuel price hikes, Monetary policy tightening and the project- inflation could fuel social discontent and kept inflation high, averaging 26.9 percent ed conservative fiscal stance are expected to resistance to further fuel subsidy reform. TABLE 2 Angola / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f a Real GDP growth, at constant market prices 1.2 3.0 1.0 3.2 2.9 2.9 Private consumption 3.7 4.0 3.1 4.3 4.3 4.5 Government consumption -1.7 8.4 -18.8 1.0 1.0 1.0 Gross fixed capital investment 5.4 8.5 -5.3 1.2 2.4 2.6 Exports, goods and services -8.6 3.3 -6.2 2.5 1.7 0.9 Imports, goods and services -3.8 26.1 -6.8 -4.6 3.1 3.1 Real GDP growth, at constant factor prices -0.1 3.1 0.6 3.2 2.9 2.9 Agriculture 17.2 3.9 2.7 4.3 4.6 5.0 Industry -8.3 1.8 -1.0 2.8 2.4 2.0 Services 6.2 4.2 1.8 3.5 2.9 3.4 Inflation (consumer price index) 25.8 21.4 13.6 27.4 16.1 11.9 Current account balance (% of GDP) 11.8 10.4 4.6 3.8 0.7 -0.2 Net foreign direct investment inflow (% of GDP) -4.6 -5.9 -2.4 -1.9 -1.3 -0.9 Fiscal balance (% of GDP) -0.4 3.3 -1.1 0.5 0.0 -0.2 Revenues (% of GDP) 22.7 27.7 20.4 20.9 19.4 18.2 Debt (% of GDP) 87.9 69.5 88.8 72.0 64.6 56.9 Primary balance (% of GDP) 4.8 7.3 4.2 6.2 5.6 5.5 b,c International poverty rate ($2.15 in 2017 PPP) 35.2 35.4 35.9 35.9 35.9 36.0 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 57.7 57.7 58.3 58.2 58.3 58.3 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 81.3 81.4 81.6 81.6 81.7 81.7 GHG emissions growth (mtCO2e) -1.9 -0.8 -0.4 -2.1 -2.6 -2.8 Energy related GHG emissions (% of total) 12.6 12.2 12.0 11.7 11.0 10.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ This macro-framework is using the national accounts in base year 2002. New national account statistics with 2015 as base year are under preparation. b/ Calculations based on 2018-IDREA. Projection using neutral distribution (2018) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. c/ Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. MPO 205 Oct 24 BENIN Key conditions and Recent developments challenges Benin’s economy expanded by 6.3 per- cent year-on-year (y/y) in 2024Q1, from Table 1 2023 Benin’s macroeconomic performance 6.2 percent in 2023Q1. Despite the closure Population, million 13.7 improved significantly over the last of the border with Niger, the services GDP, current US$ billion 19.8 years, supported by a robust track sector remained strong as growing trade GDP per capita, current US$ 1440.7 record of reform implementation. with other partners and tourism-related a 12.7 International poverty rate ($2.15) Growth has been resilient and inflation sub-sectors offset the impact, while buoy- a 43.4 has been moderate despite various ant agro-food manufacturing, construc- Lower middle-income poverty rate ($3.65) a 81.4 shocks, including climate, trade dis- tion, and agriculture sectors helped sus- Upper middle-income poverty rate ($6.85) Gini index a 34.4 ruption, and security challenges. How- tain a robust growth momentum. Despite School enrollment, primary (% gross) b 113.0 ever, sustained growth has not trans- shocks and increased pressure on food b 60.0 lated into rapid poverty reduction. and energy prices, a good harvest and Life expectancy at birth, years Benin’s elasticity between increases in the appreciation of the CFAF against the Total GHG emissions (mtCO2e) 26.5 GDP per capita and decreases in Nigerian naira contributed to inflation Source: WDI, Macro Poverty Outlook, and official data. poverty is 0.26 against an average moderating to 1 percent y/y in July 2024, a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). of 1.1 for Sub-Saharan Africa in down from 3.9 percent a year earlier. As 2018-2021. While growth has been sup- a result, the lower middle-income pover- ported by physical capital accumu- ty rate ($3.65 in 2017 PPP) decreased lation, notably backed by ambitious from 41 percent in 2023 to 38.5 percent in public investment plans, human capi- 2024. The Central Bank of West African tal accumulation remains low and gen- States (BCEAO) has kept its policy inter- Growth remained strong in 2023 and the erally below peer countries. The infor- est rates unchanged since December 2023 first quarter of 2024, bolstered by rising mal sector, representing a significant at 3.5 percent for liquidity calls and 5.5 industrial and agricultural production, proportion of the economy (86 percent percent for the marginal lending facili- of companies in 2023), contributes to ty. The WAEMU Inflation rate has been along with resilient services. Inflation has low total factor productivity, imped- on a downward trend since peaking in been contained, and the fiscal deficit is ex- ing structural transformation. Looking 2022 but remains above the 1 to 3 per- pected to continue declining to 3.7 per- ahead, Benin faces important struc- cent WAEMU target band, at 4.4 percent cent of GDP in 2024. Debt is projected to tural challenges to sustain its devel- y/y in July 2024, and regional foreign ex- decrease to 51.3 percent of GDP by 2026. opment momentum and foster inclu- change reserves remain low, covering on- siveness. Continued efforts to improve ly 3.5 months of import in 2024Q1. Cred- The outlook is subject to downside risks, revenue mobilization and create the it to the private sector grew in Benin by including climate shocks, rising security necessary fiscal space for critical in- 15.8 percent at end-June 2024, and non- challenges, and trade uncertainty. vestments in human capital, infrastruc- performing loans improved to 4.4 percent ture and buffers against future shocks at end-March 2024, from 6.5 percent at are particularly relevant. end-March 2023. FIGURE 1 Benin / Key macroeconomic balances FIGURE 2 Benin / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 60 0 100 900000 -1 90 800000 50 80 700000 -2 40 70 600000 -3 60 500000 30 50 -4 400000 40 20 300000 -5 30 20 200000 10 -6 10 100000 0 -7 0 0 2018 2019 2020 2021 2022 2023e 2024f 2025f 2026f 2011 2013 2015 2017 2019 2021 2023 2025 Debt (lhs) Fiscal balance (rhs) International poverty rate Lower middle-income pov. rate Current account balance (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 206 Oct 24 A strong revenue performance helped The regional inflation rate is expected to reduce the fiscal deficit to 4.1 percent align with the WAEMU target by 2025, of GDP in 2023 and should enable fur- Outlook while regional reserves are expected to ther consolidation to 3.7 in 2024 as rev- rise gradually, supported by the resump- enues rose by 13 percent y/y in the first Growth is projected to stabilize at 6.3 per- tion of international bond issuances, re- five months. Despite a 30.6 percent y/y cent in 2024 and remain around 6.4 per- covering exports and monetary policy increase in domestically financed invest- cent in 2025-2026. The expansion of the easing in the Euro Area. ment, due to the execution of the gov- construction and agro-food industry sub- With strong revenue performances and ernment action plan (PAG2), the over- sectors driven by increasing agricultural contained current expenditures, the fiscal all increase in public expenditure (11.8 output and the development of the ex- deficit is projected to converge toward the percent) remained below the strong rev- port-driven GDIZ - Glo-Djigbé Industrial 3 percent WAEMU target. Public debt is enue increase. Ongoing fiscal consolida- Zone, are expected to bolster growth. The expected to reach 51.3 percent of GDP by tion has led to a decline in debt from expected reopening of the border with 2026. As exports rise, the CAD is expected 54.5 percent of GDP in 2023 to 52.1 Niger and the improvement of customs to narrow to 4.6 percent of GDP in 2026. Fi- percent at end-June 2024. Active debt relations with Nigeria coupled with the nancing of the CAD will come from FDI, management, including the issuance of modernization of the port of Cotonou, Eurobonds and project loans. Poverty rates a US$750 million Eurobond in Febru- will further support the services sector. are expected to trend downward, with the ary 2024, and Liquidity Management On the demand side, strong investment, lower middle-income poverty rate ($3.65 Operations improved debt sustainabili- driven by the completion of infrastructure in 2017 PPP) declining from 38.5 percent in ty. The current account deficit (CAD) projects and foreign investment in expan- 2024 to 35.6 percent by 2026, supported by narrowed to 5.9 percent of GDP in 2023, sion of the GDIZ will balance the end strong per capita economic growth. thanks to higher export revenues and of investment in the Niger-Benin pipeline In a context of rising uncertainties, the remittances. This trend carried over in- and support growth. Rising export crop risks to the outlook are tilted to the down- to 2024Q1, with exports increasing by value added are expected to support side. In addition to natural disasters such 35.2 percent y/y, driven by strong cotton growth, while consumption remains as floods and droughts, Benin faces in- and a significant increase in soybean ex- strong amid lower inflation. Inflation in creasing security challenges in the north ports. Project and SDG loans along with Benin is expected to average 1.3 percent, and heightened trade instability. While foreign direct investment (FDI) were the supported by an improved supply of sta- Benin remains politically stable, political main external financing sources. ples and the easing of global food prices. uncertainties remain. TABLE 2 Benin / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.2 6.3 6.4 6.3 6.4 6.3 Private consumption 4.8 5.0 4.0 4.2 3.9 3.9 Government consumption 8.5 3.5 11.4 9.9 8.9 8.0 Gross fixed capital investment 17.8 13.0 12.0 8.3 8.3 7.5 Exports, goods and services 12.6 19.1 6.2 9.6 10.1 10.0 Imports, goods and services 16.8 18.5 8.8 7.6 7.2 6.5 Real GDP growth, at constant factor prices 6.6 6.0 6.3 6.3 6.4 6.3 Agriculture 5.2 4.8 5.1 5.4 5.5 5.5 Industry 9.1 7.9 7.3 8.0 8.1 7.8 Services 6.6 6.0 6.6 6.1 6.4 6.3 Inflation (consumer price index) 1.7 1.4 2.8 1.4 1.3 1.2 Current account balance (% of GDP) -4.4 -6.1 -5.9 -5.8 -5.6 -4.6 Net foreign direct investment inflow (% of GDP) 1.7 1.9 1.6 1.6 1.6 1.7 Fiscal balance (% of GDP) -5.7 -5.5 -4.1 -3.7 -3.0 -2.9 Revenues (% of GDP) 14.1 14.3 15.0 15.2 15.7 16.1 Debt (% of GDP) 50.3 54.2 54.5 54.1 52.6 51.3 Primary balance (% of GDP) -3.5 -3.9 -2.5 -1.9 -1.3 -1.2 a,b International poverty rate ($2.15 in 2017 PPP) 12.7 12.3 11.7 10.8 10.0 9.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 43.4 42.5 41.0 38.5 37.0 35.6 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 81.4 80.5 79.5 77.7 76.4 75.2 GHG emissions growth (mtCO2e) -0.4 0.3 -1.7 0.3 1.1 1.7 Energy related GHG emissions (% of total) 30.6 29.7 27.2 26.1 25.6 25.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 207 Oct 24 promoting the development of its renew- able energy potential. BOTSWANA Key conditions and To mitigate risks associated with fluctua- tions in diamond prices and ensure stable challenges and inclusive economic growth, Botswana needs to diversify its economy by develop- Table 1 2023 Botswana’s past economic success can ing tradable and labor-intensive non-min- Population, million 2.7 be attributed to strong governance, pru- eral sectors like agriculture and manufac- GDP, current US$ billion 19.7 dent economic policies and management turing. This could be supported by priori- GDP per capita, current US$ 7367.2 of its diamond wealth, and commitment tizing high-return projects, improving the a 15.4 International poverty rate ($2.15) to human capital development. Nonethe- quality of public spending, and ensuring a 38.0 less, challenges in diversifying the econ- prudent fiscal policy to preserve financial Lower middle-income poverty rate ($3.65) a 63.5 omy have constrained economic growth buffers. The adoption of policies geared to- Upper middle-income poverty rate ($6.85) Gini index a 53.3 and development. The heavy reliance on wards enhancing productivity is crucial, School enrollment, primary (% gross) b 93.7 the diamond industry exposes Botswana including those that develop labor force b 65.9 to commodity price volatility and fiscal skills, improve the regulatory framework Life expectancy at birth, years vulnerabilities. A large public-sector foot- to facilitate business operations, and en- Total GHG emissions (mtCO2e) 61.5 print inhibits private-sector development hance the efficiency and accountability of Source: WDI, Macro Poverty Outlook, and official data. and investment, resulting in low export state-owned enterprises. a/ Most recent value (2015), 2017 PPPs. b/ WDI for School enrollment (2021); Life expectancy diversification, low job creation, and (2022). sluggish productivity growth. Reforms to improve the regulatory and business en- vironment to stimulate firm entry and Recent developments growth could help reduce the high un- employment rate, particularly among Botswana's economy contracted by 1.8 youth, a main driver of the country’s percent q-o-q in 2024Q1, after a 0.9 per- Botswana’s growth is projected to decline high poverty and inequality. The unem- cent contraction in 2023Q4. This down- to 1 percent in 2024 from 2.7 in 2023, ployment rate stood at 27.6 percent in turn is primarily attributed to a 24.8 partly owing to a weak global diamond 2024Q1, and the poverty rate is projected percent decline in mining value added, market. Higher public investment and at 14.3 percent in 2023 using the Interna- and to a lesser extent to the 0.7 percent tional Poverty Line (IPL) of US$2.15 per y-o-y contraction in the non-mining pri- measures to support households are set to day (2017 PPP). vate sector. The diamond industry is increase the fiscal deficit to 6 percent of High vulnerability to climate change grappling with significant headwinds GDP. The slowdown highlights the ur- compounds these challenges and calls for caused by oversupply and high invento- gent need for structural reforms to diver- priority investments in climate adapta- ry levels, largely due to aggressive buy- sify the economy, create better jobs, and tion, and comprehensive strategies on ing during the post-pandemic recovery sustainable water management, agricul- phase. Moreover, the industry is faced reduce poverty (14.3 percent at the $2.15 with pressure from changing consumer tural resilience, and public health. line) and unemployment (27.6 percent). Botswana has the potential to contribute preferences and competition from lab- to the global green transition, including by grown diamonds. FIGURE 1 Botswana / Inflation has receded and remains FIGURE 2 Botswana / Actual and projected poverty rates within the objective range and real GDP per capita Percentage Poverty rate (%) Real GDP per capita (constant LCU) 16 70 90000 14 60 80000 12 70000 10 50 60000 8 40 50000 6 30 40000 4 30000 2 20 20000 0 10 10000 p p p n n n n ay ay ay ay Se Se Se Ja Ja Ja Ja M M M M 0 0 2021 2022 2023 2024 2009 2011 2013 2015 2017 2019 2021 2023 2025 Headline inflation Core inflation International poverty rate Lower middle-income pov. rate Upper bound Lower bound Upper middle-income pov. rate Real GDP pc Source: Statistics Botswana. Source: World Bank. Notes: see Table 2. MPO 208 Oct 24 Headline inflation has remained within the to P4.1 billion in May 2024. The trade bal- weaken to a deficit of 2 percent of GDP in Central Bank’s target range of 3-6 percent, ance remained in deficit in 2024H1 mostly 2024 on account of weaker terms of trade except for March and June when it dipped due to weak exports. and lower global demand for diamonds, below the lower bound. In 2024H1, it av- and then improve to record a 1.4 percent eraged 3.3 percent, compared with 5.0 in surplus in 2025 as the global demand for 2023H1. Favorable inflation outcomes and diamonds rebounds. the widening negative output gap have led Outlook The outlook remains uncertain and de- the Bank of Botswana to reduce the policy pends heavily on the path of the diamond rate by a cumulative 75 basis points since Real GDP growth is projected to decline to market. The pending divestment of the di- December 2023 to 1.9 percent, significantly 1 percent in 2024 from 2.7 percent in 2023, be- amond company De Beers by its majority below the SACU regional average. fore recovering to an average of 5.1 percent shareholder could bring uncertainties to The fiscal deficit in FY23/24 reached 3.2 over the medium term, as the global dia- the industry and its supply chain. Climate percent of GDP, exceeding the planned mond market recovers. The lower growth shocks, especially droughts, continue to deficit of 2.6 percent, owing to lower rev- rate reflects a slowdown in both mining pose a threat to agriculture and tourism. enues and higher spending. As of 2024Q1, and non-mining private sector growth. Supply disruptions and global demand revenues were 19 percent of GDP com- Poverty is expected to remain at 14.3 per- fluctuations could intensify commodity pared to 31 percent in 2023Q1, mostly due cent based on the International Poverty price volatility. Inflation risks are tilted to to the decline in diamond revenues. Line (IPL) of US$2.15 per day (2017 PPP). the upside, as commodity price volatility Drought relief measures in FY24/25, in- The fiscal deficit in 2024 is projected to could lead to price and real sector volatili- cluding subsidies to farmers and grants to widen to 6 percent in FY2024/25, driven ty, budgetary pressures, and cost of living vulnerable groups, are estimated at about by higher goods and services at 2.6 per- increases. Delays in planned fiscal consoli- 0.5 percent of GDP. Public debt remained cent in 2023 compared to 6.6 percent in dation could further erode fiscal and exter- stable at 22.7 percent of GDP and the share 2024 (5.6 percent of GDP) and capital ex- nal buffers, increasing Botswana’s vulner- of domestic debt has increased from pre- penditures (9.9 percent of GDP compared ability to external shocks. The slowdown pandemic levels of 8.7 percent of GDP in to 7.9 percent in 2023). Consequently, the in 2024 is yet another important reminder of 2019 to 12.2 percent in 2023. While foreign public debt ratio is projected to rise to the limitations of Botswana’s growth model exchange reserves levels are adequate at 24.5 percent of GDP. and the need for implementation of struc- 8.4 months of imports in 2024H1, the gov- Inflation is projected to remain within the tural reforms crucial to private sector de- ernment investment account has been Central Bank objective range of 3 to 6 per- velopment, economic diversification, and drawn down from P19.1 billion in July 2023 cent. The current account is expected to the achievement of development goals. TABLE 2 Botswana / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 11.8 5.6 2.7 1.0 5.3 4.9 Private consumption 2.4 3.0 5.6 3.4 2.8 2.2 Government consumption 4.0 2.5 4.0 3.2 3.0 2.7 Gross fixed capital investment -0.3 0.3 4.2 3.0 2.6 2.3 Exports, goods and services 31.7 -5.4 -13.8 18.7 10.8 10.2 Imports, goods and services 2.3 -11.7 -7.4 3.6 5.6 5.2 Real GDP growth, at constant factor prices 11.9 5.9 2.7 1.0 5.3 4.9 Agriculture -1.0 1.2 1.3 1.2 1.6 1.4 Industry 19.3 7.7 2.3 3.0 4.6 4.7 Services 8.1 5.0 3.0 -0.3 5.9 5.1 Inflation (consumer price index) 6.7 12.2 5.1 3.0 4.5 4.5 Current account balance (% of GDP) -1.8 -1.2 -0.6 -2.0 1.4 1.1 Net foreign direct investment inflow (% of GDP) -5.6 2.9 3.4 0.9 0.5 0.5 a Fiscal balance (% of GDP) 0.0 0.0 -3.2 -6.0 -1.6 -0.6 Revenues (% of GDP) 31.9 28.6 28.0 28.1 28.3 28.0 b Debt (% of GDP) 22.4 20.6 22.7 24.5 22.7 22.3 a Primary balance (% of GDP) 0.5 0.6 -2.3 -5.0 -1.3 0.0 c,d International poverty rate ($2.15 in 2017 PPP) 14.8 14.4 14.3 14.3 13.9 13.6 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 37.5 37.0 36.9 37.0 36.6 36.3 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.6 61.9 61.7 61.8 61.2 60.6 GHG emissions growth (mtCO2e) 16.8 -0.2 -1.1 -3.6 0.8 1.7 Energy related GHG emissions (% of total) 10.4 10.5 10.3 10.4 10.5 10.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (April 1st -March 31st). b/ Refers to Public and Publicly Guaranteed debt. c/ Calculations based on 2009-CWIS and 2015-BMTHS. Actual data: 2015/16. Nowcast: 2017-2023. Forecasts are from 2024 to 2026. d/ Projection for $2.15 poverty uses annualized elasticity (2009-2015) with pass-through = 0.87 based on GDP per capita in constant LCU. Higher poverty lines use regional elasticity. MPO 209 Oct 24 BURKINA FASO Key conditions and Recent developments challenges GDP growth accelerated in Q1 2024 (+4.0 percent y/y) and is expected to reach 3.7 Table 1 2023 Insecurity and political instability remain percent in 2024 (1.1 percent per capi- Population, million 23.3 the primary obstacles to sustained eco- ta). The agricultural sector is expected to GDP, current US$ billion 20.9 nomic growth. The regime changes of grow above average (+4.2 percent), espe- GDP per capita, current US$ 898.3 2022 have led to a significant decline in cially in cereal crops. The industrial sec- a 25.3 International poverty rate ($2.15) international development funding and tor is projected to recover (+2.8 percent) a 60.7 private sector investment. The security-re- but insecurity continues to disrupt min- Lower middle-income poverty rate ($3.65) a 88.1 lated disruptions of industrial gold min- ing. Services are expected to remain ro- Upper middle-income poverty rate ($6.85) Gini index a 37.4 ing activities, which in 2023 represented bust (+4.0 percent), driven by public ad- School enrollment, primary (% gross) b 82.4 77 percent of exports, 16 percent of GDP, ministration, trade, and repair services. b 59.8 and 22 percent of government revenue, Consumption and private investment will Life expectancy at birth, years have had economic repercussions. Addi- drive growth, while net exports will con- Total GHG emissions (mtCO2e) 64.0 tionally, the displacement of communities tribute negatively. The current account Source: WDI, Macro Poverty Outlook, and official data. has undermined productivity in agricul- deficit is expected to decline from an es- a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). ture, a sector already susceptible to cli- timated 8.0 percent of GDP to around 6 mate shocks. The number of recorded se- percent in 2024 as mining exports benefit curity-related fatalities was 6,044 between from a sharp rise in gold prices. January and August, compared to 5,931 in After a significant reduction in headline the same period of 2023. inflation in 2023 to 0.7 percent, inflation GDP growth is projected to increase to On January 28, 2024, Burkina Faso, Mali, surged to a 12-month high of 5.7 percent 3.7 percent in 2024 (1.1 percent per capi- and Niger issued a joint communiqué y/y in August 2024. Food prices rose ta), from 3.0 percent in 2023, supported announcing their ‘immediate’ withdrawal sharply (10.6 percent y/y) due to security by services and agriculture. Inflation is from ECOWAS. According to the revised and logistical supply constraints and price ECOWAS Treaty, a notification period of speculation given irregular rainfall in Au- projected to increase to 3.4 percent. The one year is required to leave ECOWAS. gust. With a delayed start of the agricultur- extreme poverty rate remains unchanged The three countries remain members of al season, annual average inflation is pro- at 26.5 percent. Downside risks to the WAEMU. Subsequently, on July 6, 2024, jected at 3.4 percent in 2024. outlook relate to the political transition, the three countries signed the Treaty The Central Bank of West African States rising insecurity, impacts of the Econom- establishing the Confederation of Sahel (BCEAO) has kept its policy interest rates States. These events have contributed to unchanged since December 2023 at 3.5 ic Community of West African States heightened political and policy uncer- percent for liquidity calls and 5.5 percent (ECOWAS) withdrawal, climate shocks, tainty. Moreover, the transitional gov- for the marginal lending facility. The and high borrowing costs limiting fiscal ernment under President Captain Traoré WAEMU inflation rate has been on a space for priority spending. was extended by five years, starting on downward trend since peaking in 2022 July 2, 2024. but is currently above the 1 to 3 percent FIGURE 1 Burkina Faso / Real GDP growth and FIGURE 2 Burkina Faso / Actual and projected poverty contributions to real GDP growth rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 100 500000 90 450000 10 80 400000 70 350000 5 60 300000 50 250000 0 40 200000 -5 30 150000 20 100000 -10 10 50000 2021 2022 2023 2024 2025 2026 0 0 Gov. cons. Exports GFCF 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 210 Oct 24 WAEMU target, at 4.4 percent y/y in Extreme poverty is expected to decrease July 2024, and regional foreign exchange slightly over the medium term, by approx- reserves remain low, covering only 3.5 Outlook imately 1 percentage point per year, with months of import in Q1 2024. the number of extreme poor remaining After increases in 2021 and 2022 due pri- If the security situation remains un- above 6 million. Accelerating poverty re- marily to high food price inflation, extreme changed, and assuming an orderly duction will require higher growth per poverty has remained unchanged at over ECOWAS withdrawal that limits negative capita, particularly in agriculture, which 26 percent since 2022. Urban areas saw a impacts to lower trade with non-WAEMU employs 71 percent of the poor. small decrease in poverty in 2024, driven ECOWAS states, growth could settle at its The economic outlook is subject to sig- by moderate growth in industry and ser- new potential of around 4.0 percent (1.5 nificant downside risks, including a de- vices sectors. The humanitarian situation percent per capita) over 2025-26. Mining terioration in the security situation, po- remains dire, with over 2 million internally production is expected to recover with litical instability, climatic shocks, com- displaced persons, and an estimated 2.7 the opening of new mines in 2025, and modity price volatility, and regional de- million people (11.9 percent of the popula- agricultural and service sector growth are fragmentation. An ECOWAS withdrawal tion) facing severe food insecurity between anticipated to remain robust but lower that has gaps in agreements could lead June and August 2024. than pre-conflict levels. to larger disruptions in the free move- The fiscal deficit for 2024 is projected to Despite the government’s fiscal consolida- ment of goods, services, capital, and la- decline to 5.9 percent of GDP, under- tion efforts, the WAEMU ceiling of 3 percent bor and could have spillover effects onto pinned by a rise in non-tax revenues and of GDP will likely not be reached within the trade in the WAEMU zone. However, a substantial reduction in capital expen- next 2-3 years, and public debt as a share of if new trade opportunities are realized, ditures. The fiscal deficit will predomi- GDP is anticipated to increase until 2026. these negative impacts could be miti- nantly be financed through domestic bor- The regional inflation rate is expected to gated. Burkina Faso may also continue rowing from the regional market, where align with the WAEMU target by 2025, to face elevated borrowing costs, which Burkina has faced a significant surge in while regional reserves are expected to could reduce development expenditures, interest rates exceeding 9 percent for rise gradually, supported by the resump- amid increasing demands for defense and 12-month bills. Consequently, public debt tion of international bond issuances, re- security spending. The revised Mining is anticipated to rise to 54.2 percent of covering exports, and monetary policy Code could boost revenues but may face GDP by end 2024. easing in the Euro Area. implementation challenges. TABLE 2 Burkina Faso / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.9 1.5 3.0 3.7 3.9 4.1 Private consumption 3.4 4.4 5.0 4.4 4.3 4.5 Government consumption 6.6 5.2 4.5 3.7 3.8 3.7 Gross fixed capital investment 34.8 4.2 8.9 2.9 3.1 3.4 Exports, goods and services 6.5 -2.8 -2.2 3.0 3.1 3.3 Imports, goods and services 15.5 8.2 9.0 3.8 3.5 3.7 Real GDP growth, at constant factor prices 6.9 1.5 3.0 3.7 3.9 4.1 Agriculture -4.1 5.7 1.1 4.2 4.3 4.4 Industry 11.0 -7.8 2.2 2.8 3.1 3.3 Services 10.3 5.2 4.3 4.0 4.1 4.3 Inflation (consumer price index) 3.9 14.1 0.7 3.4 2.5 2.3 Current account balance (% of GDP) 0.4 -7.2 -8.0 -6.2 -6.0 -5.8 Net foreign direct investment inflow (% of GDP) 0.5 0.3 0.3 0.4 0.4 0.4 Fiscal balance (% of GDP) -7.5 -10.3 -6.5 -5.9 -5.3 -4.8 Revenues (% of GDP) 20.3 20.9 21.3 20.8 21.3 21.5 Debt (% of GDP) 55.4 56.4 53.4 54.2 54.8 55.2 Primary balance (% of GDP) -5.8 -8.5 -4.2 -3.3 -2.7 -2.2 a,b International poverty rate ($2.15 in 2017 PPP) 25.3 26.5 26.5 25.8 25.1 24.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 60.7 62.6 61.5 60.5 60.0 59.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 88.1 89.0 88.2 87.6 87.3 86.8 GHG emissions growth (mtCO2e) 2.5 3.7 4.1 4.3 4.3 4.2 Energy related GHG emissions (% of total) 10.9 11.2 11.5 11.9 12.3 12.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 211 Oct 24 further worsened by rising domestic debt and insufficient investment in infrastruc- BURUNDI Key conditions and ture and human capital. Poverty is widespread and elevated. As of challenges 2023, poverty affects an estimated 62 per- cent of the population (at $2.15 per capita/ Table 1 2023 Burundi's economy remains in a cycle of day in 2017 PPP). The provision of basic Population, million 13.2 fragility, marked by entrenched poverty public services does not meet the popula- GDP, current US$ billion 3.5 and ongoing challenges such as political tion’s needs, with only 48 percent of ado- GDP per capita, current US$ 267.3 instability, rapid population growth, and lescents enrolled in secondary school and a 62.1 International poverty rate ($2.15) environmental degradation. The economy 30 percent of girls out of school. Chronic a 86.2 is heavily dependent on agriculture, which malnutrition is widespread, with 55.8 per- Lower middle-income poverty rate ($3.65) a 37.5 employs over 85 percent of the workforce cent of children under five affected by Gini index School enrollment, primary (% gross) b 103.9 but contributes only 40 percent to GDP, stunting, a figure likely worsened by re- Life expectancy at birth, years b 62.0 largely through low-productivity subsis- cent food inflation and food insecurity. Total GHG emissions (mtCO2e) 8.1 tence farming. Export crops are limited to Reforms focused on sustaining public fi- coffee and tea. Industrial activity is min- nances, enhancing the allocation and effec- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2020), 2017 PPPs. imal, accounting for 17 percent of GDP. tiveness of public expenditures, eliminating b/ Most recent WDI value (2022). Efforts to develop the country’s signifi- exchange rate market distortions, revitaliz- cant deposits of minerals essential for the ing the private sector, attracting foreign di- energy transition are stymied by poor lo- rect investment, and fostering growth in gistics and infrastructure. Structural im- mining, digital, and agro-industrial sectors balances persist, with low export-to-im- will be crucial for placing the country on a Growth rebounded to 2.7 percent in port coverage (30 percent in 2023 vs. 55 sustainable development path. 2023, driven by robust agricultural out- percent average in Sub-Saharan Africa), put, but momentum weakened in 2024, while environmental degradation is fur- with real growth projected at 2.2 per- ther hampering agricultural productivity. cent, due to persistent fuel shortages, Insufficient resources and infrastructure Recent developments fall short of meeting the demands of a power supply disruptions, and climatic growing population, thereby obstructing Growth accelerated to 2.7 percent in 2023, shocks. Poverty reduction has remained sustainable development. up from 1.8 percent in 2022, driven by fa- elusive, constrained by insufficient Burundi's recent economic history has vorable rainfall and robust investment. In- growth relative to demographic expan- been significantly impacted by the polit- dustry and services felt the pinch of fuel ical crisis of 2015, leading to persistent shortages and flaring premiums on the sion and, more recently, sustained high macroeconomic imbalances. These in- forex parallel market. On the demand side, inflation. The medium-term outlook is clude high fiscal and current account growth was underpinned by government clouded by considerable risks, particular- deficits (CAD), limited external financing, and private sector spending. Inflation av- ly regarding the timeline for exchange a growing gap between official and par- eraged 27.1 percent, driven by surges in allel exchange rates, and fiscal dominance food and fuel prices. By December, it fell to rate unification and regional instability. over monetary policy. The situation is 17.8 percent, with food inflation dropping FIGURE 1 Burundi / Public debt, fiscal and current account FIGURE 2 Burundi / Actual and projected poverty rates and deficits real private consumption per capita Percent of GDP Percent of GDP Poverty rate (%) Real private consumption per capita (constant LCU) 80 20 100 155000 70 90 150000 80 60 15 70 145000 50 60 140000 40 10 50 40 135000 30 20 5 30 130000 20 10 125000 10 0 0 0 120000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2013 2015 2017 2019 2021 2023 2025 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 calculations. Source: World Bank. Notes: see Table 2. MPO 212 Oct 24 to 23.1 percent from 39.8 percent, support- cope by reducing meals, liquidating assets, in 2024. Debt is expected to decrease fur- ed by improved rainfall. or resorting to child labor. ther, reaching 67.4 percent of GDP in 2026. The fiscal deficit narrowed to 9.0 percent The CAD is projected to moderate to 15.9 of GDP in 2023, down from 10.7 percent percent of GDP in 2024 and ease further in 2022, due to reduced non-recurring to 13.6 percent by 2026, driven by the re- expenditures and a modest revenue in- Outlook sumption of mining exports and the posi- crease. The deficit has been largely fi- tive impact of forex reforms. nanced through domestic short-term, Growth is projected to slow to 2.2 percent Burundi’s economic growth is insufficient high-interest loans from commercial in 2024, driven by persistent fuel shortages compared to its demographic expansion, banks and Central Bank advances. Subse- since March 2024, escalating premiums in with the population projected to double quently, public debt climbed to 72.4 per- the foreign exchange parallel market, and by 2050, resulting in stagnating per capita cent of GDP from 68.4 percent in 2022. continued high inflation. Over the medium GDP levels. Given the current trends, The CAD remains high, at 16.6 percent, term, growth is projected to average 3.9 poverty is projected to remain high and influenced by soaring oil prices and slug- percent in 2025-26, driven by agriculture, stable, at nearly 62 percent in 2024-26. gish exports, mainly due to delayed min- mining, and government spending. Favor- Structural reforms are crucial to expanding ing contract negotiations and under-per- able rainfall, improved power generation, the private non-farm sector and enhancing formance in the coffee and tea sectors. and eased foreign exchange restrictions agricultural productivity. By August 2024, Burundi’s gross interna- will support a rebound in services and in- Reducing the misalignment between offi- tional reserves covered 1.2 months of im- dustry. In 2024, inflation is projected to cial and parallel exchange rates, alongside ports, down from 1.6 months in August moderate to 22.8 percent, owing to the pos- growth-enabling macro-structural re- 2022. The foreign exchange rate premium itive effects of easing food prices, support- forms, could stabilize fuel supply, boost surged to 142.3 percent in September 2024, ed by favorable rainfall and restrictions on exports, and attract foreign investment, up from 51.6 percent a year earlier. Infla- cereals exports to neighboring countries. thereby strengthening external and fiscal tion remained elevated at 18.6 percent The fiscal deficit is expected to decline to accounts. However, agricultural setbacks year-on-year in August 2024, though down 7.1 percent of GDP in 2024, driven by cuts due to adverse weather conditions or a from 27.5 percent in August 2023, driven in capital and current spending, alongside prolonged closure of the Rwanda border by higher food and transport costs, and improved domestic revenue collection. Fis- could undermine growth prospects. Fur- increased import costs due to higher ex- cal deficit is anticipated to decline further thermore, failure to consolidate fiscal ac- change rate premiums. Inflation dispro- to 4.7 percent by 2026, owing to tax admin- counts could heighten fiscal risks and ex- portionately affects the poor, who tend to istration digitization and phased reduc- ternal vulnerabilities. A disruption to the spend a larger income share on food, po- tions in non-essential spending. Public IMF program might restrict access to con- tentially deepening poverty and adversely debt is projected to remain elevated, de- cessional financing and aid, further deteri- impacting human capital as households creasing slightly to 70.6 percent of GDP orating external and fiscal accounts. TABLE 2 Burundi / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.1 1.8 2.7 2.2 3.5 4.2 Private consumption 3.0 2.4 2.7 2.4 3.2 3.5 Government consumption 2.9 5.9 5.4 3.2 5.2 4.6 Gross fixed capital investment 3.9 4.0 8.1 7.3 9.2 12.3 Exports, goods and services 3.4 5.8 7.8 7.8 10.8 13.2 Imports, goods and services 3.2 7.0 7.0 5.7 7.0 7.3 Real GDP growth, at constant factor prices 3.1 1.8 2.7 2.2 3.5 4.2 Agriculture 3.4 -0.8 2.8 3.1 3.9 4.2 Industry 3.0 3.2 2.7 1.2 2.9 4.1 Services 2.9 3.1 2.6 2.0 3.4 4.2 Inflation (consumer price index) 8.3 18.8 27.1 22.8 20.4 16.2 Current account balance (% of GDP) -11.9 -15.9 -16.6 -15.2 -15.0 -13.6 Net foreign direct investment inflow (% of GDP) 0.3 0.3 0.0 -0.1 -0.1 -0.1 Fiscal balance (% of GDP) -4.6 -10.7 -9.0 -7.1 -5.7 -4.7 Revenues (% of GDP) 23.8 22.8 24.9 25.8 26.9 27.6 Debt (% of GDP) 66.6 68.4 72.4 70.6 68.4 67.4 Primary balance (% of GDP) -1.6 -8.2 -6.7 -4.4 -2.9 -2.1 a,b International poverty rate ($2.15 in 2017 PPP) 61.9 62.1 62.0 62.2 61.9 61.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 86.1 86.2 86.2 86.2 86.1 85.8 GHG emissions growth (mtCO2e) 3.5 2.9 2.9 2.8 2.7 2.5 Energy related GHG emissions (% of total) 10.1 10.0 10.0 9.9 9.9 9.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2020-EICVMB. Actual data: 2020. Nowcast: 2021-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2020) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. MPO 213 Oct 24 CABO VERDE Key conditions and Recent developments challenges The economy is emerging well from recent shocks with tourism playing a Table 1 2023 Cabo Verde has made remarkable eco- key role. Growth reached 5.1 percent Population, million 0.5 nomic and social progress since indepen- in 2023, with a record-high 1 million GDP, current US$ billion 2.6 dence, but growth has slowed in the last tourist arrivals allowing accommodation GDP per capita, current US$ 5083.2 decade and this small open economy was and transport to contribute 3 percentage a 4.6 International poverty rate ($2.15) one of the hardest-hit by the COVID pan- points (pp) of growth. On the demand a 19.3 demic. The archipelago faces challenges side, private consumption and exports Lower middle-income poverty rate ($3.65) a 50.9 in terms of connectivity and infrastruc- remain drivers of growth—while invest- Upper middle-income poverty rate ($6.85) Gini index a 42.4 ture development, translating into high ments lag pre-pandemic levels. Strong School enrollment, primary (% gross) b 96.4 costs of services, including electricity. growth in the services sector and lower b 74.7 Economic growth—driven by tourism, re- inflation contributed to a 0.5pp reduc- Life expectancy at birth, years mittances, and foreign direct investment tion in poverty (US$3.65 per-person per- Total GHG emissions (mtCO2e) 0.7 (FDI)—has been robust but increasingly day-2017 PPP) to reach 15.0 percent in Source: WDI, Macro Poverty Outlook, and official data. volatile over the last decade—falling from 2023. Unemployment fell to 10.3 percent a/ Most recent value (2015), 2017 PPPs. b/ WDI for School enrollment (2021); Life expectancy an average of 7.5 percent in the 2000s —below pre-pandemic levels. (2022). to 2.8 in the 2010s. A heavy reliance on The momentum has continued in 2024: the all-inclusive tourism model, strong strong activity in services and a positive state presence in the economy, and lim- contribution from agriculture after years ited linkages between FDI-benefiting sec- of drought drove GDP growth of 10.2 Cabo Verde is rebounding well from tors and the rest of the economy has led percent in Q1 (y/y). Business surveys to limited value addition. The pandem- show improved economic confidence, global shocks, buoyed by strong tourism ic, soaring commodity prices, and local particularly in tourism, commerce and performance. Growth is projected to reach drought, have underscored vulnerabilities construction sectors. Inflationary pres- 5.2 percent in 2024 and, along with mod- and accentuated debt risks, including the sures are subsiding in line with global erating inflation, will contribute to reduc- dominance of the tourism sector, the ab- food and energy prices. Headline infla- sence of buffers to shocks, and poor per- tion averaged 1.3 percent in July 2024 (y/ ing poverty (US$3.65 per-person per- forming state-owned enterprises (SOEs). y), having improved considerably in 2023 day-2017 PPP) to 14.0 percent. Strong Fiscal and structural reforms are needed (3.7 percent, from 7.9 percent in 2022). revenue collection is supporting fiscal to build buffers against external eco- Food inflation, a quarter of the CPI bas- consolidation, but debt servicing pres- nomic and climate-related shocks; in- ket, averaged 3.3 percent. Price stability sures continue. Potential global price crease private sector productivity to has allowed for monetary policy tighten- benefit from the thriving tourism sector; ing in attempts to mitigate capital flight spikes, weakened tourism demand, and and reduce internal transport costs and and safeguard the peg. limited progress with SOE reforms pose market fragmentation, thus sustaining Increased tourism receipts and slower downside risks to the outlook. higher growth. growth in goods imports reduced the FIGURE 1 Cabo Verde / Debt composition and fiscal balance FIGURE 2 Cabo Verde / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 150 0 70 600000 60 500000 120 -2 50 400000 90 -4 40 300000 60 -6 30 200000 20 30 -8 10 100000 0 -10 0 0 2019 2020 2021 2022 2023 2024f 2025f 2026f 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 External debt (lhs) Domestic debt (lhs) International poverty rate Lower middle-income pov. rate Overall fiscal balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: Government of Cabo Verde and World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 214 Oct 24 current account deficit (CAD) to 2.5 per- and ongoing investments in the tourism cent of GDP in 2023 (3.4 percent in 2022). sector. Reserves are set to remain at above While exports have been strong in H1-2024, Outlook 5 months of prospective imports, enough imports show signs of picking up—partic- to support the currency peg. ularly for capital goods—reflecting easing Output is set to expand by 5.2 percent Improved execution of the investment inflation and tourism investments. FDI in 2024, with the entry of low-cost in- budget, coupled with adjustments to pub- and concessional loans remain the primary ternational air travel further supporting lic servants’ wages, will contribute to sources of financing, and reserves—above growth in tourism and a positive, albeit widening the overall deficit to 2.7 percent 5 months of import cover—are adequate to very modest, contribution from agricul- of GDP. This is despite strong revenue col- support the currency peg. ture. Over the medium-term, growth will lection due to improved tax administra- Fiscal consolidation remains a priority be supported by the implementation of tion, broadening of the tax base, as well and is supported by strong revenue structural reforms aimed at improving as proceeds from ongoing privatization performance. Cabo Verde recorded a public sector efficiency and crowding in processes for SOEs. These developments, 20-year high primary surplus of 2 per- private investment. Inflation is expected along with efforts to contain current ex- cent in 2023, although the overall deficit to decline further in 2024 and converge penditure could reduce the fiscal deficit to shrank to 0.3 percent (3.9 percent in to around 2 percent over the medium- 1.5 percent of GDP by 2026 and bring pub- 2022). As such, public debt narrowed term—ensuring price stability. Easing lic debt to about 97.3 percent of GDP. Ac- by 10pp to 112.2 percent of GDP. Rev- inflation, together with activity in ser- celerated restructuring of key SOEs and enue performance remained strong in vices and industry sectors, is expected prudent management of contingent liabili- H1-2024—up 8 percent y/y. Spending to result in poverty finally declining to ties remains central to this trend. has been modest but is expected to pick reach the pre-pandemic level of 14.0 The outlook is subject to downside risks, up as implementation of public invest- percent by end 2024. This trend is set including potential commodity price ments accelerates in H2-2024. Debt ser- to continue in the medium-term, with spikes due to geopolitical tensions, weaker vicing pressures are mounting, in part, poverty falling to 13.0 percent in 2025 external demand in tourism markets and reflecting increased domestic borrowing and 11.6 percent by 2026. limited progress with the SOE reform due to the pandemic. Financing needs The CAD will widen this year and peak agenda, which could undermine the fiscal will continue to be supported through at 4.1 percent of GDP by 2025, as exports consolidation and weaken growth. Cli- concessional external borrowing and use gradually stabilize, and imports accelerate, mate-related shocks remain a concern, of longer-term domestic bonds. in line with the implementation of the PIP given the country's high vulnerability. TABLE 2 Cabo Verde / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.0 17.4 5.1 5.2 4.9 4.8 Private consumption 10.1 13.7 7.7 6.0 5.5 5.4 Government consumption 10.0 -6.9 1.3 8.1 1.7 0.4 Gross fixed capital investment 2.4 -17.1 -27.9 2.1 6.5 6.3 Exports, goods and services -2.9 89.8 4.5 10.8 6.1 5.7 Imports, goods and services 5.4 14.4 -8.0 11.0 6.0 5.2 Real GDP growth, at constant factor prices 7.0 16.1 5.2 5.1 4.9 4.8 Agriculture -7.0 -13.4 -7.1 5.8 5.7 5.7 Industry 0.4 8.0 1.2 2.9 3.0 3.2 Services 9.5 19.7 6.6 5.4 5.1 5.0 Inflation (consumer price index) 1.9 7.9 3.7 1.6 2.0 2.0 Current account balance (% of GDP) -12.1 -3.4 -2.5 -3.5 -4.1 -3.9 Net foreign direct investment inflow (% of GDP) 4.5 4.8 5.8 4.8 4.6 4.4 Fiscal balance (% of GDP) -7.3 -3.9 -0.3 -2.7 -2.4 -1.5 Revenues (% of GDP) 23.5 22.0 24.6 26.5 25.1 24.3 Debt (% of GDP) 146.8 122.8 112.2 107.1 102.4 97.3 Primary balance (% of GDP) -5.0 -1.7 2.0 -0.5 -0.2 0.7 a,b International poverty rate ($2.15 in 2017 PPP) 4.8 3.8 3.8 3.3 2.9 2.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 18.7 15.5 15.0 14.0 13.0 11.6 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 50.1 44.1 42.2 40.3 38.0 36.6 GHG emissions growth (mtCO2e) 2.3 0.6 4.3 4.0 4.3 4.4 Energy related GHG emissions (% of total) 82.6 83.7 83.8 84.1 84.3 84.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2015-IDRF. Actual data: 2015. Nowcast: 2016-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 215 Oct 24 regions are now affected by conflict, includ- ing spillovers from neighboring countries. CAMEROON Key conditions and challenges Table 1 2023 Recent developments Cameroon’s economy has shown re- Population, million 28.6 silience in the face of external shocks, but Cameroon’s economic recovery slowed GDP, current US$ billion 47.7 multiple structural weaknesses prevent it down in 2023, with real GDP expanding GDP per capita, current US$ 1663.5 from reaching its potential. The overlap- by only 3.3 percent, down from 3.6 per- a 23.0 International poverty rate ($2.15) ping crises between 2020 and 2023 re- cent in 2022, due to the decline in trans- a 46.7 sulted in average annual GDP growth of portation activities following high input Lower middle-income poverty rate ($3.65) a 76.0 only 2.6 percent, far below the NDS30 costs in this sector, and the depletion of Upper middle-income poverty rate ($6.85) Gini index a 42.2 targets, and stagnant per capita incomes. oil fields and energy supply shortages in School enrollment, primary (% gross) b 110.7 Growth is further hampered by poor the industry sector. A rebound occurred b 61.0 quality of infrastructure, especially elec- in the first quarter of 2024 with real GDP Life expectancy at birth, years tricity, roads, and limited internet con- growing by 3.7 percent y-o-y, fostered by Total GHG emissions (mtCO2e) 128.3 nectivity. Other factors include underde- good performance of services and export- Source: WDI, Macro Poverty Outlook, and official data. velopment of the financial system and oriented agricultural production thanks a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). heavy dependence on commodity ex- to improved yields and higher prices in ports. The growing effects of climate international markets. change and fragility remain challenges to The current account deficit increased to 4.1 Cameroon's economic growth shows stronger growth and poverty reduction. percent of GDP in 2023 from 3.6 percent Cameroon needs a major rethink of its in 2022, mainly driven by the continuous signs of recovery after its slowdown in growth model, placing stronger emphasis decline in oil production and exports. The 2023. However, the growth rate remains on private sector participation, redefining deficit remained at a high level for the below the target set out in the Nation’s the role of the state in the economy, and same reason in the first quarter of 2024, at development strategy (NDS30), imply- addressing low labor productivity. 4.7 percent of GDP, up from 3.1 percent in Poverty rates have remained virtually un- the previous quarter. ing limited poverty reduction and per- changed since 2001. Combined with rapid Average inflation has declined to 5.7 per- sistent scarcity of job opportunities. Sus- population growth, this has resulted in a cent as of the end of June 2024 from 7.7 tained fiscal consolidation should keep the significant increase in the absolute num- percent one year ago, tempered by the re- deficit at 0.8 percent of GDP in 2024 and ber of extreme poor Cameroonians, sur- strictive monetary policy stance of the re- support a further fall in public debt-to- passing 6.6 million in 2023. Inequality in gional central bank (BEAC), easing foreign Cameroon remains high, with a consump- inflation and government price control GDP ratio. While growth prospects are tion Gini coefficient of 42.2, indicating measures, despite the rise in pump prices more favorable, risks remain, including significant disparities in living standards in February 2024. the upcoming presidential elections and between regions, as well as urban and The fiscal deficit continued to decline in commodity price volatility. rural areas. Furthermore, fragility is in- 2023 to 0.8 percent of GDP, down from creasing, as nine out of Cameroon's ten 1.1 percent in 2022, supported by reduced FIGURE 1 Cameroon / Real GDP growth and contributions FIGURE 2 Cameroon / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 90 800000 8 80 700000 6 70 600000 4 60 500000 2 50 400000 0 40 300000 -2 30 20 200000 -4 -6 10 100000 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0 Gov. cons. Exports GFCF 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 216 Oct 24 fuel subsidies and capital spending and four percent in 2025 and 2026. This is dri- Average inflation will continue to decline significantly improved tax collection. ven by the following factors that should from 4.7 percent in 2024 to 3.0 percent in Public debt fell from 44.6 percent of GDP have a knock-on effect on other economic 2026, under the effects of BEAC’s restric- to 42.0 between December 2023 and June sectors: (i) an improved energy supply tive monetary policy stance. 2024. Cameroon’s public debt is deemed from the full commissioning of the Nachti- The current account deficit will remain sustainable, even though with a high risk gal hydroelectric dam which represents over the medium term at around 4.0 per- of debt distress due to liquidity ratios one-third of the current energy supply, cent of GDP, reflecting the decline in oil breaching the thresholds. and (ii) scaled-up public investment, es- production driven by oil field depletion, To address the inflationary effects of pecially in infrastructure, with the aim to and the higher imports needed for the these measures, tax breaks have been of- reach 7.0 percent of GDP by 2027 from 3.9 scaled-up public investment program. fered to sectors like agriculture, and the percent in 2023. Real per capita growth is forecasted to minimum wage and public sector salaries Higher public revenues will support be insufficient to reduce poverty over have been raised. However, considering scaled-up public investment, while the the next three years and consequently, the substantial number of poor and vul- fiscal deficit would remain at 0.8 percent an additional 600,000 people will join nerable Cameroonians working in the in- of GDP in 2024, and around 1 percent the ranks of the population living in formal sector, it is expected that these of GDP in the medium term, allowing extreme poverty which, by 2026, could measures will have minimal impact on the debt-to-GDP ratio to decrease. While grow to a total of 7.2 million people. poverty reduction. public investment in infrastructure pro- The outlook remains subject to risks jects under the NDS30 is projected to associated with (i) commodity price increase, improvements in the fiscal ac- volatility; (ii) a persistent security crisis; counts in 2024 will be pursued through (iii) lower-than-expected budget support Outlook higher tax revenue collection and a better from external donors, (iv) persistent control of current expenditures, especial- shortages in energy supply, (v) lower- The medium-term outlook is moderately ly fuel subsidies that are expected to de- than-expected public investment, (vi) positive, with real GDP growth projected cline following an increase in pump price possible tensions around the presiden- to 3.7 percent in 2024 and slightly above in February 2024. tial elections in October 2025. TABLE 2 Cameroon / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.3 3.6 3.3 3.7 4.0 4.2 Private consumption 4.7 4.2 2.4 3.5 3.7 3.8 Government consumption 2.6 -3.3 0.2 0.2 0.3 0.2 Gross fixed capital investment -3.0 14.4 10.1 8.3 8.4 8.8 Exports, goods and services 19.8 -5.1 6.4 7.0 7.7 8.0 Imports, goods and services 9.0 7.3 9.2 8.8 8.9 9.2 Real GDP growth, at constant factor prices 3.3 3.6 2.9 3.7 4.0 4.2 Agriculture 2.9 3.2 2.5 2.9 3.1 3.3 Industry 4.1 3.6 2.5 3.6 4.3 4.2 Services 3.0 3.6 3.3 3.9 4.1 4.5 Inflation (consumer price index) 2.5 6.3 7.4 4.7 3.5 3.0 Current account balance (% of GDP) -4.0 -3.6 -4.1 -4.2 -4.3 -4.0 Fiscal balance (% of GDP) -2.9 -1.1 -0.8 -0.8 -1.0 -1.1 Revenues (% of GDP) 14.8 16.8 17.2 17.6 17.9 18.0 Debt (% of GDP) 48.1 45.3 44.6 42.2 39.2 38.1 Primary balance (% of GDP) -1.9 -0.3 0.3 0.3 0.1 -0.1 a,b International poverty rate ($2.15 in 2017 PPP) 23.0 22.5 23.4 24.2 24.3 23.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 46.7 46.0 46.7 46.8 46.7 46.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 76.0 75.2 75.2 75.1 74.7 74.4 GHG emissions growth (mtCO2e) -1.0 0.4 0.9 2.2 2.4 2.1 Energy related GHG emissions (% of total) 7.0 7.0 7.0 7.1 7.1 7.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-ECAM-V. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 217 Oct 24 Critical areas for reform include revising the petroleum price structure and pro- CENTRAL Key conditions and curement system, to ensure sustainable fuel provision, strengthening domestic challenges AFRICAN REP. revenue mobilization, fiscal transparen- cy, and enhancing debt management The Central African Republic (CAR) re- and sustainability. mains entrenched in poverty and fragility Table 1 2023 despite its wealth of natural resources, Population, million 5.7 notably gold and diamonds. Adversely GDP, current US$ billion 2.6 impacted by conflict, external shocks, and Recent developments GDP per capita, current US$ 457.6 policy missteps, its income per capita International poverty rate ($2.15) a 65.7 has fallen by a third since the escalation The economy has stagnated since 2023, a 85.8 of the civil war in late 2012. It is now partly due to a 13 percent drop in gold Lower middle-income poverty rate ($3.65) a among the poorest countries in the production, possibly linked to smuggling Upper middle-income poverty rate ($6.85) 96.2 a world, with two-thirds of its population in conflict zones. However, the primary Gini index 43.0 living in extreme poverty. Additionally, cause is the delay and uncertainty around b 110.7 School enrollment, primary (% gross) the country has been unable to resolve the river campaign for fuel imports, b 54.5 Life expectancy at birth, years fuel shortages since 2022, particularly which normally represent 80-85 percent Total GHG emissions (mtCO2e) 56.2 those affecting about 80 percent of all fu- of the total. Fuel shortages, now in their Source: WDI, Macro Poverty Outlook, and official data. el imports made via the Ubangui River. third year, continue to disrupt local trade a/ Most recent value (2021), 2017 PPPs. CAR’s public finances are under im- and production. While requisitioning b/ Most recent WDI value (2022). mense pressure due to weak revenue some fuel stations in Greater Bangui and mobilization and social sector spending the black market have prevented imme- pressures, exacerbated by a de facto diate collapse, the situation remains criti- freeze on budget support from key de- cal due to limited reserves. Additionally, With fuel import shortages unresolved velopment partners out of their concern potential malfunctions at Boali, and the and repeated power outages in 2024, eco- over governance, use of fiscal resources need to rehabilitate the old power line to to finance security-related expenses, and Bangui, have reduced nighttime light ac- nomic stagnation persists, with growth policy missteps. CAR remains at high tivity in Bangui during the first half of projected at just 0.7 percent. In this con- risk of debt distress, with debt pressures 2024 (2024H1) compared to 2023H1, im- text, the country is navigating a difficult having grown substantially in recent pacting small businesses without reserves macro-fiscal situation. Unless the author- years, and with substantial liquidity risks or alternative power. ities secure sufficient grant support for that could jeopardize the government’s Regional monetary tightening, alongside ability to pay for civil service salaries and economic stagnation, has kept monthly in- 2025, there are concerns about the state's essential public services. flation below 2 percent since February ability to cover its wage bill and fulfill its The successful implementation of policy re- 2024, mainly due to moderated food and obligations without accumulating arrears forms under the IMF’s ECF program and housing prices. The BEAC has maintained in the foreseeable future. support from other development partners is a tight monetary policy, keeping the policy crucial for restoring macro-fiscal stability. rate at five percent following a cumulative FIGURE 1 Central African Republic / The composition of FIGURE 2 Central African Republic / Actual and projected public debt in recent years poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 70 120 300000 External debt Domestic debt 60 100 250000 General government debt 50 80 200000 40 60 150000 30 40 100000 20 20 50000 10 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 0 International poverty rate Lower middle-income pov. rate 2020 2021 2022 2023 2024e Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: Word Bank. Notes: see Table 2. MPO 218 Oct 24 increase of 175 basis points since Novem- national poverty line is 40.1 percent, con- The fiscal deficit is expected to improve ber 2021, and has scaled back liquidity ab- siderably lower than the average of 73.3 from 3.5 percent in 2023 to 2.8 percent in sorption since early 2024. percent for all other regions combined, and 2024. The overall fiscal balance is projected The fiscal deficit has reduced since 2023 less than half the poverty rate of CAR's to gradually deteriorate in 2025 and 2026 due to forced consolidation, especially poorest region, Haut Oubangui, where in the absence of strong grants commit- on domestically financed capital spend- 84.7 percent of the population lives in ment from donor partners. However, this ing, fiscal reforms, and increased grant poverty. Despite a decline in overall price would be partially mitigated by significant financing, despite spending overruns on inflation since 2023, poverty is expected to efforts in DRM, including the digitaliza- certain spending items, such as foreign remain high due to weak economic perfor- tion of procedures and payments, the col- missions and equipment for local armed mance and a decrease in per capita income. lection of excise duties, VAT, and miscella- forces. The detrimental fiscal direct and neous revenues, as well as reforms in ref- indirect impact of fuel shortages on rev- erence prices for timber and fuel pump enue collection should be limited if fuel prices, and revisions to the tax exemptions reserves remain. Outlook and VAT system. Public debt should stabi- Although gold production has fallen, the lize at 58.3 percent of GDP in 2024, with current account deficit has stabilized The projected growth rate for 2024 has domestic debt reaching 25.9 percent of around 9.2 percent of GDP since 2023 due been downgraded from 1.3 percent GDP. The current account balance is pro- to improved terms of trade and favorable (Spring estimates) to 0.7 percent, mirror- jected to slightly improve due to increased gold prices. Challenges remain due to a ing last year’s underperformance, due to gold production in the western prefectures lack of competitiveness and weak global lower gold production and fuel shortages. and higher local sawnwood production, value chain connections. Real GDP growth is projected to recover but it will remain in significant deficit from Extreme poverty remains pervasive and gradually, reaching 1.6 percent in 2025-26, 2025 onwards, due to the energy, equip- deep in CAR, with 65.7 percent of the partly due to base effects and the effective ment, and food bill. population living below the international implementation of policy adjustments Risks to the outlook remain skewed heav- extreme poverty line of USD 2.15 (2017 aimed at improving fuel supply after ily to the downside. The 2025 presidential PPP) per person per day. CAR also ex- three years of shortages. Inflation is ex- election could pose risks to security and hibits significant spatial inequality. Ap- pected to slow down to 1.5 percent by the stability. A reversal of recent security gains proximately 74.4 percent of rural Central end of 2024. However, poverty is likely to could negatively affect key sectors such as Africans live below the national poverty remain high due to declining per capita food production and processing, mining, line, compared with 61.1 percent of urban income, compounded by already severe transport, and retail, slowing economic residents. Regional disparities are also no- household budget constraints and a weak growth and complicating the country’s ef- table: in Bangui, the poverty rate at the economic recovery. forts to emerge from fragility. TABLE 2 Central African Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.0 0.5 0.7 0.7 1.1 2.0 Private consumption 1.3 0.0 1.2 1.5 1.9 2.3 Government consumption -3.8 -8.2 3.5 -4.5 -4.4 -1.9 Gross fixed capital investment -15.9 -4.5 -2.7 -1.4 -0.5 2.1 Exports, goods and services -5.3 2.6 9.0 1.3 2.4 3.2 Imports, goods and services -11.5 -5.5 5.5 0.8 1.7 2.7 Real GDP growth, at constant factor prices 1.5 1.0 0.7 0.7 1.1 2.0 Agriculture 2.7 2.2 2.3 1.7 2.4 2.9 Industry -1.7 -3.9 -0.5 -0.5 0.5 1.2 Services 2.2 2.4 0.1 0.4 0.3 1.6 Inflation (consumer price index) 4.3 5.6 3.0 1.5 2.3 2.9 Current account balance (% of GDP) -11.1 -12.7 -9.1 -9.2 -8.7 -8.3 Fiscal balance (% of GDP) -6.0 -5.3 -3.5 -2.8 -3.5 -3.8 Revenues (% of GDP) 13.7 12.3 14.4 14.4 13.4 13.3 Debt (% of GDP) 48.5 51.1 57.7 58.3 57.9 57.3 Primary balance (% of GDP) -5.7 -4.9 -2.9 -1.9 -2.5 -2.8 a,b International poverty rate ($2.15 in 2017 PPP) 65.7 65.3 65.8 66.1 66.8 67.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 85.8 85.6 86.1 86.1 86.5 87.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 96.2 96.1 96.4 96.4 96.5 96.5 GHG emissions growth (mtCO2e) 1.5 -0.2 -0.2 -0.2 -0.2 -0.2 Energy related GHG emissions (% of total) 0.4 0.4 0.4 0.5 0.5 0.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 219 Oct 24 CHAD Key conditions and Recent developments challenges Despite the strain caused by the ongoing refugee crisis—placing heavy demands on Table 1 2023 Chad’s economic growth has been volatile local resources and increasing fiscal pres- Population, million 18.3 and weak, reflecting the dependence on sures—Chad’s economy is expected to sus- GDP, current US$ billion 13.6 the oil sector, which accounts for 85 per- tain 3 percent growth in 2024 (-0.1 percent GDP per capita, current US$ 745.0 cent of exports and 56 percent of fiscal rev- per capita). Non-oil GDP growth is esti- a 30.8 International poverty rate ($2.15) enues. Economic diversification efforts are mated to be 2.7 percent, down from 4.1 a 62.8 ongoing, with measures aimed at industri- percent in 2023, as the growth of public in- Lower middle-income poverty rate ($3.65) a 88.8 alizing the livestock sector, facilitating ac- vestment decelerates. On the supply side, Upper middle-income poverty rate ($6.85) Gini index a 37.4 cess to inputs to the agro-pastoral sector, industry is expected to contribute 1.3 per- School enrollment, primary (% gross) b 90.4 and limiting barriers to trade with non- centage points (pps) to growth, supported b 53.0 CEMAC countries. by a modest increase in oil production, fol- Life expectancy at birth, years Chad is also among the world’s most lowed by agriculture (1 pp), which has Total GHG emissions (mtCO2e) 123.8 vulnerable countries to climate change. been negatively impacted by the major Source: WDI, Macro Poverty Outlook, and official data. Insufficient rains as well as frequent in- flooding, and services (0.7 pps). Net ex- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2022). tense flooding—most recently in 2022 ports are expected to be the main driver and this year—adversely impact agricul- on the demand side (+1.1 pps), with the ture production, which, together with volume of Q1 oil exports having increased conflict and displacement, has led to 8.4 percent compared to the same period chronic food insecurity. in 2023. Government investment and con- Ending the political transition, President sumption are expected to contribute 0.6 2024 GDP growth is expected to slow Mahamat Idriss Deby was declared the and 0.3 pps to growth, respectively. to 3 percent (-0.1 percent per capita) de- winner of the May 2024 presidential elec- The current account deficit is expected to spite increased oil exports and public tion, with limited violence. Security re- slightly widen to 1.7 percent of GDP. De- mains tenuous, with threats by Boko mand for imported goods (from invest- spending, as economic spillovers from Haram in the Lake Chad region, and the ment and military expenditures and hu- the war in Sudan continue. Inflation armed FACT rebellion in the north. Ac- manitarian-related operations in support will increase to 6.5 percent exacerbated cording to the International Organization of Sudanese refugees) remains high, with by flooding, which has led to extreme for Migration, an estimated 910,000 people terms of trade declining. levels of food insecurity. The poverty have crossed the border into Chad since Inflation, after easing to 4.1 percent in the start of the crisis in Sudan in April 2023, is projected to surge to 6.5 percent rate is expected to increase to 36.4 per- 2023, including 213,339 Chadian returnees. in 2024, due to higher food and transport cent. Downside risks to the outlook in- The war in Sudan, as well as the rebellion prices. The poverty rate is estimated to clude regional instability, insecurity, from Libya, has induced higher humani- increase by 2.6 ppts to 36.4 percent in and further climate shocks. tarian spending as well as military expen- 2024 with a total of 6.9 million in extreme ditures to secure the borders. poverty. Since mid-July, floods following FIGURE 1 Chad / GDP growth, current account, and fiscal FIGURE 2 Chad / Actual and projected poverty rates and balance real GDP per capita Percent, percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 6 100 450000 90 400000 4 80 350000 2 70 300000 60 250000 0 50 200000 40 -2 150000 30 -4 20 100000 Current account balance 10 50000 Fiscal balance -6 0 0 GDP growth 2011 2013 2015 2017 2019 2021 2023 2025 -8 International poverty rate Lower middle-income pov. rate 2021 2022 2023 2024 2025 2026 Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 220 Oct 24 heavy rains have affected over 1.5 million and digitalization efforts, and oil revenues in 2025, which translates into an additional people, destroyed 259,000 hectares of (+17.2 percent). Windfalls resulting from 588,000 people in extreme poverty. Contin- crops, and caused the loss of nearly 70,000 the increase in fuel prices and dividends ued security restrictions, low social protec- heads of livestock. An estimated 3.4 mil- from the Société de raffinage de N'Djame- tion coverage, and the ongoing Sudan cri- lion people (20 percent of the population) na have likewise contributed. Total public sis is expected to restrict poverty reduc- are facing severe food insecurity between debt is projected to increase from 38.5 per- tion, with extreme poverty projected to June and August 2024. cent in 2023 to 41.4 percent of GDP in 2024. reach 39.6 percent in 2026. The Bank of Central African States (BEAC) With declining oil prices forecasted and el- has maintained its tight monetary policy evated public spending, fiscal accounts are stance to contain inflationary pressures projected to remain in deficit in the medi- and support the external viability of the ex- Outlook um-term. As a result, public debt is pro- change rate arrangement. The BEAC poli- jected to reach 42.6 percent of GDP in 2026. cy rate was maintained at five percent fol- Growth is projected to average 2.8 percent The current account deficit is projected to lowing a cumulative increase by 175 basis (-0.3 percent per capita) over 2025-2026, as expand to an average of 2.8 percent of GDP points between November 2021 and March public investment is expected to fall from over 2025-2026. 2023. Weekly liquidity injections were dis- the highs of 2023-2024. Non-oil GDP The outlook is subject to multiple down- continued in early 2023 and BEAC has growth is projected at an average of 3.3 side risks, including lower-than-anticipat- scaled down its liquidity absorption oper- percent. After three consecutive years ed oil prices, regional instability, height- ations since the beginning of 2024. above the target range, inflation is project- ened insecurity, and further climate shocks The fiscal deficit is expected to narrow ed to moderate to an average of 3.1 percent and natural disasters. A prolonged Sudan from 3.5 percent of GDP in 2023 to 0.2 per- in the medium term. war could worsen the humanitarian crisis, cent in 2024, despite increasing expendi- The 2024 lean season is projected to be one strain public finances, and increase infla- tures (+8.8 percent) in response to human- of the worst in recent years. Flood dam- tionary pressures. Meanwhile, the conclu- itarian needs, flooding, and presidential ages and crop losses will lead to a drop sion of the political transition presents an and local elections. The consolidation is in production and household incomes, and upside risk if the government implements driven by higher tax revenues (+20.5 per- as a result, the extreme poverty rate is ex- reforms that improve productivity, eco- cent), stemming from tax modernization pected to increase by 2 ppts to 38.4 percent nomic diversification, and growth. TABLE 2 Chad / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -1.2 2.8 4.2 3.0 2.1 3.5 Private consumption 1.6 2.7 3.6 1.3 3.4 3.5 Government consumption 3.7 -1.5 -7.0 9.6 0.1 4.9 Gross fixed capital investment -4.3 -6.1 54.1 3.9 -2.4 0.5 Exports, goods and services -0.4 5.0 2.9 4.0 0.9 4.1 Imports, goods and services 5.1 2.0 16.0 1.8 1.1 3.1 Real GDP growth, at constant factor prices -1.2 2.8 4.1 3.0 2.1 3.5 Agriculture 6.2 2.0 5.0 3.1 3.4 3.5 Industry -4.6 4.1 3.3 4.1 -0.5 3.3 Services -4.3 2.3 4.1 1.9 3.2 3.7 Inflation (consumer price index) 1.0 5.8 4.1 6.5 3.2 3.0 Current account balance (% of GDP) -6.0 2.9 -0.9 -1.7 -2.5 -3.0 Fiscal balance (% of GDP) -2.5 5.1 -3.5 -0.2 -2.2 -1.9 a Revenues (% of GDP) 16.3 23.5 18.3 22.5 21.4 20.7 Debt (% of GDP) 55.9 42.3 38.5 41.4 41.8 42.6 Primary balance (% of GDP) -1.3 6.6 -2.4 1.2 -0.1 -0.4 b,c International poverty rate ($2.15 in 2017 PPP) .. 30.8 33.8 36.5 38.4 39.6 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 62.8 65.5 69.2 72.4 74.1 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 88.8 89.7 91.5 93.3 94.1 GHG emissions growth (mtCO2e) 2.8 2.1 2.0 2.0 2.1 1.9 Energy related GHG emissions (% of total) 2.3 2.2 2.2 2.2 2.2 2.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ 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. b/ Calculations based on 2022-EHCVM. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. c/ Projections using microsimulation methodology. MPO 221 Oct 24 governance issues and impeding effective policy implementation. COMOROS Key conditions and The quality of policy design and pace of implementation hindered economic challenges growth and kept poverty rates at around 38 percent (using $3.65 per day at 2017 Table 1 2023 Comoros has faced significant structural PPP) for the past decade. Weak revenue Population, million 0.9 challenges, leading to low economic collection, driven by numerous tax exemp- GDP, current US$ billion 1.3 growth and stagnating income per capita tions and widespread administrative inef- GDP per capita, current US$ 1527.5 over the past decades. From 2001 to 2022, ficiencies, undermines fiscal sustainability. a 18.6 International poverty rate ($2.15) the GDP per capita increased by only In addition, a high risk of debt distress lim- a 39.5 US$367 (constant 2017 PPP US$), one of its the government's ability to secure ad- Lower middle-income poverty rate ($3.65) a 68.6 the lowest among peer nations. The econ- equate funding. Furthermore, Comoros Upper middle-income poverty rate ($6.85) Gini index a 45.3 omy relies heavily on private sector con- faces significant climate risks, such as cy- School enrollment, primary (% gross) b 106.2 sumption, particularly from grandes clones and rising sea levels, which disrupt b 63.7 mariages—large traditional weddings economic activity, exacerbate poverty, and Life expectancy at birth, years that drive spending but do little to foster threaten long-term development. Total GHG emissions (mtCO2e) 0.8 sustainable growth. Weak institutions, a Source: WDI, Macro Poverty Outlook, and official data. small population, and geographic remote- a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2018); Life expectancy ness have hindered broader economic (2022). progress, contributing to persistent pover- Recent developments ty, and causing Comoros to lag other small island nations. The economy grew 3 percent in 2023. Political economy factors have shaped Economic activity was disrupted by post- The economy continues recovering from Comoros' economic trajectory, contribut- election demonstrations in January 2024, ing to growth volatility over the past 40 but increased private consumption driven Cyclone Kenneth and COVID-19, dri- years. Despite improved political stabili- by the grands mariages and continued ven by private consumption and invest- ty in the last two decades, economic ex- robust tourism are expected to mitigate ments in tourism and transport infra- pansion remains sluggish, constrained by this. On the supply side, the construction structure. Growth is expected to gradu- several structural challenges. State-owned sector benefited from the continuation of enterprises (SOEs) dominate key sectors, large public infrastructure investments, ally increase to 4.3 percent over the limiting competition and stifling the de- such as the construction of the El medium-term. Despite a slow start to velopment of the small private sector. Maarouf Hospital and Galawa Hotel. Av- 2024, fiscal consolidation efforts are ex- Low human capital and productivity fur- erage headline inflation has fallen to 3.7 pected to narrow the deficit and reduce ther hamper economic progress, while percent in the first half of 2024, driven by public debt, creating fiscal space for limited access to finance curtails entre- lower commodity prices, from 12.4 and preneurship and business growth. Ad- 8.5 percent in 2022 and 2023, further sup- poverty-reducing investments. The finan- porting private consumption. ditionally, the dominance of traditional cial sector remains a contingent liability systems and informal power structures Increased grants complemented im- and a priority area for reform. weakens state institutions, compounding proved expenditure rationalization and FIGURE 1 Comoros / Selected macroeconomic imbalance FIGURE 2 Comoros / Actual and projected poverty rates indicators and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 45 0 80 570000 40 560000 -1 70 35 550000 -2 60 30 540000 50 530000 25 -3 40 520000 20 -4 30 510000 15 -5 500000 10 20 490000 -6 5 10 480000 0 -7 0 470000 2019 2020 2021 2022 2023e 2024f 2025f 2026f 2014 2016 2018 2020 2022 2024 2026 Debt (lhs) Fiscal balance (rhs) International poverty rate Lower middle-income pov. rate Current account balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: National authorities and World Bank staff estimates and forecasts. Source: World Bank. Notes: see Table 2. MPO 222 Oct 24 domestic revenue mobilization efforts to financial institutions. Foreign direct in- The poverty rate is expected to remain at narrow the fiscal deficit from 4 percent vestment has continued to remain stable around 38 percent in 2024. in 2022 to 1.7 percent in 2023. However, at 0.5 percent of GDP. Lower imported inflation, from lower increased expenditure pressure from global commodity prices, is expected to spending overruns on the El Maarouf contribute to lower headline inflation, fore- hospital, the cholera outbreak, and re- casted at 1.7 percent in 2025. Fiscal consol- pairing storm damage as well as lower- Outlook idation, enhanced SOE performance, and than-expected domestic revenue mobi- increased expenditure efficiency are ex- lization in the first quarter of 2024 ap- Growth is expected to converge to 4.3 pected to reduce the fiscal deficit to 2.5 per- pear to have slowed the pace of the fis- percent in the medium-term, driven pri- cent of GDP by 2026. Public debt is project- cal consolidation. Public debt reached 38 marily by private consumption, as well ed to fall to 38.2 percent of GDP by 2026. percent in 2023 from 33.4 in 2022, but is as public investment in the El Maarouf The current account deficit is expected to considered sustainable. hospital, the Galawa hotel, and the re- average 6.7 percent of GDP over the mid- Domestic credit growth declined from 3.5 habilitation or construction of transport term, as major public investments con- percent in December 2023 (year-on-year) infrastructure. The base effect from elec- tribute to a widening of the trade deficit, to -2.7 percent in June 2024, driven by a tion expenditure in 2023 will normalize offsetting the impact of continued strong sharp decline in credit to public enterpris- government consumption. The stop-start remittances. International reserves are ex- es as they regained access to external trade progress of these projects will continue pected to cover 7-8 months of imports. credit. Private sector credit growth also fell causing volatility in capital expenditure. Downside risks to the outlook include over the same period. This decline rein- The restructuring of contingent liabili- contingent liabilities, especially in the fi- forces vulnerability in a financial sector ties in the SOE sector would improve nancial sector, threatening debt sustain- that is characterized by a high level of non- debt sustainability and create fiscal ability, prolonged global geopolitical ten- performing loans, declining provision space that can be invested in human sions and the occurrence of natural dis- rates, and insolvent institutions. and economic capital. Updating the law asters and other climate events. The 2024 Stronger domestic demand translated in- on tax exemptions would broaden the elections may impact the pace of execu- to high import demand and contributed tax base and strengthen domestic rev- tion of investment projects and the imple- to the widening of the current account enue mobilization, improving fiscal sus- mentation of key fiscal and governance deficit to 2.6 percent of GDP in 2023, up tainability. It would also encourage busi- reforms. The ongoing cholera outbreak from 0.6 percent in 2022, despite strong ness formalization, further boosting rev- may exacerbate vulnerabilities by increas- remittances. International reserves re- enue collection and supporting sustain- ing healthcare costs, reducing labor pro- mained at adequate levels, partly aided able economic growth through better ductivity, and disrupting livelihoods, par- by higher financing from international public services and a fairer tax system. ticularly in affected rural areas. TABLE 2 Comoros / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.1 2.8 3.0 3.5 4.0 4.3 Private consumption 1.0 0.2 1.9 3.2 3.6 3.6 Government consumption 5.0 5.4 11.6 -3.4 -0.3 9.4 Gross fixed capital investment 9.6 -62.2 69.8 -11.5 10.3 -6.9 Exports, goods and services 48.2 100.8 -10.1 4.6 4.9 5.5 Imports, goods and services 7.7 -4.0 8.2 -4.3 3.7 1.5 Real GDP growth, at constant factor prices 2.0 2.6 3.0 3.5 4.0 4.3 Agriculture 3.4 -2.6 4.1 1.9 3.7 3.5 Industry -0.2 13.4 3.0 3.5 4.0 4.3 Services 1.8 3.0 2.5 4.3 4.2 4.7 Inflation (consumer price index) 0.0 12.4 8.5 3.3 1.7 2.1 Current account balance (% of GDP) -0.5 -0.6 -2.6 -3.9 -5.9 -6.7 Fiscal balance (% of GDP) -2.8 -4.0 -1.7 -2.7 -2.5 -2.5 Revenues (% of GDP) 17.0 14.2 15.8 17.5 15.7 15.8 Debt (% of GDP) 29.8 33.4 38.0 39.1 38.7 38.2 Primary balance (% of GDP) -2.5 -3.7 -1.4 -2.4 -2.2 -2.2 a,b International poverty rate ($2.15 in 2017 PPP) 18.2 18.1 18.1 17.9 17.4 16.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 39.0 38.5 38.2 38.1 37.0 36.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 68.2 67.9 67.2 66.7 65.7 64.8 GHG emissions growth (mtCO2e) 1.1 1.9 1.8 1.9 2.1 1.9 Energy related GHG emissions (% of total) 53.2 53.7 54.0 54.3 54.6 54.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2015-EESIC. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2014) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 223 Oct 24 critical services and the management of key economic sectors (e.g. mining, water, DEMOCRATIC Key conditions and electricity). However, persistent SOEs’ un- derperformance has become a source of challenges REP. OF CONGO fiscal stress and macro-financial risks. Moreover, the government support to The Democratic Republic of Congo SOEs received through guarantees, subsi- (DRC) has the world's second largest dies, tax exemptions, and forfeiture of div- Table 1 2023 rainforest and vast metal deposits but idends are a drag on the budget. Population, million 102.3 is still struggling to spur economic de- Violence in eastern DRC has caused over GDP, current US$ billion 67.0 velopment and make a dent in poverty. seven million internally displaced people GDP per capita, current US$ 655.2 The country has a narrow export base (IDP) as of June 2024 and is exacerbating International poverty rate ($2.15) a 78.9 (copper and cobalt account for 80 per- the challenges facing the country, with ad- a 92.1 cent of the total export) and depends verse impact on poor households’ liveli- Lower middle-income poverty rate ($3.65) a heavily on food imports despite its agri- hoods. Cyclical conflicts and pervasive Upper middle-income poverty rate ($6.85) 97.7 a cultural potential, making it vulnerable fragility are fundamental obstacles to in- Gini index 44.7 to external shocks. Weak institutions, clusive development in DRC. The author- b 122.4 School enrollment, primary (% gross) poor governance, state capture by vest- ities have prioritized the Inga mega-hy- b 59.7 Life expectancy at birth, years ed interests, vulnerability to natural dropower dam program, which could Total GHG emissions (mtCO2e) 689.5 hazards and climate change are hinder- boost growth, reduce poverty, and raise Source: WDI, Macro Poverty Outlook, and official data. ing development prospects. living standards in the DRC and the a/ Most recent value (2020), 2017 PPPs. Low human capital (index of 0.37 in African region. b/ Most recent WDI value (2022). 2020) affects particularly the youth, 53 percent of whom are unemployed. Jobs remain informal (88.6 percent), as 65 per- DRC inaugurated a new government fol- cent of workers are in low-productivi- Recent developments lowing reelection of President Tshisekedi ty subsistence agriculture, and growth is for another term, reassuring investors not filtering to the poorest. Public spend- Following President Tshisekedi’s reelec- ing covers mainly operating outlays and tion, a new government led by Prime and development partners on reforms suffers from inefficiencies. Subpar digital Minister Judith Suminwa Tuluka, the first continuity. However, a GDP slowdown is and transport infrastructures contribute woman ever to become Head of Gov- expected in 2024 owing to the mining to poor prospects of developing an inte- ernment in the DRC, was inaugurated in sector’s deceleration. Medium-term grated domestic market. Additional chal- June 2024, signaling reform continuity. In growth prospects remain favorable despite lenges from an underdeveloped financial July, the IMF completed the final review system characterized by limited market of the Extended Credit Facility (ECF) considerable downside risks from com- contestability, elevated credit cost, and arrangement, marking the DRC’s first modity price volatility and intensification a deficient justice system have produced successful completion of an IMF program. of regional conflicts. Elevated food price an unconducive business environment. The ECF supported government efforts may constrain the fight against poverty. The government relies on state-owned to maintain macroeconomic stability and enterprises (SOEs) for the provision of build resilience. FIGURE 1 Democratic Republic of Congo / Real GDP FIGURE 2 Democratic Republic of Congo / Actual and growth and contributions to real GDP growth projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 120 180000 160000 100 8 140000 80 120000 6 100000 60 80000 4 40 60000 40000 2 20 20000 0 0 0 2012 2014 2016 2018 2020 2022 2024 2026 2021 2022 2023 e 2024 f 2025 f 2026 f International poverty rate Lower middle-income pov. rate Non-Mining Mining sector SSA growth GDP Upper middle-income pov. rate Real GDP pc Source: DRC authorities. Source: World Bank. Notes: see Table 2. MPO 224 Oct 24 These positive developments boosted in- recording a 0.4 percent of GDP surplus in investment (FDI) inflows will contribute to vestor confidence, and the Central Bank of June 2024 from a deficit (0.8 percent of foreign exchange reserves accumulation Congo’s (BCC) Business Confidence Index GDP) in June 2023. However, the mpox and support exchange rate stability, pro- (BCI) increased during the first half of 2024 outbreak would likely weaken this perfor- viding room for the BCC to anchor its (H1-24). The BCI, which tracks all sectors mance. Based on GDP growth, poverty is medium-term price stability objective. De- except agriculture, was up 35.9 percent estimated to have declined from 76 percent spite exceptional security-related spending year on year (y-o-y) in June 2024, mostly in 2020 to 74.3 percent in 2023. pressures, stringent monetary policy and driven by the mining sector. Favorable fiscal consolidation efforts will further con- copper price offset falling prices of cobalt, tribute to moderate inflation. and boosted export earnings in H1-24, im- The path ahead is challenging, with risks proving the country’s external position. Outlook such as volatile commodity prices, rising The trade balance advanced to a 7.8 per- energy and global food prices eroding cent of GDP surplus from 0.5 percent of Copper production expansion is expected household incomes, ongoing conflict in the GDP deficit in H1-23. Gross international to assuage the mining sector headwinds East, and escalating regional and global reserves peaked to US$6.0 billion in July, from sluggish cobalt prices. Higher gov- conflicts affecting exports and FDI. Failure marking a 27.7 percent y-o-y increase, and ernment spending to deliver on its ambi- to contain the mpox outbreak will further representing 2 months of imports. tious program will boost investment and strain DRC’s weak health system, under- To help alleviate inflation pressures, the support growth, which is forecast to reach mining inclusive growth and poverty re- BCC kept the key policy rate at 25 percent 4.9 percent in 2024. Over the medium term, duction. Key reforms include better public following the 1,400 basis points hike in growth is expected to average 4.7 percent, fund management, tackling corruption (in- June 2023. Headline inflation eased to 15.2 driven by the mining sector. In the near fu- cluding in the justice system), enhancing percent y-o-y in July 2024 from the high of ture, poverty will remain high despite an SOE performance, and boosting market 23.8 percent in December 2023. Food infla- anticipated decline of about 1.0 percent per competition. Reinforcing the institutional tion also moderated to 14.3 percent from annum from 74.3 percent in 2023 to 71.6 framework to reduce disaster risks and the 21.2 percent. Exchange rate depreciation percent in 2026. impact of climate change will be essential decelerated to 14.6 percent y-o-y in July The overall positive developments in the for inclusive growth and poverty reduc- 2024 from 24.5 percent in December 2023. export sector are expected to continue to tion. This is also key for DRC to successful- Despite higher security spending, good support an improved external position ly position itself as a solution country for domestic revenue performance and con- with the current account deficit narrowing the global climate crisis thanks to its hy- tained non-priority spending improved to 3.7 percent of GDP on average in the dropotential, vast rainforest, and endow- the fiscal position, with primary balance medium-term. Continued foreign direct ment in green minerals. TABLE 2 Democratic Republic of Congo / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.2 8.9 8.4 4.9 5.0 4.6 Private consumption 4.3 3.1 3.2 2.1 1.7 3.0 Government consumption 21.7 22.2 -12.9 17.1 8.1 2.5 Gross fixed capital investment 50.2 27.1 16.0 11.6 8.4 7.3 Exports, goods and services 8.2 18.9 15.8 17.1 9.4 8.1 Imports, goods and services 43.6 24.9 12.3 15.0 8.0 7.5 Real GDP growth, at constant factor prices 6.2 8.9 8.4 5.0 5.0 4.6 Agriculture 2.4 2.4 2.2 2.0 2.5 2.5 Industry 7.8 16.1 14.3 8.1 6.0 5.2 Services 5.8 2.7 2.8 1.4 4.4 4.4 Inflation (consumer price index) 9.0 9.3 19.9 17.2 8.8 7.0 Current account balance (% of GDP) -1.1 -4.8 -5.7 -4.4 -3.7 -3.5 Fiscal balance (% of GDP) -1.9 -0.5 -1.6 -2.2 -1.0 -0.9 Revenues (% of GDP) 12.6 16.7 14.5 16.1 15.6 15.4 Debt (% of GDP) 24.4 23.1 22.8 21.7 20.1 18.6 Primary balance (% of GDP) -1.5 -0.1 -1.3 -1.8 -0.6 -0.5 a,b International poverty rate ($2.15 in 2017 PPP) 77.9 76.0 74.3 73.5 72.5 71.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 91.6 90.6 89.7 89.5 89.1 88.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 97.6 97.2 97.0 96.9 96.8 96.7 GHG emissions growth (mtCO2e) -0.1 0.2 0.2 0.1 0.1 0.1 Energy related GHG emissions (% of total) 1.3 1.2 1.2 1.2 1.2 1.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2020-EGI-ODD. Actual data: 2020. Nowcast: 2021-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2020) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 225 Oct 24 human and physical capital, and balanced use of natural capital. REPUBLIC OF Key conditions and challenges CONGO From 2015 to 2023, annual real GDP Recent developments contracted by an average of 1.9 percent, In 2023, the economy grew by 1.9 percent, Table 1 2023 leading to a 32 percent cumulative fall leading to a 0.4 percent decline in GDP Population, million 6.1 in income per capita. The economic re- per capita. The Congolese economy con- GDP, current US$ billion 15.3 cession began with the oil price down- tinues to experience modest growth, dri- GDP per capita, current US$ 2508.8 turn in 2014-2016, exacerbated by public ven by the non-oil sectors. Non-oil growth International poverty rate ($2.15) a 35.4 spending cuts and domestic arrears ac- in 2024H1 was driven by agriculture and a 59.1 cumulation, which in turn reduced pri- manufacturing. Government support (tar- Lower middle-income poverty rate ($3.65) a vate investment. The COVID-19 pan- iff exemptions, protected agricultural Upper middle-income poverty rate ($6.85) 83.5 a demic prolonged the recession, reducing zones, agricultural mechanization centers, Gini index 48.9 GDP per capita to early 1970s levels. etc.) and private sector investment boosted b 87.7 School enrollment, primary (% gross) Hence, extreme poverty increased from agricultural growth, while strong external b 63.1 Life expectancy at birth, years 33.5 percent in 2015 to 46.6 percent demand for cement and new breweries Total GHG emissions (mtCO2e) 29.2 in 2022, reversing previous progress in drove manufacturing growth. Oil produc- Source: WDI, Macro Poverty Outlook, and official data. poverty reduction. tion declined by 2.7 percent in 2024H1 due a/ Most recent value (2011), 2017 PPPs. The failure to adjust public spending to aging equipment and fields. b/ Most recent WDI value (2022). when oil revenue started to decline has Despite reduced oil revenues, the budget led to a sharp increase in the debt-to- recorded a surplus in 2024Q1 due to im- GDP ratio from 42.3 percent in 2014 to a proved tax revenue mobilization, fuel sub- Income per capita is expected to decline peak of 103.5 percent in 2020 and moder- sidy cuts, and restrained public spending. by 0.2 percent in 2024, resulting from a ating to 96 percent in 2023. Thus, Congo Domestic tax and customs revenue in- modest growth rate of 2.1 percent. Hence, was classified in 2017 as being in “debt creased by 14 percent and 21 percent, respec- distress” with unsustainable debt. Debt tively (y-o-y) in 2024Q1 while exemptions the poverty rate is projected to slightly in- restructuring and debt management re- granted by the state were down by 9 percent crease. Tax reforms are aiding domestic forms have made Congo’s debt sustain- at the same period. Public spending de- resource mobilization, maintaining a able since 2021, but the country remains creased, due to lower spending on goods budget surplus projected at 2.8 percent of in debt distress due to ongoing restruc- and services and investment. After declin- GDP in 2024, down from 3.6 percent in turing and audit of domestic arrears. ing to 86.6 percent in 2022, the debt-to-GDP Reliance on oil revenues makes the economy ratio reached 96 percent in 2023 due to audit- 2023. The growth outlook has improved vulnerable to oil production decline and ed domestic arrears. The current account but remains vulnerable to oil production price volatility, which adversely affects surplus declined to 8.6 percent of GDP in decline, oil price volatility, and delays in long-term growth prospects. Sustainable 2023 due to decreasing export receipts and structural reforms. development requires diversifying nation- high import bills from investment in the gas al assets and strengthening institutions, production center construction. FIGURE 1 Republic of Congo / Real GDP growth FIGURE 2 Republic of Congo / 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 80 2 70 800000 0 60 -2 50 600000 40 -4 400000 30 -6 20 Oil GDP 200000 -8 10 Non-Oil GDP -10 0 0 Real GDP 2011 2013 2015 2017 2019 2021 2023 2025 -12 International poverty rate Lower middle-income pov. rate 2019 2020 2021e 2022e 2023e 2024f 2025f 2026f Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 226 Oct 24 The banking sector remains solvent but and an average of 3.4 percent in The fiscal surplus is projected to decline vulnerable to non-performing loans. As of 2025-2026. The oil sector, projected to to 2.8 percent of GDP in 2024 and further 2023H1, bank deposits and loans to the pri- grow by 2.3 percent between 2025 and to 1.9 percent in 2025-2026 due to the an- vate sector increased in the first quarter 2026, will be supported by the renewal ticipated drop in oil prices. The projected of 2024. Inflationary pressures persisted at of equipment and oil fields thanks to medium-term rise in social spending and the beginning of 2024, driven by last year’s upcoming investments. The non-oil sec- capital expenditure should have a negative fuel price increase, and cement and beer tor, projected to reach an average growth impact on the budget surplus. However, prices hike. The Bank of Central African rate of 4.3 percent in 2025-26, will be un- new investments in oil equipment and States (BEAC) maintained its tight mone- derpinned by the continued momentum fields may bolster oil production and thus tary policy stance to contain inflation and in agriculture and industry. Non-oil ac- preserve fiscal surplus. Congo's debt-to- support the external viability of the ex- tivities will also be supported by the in- GDP ratio remains high and a source of fis- change rate arrangement. After a cumula- crease in domestic demand that is ex- cal risk but is projected to decline to 86.6 tive increase of 175 basis points between pected to result from the continued clear- percent in 2025-2026 thanks to recent re- November 2021 and March 2023, the ance of domestic arrears, the gradual in- forms. The expected decline in exports BEAC has maintained its policy rate at 5 crease in social spending and public in- should reduce the current account surplus percent. Weekly liquidity injections were vestment. Bank deposits and loans to the to 2.9 percent, while the expected slow- discontinued in early 2023 and BEAC has private sector are expected to continue down in imports should help preserve the scaled down its liquidity absorption oper- to rise in 2024 as a result of the up- surplus in 2024. ations since the beginning of 2024. coming payment of domestic arrears. In- The recovery faces low growth prospects The poverty rate rose to 46.76 percent in 2023 flationary pressures are expected to per- with risks predominantly to the downside, due to negative GDP per capita growth. sist, reaching 3.8 percent in 2024, return- including oil price volatility, weaker global ing to the BEAC target of 3 percent by demand, postponed oil investments, 2025. GDP per capita growth is projected tighter financing conditions, adverse to remain negative in 2024 at -0.2 per- weather conditions, and weak reform im- Outlook cent. The poverty rate is thus expected plementation. However, the expected ex- to marginally increase to 46.8 percent in pansion of the gas industry presents an up- The Congolese economy should experi- 2024, before declining to an average of side risk for growth, public finances, and ence modest growth of 2.1 percent in 2024 46.0 percent in 2025-26. the balance of payments. TABLE 2 Republic of Congo / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021e 2022e 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 1.0 1.5 1.9 2.1 3.5 3.3 Private consumption 11.5 5.0 4.9 5.6 4.7 5.0 Government consumption 2.1 -5.0 0.6 1.3 1.9 1.5 Gross fixed capital investment 14.0 10.0 8.6 7.0 4.4 5.1 Exports, goods and services -1.0 -0.7 1.0 -0.7 4.2 2.5 Imports, goods and services 25.0 5.9 8.9 6.5 6.3 4.9 Real GDP growth, at constant factor prices 1.0 1.5 1.9 2.0 3.5 3.3 Agriculture 1.9 3.0 2.8 2.8 3.4 3.7 Industry -3.3 -0.6 0.7 1.1 4.6 3.5 Services 2.0 3.1 2.9 2.8 3.2 3.4 Inflation (consumer price index) 2.0 3.0 4.3 3.8 3.0 3.0 Current account balance (% of GDP) 11.6 15.4 8.6 2.9 1.5 1.8 Net foreign direct investment inflow (% of GDP) 2.2 7.9 9.5 4.8 5.1 4.9 Fiscal balance (% of GDP) 1.2 7.9 3.6 2.8 1.9 1.9 Revenues (% of GDP) 21.1 28.6 24.3 24.0 23.6 23.5 Debt (% of GDP) 92.1 86.6 96.0 94.7 89.3 83.8 Primary balance (% of GDP) 3.1 10.2 6.4 5.6 4.7 4.6 a,b International poverty rate ($2.15 in 2017 PPP) 46.4 46.6 46.8 46.8 46.4 45.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 70.6 70.9 71.0 71.1 70.7 70.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 90.6 90.7 90.8 90.8 90.6 90.4 GHG emissions growth (mtCO2e) -4.1 2.8 2.5 2.2 1.5 1.2 Energy related GHG emissions (% of total) 15.1 15.4 16.0 16.6 17.6 18.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2011-ECOM. Actual data: 2011. Nowcast: 2012-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2011) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 227 Oct 24 CÔTE D'IVOIRE Key conditions and Recent developments challenges Despite global and regional turbulence and tightened financial conditions, growth re- Table 1 2023 The Ivorian economy proved remarkably mained robust at 6.2 percent in 2023 and Population, million 28.9 resilient against global and regional crises, should rebound to 6.5 percent in 2024, dri- GDP, current US$ billion 78.9 averaging 6.7 percent real growth (4.1 per- ven by strong public and private investment GDP per capita, current US$ 2731.8 cent per capita) over 2021-2022, though be- as well as private consumption. Higher fre- a 9.7 International poverty rate ($2.15) low pre-pandemic levels. Poverty de- quency data during H1-2024 compared to a 38.4 clined from 39.5 percent to 37.5 percent H1-2023 indicate that activity remains Lower middle-income poverty rate ($3.65) a 76.4 between 2018 and 2021, highlighting a buoyant. Formal employment rose 7.4 per- Upper middle-income poverty rate ($6.85) Gini index a 35.3 low growth transmission to poverty re- cent thanks to buoyant activity and the im- School enrollment, primary (% gross) b 93.8 duction, with a persistent and significant plementation of the government's youth b 58.9 urban-rural divide. Rising geopolitical program, while higher farmgate cocoa Life expectancy at birth, years and climate uncertainties underscore the prices (+50 percent), supported domestic Total GHG emissions (mtCO2e) 54.7 need for improved growth quality demand. Electricity consumption growth Source: WDI, Macro Poverty Outlook, and official data. through deeper structural reforms and in- accelerated from 7.8 percent to 11.6 percent, a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). creased fiscal space, to meet the gov- despite tariff increases and colder weather. ernment’s ambition to halve poverty and Agriculture output was mixed as heavy achieve upper-middle-income status by rains hindered major export commodities. Despite global turbulence and tightened 2030. Increasing fiscal space requires sus- Cocoa and cashew output declined by 5 per- tained domestic revenue mobilization, cent and 18.7 percent, respectively. Despite financial conditions, economic growth particularly through tax revenue, as well slowing manufacturing and construction, should reach 6.5 percent in 2024. Stead- as improved expenditure efficiency. industry output grew 5.5 percent, bolstered fast revenue-based fiscal consolidation Strong economic management and by buoyant oil (+92.4 percent) and gold pro- and debt management have bolstered in- prospects and promising hydrocarbon duction (+20.5 percent). Services performed production have improved investor per- strongly, with the retail trade turnover in- vestor confidence, with improved terms ception, leading to risk rating upgrades by dex rising 12.5 percent, driven by digital of trade, supporting macroeconomic sus- major rating agencies. Headwinds include communication and transportation. tainability. Increased oil production and persistent geopolitical tensions, leading to The fiscal deficit decreased from 6.8 per- ongoing structural and climate reforms commodity price volatility, supply-chain cent of GDP in 2022 to 5.2 percent in could sustain growth. Extreme poverty disruptions, and rising borrowing costs. 2023 due to strong tax collection and re- Heightened regional insecurity could duced crisis-related subsidies. It further incidence declined to 10.3 percent in dampen foreign direct investment and declined to 1.6 percent of GDP in 2024 from 10.7 percent in 2023, due to shift public expenditure towards security H1-2024 as revenue growth (+10.7 per- lower inflation, higher cocoa prices, and at the expense of social sectors. Climate cent) outpaced expenditure (+5.5 per- improved growth. change also poses a significant challenge to cent), aiming for a 4 percent target in development prospects. 2024. Gross fiscal financing needs totaling FIGURE 1 Côte d'Ivoire / Budget balance and change in FIGURE 2 Côte d'Ivoire / Actual and projected poverty public debt 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 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Budget balance Change in debt International poverty rate Lower middle-income pov. rate WAEMU fiscal target Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 228 Oct 24 6 percent of GDP were covered regional- facility since December 2023. Although boost productivity and growth potential. ly (one-third) and externally (two-thirds), WAEMU's inflation rate has decreased The “Calao” oil field exploitation could con- partly from February's Eurobond is- since its 2022 peak, it remains above the siderably boost prospects, further investor suance. Despite lower production, high regional target, at 4.4 percent y/y in July confidence, and ease financing conditions. cocoa prices and tax measures should 2024. Regional foreign exchange reserves Domestic revenue mobilization under the sustain revenue in H2-2024 and improve remain low, covering only 3.5 months of new Medium-Term Revenue Strategy the current account deficit (CAD) to 6.1 imports in 2024Q1. aims to: reduce the fiscal deficit to the 3 percent of GDP in 2024 from 7.9 percent Extreme poverty incidence is projected to percent regional target in 2025; stabilize in 2023. Terms of trade improved signif- fall to 10.3 percent in 2024, a 0.4 percentage debt at 58 percent of GDP; and allow icantly (+14.5 percent) in H1-2024 as ex- point drop from 2023. This decrease marks for sustained priority social and infra- port prices grew (+6.6 percent) while im- a turning point after three years of increas- structure spending. Improving terms of port prices fell (-6.9 percent), boosting the ing extreme poverty incidence from 2021 trade and private sector-led export diver- trade balance of goods by 125 percent. to 2023. Higher cocoa farmgate prices sification should boost the trade balance Money supply growth slowed to 3.4 per- would boost nominal gains growth in agri- and narrow the CAD. The regional infla- cent mid-2024 from 10 percent in 2023, due culture, benefiting 45.8 percent of the tion rate should align with its target by to deceleration in credit to the private sec- workforce, 76.6 percent of rural workers, 2025, while regional reserves are expect- tor (+7.6 percent vs. 21 percent mid-2023), and 70.2 percent of the poor. These gains, ed to rise gradually, supported by the re- public sector claims (+6.7 percent vs. 13 along with lower food inflation and ex- sumption of international bond issuances, percent), and an increase in net external as- panding industry and services, would help recovering exports, and monetary policy sets (-8.9 percent). Combined with moder- reduce poverty. easing in the Euro Area. Continued in- ating commodity prices, this decelerated flation decline and broad-based growth inflation to 3.8 percent from 4.4 percent could reduce extreme poverty to 9.4 in in 2023, despite energy prices increasing 2025 and 8.4 percent in 2026. (+11.1 percent) due to the loosening of Outlook Risks to the outlook remain tilted to the fuel subsidies and higher electricity tar- downside. Climate change could hinder iffs. Core inflation fell to 2.8 percent (y/ Growth should average 6.5 percent in agricultural production. Heightened glob- y), within the regional central bank’s 1-3 2025-2026, supported by prudent macro- al and regional tensions, notably an esca- percent target band. economic and structural policies and ex- lation of the conflicts in the Middle East The Central Bank of West African States panding extractive sectors. Together with or the Sahel, could revert progress on (BCEAO) has maintained its policy inter- sustained investments in transport and market sentiment, inflation, and foreign est rates at 3.5 percent for liquidity calls digital infrastructure, and agricultural val- reserves, tightening financing conditions, and 5.5 percent for the marginal lending ue chain development, this could also and exacerbating debt vulnerabilities. TABLE 2 Côte d'Ivoire / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.1 6.2 6.2 6.5 6.4 6.6 Private consumption 5.3 4.4 2.8 3.0 3.5 3.6 Government consumption 6.1 11.1 4.9 -2.5 -1.9 1.2 Gross fixed capital investment 15.1 14.1 18.2 22.9 4.2 13.5 Exports, goods and services 17.3 49.4 8.6 4.0 16.0 13.2 Imports, goods and services 15.9 58.4 10.5 8.5 6.6 13.0 Real GDP growth, at constant factor prices 6.1 6.6 6.1 6.5 6.4 6.6 Agriculture 7.7 4.3 -1.7 4.7 4.3 5.5 Industry 5.2 7.3 6.1 8.4 7.8 8.6 Services 5.9 7.1 8.8 6.2 6.4 6.1 Inflation (consumer price index) 4.2 5.2 4.4 3.6 3.0 2.0 Current account balance (% of GDP) -3.9 -7.7 -7.9 -6.1 -3.1 -3.0 Net foreign direct investment inflow (% of GDP) 1.5 2.0 1.7 3.8 3.8 3.3 Fiscal balance (% of GDP) -4.8 -6.7 -5.2 -4.0 -3.0 -3.0 Revenues (% of GDP) 15.7 15.2 16.3 16.8 17.6 17.9 Debt (% of GDP) 51.4 57.9 59.8 59.8 59.9 59.3 Primary balance (% of GDP) -2.9 -4.5 -2.6 -1.6 -0.5 -0.6 a,b International poverty rate ($2.15 in 2017 PPP) 9.7 9.8 10.7 10.3 9.4 8.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 38.4 38.0 38.9 38.3 36.9 34.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 76.4 76.1 76.1 75.8 74.9 73.4 GHG emissions growth (mtCO2e) 3.1 1.7 0.3 0.1 1.2 1.3 Energy related GHG emissions (% of total) 25.5 26.2 25.7 25.1 25.0 24.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 229 Oct 24 Index. Living standards remain low with life expectancy at birth estimated EQUATORIAL Key conditions and at 60.7 years. The II National House- hold Survey report, scheduled to be challenges GUINEA released in 2024, will fill knowledge gaps in poverty and inequality, en- Equatorial Guinea’s oil dependent econo- abling evidence-based policies to boost my has contracted over the past decade human development and reduce poverty. Table 1 2023 amid a shrinking hydrocarbon sector, de- Population, million 1.7 clining investment, and a series of exter- GDP, current US$ billion 12.1 nal and domestic shocks. Between 2013 GDP per capita, current US$ 7066.6 and 2023, economic activity contracted by Recent developments School enrollment, primary (% gross) a 51.2 4.1 percent per year, on average. GNI per a 61.2 capita was estimated at US$5,240 in 2023, Following two years of recovery, the Life expectancy at birth, years a 58 percent decrease compared to its Equatoguinean economy contracted in Total GHG emissions (mtCO2e) 13.2 peak level in 2008. 2023 with a real GDP growth rate of Source: WDI, Macro Poverty Outlook, and official data. Structural reforms are needed to prevent -5.7 percent, driven by lower hydrocar- a/ Most recent WDI value (2022). long-term economic decline, by diversify- bon output. Production of oil and gas ing growth drivers and building fiscal sta- contracted by 21.7 percent and 13.5 per- bility through domestic revenue mobiliza- cent, respectively, on the back of recent tion efforts and more efficient public incidents at Zafiro and FPSO Serpentina After contracting by 5.7 percent in spending. Reforms have been adopted in platforms. However, the hydrocarbon 2023, economic activity in Equatorial recent years to improve governance and sector has been showing signs of recov- Guinea is projected to pick up in 2024 the business environment, including the ery. Preliminary data indicate a pick-up passage of an anti-corruption law, the sig- in hydrocarbon production (5.6 percent mainly supported by stronger hydrocar- nature of a decree establishing a treasury increase in 2024Q2, year-on-year). The bon output. Fiscal and external posi- single account, the drafting of a procure- current account deficit widened to 1.6 tions are expected to improve thanks to ment law and a revised tax law, and more percent of GDP in 2023 (from 0.9 percent higher hydrocarbon earnings but will recently the passage of a presidential de- of GDP in 2022) on account of declining cree that introduces economic and finan- hydrocarbon export earnings. deteriorate in the medium term as hy- cial measures in support of the sustainabil- Lower oil production led to a 74 percent drocarbon production declines. A more ity of the economy and public finances. decline in oil revenues in 2023 and re- pronounced decline in oil production Yet, weaknesses persist in the governance duced the fiscal surplus to 2.6 percent of and prices than expected, a sustained of extractive revenues, human capital out- GDP in 2023, compared to 11.6 percent in tightening of global financial conditions, comes, and the business environment, pre- 2022. Meanwhile, the non-oil fiscal deficit venting the country from achieving sus- widened to 16.4 percent of GDP in 2023, global trade disruptions, and a decline tained, diversified, and inclusive growth. compared to 12.7 percent of GDP in 2022. in demand from main export partners Despite its upper middle-income status, Preliminary data for 2024H1 indicate a represent downside risks to the outlook. Equatorial Guinea ranks only 133rd out of decrease in revenues and spending by 193 countries on the Human Development 12 percent and 7 percent, year-on-year, FIGURE 1 Equatorial Guinea / Hydrocarbon production (in FIGURE 2 Equatorial Guinea / Human Development Index thousands of barrels per day of oil equivalent) Thousands of barrels Index 300 0.8 250 0.6 200 0.4 150 100 0.2 50 0.0 0 Upper Middle Income Equatorial Guinea CEMAC 2022 2023 2024f 2025f 2026f Countries Sources: National authorities and World Bank. Source: United Nations Development Programme. Note: CEMAC = Economic and Monetary Community of Central African States. MPO 230 Oct 24 respectively. Over the period 2019-23, non-performing loans—32 percent of to- Risks to the outlook are tilted to the CFAF 572.2 billion (or 9.5 percent of tal loans in end-2023—remain a source of downside. A stronger decline in hydro- GDP) out of the CFAF 1,382.5 billion was banking system vulnerability. carbon production or prices would re- paid to reduce outstanding debt to con- duce the fiscal space and risk external sta- struction companies. Nonetheless, as GDP bility given Equatorial Guinea’s overde- shrank in 2023, public debt increased as a pendence on oil. Global trade disruptions share of GDP from 35 percent in 2022 to Outlook affecting commodity and food prices 36.6 percent in 2023. amid a protracted war on Ukraine would The Bank of Central African States The Equatoguinean economy is set to increase food insecurity, especially for the (BEAC) has tightened its monetary policy grow by 4.7 percent in 2024, driven by most vulnerable, as the country relies since 2022 to contain inflationary pres- a rebound in the hydrocarbon sector heavily on food imports. A further tight- sures and support the exchange rate thanks to expected repairs at hydro- ening of global financial conditions and arrangement. The BEAC policy rate was carbon platforms following recent inci- lower demand from China and India, maintained at five percent following a dents. Barring strong structural reforms Equatorial Guinea’s main export partners, cumulative increase of 175 basis points and substantial new hydrocarbon dis- could also undermine growth. On the up- between November 2021 and March coveries, average annual growth is pro- side, the government is continuing its ef- 2023. Weekly liquidity injections were jected at -2.6 percent in 2025-2026, re- forts to optimize hydrocarbon reserves. discontinued in early 2023 and BEAC flecting mostly declining hydrocarbon The secular decline in hydrocarbon re- has scaled down its liquidity absorption production. Following a projected im- serves indicates the need for Equatorial operations since the beginning of 2024. provement in 2024, the current account Guinea to adopt a new growth model Inflation decreased from 4.9 percent in balance is forecast to deteriorate over and better leverage the remaining hy- 2022 to 2.4 percent in 2023, due to con- the medium term to an average of –2.7 drocarbon resources to unlock alterna- tainment measures by the BEAC and the percent of GDP over 2025-2026 due to tive sources of growth. Ultimately, im- agreement to import food products from declining hydrocarbon export earnings. plementing the country’s economic di- Serbia, and the reduction of some import The fiscal balance is projected to im- versification vision will require efforts tariffs on imports. However, it inched prove to 3.4 percent of GDP in 2024 to advance the governance and anti-cor- up to 2.8 percent in August 2024, driven thanks to an increase in hydrocarbon ruption agenda, facilitate trade, boost by higher prices of food and non-alco- revenues and fiscal consolidation but human capital development, and im- holic beverages, housing, water, electric- will decrease in 2025-26 as hydrocarbon prove the business environment and ity, gas, and other fuels. High levels of revenues continue to decline. public financial management. TABLE 2 Equatorial Guinea / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 0.9 3.7 -5.7 4.7 -4.4 -0.8 Private consumption 2.0 3.1 2.2 2.1 2.0 2.1 Government consumption 4.3 8.5 2.4 -8.6 3.9 3.3 Gross fixed capital investment 6.8 7.2 5.1 -1.5 -1.1 -1.0 Exports, goods and services -5.1 7.6 -5.5 12.6 -7.2 -1.7 Imports, goods and services -3.4 13.9 10.4 4.5 3.0 3.2 Real GDP growth, at constant factor prices 0.9 3.6 -5.9 4.7 -4.4 -0.8 Agriculture 6.5 6.2 2.2 2.3 2.1 1.9 Industry -2.9 2.0 -11.9 6.2 -11.0 -2.5 Services 7.3 5.9 2.7 2.8 4.1 1.1 Inflation (consumer price index) -0.1 4.9 2.4 2.9 3.3 3.0 Current account balance (% of GDP) -2.1 -0.9 -1.6 -0.9 -2.6 -2.7 Net foreign direct investment inflow (% of GDP) 5.2 5.0 1.2 1.0 0.8 0.7 Fiscal balance (% of GDP) 2.6 11.6 2.6 3.4 1.5 0.2 Revenues (% of GDP) 15.4 26.9 22.3 22.0 20.8 19.7 Debt (% of GDP) 43.0 35.0 36.6 35.3 34.3 33.7 Primary balance (% of GDP) 3.7 12.7 3.7 4.5 2.7 1.4 GHG emissions growth (mtCO2e) 7.8 5.5 -7.2 5.7 -7.7 -3.2 Energy related GHG emissions (% of total) 29.6 34.7 32.6 39.1 36.5 36.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 231 Oct 24 underdeveloped financial sector. The ab- sence of a competition law framework dis- ERITREA Key conditions and courages foreign capital inflows. Strict im- port restrictions limit the demand for for- challenges eign currency in the context of low foreign exchange reserves. Informal cross-border Table 1 2023 Eritrea is an agriculture-driven economy trade appears to be less affected since the Population, million 3.7 and relies on mining sector exports. Ap- conflict in northern Ethiopia ended, giving GDP, current US$ billion 2.7 proximately 70 percent of the population cross-border trade a boost. GDP per capita, current US$ 712.3 lives in rural areas and relies on rainfed The conditions that prevailed over the a 72.0 School enrollment, primary (% gross) farming, livestock, and fisheries activities. past decade have led to severe data pro- a 66.6 Despite its vast agricultural potential, Er- duction capacity constraints. National ac- Life expectancy at birth, years Total GHG emissions (mtCO2e) 6.8 itrea's rural economy is a subsistence one, counts data are limited to unofficial GDP Source: WDI, Macro Poverty Outlook, and official data. with low agricultural productivity. The estimates produced by the Ministry of a/ WDI for School enrollment (2019); Life expectancy country is vulnerable to climate change, Finance that the government does not (2022). with frequent weather shocks posing a endorse. Inflation estimates cover only heavy burden on the economy and liveli- the capital city, Asmara, and full balance hoods. Eritrea emerged from a decade of in- of payment accounts are not produced. ternational isolation with the lifting of UN Poverty statistics have not been produced sanctions in November 2018. During that for more than a decade. period, the government relied on domestic sources of growth. Competition is severely constrained by state-owned enterprises' The Colluli potash mine project is ex- dominance and government restrictions. In Recent developments pected to support a modest increase in practice, there is no fundamental right for ei- GDP growth to an estimated 2.8 per- ther foreign or domestic private entities to Real GDP growth was estimated at 2.6 establish or run business enterprises free percent in 2023, mainly driven by the cent in 2024. Lower global food prices from government interference. Zinc, cop- construction of the Colluli potash mining are expected to help reduce inflation to per, and gold account for over 90 percent project. Meanwhile, inflation moderated 5.1 percent in 2024. Downside risks to of exports, so fluctuations in metal prices to just over 6 percent in 2023, under- the outlook include production delays at and demand from China, a key trading pinned mainly by easing global food and partner, are a key source of vulnerability. energy prices, providing some respite for the Colluli mine, global commodity price Economic fundamentals have been ham- households. Zinc prices fell by 24 percent volatility, geopolitical and regional ten- pered by fiscal dominance and an under- in 2023 and continued declining by 2 per- sions, and climate vulnerabilities. developed financial sector. Monetary pol- cent in first eight months of 2024 (yoy). icy under a fixed exchange rate regime However, copper prices remained rela- (pegged to the US dollar) seems ineffective tively high, while rising global risk aver- and has been undertaken through admin- sion and geo-political risk has pushed istrative measures. Its effectiveness is fur- global gold prices to multi-decade highs, ther weakened by fiscal dominance and an contributing to higher export revenues. FIGURE 1 Eritrea / Evolution of total public debt FIGURE 2 Eritrea / Primary and overall fiscal balances Percent of GDP Percent of GDP 300 0 250 -1 -2 200 -3 150 -4 100 -5 50 Overall fiscal balance Primary fiscal balance -6 0 2020 2021 2022 2023 2024e 2025f 2026f -7 Domestic debt External debt Total public debt 2020 2021 2022 2023 2024e 2025f 2026f Sources: Ministry of Finance, Planning, and Economic Development, IMF, and Sources: Ministry of Finance, Planning and Economic Development, IMF, and World Bank staff estimate. World Bank staff estimates. MPO 232 Oct 24 Higher export revenues and lower fuel significantly in the coming years. Signif- and food imports helped maintain the icant improvements in the agricultural current account surplus above 14 percent Outlook sector and increased productive employ- of GDP. Notwithstanding such large sur- ment in urban areas are critical to ad- pluses, international reserves are estimat- GDP growth is projected to modestly in- dressing the widespread deprivation in ed at around three months of imports. crease to 2.8 percent in 2024 and 3.0 per- the country. Strong mining export revenues have also cent in 2025, as domestic demand is boost- Significant downside risks include weaker- supported government revenues. Public ed in the short term by progress in the con- than-expected global or Chinese demand debt was estimated at around 219 per- struction of the Colluli mine, and project- for commodity exports and related volatil- cent of GDP at end-2023, of which nearly ed to reach 3.3 percent in 2026 once the ity in metals and minerals prices, produc- 80 percent is owed to domestic banks. mine begins production. As global food tion delays at the Colluli mine, spillovers The country is in debt distress, and as of prices eased in 2024, average inflation is from Sudan conflict, and rising geopolit- May 2024, Eritrea was at a pre-decision expected to decrease further to 5 per- ical tensions and an increasing degree of point in the Highly Indebted Poor Coun- cent in 2024 and 5.2 percent in 2025. isolation reflected in the recent flight sus- tries (HIPC) list. The current account surplus is expect- pension by Ethiopia Airlines to Eritrea. Following an engagement hiatus in 2020, ed to remain large at around 14 percent Moreover, climate vulnerabilities could in- Eritrea has begun to re-engage with inter- of GDP in 2024, helped by robust min- tensify in the coming years, increasing an national development partners and revi- ing sector performance amid tight im- already high risk of food insecurity. talize some bilateral relations since 2023. port controls. Gradual fiscal consolida- Eritrea’s re-engagement with the interna- The African Development Bank approved tion and sustained mining sector receipts tional community could help to signifi- US$49.9 million in 2023 to build a should support a narrowing of the fiscal cantly reduce external arrears and provide 30-megawatt solar photovoltaic power deficit to 4 percent of GDP in 2024, with much-needed financing to build essential plant in Dekemhare, which is scheduled fiscal consolidation continuing over the infrastructure over the medium term. This to be completed in 2027. The Chinese medium term. The economic recovery is would help reduce the risks associated company Sichuan Road and Bridge Group expected to support a reduction in the with climate change, and foster the devel- has acquired a 50 percent stake in the Col- public debt-to-GDP ratio, from 211 per- opment of the private and financial sec- luli project, with an estimated operation cent in 2024 to 188 percent in 2026. The tors, which could enhance job creation start in 2026. poverty rate is not expected to decline and promote inclusive growth. TABLE 2 Eritrea / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.9 2.5 2.6 2.8 3.0 3.3 Private consumption 3.0 3.6 4.0 4.3 4.1 4.1 Government consumption 14.0 5.7 3.7 4.1 4.1 4.1 Gross fixed capital investment 39.1 13.1 22.7 3.6 12.5 14.9 Exports, goods and services 31.0 9.2 5.1 3.7 4.1 4.1 Imports, goods and services 21.6 11.0 5.3 4.1 4.3 4.3 Real GDP growth, at constant factor prices 2.9 2.5 2.6 2.8 3.0 3.3 Agriculture 4.5 1.6 3.5 3.6 3.2 3.2 Industry 1.4 3.2 2.9 3.3 3.3 3.1 Services 5.3 1.3 1.5 1.2 2.2 3.8 Inflation (consumer price index) 6.6 7.4 6.4 5.1 5.2 5.2 Current account balance (% of GDP) 14.0 13.0 14.1 14.2 14.2 15.8 Net foreign direct investment inflow (% of GDP) 1.4 1.3 1.2 1.2 1.0 1.0 Fiscal balance (% of GDP) -5.8 -5.6 -4.8 -4.0 -3.8 -3.4 Revenues (% of GDP) 26.7 27.0 27.6 28.5 28.7 29.1 Debt (% of GDP) 241.7 239.8 219.4 210.6 193.8 188.3 Primary balance (% of GDP) -4.2 -4.2 -3.7 -2.8 -2.6 -2.2 GHG emissions growth (mtCO2e) 0.9 0.9 1.0 1.4 1.4 1.4 Energy related GHG emissions (% of total) 12.0 12.2 12.2 12.4 12.6 13.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 233 Oct 24 Information System (IFMIS). In 2023, a large increase in SACU revenues has al- ESWATINI Key conditions and lowed the government to finance high- er public spending, but this might prove challenges difficult to reverse when these revenues decline. The recent creation of the SACU Table 1 2023 Structural challenges in the business envi- Stabilization Fund is a step forward in Population, million 1.2 ronment, fiscal policy, and state-owned en- reducing fiscal risks. GDP, current US$ billion 4.6 terprises have constrained growth and hin- Eswatini’s social indicators are lagging GDP per capita, current US$ 3822.9 dered broad-based improvements in liv- those of other lower middle-income coun- a 36.1 International poverty rate ($2.15) ing standards over the past few decades. tries The most recent labor force survey a 58.0 After achieving 8 percent average eco- puts unemployment at 33.3 percent in Lower middle-income poverty rate ($3.65) a 78.1 nomic growth from 1980 until 1994, GDP 2021, the highest rate on record in over a Upper middle-income poverty rate ($6.85) Gini index a 54.6 growth fell to an annual average of 3 per- decade and over 50 percent of the popula- School enrollment, primary (% gross) b 120.9 cent from 1996 to 2023, as many big firms tion continues to live below the US$3.65/ b 56.4 relocated to South Africa, and Eswatini's day (2017 PPP) lower middle-income Life expectancy at birth, years economy became increasingly dependent country poverty line. High and persistent Total GHG emissions (mtCO2e) 3.2 on government-driven consumption. Fos- inequality (54.6 percent Gini index in 2016) Source: WDI, Macro Poverty Outlook, and official data. tering development entails shifting from is also a risk to social stability. a/ Most recent value (2016), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy state-led growth to private-sector-led (2022). growth and increasing the effectiveness of fiscal policy. These could in turn improve the country’s attractiveness as an invest- Recent developments ment destination relative to its neighbors Real GDP is projected to grow by 4.6 and help address several structural chal- Overall, the economy performed well lenges in the business climate. during the first half of 2024, supported percent in 2024, driven by higher ex- Strengthening public financial manage- by both domestic and foreign demand. ports and public spending financed by ment could improve the efficiency and ef- The sustained increase in SACU rev- higher Southern African Customs fectiveness of government spending. Key enues boosted domestic demand and lift- Union (SACU) revenues. The fiscal public financial management chal- ed growth in the service sector. Mer- lenges include limited planning, bud- chandise exports increased by 14 percent deficit is projected to narrow but high geting, and expenditure controls. Large over the past 12 months. Despite high in- public expenditure arrears and heavy arrears to the private sector (at over 5 per- terest rates, credit extended to business- dependence on (volatile) SACU revenues cent of GDP as of July 2024) reflect financ- es and households increased, indicating will remain sources of vulnerabilities. ing gaps and deficiencies in procurement some uptick in economic activity. Nev- Inflation is projected to fall below 4.5 and cash management. Addressing these ertheless, construction activities declined challenges will require adequate imple- during this period. percent, while the poverty rates will Inflationary pressures eased in the first mentation of the 2017 Public Financial stay elevated. Management Act and the introduction seven months of 2024, partly due to the of an Integrated Financial Management easing of global inflation drivers. Annual FIGURE 1 Eswatini / SACU revenues and macroeconomic FIGURE 2 Eswatini / Actual and projected poverty rates and variables real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 15 100 50000 12 90 45000 80 40000 9 70 35000 6 60 30000 3 50 25000 40 20000 0 30 15000 -3 20 10000 -6 10 5000 0 0 -9 2009 2011 2013 2015 2017 2019 2021 2023 2025 2018 2019 2020 2021 2022 2023e 2024f 2025f 2026f International poverty rate Lower middle-income pov. rate Current account SACU revenue Fiscal deficit Upper middle-income pov. rate Real GDP pc Sources: Eswatini Ministry of Finance and World Bank staff projections. Source: World Bank. Notes: see Table 2. MPO 234 Oct 24 inflation averaged 4.2 percent during this international reserves remained below 3 the government uses SACU reserves to fi- period compared to 5.4 percent during the months of imports. nance the fiscal deficit. same period in 2023. Food inflation de- Limited formal job creation and the high Improvement in household welfare will clined from double digits to single digits. concentration of employment in low val- be constrained by lower agricultural pro- The Central Bank has maintained its repo ue-added activities such as subsistence duction (due to factors such as erratic rate at 7.5 percent since July 2023—aligned agriculture constrain poverty reduction. rainfall, and insufficient investments in with the monetary policy stance in South inputs) and structural challenges includ- Africa but 75 basis points lower. ing low job creation and access to services The fiscal situation has improved driven and markets. Poverty, based on the low- by high SACU revenues, yet high public Outlook er-middle-income country poverty line expenditure arrears still require urgent ($3.65), is projected to decline slightly resolution. The fiscal deficit is estimated Real GDP growth is projected to remain from 54 percent in 2022 to 51.9 percent in to have declined to 2.0 percent of GDP in strong at 4.6 percent in 2024, driven by 2024 and 51.2 percent in 2025. 2023 (from 6.5 percent in 2022) as SACU higher exports and domestic spending fi- Growth is projected to gradually decline in revenues more than doubled. Notwith- nanced from higher SACU revenues. Ris- the medium term as less favorable exter- standing the surge in revenues expendi- ing external demand is expected to pull nal demand reduces SACU revenues. The ture arrears increased from 4.9 percent at manufacturing and other exports. High main drivers of growth over the medium the end of 2023 to over 5.0 percent of GDP SACU revenues in 2024 are projected to term are expected to be investments in the in July 2024, reflecting deficiencies in cash ease fiscal and external pressures, but the mining and energy sectors, and the com- flow management and commitment con- situation is complicated by financing chal- mencement of Phase I of the Mkhondvo- trols. Public debt declined to below 40 per- lenges and associated expenditure arrears. Ngwavuma Water Augmentation Pro- cent of GDP and the government deposit- The fiscal deficit is projected to remain at gram. Inflation is projected to remain with- ed E750 million into Revenue Stabilization 2.0 percent of GDP in 2024, on account in the 3-6 percent target band, reflecting Fund during 2024H1. of higher SACU revenues. Public debt is easing global inflationary trends. The trade surplus more than doubled year- projected to remain below 40 percent of Risks to the outlook include global uncer- on-year in January-July 2024. The 14 per- GDP. In the medium-term fiscal deficit tainties and lower-than-expected growth cent increase in exports was driven mainly may increase due to declining SACU rev- in South Africa that could reduce exports. by soft drink concentrate and sugar ex- enue. The current account surplus is pro- Fiscal risks could emanate from lower ports while the 10 percent increase in im- jected to increase in 2024. Nevertheless, SACU receipts and spending pressures. In- ports was partly driven by capital and en- gross official reserves are projected to re- terest rate differentials with South Africa ergy products. Nevertheless, the level of main below 3 months of import cover, as are a risk to potential capital outflows. TABLE 2 Eswatini / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 10.7 0.5 4.8 4.6 3.5 2.9 Private consumption 5.7 -5.3 4.1 4.5 3.8 3.2 Government consumption -10.6 -0.3 9.7 2.2 0.8 1.6 Gross fixed capital investment 11.4 -10.8 1.0 3.0 2.3 1.2 Exports, goods and services 8.8 -0.4 8.0 4.0 2.6 2.4 Imports, goods and services 14.0 3.4 7.0 2.7 2.0 2.0 Real GDP growth, at constant factor prices 10.7 0.2 4.8 4.6 3.5 2.9 Agriculture 4.6 5.1 -2.5 3.3 1.9 1.8 Industry 17.9 -0.3 1.5 5.6 4.4 3.0 Services 7.1 -0.1 8.2 4.2 3.1 3.0 Inflation (consumer price index) 3.7 4.8 5.0 4.4 5.4 5.0 Current account balance (% of GDP) 2.6 -2.7 2.2 4.8 2.7 2.1 Net foreign direct investment inflow (% of GDP) 1.2 0.7 1.1 0.9 1.1 1.1 Fiscal balance (% of GDP) -4.6 -6.5 -2.1 -2.0 -2.2 -1.6 Revenues (% of GDP) 25.1 24.0 29.7 29.4 27.6 27.4 Debt (% of GDP) 37.9 42.2 41.0 39.7 38.7 38.5 Primary balance (% of GDP) -2.7 -4.2 0.9 0.5 0.4 1.0 a,b International poverty rate ($2.15 in 2017 PPP) 30.9 31.0 29.6 28.2 27.2 26.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 53.7 54.0 52.8 51.9 51.2 50.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 76.1 76.2 75.1 74.4 73.9 73.5 GHG emissions growth (mtCO2e) 7.3 0.6 0.8 2.9 4.2 4.5 Energy related GHG emissions (% of total) 47.2 46.8 46.3 47.0 48.2 49.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2016-HIES. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 235 Oct 24 account restrictions, and the moderniza- tion of the monetary policy framework. ETHIOPIA Key conditions and These reforms are supported by an IMF program, World Bank Development Policy challenges Financing, and proposed debt relief through the G20 Common Framework. Table 1 2023 Between 2004-2018, Ethiopia was among Uncertainty remains high, but there are Population, million 126.5 the world's fastest-growing economies. early signs that the forex market is stabi- GDP, current US$ billion 171.3 The state-led development model im- lizing after the initial reforms. Ethiopia's GDP per capita, current US$ 1353.5 proved infrastructure and living standards challenge now is to sustain and deepen a 27.0 International poverty rate ($2.15) but relied on an overvalued currency, un- these reforms to translate economic im- a 65.0 sustainable debt, and strict regulations provements into tangible benefits for peo- Lower middle-income poverty rate ($3.65) a 90.9 limiting private investment. This approach ple: higher incomes, more jobs, and better Upper middle-income poverty rate ($6.85) Gini index a 35.0 hurt competitiveness, fueled inflation, and public services. School enrollment, primary (% gross) b 85.5 drained resources. The model did not b 65.6 boost productivity enough to transform Life expectancy at birth, years the economy or provide jobs for about two Total GHG emissions (mtCO2e) 201.4 million new job seekers annually. Global Recent developments Source: WDI, Macro Poverty Outlook, and official data. trade integration remains limited, and a/ Most recent value (2015), 2017 PPPs. b/ Most recent WDI value (2022). growing budget constraints sharply re- Growth rebounded to 7.2 percent in FY23 duced social and capital spending. Human after the Tigray conflict ended. It remained capital levels have stayed low, and 70 per- strong in FY24, boosted by better harvests cent of the workforce still depends on agri- and agricultural reforms. However, in- culture. As this model faltered, multiple creasing forex shortages and falling rev- Ethiopia liberalized its foreign exchange crises hit: COVID-19, Russia’s invasion of enues (below 7 percent of GDP in FY24) in- market, removing a significant obstacle to Ukraine, the Tigray conflict, and droughts. tensified economic pressures. The parallel economic growth and stability. Comple- As a result, growth declined and economic forex market premium exceeded 100 per- mentary structural reforms support the imbalances worsened, leading to a debt cent, and international reserves hit crit- default in late 2023. Living standards have ical lows. This weakened manufacturing transition to private sector-led growth deteriorated for the first time in over two and services. Declining revenues and for- and improve economic management. A decades. The Tigray conflict displaced eign assistance forced fiscal cuts, reducing safety net budget expansion is expected to over 20 million people, resulting in large capital spending and regional grants. The help cushion the poor from the short-term humanitarian and reconstruction needs fiscal deficit decreased to 1.8 percent in impacts of these reforms. The persistence (estimated at US$20 billion). About 15 mil- FY24, reducing the need for highly infla- lion people rely on food aid. tionary monetary financing from the cen- of widespread fragility, poverty, and To stabilize the economy and revive tral bank which fuels inflation. Inflation pressing humanitarian needs pose chal- growth, the government announced major has fallen steadily in 2024 from about lenges to sustaining reform momentum. reforms in late July 2024. This included an 30 percent in the two previous years to immediate shift to market-determined ex- 18.6 percent in July 2024. Public debt as change rates, the removal of most current a share of GDP continued to decline due FIGURE 1 Ethiopia / Nominal exchange rate of Ethiopian FIGURE 2 Ethiopia / Actual and projected poverty rates and Birr (ETB) real private consumption per capita ETB/US$ Percent Poverty rate (%) Real private consumption per capita (constant LCU) 120 110 100 14000 100 90 100 Premium (rhs) 12000 90 80 Official (lhs) 80 70 10000 80 Parallel market (lhs) 70 60 8000 60 60 50 40 6000 50 40 30 40 4000 30 20 20 2000 10 20 0 0 0 10 2010 2012 2014 2016 2018 2020 2022 2024 2026 19 20 21 22 23 24 8 9 0 1 2 3 4 International poverty rate Lower middle-income pov. rate l-1 l-1 l-2 l-2 l-2 l-2 l-2 n- n- n- n- n- n- Ju Ju Ju Ju Ju Ju Ju Ja Ja Ja Ja Ja Ja Upper middle-income pov. rate Real priv. cons. pc Source: National Bank of Ethiopia. Source: World Bank. Notes: see Table 2. MPO 236 Oct 24 to tight borrowing limits. Import suppres- trend of declining real expenditure in sion, lower global commodity prices, and recent years. higher Ethiopian Airlines exports helped Outlook To cushion the short-term impacts of limit the current account deficit to about macroeconomic reforms on poverty (main- 2.8 percent of GDP in FY24. Short-term economic activity is expected ly through higher prices), the government After the forex market reforms, the to slow due to tighter monetary policies will significantly expand social assistance weighted average US Dollar exchange and investor uncertainty. However, spending. This includes a nearly five-fold rate depreciated by 91 percent, and the growth should recover as conditions stabi- increase in social assistance spending, parallel market premium narrowed to lize and forex availability improves. Con- wage increases for the lowest-paid civil about 7 percent. Large IMF and World tinued reforms and expected debt relief servants, and a temporary social spending Bank disbursements linked to the reforms will increase private and public invest- package worth 1.1 percent of GDP. These have boosted international reserves. ment, raising medium-term growth to measures will boost beneficiary payments Measures to recapitalize the Commercial about 7 percent. and extend coverage to more permanent Bank of Ethiopia and strengthen banking Inflation is likely to rise to about 30 and temporary recipients. The government supervision aim to enhance financial sta- percent due to higher import costs and is also phasing in fuel and fertilizer price bility and efficiency. Despite increased utility tariff adjustments. It is expected increases and safeguarding essential food risks from the banking sector's higher net to decrease to low double digits by and medicine imports from price spikes. open position due to forex reforms, the FY26 as the impacts of one-off price ad- In the medium term, the reforms are ex- sector remains adequately capitalized. justments fade and reforms ease sup- pected to generate more employment op- Recent conflicts, economic shocks, and ply constraints. Phased fuel and fertiliz- portunities for the poor and increase de- high population growth have likely in- er price increases will help manage in- mand for agricultural products in both do- creased poverty and lowered household flation. Improved forex availability will mestic and international markets. This welfare nationwide. The reforms aim to re- increase demand for imports, contribut- should ultimately improve living condi- verse these trends by accelerating rural ing to a wider current account deficit tions and accelerate poverty reduction. agricultural market activity, improving in FY25. The deficit should then narrow However, significant risks remain. Lower- rural land tenure and security, and ex- as import suppression eases and exports than-expected forex inflows, unforeseen panding urban and rural safety net cover- become more competitive. Tax reforms financial exposures, and the intensifica- age and benefits. These recent measures fo- and increased development assistance tion of conflict could undermine growth, cus on addressing poverty and improving are expected to support a recovery in private investment, and efforts to stabilize overall welfare. public spending levels, reversing the the economy. TABLE 2 Ethiopia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020/21 2021/22 2022/23 2023/24e 2024/25f 2025/26f Real GDP growth, at constant market prices 6.3 6.4 7.2 6.1 6.5 7.1 Private consumption 3.0 4.5 6.1 6.9 5.5 5.6 Government consumption 12.2 1.5 -16.0 -9.3 29.7 1.1 Gross fixed capital investment 7.6 11.0 11.2 10.3 5.2 9.7 Exports, goods and services 5.5 11.7 -0.8 4.5 11.2 11.0 Imports, goods and services 2.0 10.8 -4.1 13.0 9.9 8.1 Real GDP growth, at constant factor prices 6.3 6.4 7.2 6.1 6.5 7.1 Agriculture 5.5 6.0 6.3 6.0 6.0 5.9 Industry 7.3 4.8 6.9 4.4 5.2 7.1 Services 6.3 7.9 8.0 7.3 7.7 8.1 Inflation (consumer price index) 20.2 33.7 32.6 27.0 29.9 16.2 Current account balance (% of GDP) -2.7 -4.0 -2.8 -2.8 -4.5 -3.2 Fiscal balance (% of GDP) -2.5 -4.2 -2.7 -1.8 -2.5 -2.0 Revenues (% of GDP) 10.7 8.2 7.9 7.6 9.1 10.6 Debt (% of GDP) 56.6 54.4 42.7 36.3 32.5 31.1 Primary balance (% of GDP) -2.0 -3.6 -2.1 -1.2 -1.9 -1.4 a,b International poverty rate ($2.15 in 2017 PPP) 28.7 32.4 34.3 33.9 34.3 33.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 65.0 68.3 68.0 65.7 64.8 63.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 89.3 90.0 88.2 85.8 83.6 81.7 GHG emissions growth (mtCO2e) -2.8 1.4 3.5 3.2 2.6 2.3 Energy related GHG emissions (% of total) 14.0 14.3 14.3 14.2 14.2 14.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. Growth projections reflect limited available information, and are subject to revision as better data becomes available. a/ Calculations based on 2015-HICES. Actual data: 2015. Nowcast: 2016-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 237 Oct 24 Substantial efforts are being made to clear past payment arrears, but accumulation GABON Key conditions and of new ones remains a challenge. High fiscal and liquidity risks led Moody’s and challenges Fitch to downgrade Gabon’s ratings, while the IMF’s May 2024 debt sustain- Table 1 2023 The August 2023 coup was followed by a ability analysis assessed a high risk of Population, million 2.4 peaceful transition in Gabon, with signif- debt distress, noting a significant deterio- GDP, current US$ billion 20.1 icant institutional changes. A national di- ration in debt sustainability since the pre- GDP per capita, current US$ 8231.1 alogue was held in April 2024 and a new vious assessment in 2022. a 2.5 International poverty rate ($2.15) constitution should be adopted by refer- As outlined in the National Development a 8.1 endum by end-2024. Legal and policy re- Plan for the Transition, reforms are needed Lower middle-income poverty rate ($3.65) a 31.2 forms and investments are being made in to create jobs and local value-addition in Upper middle-income poverty rate ($6.85) Gini index a 38.0 roads, airports, energy and water, a new sustainable forestry, mining, agriculture, School enrollment, primary (% gross) b 100.6 public bank for SME support, agriculture, and fisheries. Improving access to credit, b 65.7 housing, and social areas. labor skills, infrastructure, and public ac- Life expectancy at birth, years Several development challenges persist. tion, is essential for higher growth. The re- Total GHG emissions (mtCO2e) 19.7 Despite Gabon’s resource wealth, extrac- turn to constitutional order within the an- Source: WDI, Macro Poverty Outlook, and official data. tives-based growth remains insufficient, nounced timetable is crucial to avoid ac- a/ Most recent value (2017), 2017 PPPs. b/ Most recent WDI value (2022). vulnerable to price fluctuations, and un- centuating financing risks. Optimizing able to create enough jobs. One-third of revenues and improving spending disci- the population lives in poverty, twice pline, efficiency, and targeting will be key as much in rural areas. High urbaniza- to reinforcing fiscal sustainability. tion has concentrated poverty in cities Gabon’s economy grew by 2.4 percent like Libreville and Port-Gentil. Income in 2023, a lower growth compared to inequality is stark, youth unemployment 2022, impacted by logistical disruptions. is high and informality limits job op- Recent developments Triggered by the August 2023 coup, the portunities. Infrastructure gaps hinder growth and investment. In 2023, Gabon’s GDP grew by 2.4 per- ongoing political transition is an oppor- While major transparency initiatives are cent, a lower growth rate compared tunity for reforms, with many actions underway, such as the planned publication to 2022, as landslides caused railway underway. An orderly return to consti- of oil contracts and validation of Gabon’s blockages that affected manganese and tutional order will be crucial to avoid EITI membership, governance challenges wood exports. As the new government social, economic, and financing risks. impede efficient resource use. High social restored international relations and ac- expectations—that the political transition celerated public investments, the coup Strong reforms are required to reverse will tangibly improve living condi- did not significantly affect growth, ex- the current trend and set the country tions—are translating into higher spend- cept for the impact of nighttime curfews on a poverty reduction path, without ing, and worsening fiscal and debt pres- on services. Demand-side growth was compromising public finances. sures. For instance, fuel subsidies have led by oil exports and public invest- been expanded, at a significant fiscal cost. ment. The economy grew by 1.1 percent FIGURE 1 Gabon / Growth of real GDP, real oil GDP, and FIGURE 2 Gabon / Actual and projected poverty rates and real non-oil GDP real GDP per capita Percent change Poverty rate (%) Real GDP per capita (constant million LCU) 15 50 2.6 Oil GDP 45 2.6 12 Non-Oil GDP 40 2.5 9 35 2.5 Real GDP 6 30 2.5 25 2.5 3 20 2.5 0 15 2.4 10 2.4 -3 5 2.4 -6 0 2.4 2017 2019 2021 2023 2025 -9 International poverty rate Lower middle-income pov. rate 2017 2018 2019 2020 2021 2022 2023 2024f 2025f 2026f Upper middle-income pov. rate Real GDP pc Sources: Official government data and World Bank calculations. Source: World Bank. Notes: see Table 2. MPO 238 Oct 24 in 2024Q1 (q-o-q), led by higher-than- early 2023, and scaled-down liquidity ab- the coming years. Further spending in- expected oil output and a recovering sorption operations since early 2024. Yet, creases in response to significant spend- wood production, boosted by stronger credit to firms expanded by 23.3 percent in ing pressures, coming from capital expen- Asian and European demand. June2024(y-o-y), with privatedemand com- ditures, fuel subsidies, other social mea- The current account surplus remained ingnotablyfromoilandconstruction. sures, and the 2025 elections would wors- high at 28.5 percent of GDP in 2023, Lower growth compared to 2022 and in- en the fiscal situation. A deteriorating fis- supported by commodity exports, de- sufficient job creation increased poverty. cal position, with deficits averaging 4.3 spite increased imports due to higher The share of Gabonese living under $6.85 percent of GDP in 2024-26, would, with- public spending. per day (in 2017 PPP) is estimated to have out corrective measures to contain spend- Despite stronger tax collection, higher ex- reached 35.1 percent in 2023, or nearly ing such as fuel subsidies, aggravate penditures increased the overall fiscal 855,000 people. Gabon’s debt situation. deficit to 1.0 percent of GDP in 2023, bring- Inflation should remain below the 3.0 re- ing the non-oil primary balance to -12.7 per- gional convergence criteria. Yet, the preva- cent of non-oil GDP, due to electoral spend- lence of non-labor-intensive oil and mining ing and the resumption of public service hir- Outlook industries, lack of private sector growth, ing, new social measures, and public works and mismatching labor skills result in high launched in late 2023. Additional debt com- Moderate growth is projected to continue, unemployment. Joblessness and under- ponents were identified since the transition, at around 2.9 percent in 2024-26. Depleting funded, poorly targeted social protection bringing public debt to 72.1 percent of GDP reserves would start to reduce oil output are expected to sustain elevated poverty in 2023. In 2024Q1, higher-than-anticipated in 2025, but growth would be sustained levels, projected to reach 39.0 percent by oil prices benefited oil revenues, which, by expanding the wood industry, oil palm 2025. The absolute number of individuals combined with spending below budgetary and rubber plantations, and the entry into living in poverty in Gabon is expected to forecasts, led to an estimated fiscal surplus production of new iron and manganese surpass one million by 2026. of 1.5 percent of GDP. deposits. Also, major public projects External risks for Gabon's outlook include At 1.0 percent in June (y-o-y), inflation con- would drive construction and services. oil price shocks, lower Asian demand, tinued to ease in early 2024, in view of ex- The current account surplus would reduce stricter global financial conditions, and panded price ceilings on essential goods, fu- gradually over the years. Lower oil pro- worsening geopolitical conflicts that could elsubsidies,andatightmonetarypolicy.The duction would affect exports, while im- increase inflation and trade disruptions. BEAC kept the policy rate at five percent fol- ports would decline more gradually in the Internally, delays in the transition could lowing a cumulative 175 basis point increase context of constrained fiscal space. compromise stability and access to finance, between November 2021 and March 2023, Slightly decreasing oil prices and lower and a stronger focus on the political agen- discontinued weekly liquidity injections in production would reduce oil revenues in da could stall growth-enabling reforms. TABLE 2 Gabon / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.5 3.1 2.4 3.1 2.4 3.0 Private consumption -1.4 -0.3 2.1 1.4 1.6 3.0 Government consumption 3.2 3.8 1.5 4.8 1.0 -2.1 Gross fixed capital investment 12.7 8.5 6.1 -2.3 4.7 -2.0 Exports, goods and services 12.8 12.9 -2.5 7.5 -2.2 -0.1 Imports, goods and services 17.4 12.5 1.3 1.5 0.0 -4.1 Real GDP growth, at constant factor prices 3.5 3.5 2.5 3.1 2.4 3.0 Agriculture 19.2 9.7 -2.0 1.8 4.0 6.6 Industry 3.2 3.4 3.8 2.8 -1.1 4.2 Services 1.3 2.5 2.5 3.6 4.3 1.7 Inflation (consumer price index) 1.1 4.3 3.7 2.4 2.3 2.2 Current account balance (% of GDP) 27.3 34.4 28.5 30.7 27.2 27.9 Net foreign direct investment inflow (% of GDP) 2.2 4.7 5.6 4.9 4.6 4.5 Fiscal balance (% of GDP) -1.9 -0.8 -1.0 -1.2 -6.0 -5.7 Revenues (% of GDP) 15.3 21.1 23.4 23.9 20.5 19.0 Debt (% of GDP) 68.5 57.0 72.1 71.5 77.3 79.1 Primary balance (% of GDP) 0.9 1.8 1.9 1.9 -2.8 -2.5 a,b International poverty rate ($2.15 in 2017 PPP) 2.3 2.3 2.8 3.0 3.5 3.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 8.2 8.3 9.9 10.8 11.3 11.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 31.7 31.8 35.1 37.0 39.1 39.0 GHG emissions growth (mtCO2e) -2.8 -1.4 -1.6 0.0 0.0 0.7 Energy related GHG emissions (% of total) 14.2 14.2 13.1 11.8 10.6 9.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2017-EGEP. Actual data: 2017. Nowcast: 2018-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 239 Oct 24 compared with 6.3 percent in urban areas), the poor remain spatially concentrated in THE GAMBIA Key conditions and Kanifing and Brikama. Persistent poverty reflects profound deficits in human capi- challenges tal endowments, weak formal labor mar- kets, the high prevalence of low-produc- Table 1 2023 The Gambia is leveraging its democratic tivity jobs, and exposure to shocks, in- Population, million 2.8 transition that began in 2016 but still cluding climate events. GDP, current US$ billion 2.4 faces constraints that hinder its economic A National Development Plan 2023-2027 GDP per capita, current US$ 853.1 transformation, job creation and poverty is being implemented to consolidate de- a 17.2 International poverty rate ($2.15) reduction. The Gambia has recorded re- mocratic governance, accelerate growth, a 47.0 silient growth, with real GDP rising by and build resilience to shocks. Its im- Lower middle-income poverty rate ($3.65) a 80.6 4.9 percent (2.2 percent per capita) on an- plementation entails significant financing Upper middle-income poverty rate ($6.85) Gini index a 38.8 nual average over 2017-2023, higher than and capacity needs. School enrollment, primary (% gross) b 93.7 the 2.8 percent (-0.4 percent per capi- b 62.9 ta) on annual average over 1990-2016. Life expectancy at birth, years There was a modest increase in produc- Total GHG emissions (mtCO2e) 3.2 tivity. However, global shocks in 2020 re- Recent developments Source: WDI, Macro Poverty Outlook, and official data. versed these productivity gains. The re- a/ Most recent value (2020), 2017 PPPs. b/ WDI for School enrollment (2023); Life expectancy covery was hindered by governance and Growth is expected to accelerate to 5.6 per- (2022). institutions challenges, a weak business cent (3.0 percent per capita) in 2024, driven environment, and climatic shocks, which mainly by agriculture and services, which prevented a labor shift to relatively more benefit from favorable rainfall and in- productive sectors. creased tourism. Industry decelerated fol- Economic growth is expected to accelerate These weaknesses are coupled with lowing the completion of major infrastruc- downside risks from high dependence on ture projects in preparation for the Organi- to 5.6 percent in 2024 as favorable rain- imports of essential goods and services, zation of Islamic Cooperation (OIC) Sum- fall supported agricultural production putting persistent pressure on the balance mit. Private investment and consumption, while increased tourism bolstered ser- of payments. Fiscal risks remain substan- supported by remittances, and public vices. Inflation would moderately de- tial, given State-Owned Enterprises consumption driven by the hosting of (SOEs) contingent liabilities and the high the OIC Summit, boosted growth on the crease to 14.4 percent and poverty will dependence on external grant financing demand side. Inflation is set to slow only decline. The fiscal deficit is expected at 2.6 due to low domestic revenue mobiliza- moderately to 14.4 percent in 2024, driven percent of GDP, driven by a moderate in- tion. High public debt also crowds out mainly by import prices. crease in domestic revenue and lower cap- private sector credit. The fiscal deficit is expected at 2.6 percent ital spending. High inflation, debt vul- In 2023, an estimated 16.1 percent of the of GDP in 2024, down from 3.7 percent population lived in extreme poverty (mea- in 2023, driven by a moderate increase nerabilities, balance of payment pres- in domestic revenue and a decrease in sured at the international poverty line of sures, and global geopolitical tensions $2.15 in 2017 PPPs). While poverty rates capital spending. Public debt is expected cloud the outlook. were higher in rural areas (28.1 percent, to continue to decline to 69.3 percent FIGURE 1 The Gambia / Real GDP growth, current account FIGURE 2 The Gambia / Actual and projected poverty rates balance, fiscal balance, and public debt and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 90 8 100 30000 6 90 80 25000 4 80 2 70 20000 70 60 0 50 15000 -2 60 40 -4 10000 30 50 -6 20 5000 -8 10 40 -10 0 0 2019 2020 2021 2022 2023 2024 2025 2026 2010 2012 2014 2016 2018 2020 2022 2024 2026 Public debt (lhs) Real GDP growth (rhs) International poverty rate Lower middle-income pov. rate Current account balance (rhs) Fiscal balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: The Gambian authorities and World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 240 Oct 24 of GDP in 2024, from 75.6 percent in higher private consumption and better remain. Investments in better access to 2023. Nevertheless, The Gambia remains household living standards. health and education facilities and at high risk of debt distress. The current stronger private sector-led growth with account deficit (CAD) is projected to be higher productivity jobs will be critical for almost halved to 4.5 percent of GDP in future inclusive growth. 2024, supported by increased tourism, Outlook The CAD is expected to narrow to 2.7 per- higher remittances, and a decrease in in- cent of GDP in 2025-2026, reflecting robust vestment-related imports. The Central Growth is projected to average 5.6 percent remittances, a decrease in investment-re- Bank of the Gambia has maintained a tight (3.2 percent per capita) in 2025-26, driven by lated imports, and strong export growth. monetary stance, keeping its policy rate increased broad-based economic growth. The Central Bank intends to keep a tight high at 17 percent in August 2024, un- However, it is expected to decelerate in 2026 monetary policy stance to ensure inflation changed since August 2023. International as a result of capital spending-based fiscal firmly declines. The fiscal deficit is pro- reserves, while remaining at comfortable consolidation. Agriculture and services are jected to narrow to 0.5 percent of GDP levels, are projected to decline to 4.7 expected to sustain growth, assuming fa- over 2025-26, supported by spending con- months of imports in 2024, down from 4.9 vorable rainfall and continued recovery of trol efforts, including aligning expendi- months in 2023, with about an annual av- tourism. Robust remittances will sustain ture with available resources, and on- erage of 11 percent depreciation expected private sector demand, which, together going domestic revenue mobilization re- in the nominal exchange rate. The banking with infrastructure programs, are expected forms, including a single window plat- industry continues to be stable, with to drive growth. Inflationary pressures, re- form, an e-tracking of transit trucks, dig- healthy financial soundness indicators. flecting the restrictive monetary policy and ital tracing system, a digital weighbridge, Higher labor incomes—driven by a grad- easing global supply conditions, are pre- the rental tax compliance system, the re- ual recovery of tourism, public construc- dicted to ease to 8.2 percent in 2025-2026, duction in fuel subsidies and increases tion works, and a successful har- stimulating private consumption. in some administrative fees. Public debt vest—supported household consumption. Rising economic activity, higher remit- is projected to decrease to an average of Extreme poverty is expected to decline to tances, and declining inflationary pres- 61.5 percent of GDP in 2025-26, supported 15.5 percent in 2024. While inflation, es- sure are expected to improve household by the fiscal path. Nevertheless, The Gam- pecially for food prices, remains around welfare. Consequently, the extreme bia is expected to remain at high risk of 17.0 percent and continues to erode poverty rate is expected to decrease to debt distress, and the end of the debt-ser- household purchasing power, soaring re- 14.8 percent in 2025. Nonetheless, struc- vice deferrals in 2024 could weigh on debt mittances are expected to contribute to tural impediments to poverty reduction sustainability and economic growth. TABLE 2 The Gambia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.3 4.9 5.3 5.6 5.8 5.4 Private consumption 7.2 3.4 3.3 3.8 4.1 4.2 Government consumption -7.9 2.3 2.4 5.6 3.0 3.1 Gross fixed capital investment -8.7 15.1 13.8 10.9 10.2 8.0 Exports, goods and services -27.2 8.5 18.9 20.0 21.5 22.8 Imports, goods and services -15.2 16.2 11.0 10.0 9.8 9.6 Real GDP growth, at constant factor prices 5.3 4.9 5.3 5.6 5.8 5.4 Agriculture 13.7 3.6 3.7 6.6 5.7 5.5 Industry 2.9 3.1 9.3 2.9 6.1 5.0 Services 2.8 6.0 4.7 6.2 5.8 5.5 Inflation (consumer price index) 7.4 11.5 16.9 14.4 9.8 6.6 Current account balance (% of GDP) -4.3 -4.2 -8.6 -4.5 -3.0 -2.4 Fiscal balance (% of GDP) -4.8 -5.0 -3.7 -2.6 -0.5 -0.5 Revenues (% of GDP) 16.8 17.7 20.4 21.2 21.1 21.0 Debt (% of GDP) 83.9 83.4 75.6 69.3 64.3 58.7 Primary balance (% of GDP) -1.8 -2.9 -1.6 0.4 2.8 2.4 a,b International poverty rate ($2.15 in 2017 PPP) 16.1 16.3 16.1 15.5 14.8 14.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 45.1 45.7 45.6 44.7 43.6 42.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 80.2 81.3 80.6 79.5 78.4 77.8 GHG emissions growth (mtCO2e) 0.7 1.6 2.6 2.7 2.6 2.5 Energy related GHG emissions (% of total) 23.4 24.2 25.1 25.8 26.5 27.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2020-IHS. Actual data: 2020. Nowcast: 2021-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 241 Oct 24 GHANA Key conditions and Recent developments challenges GDP growth in the first half of 2024 exceed- ed expectations at 5.9 percent, up from 2.8 Table 1 2023 Ghana has made notable progress percent in 2023H1. Industry (8.1 percent y-o- Population, million 34.1 towards economic stabilization, ad- y), led by a strong rebound in the oil and gas GDP, current US$ billion 76.2 dressing severe macroeconomic im- sector, drove the expansion. Agriculture GDP per capita, current US$ 2234.2 balances that peaked in 2022. The na- grew by 5.1 percent, with notable improve- a 25.2 International poverty rate ($2.15) tion experienced a surge in public ments in crop production (despite signifi- a 48.8 debt due to fiscal responses to ex- cant contraction in cocoa), while the services Lower middle-income poverty rate ($3.65) a 78.5 ternal shocks, losing access to inter- sector grew by 4.5 percent, down from the 6 Upper middle-income poverty rate ($6.85) Gini index a 43.5 national financial markets, and which percent in 2023H1, with slower growth in al- School enrollment, primary (% gross) b 96.5 led to debt distress, declining inter- most all services sub-sectors. b 63.9 national reserves, and rising infla- Tight monetary policy and stable exchange Life expectancy at birth, years tion. To combat these issues, Ghana rates tamed high inflation in 2023, from Total GHG emissions (mtCO2e) 20.7 implemented significant macroeco- a peak of 54.1 percent in December 2022 Source: WDI, Macro Poverty Outlook, and official data. nomic policy adjustments, including to 23.2 percent in December 2023. Howev- a/ Most recent value (2016), 2017 PPPs. b/ Most recent WDI value (2022). comprehensive debt restructuring and er, disinflation slowed in 2024, with infla- fiscal consolidation. Sustaining the re- tion at 20.4 percent y-o-y in August, due covery will require continued progress to higher food prices and renewed pres- Progress toward comprehensive debt re- in tax policy, revenue administration, sures on the Ghana cedi which depreciated public financial management reforms, by 18.6 percent against the US Dollar in structuring and wide-reaching reforms and structural reforms in the energy 2024H1, compared to 5.8 percent in the under the macroeconomic stabilization and cocoa sectors. The government’s previous six months. program has put Ghana on a path to fis- program is supported by an IMF Ex- The current account was in surplus in the cal sustainability. Currency stabilization tended Credit Facility (approved in first half of 2024, rising to 1.5 percent of GDP, May 2023) and the World Bank’s De- from 1.1 percent in 2023H1. This reflects ro- and tight monetary policy are gradually velopment Policy Operations. bust remittance flows, spurred by Fintech reducing inflation despite lingering Poverty in Ghana had been declining reforms, and reduced interest payments due pressures among persistently high food since the 1990s, but the COVID-19 to the external debt service suspension. prices, which strain the purchasing pow- pandemic marked an inflection point Gross international reserves increased from er of households. To reach Ghana’s eco- and poverty has been rising since 2020. US$5.9 billion (2.7 months of import cover) Weak economic growth, constrained in December 2023 to US$6.9 billion (3.1 nomic potential, improvements are need- government spending, and high in- months of import cover) in June 2024, sup- ed in revenue mobilization, expenditure flation, especially among food prices, ported by an improved trade surplus and management, and growth-enhancing have eroded living standards, pushing foreign exchange inflows from multilateral. structural reforms. more people into poverty and at risk The January-June 2024 fiscal outturn was of food insecurity. favorable, with the primary deficit on FIGURE 1 Ghana / Fiscal targets and outturn FIGURE 2 Ghana / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 25 90 7000 21.5 Total revenue and grants 19.6 Total expenditure 80 6000 20 70 Fiscal Deficit 15.8 16.0 5000 60 15 4000 50 10.0 9.6 40 3000 10 7.2 7.1 30 5.7 2000 3.6 20 5 2.7 2.5 10 1000 0 0 0 2012 2014 2016 2018 2020 2022 2024 2026 Budget Outturn Budget H1 Outturn H1 International poverty rate Lower middle-income pov. rate 2023 2024 Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance and World Bank. Source: World Bank. Notes: see Table 2. MPO 242 Oct 24 target at 0.2 percent of GDP and the overall international poverty line of US$2.15 per The fiscal deficit forecast for 2024 is revised deficit lower than planned. Total revenue day) in 2023, up 3.1 percentage points from down to 4.2 percent of GDP, reflecting and grants slightly underperformed at 7.1 the previous year. At the Lower-Middle In- nominal GDP adjustments and robust con- percent of GDP, due to lower oil and gas come Country (LMIC) poverty line of solidation efforts. Over the medium term, receipts. However, total expenditure was US$3.65 per day, 54.7 percent of the popu- the government plans to broaden the tax 9.6 percent of GDP, below the mid-year lation was considered poor in 2023. base and improve compliance by strength- target, owing to capital spending cuts and ening the regulatory framework and dig- lower interest expenditure. In June, Ghana italizing service delivery. Amendments to concluded debt negotiations with its offi- the Fiscal Responsibility Act and the estab- cial creditors to restructure US$5.4 billion Outlook lishment of a Fiscal Council should further of bilateral debt and reached a preliminary strengthen fiscal discipline. deal with bondholders to restructure Growth projections for 2024 are revised Poverty rates are expected to rise until US$13 billion in Eurobond debt. upwards to 4 percent, balancing the 2026, peaking in 2025 at 31.5 percent—lev- The banking sector demonstrated re- strong first-half performance against the els last seen in the late-2000s—before dip- silience after the 2023 domestic debt ex- tight fiscal and monetary policy environ- ping to 30.6 percent. At the LMIC line, change, with banking assets growing by ment, elevated interest rates that dampen rates may hit 55.1 percent by 2026. This 33.3 percent in the first half of 2024. Cap- private consumption and investment, and trend correlates with limited growth in ital adequacy ratios remained stable at drought conditions affecting agricultural services and agriculture, sectors where 14.3 percent with regulatory reliefs and production—assuming losses are partial- many poor and vulnerable households improved to 10.6 percent without them, ly mitigated by the government emer- work, and increasing prices surpassing in- up from 7.4 percent the previous year. gency response. Over the medium term, come growth for the poorest. However, the non-performing loan ratio growth is expected to strengthen as sta- The outlook faces multiple risks, including worsened to 24.1 percent from 18.7. For bilization solidifies and reforms take ef- the drought impact, commodity price full recovery, continued profit growth, re- fect. By 2026, growth should accelerate to volatility, exchange rate uncertainties, capitalization, and stringent credit stan- around 5 percent, supported by stronger high domestic financing needs, and poten- dards are vital. non-extractive sector performance, espe- tial pre-election policy shifts, while energy High inflation and tepid economic growth cially in agriculture and services, and fa- sector shortfalls threaten fiscal consolida- have worsened household welfare. An es- vorable conditions in extractive indus- tion. Delays in implementing structural re- timated 29.5 percent of the population tries, including small-scale gold mining forms under the IMF program could also lived in extreme poverty (measured at the and new oil reserves. erode international creditor confidence. TABLE 2 Ghana / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.1 3.8 2.9 4.0 4.2 4.9 Private consumption 0.8 4.8 4.6 4.9 5.0 5.7 Government consumption 82.1 -31.7 -8.0 -0.4 -2.5 0.9 Gross fixed capital investment 4.5 28.6 3.9 3.0 5.5 2.6 Exports, goods and services 69.1 9.6 5.8 4.1 4.4 5.6 Imports, goods and services 113.8 13.8 6.3 3.6 5.0 4.0 Real GDP growth, at constant factor prices 5.4 3.7 2.9 4.0 4.2 4.9 Agriculture 8.5 4.2 4.5 2.3 4.2 4.9 Industry -0.5 0.6 -1.2 4.3 3.5 3.4 Services 9.4 6.2 5.5 4.5 4.9 5.9 Inflation (consumer price index) 10.0 31.5 40.3 23.2 11.5 8.0 Current account balance (% of GDP) -3.7 -2.3 -1.4 -2.5 -2.0 -2.0 Net foreign direct investment inflow (% of GDP) 2.0 2.0 1.7 2.0 3.0 2.1 a Fiscal balance (% of GDP) -11.4 -11.0 -3.5 -4.2 -3.8 -3.1 Revenues (% of GDP) 15.3 15.6 16.0 17.3 17.9 18.4 a,b Debt (% of GDP) 76.7 88.7 86.1 82.4 79.4 76.0 a Primary balance (% of GDP) -4.1 -3.6 0.6 0.5 1.5 1.5 c,d International poverty rate ($2.15 in 2017 PPP) 24.5 26.4 29.4 30.8 31.5 30.6 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 46.6 49.7 54.7 56.0 56.8 55.1 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 76.5 78.8 82.6 82.5 83.1 82.0 GHG emissions growth (mtCO2e) 11.8 10.8 8.7 4.1 3.5 4.1 Energy related GHG emissions (% of total) 131.2 123.8 117.9 117.2 116.1 115.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal and debt forecasts do not factor in the impact of the ongoing Debt Restructuring (DR) as the process is yet to conclude. b/ Starting from 2022, public debt numbers include, in addition to central government debt, explicitly guaranteed (and certain implicitly guaranteed) SOE debt, cocobills issued by Cocobod, and reconciled domestic arrears to suppliers. c/ Calculations based on 2016-GLSS-VII. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026. d/ Projections using microsimulation methodology. MPO 243 Oct 24 particularly from mining, to create space for public investment. GUINEA Key conditions and challenges Table 1 2023 Recent developments Growth was robust during 2019-2023, av- Population, million 14.2 eraging 5.3 percent (2.8 percent per capita), After growing at 6.7 percent (4.3 percent GDP, current US$ billion 22.2 driven mainly by the mining sector but al- per capita) in 2023, supported by strong GDP per capita, current US$ 1564.4 so by productivity gains in agriculture. mining sector performance, growth is ex- a 13.8 International poverty rate ($2.15) However, weak mining linkages to non- pected to moderate to 5.3 percent in 2024, a 46.6 mining sectors, headwinds from Dutch- partly due to the impact of the December Lower middle-income poverty rate ($3.65) a 86.8 disease dynamics, and external shocks 2023 fuel depot explosion and power out- Upper middle-income poverty rate ($6.85) Gini index a 29.6 limited job creation and poverty reduc- ages on the non-mining sector. Growth in School enrollment, primary (% gross) b 98.0 tion—Guinea’s international poverty rate, the mining sector remains robust, with b 59.0 measured at a $3.65 threshold for LMICs, bauxite production up 17 percent y/y in Life expectancy at birth, years averaged 47.7 percent over the same pe- 2024Q1 and gold exports up 7 percent, dri- Total GHG emissions (mtCO2e) 45.0 riod. Guinea has abundant natural re- ven by increased investment and the start Source: WDI, Macro Poverty Outlook, and official data. sources, a growing population, and a of production by new formal sector enter- a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). privileged geographic location. The prises. On the demand side, a surge in Simandou iron ore project, with exports mining-related investment and public in- expected by 2026, has the potential to frastructure spending continues to drive transform Guinea's economy and create growth and contributes to the slight in- jobs if appropriate reforms are imple- crease in the debt-to-GDP ratio to an esti- mented. However, harnessing its resources mated 42.1 percent in 2024. Increased capi- Growth is set to slightly decelerate in remains Guinea’s greatest challenge espe- tal spending and higher interest payments, 2024 partly due to the impact of the De- cially as the ongoing mining boom and the combined with slightly lower revenues cember 2023 fuel depot explosion. The fis- associated appreciation of the real effective due to the impact of the explosion on the exchange rate are affecting the competi- non-mining sector, widen the fiscal deficit, cal deficit is projected to widen to 3.0 tiveness of non-mining sectors and diver- estimated to reach 3.0 percent of GDP by percent in 2024 as capital spending in- sification. Boosting growth and poverty re- end-2024 up from 1.8 percent in 2023. creases. Growth is projected to rise in duction requires overcoming low levels of Inflation accelerated to an average of 8.5 2025-26 supporting poverty reduction. human capital, large infrastructure gaps, percent in 2024H1 (up from 7.8 percent The delay in the political transition pre- an underdeveloped financial sector, weak in 2023), due to the temporary impacts of institutional capacity, and large gender the December 2023 fuel depot explosion sents downside risks, while the start of gaps in education, earnings, agricultural and to lower electricity supply. Howev- the Simandou iron mining project repre- productivity, and low political representa- er, inflation has fallen from its peak of 9.3 sents an upside risk. tion. Reforms are also needed to lower in- percent y/y in January 2024, immediate- effective subsidies and boost public spend- ly after the explosion, to 8.1 percent in ing efficiency and revenue mobilization, June 2024. With inflation starting to ease, FIGURE 1 Guinea / Public debt, fiscal deficit, and inflation FIGURE 2 Guinea / 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 7.0 40 90 12 6.0 35 80 10 70 5.0 30 60 4.0 25 8 50 20 6 40 3.0 15 30 2.0 4 10 20 1.0 2 10 5 0 0.0 0 0 2018 2020 2022 2024 2026 2021 2022 2023e 2024e 2025f 2026f 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 Table 2. MPO 244 Oct 24 the central bank maintained its policy rate (excluding Simandou mine operations ex- implementation of the bauxite reference at 11 percent and the reserve requirement pected by 2026), driven mainly by invest- price mechanism since July 2022. Elec- ratio at 13 percent. The increase in real ment (private and public) expected to in- tricity subsidies are expected to decline, GDP per capita, combined with a deceler- crease by an annual average of 24 percent. driven by tariff adjustments and as utili- ation in food inflation, is expected to re- Inflation is anticipated to decline to an ty reforms bear fruit, notably the contin- duce the poverty rate (less than US$3.65 average of 7.8 percent in 2025-26, helped ued rollout of prepaid meters and inten- per day, 2017 PPP) to 49.9 percent in 2024 by lower food prices and prudent mon- sified bill collection efforts. The debt-to- (down from 51.4 percent in 2023). etary policy including minimal deficit fi- GDP ratio would decline to 40.0 percent The current account deficit is estimated nancing by the central bank. The $3.65 in- of GDP by 2026. to widen to 12.5 percent of GDP in 2024 ternational poverty rate is projected to fall The current account deficit is projected to due to a significant decline in the trade to an average of 46.5 percent in 2025-26 remain high, averaging 10.9 percent of surplus, linked to foreign direct invest- due to the easing of food prices. Given GDP in 2025-26, as the FDI-induced trade ment (FDI) related imports. FDI, the main the limited poverty gains from mining- deficit persists. FDI is projected to average source of external financing and largely driven growth, redistribution mecha- 14.5 percent of GDP in 2025-26, while the mining-related, is estimated to reach 17.4 nisms to vulnerable populations and pro- real effective exchange rate would contin- percent of GDP. ductivity gains in non-mining sectors will ue to appreciate. Downside risks include be required for inclusive growth. uncertainties in the timing of the political The fiscal deficit would decline to transition, which could slow reform im- around 2.5 percent in 2025-2026, in line plementation, and spillovers from conflicts Outlook with continued prudent fiscal policies. elsewhere in the world, which could trig- Tax revenues are projected to increase ger a new wave of trade disruptions and After a temporary deceleration in 2024, gradually to 13.4 percent of GDP in 2026, inflation. On the upside, the start of the growth is projected to regain momen- supported by tax administration reforms Simandou iron mine operations would tum in 2025-2026, averaging 6.2 percent and additional mining revenues from the boost exports and growth. TABLE 2 Guinea / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.6 4.0 6.7 5.3 6.0 6.4 Private consumption 1.5 3.9 4.0 3.8 4.2 4.4 Government consumption 5.7 -5.7 1.4 3.9 5.4 5.3 Gross fixed capital investment 3.5 1.9 44.5 40.0 36.8 12.0 Exports, goods and services 30.4 -5.3 8.0 6.5 6.7 7.0 Imports, goods and services -3.5 -13.3 16.1 19.0 20.0 8.7 Real GDP growth, at constant factor prices 5.6 4.3 6.7 5.3 6.0 6.4 Agriculture 9.0 6.0 5.5 5.3 5.9 6.0 Industry 4.5 5.7 10.9 8.3 9.0 9.3 Services 4.9 2.5 4.0 2.6 3.3 3.9 Inflation (consumer price index) 12.6 10.5 7.8 8.3 7.9 7.6 Current account balance (% of GDP) 1.4 -0.6 -10.7 -12.5 -13.6 -8.3 Net foreign direct investment inflow (% of GDP) 10.7 12.6 14.6 17.4 17.9 11.1 Fiscal balance (% of GDP) -1.8 -0.9 -1.8 -3.0 -2.6 -2.4 Revenues (% of GDP) 14.6 13.7 14.7 14.4 15.2 15.8 Debt (% of GDP) 42.4 40.1 41.8 42.1 40.9 40.0 Primary balance (% of GDP) -0.8 0.0 -1.2 -2.0 -1.6 -1.4 a,b International poverty rate ($2.15 in 2017 PPP) 12.8 13.8 14.8 13.7 12.6 11.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 46.6 49.7 51.4 49.9 47.5 45.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 86.8 88.7 89.5 89.0 88.0 87.3 GHG emissions growth (mtCO2e) 3.1 3.0 3.1 3.1 3.2 3.3 Energy related GHG emissions (% of total) 11.1 11.1 11.3 11.6 11.8 12.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 245 Oct 24 non-performing loans, which doubled to 9.3 percent in 2023, continue to make GUINEA-BISSAU Key conditions and the banking sector another possible source of contingent liabilities. challenges Table 1 2023 Raw cashew nuts exports, approximately Population, million 2.2 90 percent of merchandise exports, deter- Recent developments GDP, current US$ billion 2.0 mine economic performance. Cashew pro- GDP per capita, current US$ 921.3 duction is dispersed among smallholder Growth will remain robust at 5 percent a 26.0 International poverty rate ($2.15) farmers, whose income supports overall (2.8 percent per capita) in 2024, from 5.2 a 60.2 economic activity. Poverty remains wide- percent in 2023, reflecting rebounding Lower middle-income poverty rate ($3.65) a 89.1 spread—particularly in rural areas. Hu- services and private demand. Cashew Upper middle-income poverty rate ($6.85) Gini index a 33.4 man development indicators are among production will likely fall short of the School enrollment, primary (% gross) b 113.3 the lowest in the world, and low access 2023 output due to a plague affecting the b 59.9 to basic services contributes to exclusion crop. Increased activity in fisheries sup- Life expectancy at birth, years and marginalization. Political instability is ports overall growth in agriculture. High- Total GHG emissions (mtCO2e) 4.2 chronic in Guinea-Bissau, the world’s most er farmgate prices and lower food prices Source: WDI, Macro Poverty Outlook, and official data. coup-prone country. Regional uncertainty will boost private consumption while ex- a/ Most recent value (2021), 2017 PPPs. b/ WDI for School enrollment (2010); Life expectancy and upcoming elections may further stoke ports are projected to increase, with high- (2022). domestic tensions. er external demand and anti-smuggling Access to credit is limited and the enabling reforms. This will partly compensate for environment for private sector-led growth lower investments and government is weak due to poor infrastructure, low lev- spending. Headline inflation averaged 3.2 Stronger cashew exports and falling in- els of human capital, and limited public percent in August 2024, down from 7.2 services. Investments to improve infra- percent in 2023. Extreme poverty ($2.15 flation will support growth of 5 percent structure have picked up but are mostly per-person per-day PPP 2017) is expected in 2024, reducing poverty to 23.4 per- donor financed as fiscal space is limited by to fall to 23.4 percent. Agricultural cent ($2.15 per-person per-day PPP low domestic revenue mobilization and a growth combined with subdued inflation, 2017). Expenditure rationalization, im- relatively high wage bill. especially among food items, contributed Transparency and governance of state- to this decline. proved revenue mobilization and higher owned enterprises, especially the national Declining average cashew prices and high- grants will support fiscal consolidation electricity and water company, EAGB, is er imported fuel and food prices accentu- and reduce public debt. Progress with limited. EAGB accrues substantial public ated external pressures in 2023, putting the institutional reforms hinges on the reso- debt through government guaranteed let- current account deficit (CAD) at 8.7 per- lution of the current political instabili- ters of credit. Identifying contingent fis- cent of GDP. Chronic infrastructure and cal liabilities is difficult, increasing fiscal logistical issues at the port of Bissau are ty. Additional downside risks to the causing congestion and slowing the rate risks, amplifying debt vulnerabilities, outlook include shocks to the cashew and limiting the capacity to absorb of exports. While cashew exports are ex- sector and climatic shocks. shocks. Banks undercapitalization and pected to reach 200,000 tons, problems at FIGURE 1 Guinea-Bissau / Evolution of main FIGURE 2 Guinea-Bissau / Actual and projected poverty macroeconomic indicators rates and real GDP per capita Percent, percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 100 600000 6 90 4 500000 80 2 70 400000 0 60 -2 50 300000 -4 40 200000 -6 30 -8 20 100000 -10 10 0 0 15 16 17 18 19 20 21 22 23 f f f 24 25 26 20 20 20 20 20 20 20 20 20 2010 2012 2014 2016 2018 2020 2022 2024 2026 20 20 20 Real GDP growth Fiscal balance International poverty rate Lower middle-income pov. rate Current account balance Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance and World Bank. Source: World Bank. Notes: see Table 2. MPO 246 Oct 24 the port are expected to extend the export Regional foreign exchange reserves re- 3 percent of GDP by 2026, with public period to November. High cashew ex- main low, covering only 3.5 months of debt falling to 72 percent of GDP. The ports and lower import costs (given eas- imports in 2024Q1. pace of the fiscal adjustment is highly ing inflation) will narrow the CAD to 6.2 dependent on greater revenue mobiliza- percent of GDP in 2024. tion, strengthened expenditure controls, The fiscal position deteriorated in 2023 to and increased grant financing. It is sub- 8.1 percent of GDP, reflecting a combina- Outlook ject to considerable uncertainty given the tion of poor revenue performance, higher- country’s ongoing political volatility. than-expected discretionary spending, and Growth is expected to remain at 5 per- The regional inflation rate is expected debt servicing pressures. The authorities cent (2.8 percent per capita) over the to align with WAEMU target by 2025, took measures to address fiscal slippages, medium term, with agriculture remain- while regional reserves are expected to including the removal of rice and fuel sub- ing key. Greater diversification in the en- rise gradually, supported by the resump- sidies in April 2024 and tighter control of ergy mix and improved conditions for tion of international bond issuances, re- discretionary spending. This, along with the government to renegotiate the exist- covering exports, and easing monetary a hiring freeze that has limited wage bill ing Karpower contract will reduce ener- policy in the Euro Area. Robust agricul- growth, improved domestic revenue mo- gy costs and stimulate the real sector. tural production is expected to continue bilization, and higher donor grants, could Continued easing of inflationary pres- in 2025 and, with lower food prices, will reduce the fiscal deficit to 4.4 percent (5.2 sures and a strong cashew season will reduce poverty rates to 21.8 percent. Fur- percent including planned arrears clear- encourage private consumption. ther progress is expected in 2026, with ance) in 2024, with public debt falling to Favorable weather conditions and divi- poverty reaching 20.7 percent and almost 77.5 percent of GDP. dends from government investments into 40,000 people getting out of extreme The Central Bank of West African States agricultural inputs over the last few years poverty (versus 2024). Household pur- (BCEAO) has kept its policy interest rates should support strong cashew production. chasing power will improve with higher unchanged since December 2023 at 3.5 Continued efforts to curtail smuggling cashew prices and lower food prices, ben- percent for liquidity calls and 5.5 percent will improve exports. Consequently, the efiting the poorest who spend a higher for the marginal lending facility. Since CAD is projected to reach 4.4 percent of share of their income on food. peaking in 2022, the WAEMU Inflation GDP by 2026, mostly financed by con- The outlook is subject to substantial down- rate has been on a downward trend at cessional loans and grants. Higher rev- side risks stemming from political insta- 4.4 percent y/y in July 2024, but remains enue collection and greater spending dis- bility, climate and agricultural shocks, and above the 1 to 3 percent WAEMU target. cipline could lower the fiscal deficit to uncertainty of energy sector operations. TABLE 2 Guinea-Bissau / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.2 4.2 5.2 5.0 5.0 5.0 Private consumption 15.7 3.6 0.2 4.5 4.3 4.1 Government consumption 16.0 7.0 5.5 -8.8 -3.4 3.8 Gross fixed capital investment -5.0 13.8 23.6 8.6 9.0 4.8 Exports, goods and services 15.0 -6.5 -3.1 12.2 8.6 7.1 Imports, goods and services 4.0 2.5 0.8 3.0 5.0 4.0 Real GDP growth, at constant factor prices 6.1 4.8 5.2 5.0 5.0 5.0 Agriculture 5.4 6.1 7.8 4.3 4.2 4.1 Industry 5.6 4.8 5.0 5.1 5.2 5.3 Services 6.9 3.8 3.3 5.4 5.6 5.6 Inflation (consumer price index) 3.3 7.9 7.2 3.5 2.0 2.0 Current account balance (% of GDP) -0.8 -8.6 -8.7 -6.2 -4.6 -4.4 Fiscal balance (% of GDP) -5.9 -6.1 -8.1 -4.4 -3.4 -3.0 Revenues (% of GDP) 19.1 15.3 13.7 15.3 15.6 15.8 Debt (% of GDP) 79.0 80.8 79.3 77.5 74.7 72.0 Primary balance (% of GDP) -4.3 -4.7 -5.5 -1.8 -0.9 -0.5 a,b International poverty rate ($2.15 in 2017 PPP) 26.0 25.2 24.8 23.4 21.8 20.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 60.2 59.2 58.8 57.8 56.2 54.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 89.1 89.1 88.8 88.6 87.6 86.9 GHG emissions growth (mtCO2e) -3.8 1.4 2.6 1.8 1.9 2.0 Energy related GHG emissions (% of total) 7.8 8.0 8.1 8.2 8.3 8.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 247 Oct 24 Fiscal consolidation efforts continue, though not without challenges. Kenya’s KENYA Key conditions and sovereign credit ratings have been down- graded, reflecting heightened risks to pub- challenges lic finances. Expenditure-side measures to contain the wage bill, transfers to public Table 1 2023 Kenya’s macroeconomic environment is sector entities, and intermediate consump- Population, million 55.1 improving, with receding inflation and a tion, along with the rationalization of non- GDP, current US$ billion 108.1 more stable exchange rate that supports priority projects, remain important. In ad- GDP per capita, current US$ 1961.0 the incomes of households and firms. dition, improving the efficiency and trans- a 36.1 International poverty rate ($2.15) However, structural imbalances persist parency of public expenditures, including a 70.1 and undermine Kenya’s aspirations to be- continuous efforts to reduce corruption, is Lower middle-income poverty rate ($3.65) a 91.3 come an upper-middle-income country. critical. Although tax revenues have been Upper middle-income poverty rate ($6.85) Gini index a 38.7 Fiscal and current account pressures as- underperforming, recent protests high- School enrollment, primary (% gross) b 97.2 sociated with increasing public spending, light the need for further progressive and b 62.1 high fiscal deficits, and growing debt equitable fiscal reforms. Life expectancy at birth, years during recent years expose Kenya to Total GHG emissions (mtCO2e) 77.9 macroeconomic volatility. Productivity, a Source: WDI, Macro Poverty Outlook, and official data. key driver of economic growth, grew lit- a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). tle during the last decade, limiting in- Recent developments come growth and more and better jobs. The increasing frequency and intensity Kenya’s GDP growth is decelerating in of climate shocks, as shown by severe 2024, following the strong cyclical re- floods across the country earlier this year, bound in 2023. Real GDP expanded by 5 Economic growth is slowing from the is threatening the livelihood of Kenyans, percent during the first quarter (Q1-24) of strong rebound of 2023 and is estimat- especially the poor. 2024, compared to 5.5 percent in Q1-23 ed at 5.0 percent in 2024. Poverty re- Moreover, economic growth is not suffi- and 5.6 percent for the full year of 2023. mains high as the link between growth ciently inclusive, and the link between The agriculture and services sectors con- growth and poverty reduction has weak- tinued to show resilience, with agricul- and poverty reduction has weakened. ened. Adverse climate shocks are lowering ture supported by favorable rainfall earli- Inflation is falling and the exchange agricultural productivity, especially in arid er in the year. The international poverty rate has stabilized, showing the govern- and semi-arid counties. Good paying jobs rate (US$2.15) is estimated to have de- ment’s commitment to a stronger in services favor skilled workers, while clined from 35.8 percent in 2022 to 34.7 macroeconomic policy framework. How- poorer and low-skilled workers struggle to percent in 2023. However, manufacturing access productive jobs. Going forward, is underperforming. The Purchasing ever, the revenue-led fiscal consolidation structural reforms that raise productivity Managers’ Index (PMI) contracted in four strategy has proved challenging, espe- of the private sector, expand access to out of the first eight months of 2024, an cially after the mid-2024 protests. The skills, increase access to capital, and indication of deteriorating market condi- outlook remains subject to elevated risks. strengthen households’ resilience to cli- tions. Overall, the industry sector grew mate shocks are needed. by 0.1 percent during Q1-24, year-on-year FIGURE 1 Kenya / Purchasing Managers’ Index (PMI) FIGURE 2 Kenya / Actual and projected poverty rates and real private consumption per capita Purchasing Manager's Index Poverty rate (%) Real private consumption per capita (constant LCU) 54 100 160000 90 140000 52 80 120000 70 50 100000 60 50 80000 48 40 60000 30 46 40000 20 10 20000 44 0 0 2015 2017 2019 2021 2023 2025 42 International poverty rate Lower middle-income pov. rate Feb-22 Aug-22 Feb-23 Aug-23 Feb-24 Aug-24 Upper middle-income pov. rate Real priv. cons. pc Source: S&P Global. Source: World Bank. Notes: see Table 2. MPO 248 Oct 24 (y-o-y); all subsectors grew less than in 65.5 percent of GDP by the end of FY2023/ challenging socio-political environment. the same quarter a year before. 24, almost half of it being external debt. Yet, expenditure rationalization efforts are The tighter monetary policy framework expected to contain public spending; the has shown to be effective. Inflation fell fiscal deficit is projected at 4.3 percent of to 4.4 percent by August 2024 (y-o-y) GDP in FY2024/25. from 6.6 percent in December 2023, with- Outlook Real per capita incomes are expected to in the Central Bank of Kenya (CBK) 5±2.5 increase, and the poverty rate to continue percent target range, while monthly real GDP is projected to grow by 5.0 percent its downward trend. However, this de- credit growth to the private sector slowed in 2024 and by 5.1 percent on average in cline is slow and vulnerable to a reversal to 6.6 percent month-on-month (m-o-m) 2025-2026. Severe floods, subdued busi- in the event of shocks. The US$2.15 in June (December 2023: 8.3 percent). FX ness sentiment following the mid-2024 poverty rate is expected to fall to 34.0 reserves rose to US$7.3 billion or 3.8 protests, and reduced public spending will percent in 2024. months of imports as of end-August, 8 weigh on growth in the short and medium The outlook is subject to elevated risks. percent above the December 2023 figure. term. However, the materialization of re- Failure to achieve fiscal consolidation tar- On the external front, goods exports are forms and a continued commitment to gets would exacerbate Kenya’s debt vul- recovering, growing by 5.0 percent in the macroeconomic prudence are expected to nerabilities. Continued social and political last 12 months up to June 2024, thanks boost private investment. The CAD is ex- tensions could further dampen investor primarily to higher exports of agricultural pected to remain between 4.0-4.1 percent confidence and challenge fiscal consolida- products. Imports are recovering too, but of GDP, with exports and foreign direct in- tion efforts, while additional climate haz- at a slower rate. Consequently, the cur- vestments increasing in the medium term ards could resume inflationary pressures. rent account deficit (CAD) reached 3.7 as trade agreements are implemented and Reduced growth of the economies of in- percent of GDP in the 12 months up to global financial conditions ease further. ternational partners could undermine June 2024. Eventually, credit growth is expected to Kenyan exports and remittances, while in- Fiscal consolidation efforts continued dur- accelerate as the CBK implements a more creased global geopolitical risks might ing FY2023/24. Still, despite growing by accommodative monetary policy; on Au- raise commodity prices and harm Kenya, 14.5 percent, revenues fell short by 1.2 per- gust 2024, the CBK lowered its policy rate a net commodity importer. Upside risks cent of GDP from the target for the fiscal by 25 basis points to 12.75 percent. are linked to faster-than-expected normal- year and the fiscal deficit reached 5.6 per- The fiscal adjustment is projected to be ization in global financing conditions and cent of GDP. Gross public debt reached slower than anticipated amid the more lower commodity prices. TABLE 2 Kenya / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 7.6 4.9 5.6 5.0 5.1 5.1 Private consumption 6.4 3.3 6.2 5.6 5.4 5.4 Government consumption 6.0 8.1 3.5 0.9 0.6 1.0 Gross fixed capital investment 10.8 -0.8 1.9 2.3 6.2 7.1 Exports, goods and services 15.3 11.9 -4.5 5.5 9.8 10.1 Imports, goods and services 22.2 4.6 -3.1 1.3 5.6 7.2 Real GDP growth, at constant factor prices 7.1 4.5 5.4 5.0 5.1 5.1 Agriculture -0.4 -1.5 6.5 4.8 5.0 5.1 Industry 7.5 3.9 1.9 1.1 2.9 3.6 Services 9.6 6.6 6.2 6.1 5.7 5.4 Inflation (consumer price index) 6.1 7.6 7.7 5.0 5.0 5.0 Current account balance (% of GDP) -5.2 -5.0 -4.0 -4.0 -4.1 -4.1 Net foreign direct investment inflow (% of GDP) 0.0 0.3 0.2 0.8 1.0 1.3 Fiscal balance (% of GDP) -7.3 -5.9 -5.6 -5.0 -3.8 -3.3 Revenues (% of GDP) 16.8 16.9 16.8 17.0 18.4 19.8 Debt (% of GDP) 68.1 69.9 68.7 65.1 63.3 60.3 Primary balance (% of GDP) -2.5 -0.8 -0.3 0.8 1.5 1.6 a,b International poverty rate ($2.15 in 2017 PPP) 36.1 35.8 34.7 34.0 33.2 32.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 70.1 69.8 68.8 68.2 67.4 66.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.3 90.9 89.6 88.8 87.8 86.8 GHG emissions growth (mtCO2e) -4.8 -0.3 4.6 6.6 7.5 6.8 Energy related GHG emissions (% of total) 28.4 29.9 29.8 29.3 28.7 28.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2013-, 2018-, and 2021-KCHS. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using point to point elasticity at regional level with pass-through = 1 based on private consumption per capita in constant LCU. MPO 249 Oct 24 The accumulation of arrears remains the main threat to macroeconomic stability LESOTHO Key conditions and due to volatile Southern African Customs Union (SACU) receipts, a rigid budget challenges structure, poor cash management, and de- ficiencies in government procurement pro- Table 1 2023 Lesotho faces the challenge of adopting a cedures. The enactment of the Public Pro- Population, million 2.3 new development model based on private curement Act in 2023 is a step forward to GDP, current US$ billion 2.2 sector dynamism to reduce poverty. A curtail arrear accumulation by prohibiting GDP per capita, current US$ 962.8 large public sector, cumbersome and un- public procurement outside of the Inte- a 32.4 International poverty rate ($2.15) clear business regulations, and difficulties grated Financial Management Information a 54.6 in obtaining credit deter investment. De- System (IFMIS). Implementation of several Lower middle-income poverty rate ($3.65) a 81.0 spite high public investment, significant fiscal reforms, notably procurement regu- Upper middle-income poverty rate ($6.85) Gini index a 44.9 infrastructure gaps persist, discouraging lations and the Public Financial Manage- School enrollment, primary (% gross) b 87.3 private investment and inhibiting partici- ment Act, would help improve macroeco- b 53.0 pation in global value chains. nomic coordination, budgeting processes, Life expectancy at birth, years Over the past years, weak demand has had capital budget execution rates from low Total GHG emissions (mtCO2e) 3.6 negative impacts on the country’s main ex- levels, and the overall effectiveness of fis- Source: WDI, Macro Poverty Outlook, and official data. ports (apparel and textile, water, and dia- cal policy in supporting growth. a/ Most recent value (2017), 2017 PPPs. b/ WDI for School enrollment (2023); Life expectancy monds). Uncertainty regarding the exten- (2022). sion of the African Growth and Opportu- nities Act (AGOA) beyond September 2025 has already caused some companies in the Recent developments Growth will be driven by investments textile sector to leave the country, resulting associated with Phase II of the Lesotho in higher unemployment. Furthermore, The implementation of the large LHWP- the lack of private sector dynamism and II project gathered pace, fueling eco- Highlands Water Project (LHWP-II), in- skill mismatches limit job creation. nomic growth. The economy expanded creasing in 2024 and 2025, and moder- Private sector job creation is essential by 2.0 percent in the first quarter of ating thereafter. Structural weaknesses to help bring down the unemployment 2024, compared to a 1.2 percent contrac- limit private investments, export poten- rate from an estimated 22.5 percent in tion in the same quarter of 2023. Moder- 2019 and contribute to reducing high ately strong growth was seen in most sec- tial, and job creation. Consequently, the poverty rates. Over one-third of the pop- tors, except for 'Business Services', 'Public poverty rate will remain high, at around ulation was estimated to live on less Administration', and 'Other Services', 36 percent, using the international pover- than US$2.15 per day (2017 PPP) in which contracted. ty line of $2.15 per day. Weaker global 2023. Lesotho also faces a legacy of high The number of employees in companies and regional growth, the impact of cli- inequality and is in the top quintile supported by the Lesotho National De- of countries with the most unequal in- velopment Corporation (LNDC) de- mate change, and uncertainties regarding creased annually from 38,282 to 34,555 come distribution. Poverty is high in rur- the extension of AGOA beyond 2025 pose al highlands limiting access to services between June 2023 and June 2024 as some downside risks. and market opportunities. textile companies reduced their workforce FIGURE 1 Lesotho / Fiscal surpluses in the medium-term FIGURE 2 Lesotho / 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 8 90 10500 60 6 80 10000 4 70 50 60 9500 2 40 50 0 9000 40 30 -2 30 8500 20 20 -4 8000 10 10 -6 0 7500 0 -8 2017 2019 2021 2023 2025 2021 2022 2023e 2024f 2025f 2026f 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 Table 2. MPO 250 Oct 24 in response to fewer orders from the U.S. global demand for diamonds and lower and external balances. As a result, the CAD The headline inflation rate declined to 6.7 textile output. is expected to improve in 2024 and worsen percent in July 2024 from its peak of 9.8 in 2025, as imports associated with LHWP- percent in July 2022, owing mainly to II reach their peak, despite an expected re- lower fuel and food prices. However, do- covery in the global demand for diamonds. mestic food prices remain high because of Outlook Fiscal performance is projected to improve imported inflation caused by the weaker over the medium term, with Lesotho ex- currency, and higher transportation and The growth outlook is tightly linked to pected to record fiscal surpluses, on ac- intermediation costs associated with the the LHWP-II project cycle and is ex- count of the SACU revenues windfall and severe drought caused by El Niño in pected to be subdued beyond the pro- higher water royalties, after a period of Southern Africa. ject’s time horizon. The expected recov- persistent fiscal deficits. Fiscal surpluses The fiscal balance improved from a 1 per- ery of the diamond sector will also sup- provide an opportunity to embark on an cent surplus in December 2023 to a surplus port exports. The launch of the Milleni- ambitious set of fiscal and structural re- of 4.5 percent of GDP in June 2024, driven um Challenge Corporation Compact II in forms to promote growth and alleviate by increased SACU revenues and water 2025 will lay the foundations for more poverty, including through prioritizing royalties. The implementation of the Public robust exports and growth beyond the pro-growth capital investments. More Procurement Act of 2023 helped contain projection period. However, weak growth specifically, establishing a macroeconomic the growth in expenditures on goods and in South Africa and persistent structural stabilization fund coupled with introduc- services. The public debt stock declined to constraints will continue to restrain pri- ing fiscal rules would be an important 55 percent of GDP in June, from 56.9 per- vate investment, weighing on the coun- step forward to promote macroeconomic cent of GDP in March 2024, in part due to try’s economic potential. stability and growth. Treasury bonds buyback. The annual inflation rate is expected to Risks are tilted to the downside. Slower re- The current account deficit (CAD) nar- average 6.4 percent in 2024 and gradually gional and global growth could dent ex- rowed from 1.7 percent in March to 0.8 moderate to an average of 5.3 percent ports and remittances. Climate shocks can percent of GDP in June 2024, as both from 2025 to 2026, in line with move- reduce agricultural output, threatening primary and secondary income accounts ments in energy and food prices. Inflation livelihoods. An important downside risk improved, linked to higher returns from is expected to stay high due to increased to exports and jobs is that of Lesotho losing commercial banks and the central bank, food prices caused by El Niño and higher preferential access to the US market if and higher SACU revenue, respective- fuel prices due to supply chain disrup- AGOA is not extended beyond 2025. Con- ly. In contrast, the trade deficit widened tions and exchange rate depreciation. sequently, the US$2.15 per day poverty due to higher imports related to LHWP- Elevated SACU transfers and higher water rate is projected to change little and hover II and lower exports associated to weak royalties are expected to improve fiscal around 36 percent. TABLE 2 Lesotho / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.9 1.3 0.9 2.5 2.3 2.0 Private consumption -6.7 9.1 3.8 3.8 3.9 3.9 Government consumption -5.3 2.4 2.2 18.1 6.9 9.6 Gross fixed capital investment 6.5 12.1 46.1 9.1 35.3 20.9 Exports, goods and services 5.1 36.7 2.2 2.2 2.2 2.0 Imports, goods and services -0.4 22.5 10.3 10.8 11.3 10.5 Real GDP growth, at constant factor prices 1.9 1.3 0.9 2.5 2.3 2.0 Agriculture -16.0 12.5 2.4 1.5 2.3 2.5 Industry 4.7 5.0 5.0 5.3 5.0 5.0 Services 2.3 -0.5 -0.5 1.6 1.3 0.8 Inflation (consumer price index) 6.0 8.3 6.4 6.4 5.4 5.1 Current account balance (% of GDP) -7.9 -12.0 -2.9 -1.3 -2.8 -1.0 Net foreign direct investment inflow (% of GDP) 1.2 1.2 1.4 1.9 1.4 1.3 Fiscal balance (% of GDP) -4.7 -5.7 9.2 7.0 1.6 -0.7 Revenues (% of GDP) 56.5 51.1 55.7 57.7 57.3 60.5 Debt (% of GDP) 57.8 57.7 55.8 53.4 49.8 46.4 Primary balance (% of GDP) -3.2 -4.3 10.4 8.0 2.6 0.3 a,b International poverty rate ($2.15 in 2017 PPP) 37.0 37.0 37.0 36.7 36.6 36.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 59.7 59.6 59.7 59.3 59.0 58.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 84.8 84.7 84.7 84.5 84.3 84.2 GHG emissions growth (mtCO2e) 1.9 2.0 2.3 2.4 2.7 2.0 Energy related GHG emissions (% of total) 62.1 62.5 62.9 63.3 63.7 63.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2017-CMSHBS. Actual data: 2017. Nowcast: 2018-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2017) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 251 Oct 24 demonstrated robust growth of 13.9 per- cent, primarily driven by gold mining and LIBERIA Key conditions and construction. The services sector grew by 3.7 percent, driven by the financial and challenges hospitality subsectors, increased trade and transport activities, and improved access Table 1 2023 Liberia is confronted with development to electricity. Output in the agriculture sec- Population, million 5.4 challenges, which include substantial de- tor grew by a modest by 1.4 percent, re- GDP, current US$ billion 4.2 ficiencies in human development and in- flecting declines in palm oil and rubber GDP per capita, current US$ 782.5 frastructure, a reliance on global com- production. On the demand side, contin- a 27.6 International poverty rate ($2.15) modity markets, a limited revenue base, ued recovery in private consumption, in- a 60.6 and extensive spending requirements. creased public-sector spending, and a Lower middle-income poverty rate ($3.65) a 88.9 The country’s real GDP per capita stood surge in gold exports were the main dri- Upper middle-income poverty rate ($6.85) Gini index a 35.3 at $704 in 2023, indicating a 12.7 percent vers of growth. With the recovery in School enrollment, primary (% gross) b 72.9 decline since 2013. Most development growth in the last three years, poverty de- b 61.1 measures, such as access to healthcare, clined slightly in 2023. The share of the Life expectancy at birth, years education, and basic utilities are below population living below the international Total GHG emissions (mtCO2e) 16.2 regional and international benchmarks. poverty line (i.e., on less than US$2.15 per Source: WDI, Macro Poverty Outlook, and official data. From 2012 and 2022, Liberia's ratings on person per day) fell by 0.5 percentage a/ Most recent value (2016), 2017 PPPs. b/ Most recent WDI value (2022). the Worldwide Governance Indicators for points to 28 percent. government effectiveness and control of Headline inflation moderated to 6.2 per- corruption deteriorated markedly, reflect- cent year-on-year (y/y) in June 2024, from Liberia’s economy expanded by an esti- ing inadequate and unequal service de- 12.4 percent in June 2023, while core infla- livery, weak institutional and administra- tion fell to 3.5 percent (y/y) from 12.8 per- mated 4.7 percent in 2023 and is expected tive capacities, and limited transparency cent in June 2023. Food inflation declined to maintain this momentum. Inflationary and accountability. Liberia needs reforms from 26.9 percent in December 2023 to 11.6 pressures have eased since peaking in fis- in its institutional and business environ- percent in June 2024. The easing inflation- cal year 2023. Although the medium-term ment, investments in human capital, and ary pressures reflect a tight monetary pol- improvements in basic services and infra- icy and broadly stable exchange rates. The outlook is positive, it still depends on pre- structure to achieve sustained and inclu- exchange rate depreciated by 3.0 percent serving macroeconomic stability, prudent sive growth, improve governance in the during H1-2024 compared to 11.9 percent fiscal consolidation, and continued imple- public sector, and strengthen resilience. in H1-2023, while the policy rate was kept mentation of structural reforms in key at 20.0 percent, well above inflation. enabling sectors. The risks to the outlook The fiscal deficit in 2023 reached an un- sustainable 7.1 percent of GDP due to a are tilted to the downside as poor gover- Recent developments decline in revenues and grants and an in- nance, fiscal lapses, and volatility in com- crease in consumption spending. The fiscal modity prices could jeopardize macroeco- Despite the challenges, Liberia's economy deficit was financed by concessional re- nomic stability and growth. showed resilience and expanded by 4.7 sources and direct borrowing from the percent in 2023. The industrial sector Central Bank. To address this, the new FIGURE 1 Liberia / Real GDP growth and contributions to FIGURE 2 Liberia / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 100 900 90 800 5 80 700 70 4 600 60 500 3 50 400 40 2 300 30 20 200 1 10 100 0 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2021 2022 2023 2024e 2025f 2026f 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 Table 2. MPO 252 Oct 24 government has proposed a revised bud- A large share of the population will remain get that aims for a 2.3 percent spending cut in poverty until inclusive growth and low that affects capital spending, social bene- Outlook inflation can provide a conducive environ- fits, subsidies, and grants. The objective is ment to recover their livelihoods. Current to achieve a fiscal adjustment of 3.5 percent Renewed interest and investment in poverty projections will be revised as they of the GDP in 2024. Public debt hovered mining, coupled with continued imple- under-estimate upward pressures on around 56 percent of GDP by the end of mentation of critical reforms in key en- poverty, by not considering the impact of 2023, up from 53 percent in 2022. abling sectors, are expected to unlock inflation on purchasing power. The savings and investments gap widened Liberia’s growth potential in the medi- Liberia's CAD is projected to decrease during 2023, leading to a current account um term. The economy is expected to in 2024 but will stay high averaging 22 deficit (CAD) of 26.4 percent of GDP. Ex- expand by 5.3 percent in 2024 and near- percent in the medium term. The el- ports increased by 8.2 percent, slower than ly 6 percent by 2026 supported by: evated CAD is due to capital imports the 16.6 percent growth in 2022, while im- (i) significant foreign direct investments for vital infrastructure and investments, ports expanded by 27.2 percent due to high- (FDI) in the iron ore sector, (ii) sus- requiring trade improvements and on- er petroleum products and machinery tained strength in the gold sector, and going external financial support. The prices, leading to a higher trade deficit. The (iii) increased infrastructure investment. deficit will be financed by FDI, project CAD was financed by net IMF credit, loans, The government has prioritized agricul- grants, and concessional loans. and drawdowns of gross official reserves. ture and developed a sector plan with a Fiscal deficit is expected to decrease av- Consequently, gross external reserves fell to focus on increasing productivity. eraging 3.2 percent during 2024-2026 an- US$486 million in 2023 from US$644 million In 2024 and beyond, inflation is ex- chored on improved revenue mobilization in 2022, covering about two months of im- pected to moderate, provided prudent and expenditure management. ports. Notably, financial-sector vulnerabil- monetary and fiscal policies are main- Risks to the outlook are tilted to the down- ities moderated. Non-performing loans ra- tained. Headline inflation is projected side as weak governance, fiscal slippages, tio dropped to 11.2 percent from 16.4 per- to decrease to 7.7 percent in 2024, and fluctuations in commodity prices cent in 2022, and the banking sector re- down from 10.1 percent in 2023, and could undermine macroeconomic stability mained adequately capitalized. reach 5.5 percent by 2026. and growth. TABLE 2 Liberia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.0 4.8 4.7 5.3 5.7 5.8 Private consumption 4.7 3.3 3.5 3.7 3.8 3.9 Government consumption 0.2 -5.7 0.0 -12.7 -5.8 3.0 Gross fixed capital investment -7.9 9.4 36.2 2.9 7.4 8.7 Exports, goods and services 14.7 7.7 23.6 21.1 11.2 6.1 Imports, goods and services 1.8 3.1 25.1 6.9 5.2 4.0 Real GDP growth, at constant factor prices 4.8 4.8 4.7 5.3 5.7 5.8 Agriculture 3.3 5.9 1.4 5.0 5.7 5.9 Industry 13.3 6.7 13.9 5.8 6.3 6.0 Services 3.0 2.8 3.7 5.4 5.3 5.7 Inflation (consumer price index) 7.8 7.6 10.1 7.7 6.0 5.5 Current account balance (% of GDP) -17.8 -17.7 -26.4 -23.7 -21.6 -20.6 Fiscal balance (% of GDP) -2.4 -5.6 -7.1 -3.6 -3.2 -2.7 Revenues (% of GDP) 27.2 21.5 20.4 20.8 21.2 21.6 Debt (% of GDP) 53.2 53.4 55.7 59.9 59.5 57.9 Primary balance (% of GDP) -1.6 -4.6 -6.1 -2.7 -2.3 -1.8 a,b International poverty rate ($2.15 in 2017 PPP) 29.1 28.5 27.9 27.2 26.5 25.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 60.6 60.6 60.6 60.6 60.6 60.6 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 87.7 88.2 88.6 89.1 89.8 90.4 GHG emissions growth (mtCO2e) 0.1 3.2 3.2 3.1 3.1 3.2 Energy related GHG emissions (% of total) 4.2 4.2 4.1 4.0 4.0 3.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2014-HIES and 2016-HIES. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026. b/ Projection using point-to-point elasticity (2014-2016) with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 253 Oct 24 population, on top of an inadequate sup- ply of food and energy. MADAGASCAR Key conditions and Reducing persistent poverty and promot- ing high and resilient growth would re- challenges quire improved governance and business climate conducive to private investments Table 1 2023 The real per capita income has declined including climate-resilient investment, Population, million 30.3 60 percent since 1975. The international deepened structural reforms in key sec- GDP, current US$ billion 15.8 poverty rate (US$2.15 international tors (mining, telecommunications), and GDP per capita, current US$ 520.7 poverty line, 2017 PPP, poverty rate closing the gap in human and physical a 80.7 International poverty rate ($2.15) henceforth) stands at 80 percent. The capital accumulation. a 92.4 multidimensional poverty rate, which en- Lower middle-income poverty rate ($3.65) a 98.2 compasses access to basic services such Upper middle-income poverty rate ($6.85) Gini index a 42.6 as health, education, and living condi- School enrollment, primary (% gross) b 138.2 tions, stands at 69 percent and is the Recent developments b 65.2 fifth highest globally. Madagascar has not Life expectancy at birth, years been able to leverage its comparative ad- Growth is projected to increase to 4.5 per- Total GHG emissions (mtCO2e) 40.5 vantage in commodity exports to accel- cent in 2024 from 3.8 percent in 2023, Source: WDI, Macro Poverty Outlook, and official data. erate structural transformation, and low- driven by agriculture, mining (graphite, a/ Most recent value (2012), 2017 PPPs. b/ Most recent WDI value (2022). productivity agriculture accounts for the chromium, mica), manufacturing (notably largest share of value added. Extractives, textile), and telecommunications. Tourism construction, and public works were the continued its post-pandemic recovery, GDP growth is projected at 4.5 percent in main growth drivers but were also the with tourist arrivals between January and most affected by COVID-19. July 2024 matching 88 percent of the 2019 2024, supported by agriculture, mining, Governance and institutional challenges level. Employment was relatively stable and private investment. Higher agricul- hindered the development. State capture with labor demand expressed mainly ture output and tighter monetary policy in key sectors reduced market contesta- from the industry and service sectors eased inflation from the double-digit peak bility and vested interests impeded re- while most of the companies in the agri- forms, including for the state-owned util- culture sector reported reduced employ- in March 2023. Growth is expected to av- ity company (JIRAMA). Low human cap- ment. Higher agriculture output and erage 4.6 percent over 2024-26, condi- ital, slow economic transformation, and a tighter monetary policy eased inflation to tional on sustained structural reforms. high vulnerability to climate and external 7.6 percent in July 2024 from the peak Poverty is expected to remain high at 80 shocks undermine growth. Labor market of 12.4 percent in March 2023. Increased percent (international poverty line of participation remains low at 58.8 percent, domestic rice production in 2023 helped and 51.2 percent for women, compared contain rice price increases (20 percent US$2.15, 2017 PPP). Key downside risks with 66.9 percent for men. of household expenses), although prices include weaker than expected financial Intensifying climate-related disasters, in- remained elevated due to market distor- performance of major SOEs, power short- cluding cyclones, droughts, water stress- tions. Persistent inflation prompted the ages, and weather shocks. es, and rising temperatures have exerted central bank to raise both the deposit fa- a heavy toll on the economy and the cility rate and the marginal lending rate FIGURE 1 Madagascar / Current account deficit financing FIGURE 2 Madagascar / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 120 840000 6 820000 100 4 800000 2 80 780000 760000 0 60 740000 -2 40 720000 -4 2019 2020 2021 2022 2023e 2024e 2025f 2026f 700000 20 Change in reserve, net (increase = –) 680000 Errors and omissions Financial account (exl FDI) 0 660000 Capital account 2010 2012 2014 2016 2018 2020 2022 2024 2026 Foreign direct investment (FDI) International poverty rate Lower middle-income pov. rate Current account deficit (CAD) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 254 Oct 24 by 50 basis points, to 9.5 percent and 11.5 June 2024 adjusted downward expendi- more and better jobs. In addition, a better percent, respectively, in August 2024. ture and revenue projections while in- education level is also crucial for higher The current account deficit (CAD) creasing transfers to JIRAMA and subsi- labor market participation. widened to 3.5 percent of GDP in the first dies on fuel pump prices. The public debt The CAD is projected to progressively de- semester of 2024 (2024H1), from 1.8 per- stood at 55.6 percent of GDP by end 2023. crease over 2024-26, reflecting rising ex- cent of GDP (y/y) in 2023 following a sharp ports (mining, tourism) and lower oil contraction in the volumes and prices of prices. Gross reserves are expected to be main exports (nickel, cobalt, cloves). The adequate in the medium term, supported price of vanilla remained subdued at Outlook by foreign direct investment inflows and around US$50 per kilogram during the ex- official transfers. port season, offsetting the boost in the ex- Growth is projected to average 4.6 per- The fiscal deficit is projected to stabilize port volume. The CAD was mainly fi- cent over 2024-26, driven by industry around 3.9 percent of GDP over 2024-26, nanced by official external financing which (textile, mining) and services. The growth supported by improved spending effi- also helped stabilizing international re- projection assumes sustained implemen- ciency, conditional on sustained reforms serves at 5.7 months of imports since tation of the structural reforms that have for the operational and financial recovery end-2023. The Ariary slightly appreciated been initiated recently, including those of JIRAMA, and increased revenue col- against major currencies over 2024H1. aiming at strengthening market contesta- lection notably from mining (production The budget execution (cash basis) reached bility in key sectors such as mining and and exports expected to resume after the 43.7 percent of the annual projection by digital, and at improving the investment enactment of the new mining code). Pub- end-June 2024, mainly on salary and ex- climate. Food and energy will continue to lic debt is expected to stabilize at around ternally-financed investment, while the ex- drive inflation but inflation is projected to 55.9 percent of GDP over the medium ecution rate for domestically-financed in- decline, due to continued monetary tight- term. Madagascar remains at moderate vestment was low at 8.3 percent. Tax rev- ening and more effective monetary policy risk of debt distress. enue collection stood at 38.5 percent of the as the central bank advances with its new The outlook is subject to downside risks annual projection, undermined by weak policy operational framework. associated with the weak financial perfor- international trade and a high reliance on The poverty rate is projected to decline mance of major state-owned enterprises trade-related revenues, which usually con- slightly to 79.5 percent in 2024, mainly weighing on public finance, frequent pow- tribute half of the total tax revenue. The due to higher agricultural output. Low- er outages impacting downstream sectors, fiscal deficit stood at 1.2 percent of GDP productivity and low-wage activities and high vulnerability to external shocks by June 2024, financed mainly by external within the primary sector remain promi- including commodity price fluctuations financing. A revised budget adopted in nent, urging the need for the creation of and adverse weather. TABLE 2 Madagascar / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.7 4.0 3.8 4.5 4.6 4.7 Private consumption 6.0 -9.3 -12.3 3.0 3.2 3.3 Government consumption 0.2 34.4 1.9 0.2 0.3 0.4 Gross fixed capital investment 12.7 -13.4 10.1 6.6 6.8 6.9 Exports, goods and services 55.0 29.5 12.6 1.0 11.2 11.3 Imports, goods and services 12.7 13.1 -2.9 -0.9 11.0 11.2 Real GDP growth, at constant factor prices 6.5 4.0 3.5 4.5 4.6 4.7 Agriculture -1.6 0.9 4.1 4.0 4.3 4.3 Industry 19.7 11.2 2.4 4.6 4.6 4.7 Services 7.3 3.5 3.6 4.7 4.7 4.9 Inflation (consumer price index) 5.8 8.2 9.9 7.4 7.1 6.7 Current account balance (% of GDP) -4.9 -5.4 -4.5 -6.8 -6.0 -5.6 Net foreign direct investment inflow (% of GDP) 1.7 2.2 2.2 2.2 2.3 2.4 Fiscal balance (% of GDP) -2.8 -5.5 -4.1 -3.8 -3.8 -4.0 Revenues (% of GDP) 10.9 10.9 13.8 13.0 11.9 12.6 Debt (% of GDP) 51.9 53.9 55.6 55.5 55.8 56.3 Primary balance (% of GDP) -2.2 -5.0 -3.4 -2.9 -2.9 -3.0 a,b International poverty rate ($2.15 in 2017 PPP) 81.0 80.6 80.2 79.7 79.1 78.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 92.6 92.4 92.2 91.9 91.7 91.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 98.2 98.1 98.1 98.0 97.9 97.8 GHG emissions growth (mtCO2e) -1.1 1.1 1.0 1.3 1.0 1.0 Energy related GHG emissions (% of total) 12.5 12.9 12.9 13.3 13.7 14.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2012-ENSOMD. Actual data: 2012. Nowcast: 2013-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 255 Oct 24 restore macroeconomic stability and cre- ate foundations for sustainable and in- MALAWI Key conditions and clusive long-run growth. However, im- plementation of these reforms has been challenges piecemeal, and momentum is further slip- ping in advance of the September 2025 Table 1 2023 Over the past two years, the low eco- general elections. Debt restructuring ne- Population, million 20.9 nomic growth in Malawi remained below gotiations have proceeded slowly, with GDP, current US$ billion 14.1 population growth, resulting in a decline the authorities only concluding negotia- GDP per capita, current US$ 673.7 in per capita GDP. The agricultural sec- tions with China. Negotiations with com- a 70.1 International poverty rate ($2.15) tor, which employs most of the work- mercial creditors (Afreximbank and TDB) a 89.1 force and continues to rely primarily on and other bilateral creditors (Saudi Fund, Lower middle-income poverty rate ($3.65) a 97.3 rain-fed production, faces declining pro- Kuwait Fund, and Abu Dhabi Fund) are Upper middle-income poverty rate ($6.85) Gini index a 38.5 ductivity and real income. Diversification still ongoing. Multiple price distortions, School enrollment, primary (% gross) b 126.4 efforts and increased irrigation are pro- including an overvalued official exchange b 62.9 ceeding slowly, making the country more rate, remain prevalent in the economy Life expectancy at birth, years susceptible to economic and climatic and have resulted in widespread resource Total GHG emissions (mtCO2e) 22.7 shocks, and further exacerbating socio- misallocation and complicated efforts to- Source: WDI, Macro Poverty Outlook, and official data. economic challenges. ward macroeconomic stabilization. a/ Most recent value (2019), 2017 PPPs. b/ Most recent WDI value (2022). In the past three years, food insecurity has been increasing, especially towards the end of the year. El Niño induced Malawi’s economic situation remains poor harvest exacerbates food insecurity, Recent developments which is worsened by higher food prices challenging. A severe drought in given that households increasingly rely Real GDP is estimated to have grown 2024 has exacerbated macroeconomic on markets to complement their own only by 1.6 percent year-on-year in 2023 imbalances and added to successive food production. As a result, efforts to re- affected by the unavailability of inputs poor harvests and high food prices. duce poverty are falling short, and the amid forex constraints and the impact of proportion of people living on less than Tropical Cyclone Freddy. Poverty has re- Food insecurity is hindering poverty US$2.15 per day is still above 71 percent mained stubbornly high, at over 71 per- reduction, with nearly three-quarters in 2024, which is higher than during the cent, as real GDP contracted in per capita of the population living in extreme COVID-19 pandemic. terms in 2023 (based on the poverty line poverty. The financing of high fiscal Persistent and widening fiscal and current of US$2.15 a day). deficits and rising food prices are fu- account deficits, an unsustainable debt The current account deficit remained high burden, capital controls, and trade dis- at 16.1 percent of GDP, putting pressure elling inflation. Real GDP is projected tortions have contributed to economic on official reserves, which persistently re- to grow only 1.8 percent in 2024, and volatility, policy uncertainty, and a vi- mained below 1 month of import cover in an acceleration is expected in 2025 if cious cycle of crises. The authorities initi- 2023. The commitment to increasing ex- reforms implementation progresses. ated several fiscal and structural reforms, change rate flexibility announced in No- including external debt restructuring, to vember 2023 has yet to be consistently FIGURE 1 Malawi / Real GDP growth and sectoral FIGURE 2 Malawi / Actual and projected poverty rates and contributions to real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 5 120 390000 4 380000 100 370000 3 80 360000 2 60 350000 1 340000 40 0 330000 20 320000 -1 2020 2021 2022 2023e 2024p 2025p 2026p 0 310000 Agriculture Industry 2010 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 Source: World Bank staff estimates and projections. Source: World Bank. Notes: see Table 2. MPO 256 Oct 24 implemented. The exchange rate premi- and food, while the impact of the pro- um in the informal market has widened longed drought is expected to constrain further, reflecting increasing distortions Outlook export growth. Over the medium-long in the foreign exchange market. term, ongoing investments in commercial- Despite the tight monetary policy stance Real GDP is projected to grow modestly ized agriculture and the mining sector are pursued by the Reserve Bank of Malawi by 1.8 percent in 2024—a third consec- expected to boost economic activity and (RBM), inflation at 33.7 percent remains el- utive contraction in per capita terms. El increase exports, but these are likely to evated, driven by supply side constraints Niño-induced drought conditions take several years to materialise. and the high fiscal deficit. The recent weighed on agricultural production. Poverty and food insecurity are expected drought has constrained grain supply, fur- Maize production in the 2023-24 cropping to increase in 2024 amidst this challeng- ther increasing prices for maize, the coun- season is more than 20 percent below the ing economic environment. Nearly 30 try’s staple, by 16 percent in August 2024 food target set by the government. Fur- percent of the population is expected to year-on-year and disproportionately af- ther, unavailability of foreign exchange face crisis-level food insecurity during the fecting the poor. Any resort to monetary fi- continues to constrain the importation of lean season and poverty is expected to nancing of the deficit could further height- raw materials and production inputs. Re- reach 72.0 percent of the population by en inflationary pressures in 2024. al GDP growth is projected at 4.2 percent the end of 2024. Fiscal revenues grew by 0.6 percentage in 2025 due to agricultural sector recovery The outlook is subject to significant points to 16.8 percent of GDP in 2023, and spillovers towards manufacturing downside risks, including continued fiscal buoyed by a good performance in tax and transportation subsectors. slippages, which could entrench macro- revenue and grants disbursements by The current account deficit is estimated economic instability. Failure to address development partners. Despite this posi- to reach 18.7 percent of GDP in 2024, external imbalances may continue to re- tive development, the country registered putting further pressure on official re- sult in input shortages. Upside risks in- the highest fiscal deficit in sub-Saharan serves estimated at US$119.9 or 0.5 clude faster-than-expected development Africa, at 10.2 percent of GDP, due to months of import cover in August 2024. of the mining sector, an increase in non- fiscal slippages and the recapitalization Imports are expected to continue rising debt creating flows, especially grants to of the RBM to compensate for exchange given sustained demand for strategic the budget, and a rapid conclusion of rate losses. commodities, including fuel, fertilizer, debt-restructuring negotiations. TABLE 2 Malawi / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.8 0.9 1.6 1.8 4.2 3.3 Private consumption 2.6 0.6 3.8 4.7 4.8 5.6 Government consumption -1.1 -5.8 14.8 5.3 7.6 -0.8 Gross fixed capital investment 6.5 12.4 -14.3 -6.5 0.4 -14.1 Exports, goods and services 2.5 3.1 3.5 8.8 6.7 6.0 Imports, goods and services 2.5 3.9 3.9 9.6 6.3 3.9 Real GDP growth, at constant factor prices 2.8 0.9 1.6 1.8 4.2 3.3 Agriculture 5.2 -1.0 0.6 -2.0 5.0 3.0 Industry 1.9 0.9 1.6 2.1 3.3 3.1 Services 2.0 1.8 2.1 3.3 4.2 3.5 Inflation (consumer price index) 9.3 20.9 28.7 33.6 27.3 22.6 Current account balance (% of GDP) -15.2 -17.3 -16.1 -18.7 -16.5 -14.4 Net foreign direct investment inflow (% of GDP) 0.8 1.6 1.5 1.2 1.1 1.0 Fiscal balance (% of GDP) -8.4 -10.3 -10.2 -7.7 -9.9 -6.4 Revenues (% of GDP) 15.1 16.2 16.8 16.6 16.7 16.5 Debt (% of GDP) 67.2 75.5 90.3 85.4 83.2 79.5 Primary balance (% of GDP) -4.4 -5.8 -5.6 -3.3 -5.7 -3.1 a,b International poverty rate ($2.15 in 2017 PPP) 70.6 71.3 71.7 72.0 71.3 71.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 89.4 89.5 89.7 89.8 89.5 89.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 97.4 97.5 97.5 97.5 97.5 97.4 GHG emissions growth (mtCO2e) 0.9 1.5 1.6 1.6 1.4 1.6 Energy related GHG emissions (% of total) 8.0 8.1 8.1 8.1 8.1 8.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2019-IHS-V. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2019) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 257 Oct 24 the three countries signed the Treaty estab- lishing the Confederation of Sahel States. MALI Key conditions and These events have contributed to height- ened political and policy uncertainty, in- challenges cluding the timetable for elections in Mali. Table 1 2023 Mali’s economy remains under-diversi- Population, million 23.3 fied with little structural change over the GDP, current US$ billion 20.2 last three decades. Agriculture and low- Recent developments GDP per capita, current US$ 869.0 productivity services dominate the eco- a 20.8 International poverty rate ($2.15) nomic and employment landscape, while GDP growth is expected to increase a 56.1 manufacturing is limited to agro-indus- slightly from 3.5 percent in 2023 to 3.7 Lower middle-income poverty rate ($3.65) a 85.9 tries and cotton ginning. Gold and cotton percent in 2024 (0.6 percent per capita). Upper middle-income poverty rate ($6.85) Gini index a 35.7 exports expose the economy to commod- Services are expected to grow (+4.2 per- School enrollment, primary (% gross) b 72.6 ity prices and climatic shocks. Per capita cent), albeit less than in 2023, supported b 59.4 GDP growth stagnated over the last by a stronger than expected telecommu- Life expectancy at birth, years decade, limiting poverty reduction efforts, nications sector (+11 percent in Q1 y/y). Total GHG emissions (mtCO2e) 52.6 while human development indicators Agriculture is expected to rebound (+3.6 Source: WDI, Macro Poverty Outlook, and official data. show mixed progress. percent), driven by a successful cotton a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). Persistent insecurity, a weakened social campaign. Industry is projected to slight- contract, and limited investments are ly recover (+2.5 percent), driven by con- key bottlenecks to inclusive and sustain- struction and food manufacturing, while able growth. In combination with the electricity shortages continue to disrupt absence of the State in remote areas, this the production of fertilizers and metallur- GDP growth is projected to reach 3.7 per- has increasingly disrupted service de- gy. Private consumption is expected to be cent in 2024 (0.6 percent per capita), sup- livery. The recurrence of conflict repre- the principal driver on the demand side, ported by agriculture and services, while sents a political and security risk, which contributing 3.3 percentage points (pps), continuing electricity shortages are ex- could be potentially mitigated by the followed by private investment (+1.5 successful implementation of the pps), especially in telecommunications. pected to hinder industrial production. roadmap outlined by the Dialogue Inter- The current account deficit is expected to The extreme poverty rate is projected to Malians for Peace and National Recon- narrow to 6 percent of GDP, driven by fall to 20.8 percent, supported by lower ciliation, concluded in May 2024. the rebound in cotton exports (+ 7.4 per- inflation of 1.2 percent. The outlook is On January 28, 2024, in a joint commu- cent in Q1 y/y), lithium production, and subject to downside risks from rising in- niqué, Burkina Faso, Mali and Niger an- improved terms of trade. nounced their ‘immediate’ withdrawal Inflation is expected to fall to 1.2 percent security, impacts of the Economic Com- from ECOWAS. According to the revised in 2024, due to stronger agricultural output munity of West African States (ECOW- ECOWAS Treaty, a notification period of and lower import costs. These dynamics AS) withdrawal, climate shocks, and con- one year is required to leave ECOWAS. will help the extreme poverty rate, which tinuing high borrowing costs. The three countries remain members of had increased to 21.5 percent in 2023, to WAEMU. Subsequently, on July 6, 2024, fall back to 20.8 percent in 2024. However, FIGURE 1 Mali / Real GDP growth, current account, and FIGURE 2 Mali / Actual and projected poverty rates and real fiscal balances GDP per capita Percent, percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 6 120 270000 4 100 260000 2 80 250000 0 60 240000 -2 40 230000 -4 20 220000 -6 0 210000 -8 2009 2011 2013 2015 2017 2019 2021 2023 2025 2018 2019 2020 2021 2022 2023e 2024p 2025p 2026p International poverty rate Lower middle-income pov. rate Fiscal balance Current account balance GDP growth Upper middle-income pov. rate Real GDP pc Sources: Malian Government and World Bank. Source: World Bank. Notes: see Table 2. MPO 258 Oct 24 the humanitarian situation remains se- the regional market, where Mali has faced by the resumption of international bond rious, with over 330,000 internally dis- a significant surge in interest rates, exceed- issuances, recovering exports, and mone- placed persons, in addition to an estimat- ing 9 percent for 12-month bills. While to- tary policy easing in the Euro Area. ed 1.4 million people (6 percent of the tal public debt is expected to increase to The extreme poverty rate is expected to de- population) facing severe food insecurity 57 percent of GDP in 2024, the risk of debt cline by 1.1 percentage points over the medi- between June and August 2024, a situa- distress remains moderate. um term, reaching 19.7 percent in 2026, but tion being exacerbated by major flooding the number of poor is projected to increase during the rainy season. by nearly 20,000 people over the period. The Central Bank of West African States The outlook remains subject to downside (BCEAO) has kept its policy interest rates Outlook risks related to a persistent electricity cri- unchanged since December 2023 at 3.5 sis, rising insecurity and displacement, percent for liquidity calls and 5.5 percent Real GDP growth is forecasted to in- and further climatic shocks. An ECOW- for the marginal lending facility. The crease to an average of 4.3 percent over AS withdrawal that has gaps in agree- WAEMU Inflation rate has been on a 2025-26, supported by agriculture and ments could lead to larger disruptions downward trend since peaking in 2022 telecommunication services, and assum- in the free movement of goods, services, but is currently above the 1 to 3 percent ing the security situation doesn’t dete- capital, and labor and could have WAEMU target, at 4.4 percent y/y in riorate, some improvement in electricity spillover effects onto trade in the WAE- July 2024, and regional foreign exchange supply, and an orderly ECOWAS with- MU zone. However, if new trade oppor- reserves remain low, covering only 3.5 drawal that limits negative impacts to tunities are realized, these negative im- months of import in 2024Q1. lower trade with non-WAEMU ECOWAS pacts could be mitigated. Mali may al- The fiscal deficit is expected to narrow states. The Government’s fiscal consoli- so continue to face elevated borrowing to 3.5 percent of GDP in 2024, supported dation efforts are expected to enable it costs, which could lead to reductions in by higher tax revenues (+20.7 percent in to converge to the WAEMU ceiling of 3 growth-enhancing investments, amid in- Q1 2024 y/y)—the impact of tax digital- percent by 2026. Inflation is forecasted to creasing demands for defense and secu- ization efforts. On the expenditure side, converge towards the BCEAO target of rity spending. On the upside, strong im- the large public wage bill is expected to 2 percent in 2026. The regional inflation provements in electricity trade, produc- decrease to 9 percent of GDP in 2024. rate is projected to align with WAEMU tion, and supply and reduced regional The fiscal deficit will predominantly be fi- target by 2025, while regional reserves tensions would ease market uncertainty nanced through domestic borrowing from are expected to rise gradually, supported and support investment. TABLE 2 Mali / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.1 3.5 3.5 3.7 4.0 4.5 Private consumption 3.0 4.0 3.9 4.0 4.1 4.1 Government consumption 5.8 7.6 16.7 -0.3 0.7 1.9 Gross fixed capital investment 4.8 1.0 -3.6 6.7 6.0 6.7 Exports, goods and services -1.0 18.1 -3.9 2.8 4.3 5.1 Imports, goods and services 14.1 0.7 2.3 3.9 4.3 4.3 Real GDP growth, at constant factor prices 3.0 4.3 3.4 3.7 4.0 4.5 Agriculture 1.4 2.4 2.3 3.6 4.5 4.5 Industry 1.0 3.7 2.0 2.5 3.5 3.5 Services 5.1 5.8 4.9 4.2 3.9 4.9 Inflation (consumer price index) 4.0 9.7 2.1 1.2 2.0 2.0 Current account balance (% of GDP) -7.7 -7.0 -7.2 -6.0 -4.5 -3.7 Net foreign direct investment inflow (% of GDP) 3.0 2.6 2.5 3.2 3.1 2.9 Fiscal balance (% of GDP) -4.9 -4.8 -3.9 -3.5 -3.3 -3.0 Revenues (% of GDP) 22.0 19.8 23.6 23.4 23.7 22.2 Debt (% of GDP) 50.4 51.8 55.9 57.0 57.2 56.1 Primary balance (% of GDP) -3.5 -3.4 -2.2 -1.5 -1.3 -1.2 a,b International poverty rate ($2.15 in 2017 PPP) 20.8 20.7 21.5 20.8 20.4 19.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 56.1 56.0 58.4 56.6 56.0 54.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 85.9 85.6 87.2 86.1 85.7 85.1 GHG emissions growth (mtCO2e) 4.1 4.3 2.7 4.2 4.8 5.1 Energy related GHG emissions (% of total) 16.4 17.4 16.6 16.8 17.3 18.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 259 Oct 24 MAURITANIA Key conditions and Recent developments challenges Economic activity is expected to remain robust at 6.5 percent in 2024 (3.7 percent Table 1 2023 The service sector constitutes the largest per capita), supported by the expansion Population, million 4.9 share of Mauritania’s economy, but ex- of services and by increases in iron ore GDP, current US$ billion 10.6 tractives will continue to drive exports and fish exports of 15 and 43 percent y- GDP per capita, current US$ 2183.7 and growth in the near term. The first o-y in the first half of 2024. Overall, real a 5.4 International poverty rate ($2.15) phase of the Greater Tortue Ahmeyim exports grew by 15 percent over the a 25.8 (GTA) Offshore gas will start in mid-2025, same period. Compared to the same Lower middle-income poverty rate ($3.65) a 68.0 boosting exports and supporting domes- period in 2023, industrial production Upper middle-income poverty rate ($6.85) Gini index a 32.0 tic power generation. The expansion in witnessed a solid start in the first School enrollment, primary (% gross) b 86.7 iron ore production and transformation quarter of 2024 (+11.5 percent), thanks b 64.7 will support the narrowing of the current to strong mining, manufacturing, and Life expectancy at birth, years account deficit (CAD) and further boost construction activities. Private demand Total GHG emissions (mtCO2e) 14.9 growth. Post-election policies are expect- was strong thanks to increases in elec- Source: WDI, Macro Poverty Outlook, and official data. ed to focus on supporting growth while tricity and fuel consumption. Inflation a/ Most recent value (2019), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy maintaining fiscal discipline and building continued its downward trend, driven (2022). the prerequisites for a diversified, re- by tighter monetary policy and lower silient, and inclusive economy. food and oil prices. It reached 3 percent Ambitious reforms will be needed in (y/y) in July 2024, compared to 4 per- building, using, and protecting human cent (y/y) in July 2023. This downward Growth is expected to remain robust in capital, improving the efficiency of trend is expected to continue through public investments and the overall 2024 to reach an annual average infla- 2024 after a strong performance in quality of infrastructure, boosting pro- tion of 2.7 percent (y/y). 2023. The fiscal and external positions ductivity and innovation, increasing A decline of 2.0 percent in real per capita are projected to improve. Monetary poli- female labor participation and job value-added in the agricultural sector is cy tightening and lower food and energy quality, strengthening the business cli- expected to slightly increase the poverty mate and strengthening governance rate (at US$3.65-a-day) in rural areas, prices supported inflation easing in and resilience to climate shocks. from 41.6 percent in 2023 to 41.9 percent mid-2024. The poverty headcount rate Poverty reduction remains dependent in 2024. Conversely, this poverty rate is (US$3.65-a-day) is expected to decline on agricultural activities and sensitive expected to decline in urban areas from to 27.4 percent in 2024. The outlook is to inflation. Indeed, the last 2019 13.7 percent to 12.0 percent, in line with subject to downside risks stemming household survey suggests that agri- higher real per capita value-added in in- cultural activities and food products dustrial (+4.7 percent) and services activ- from delayed gas production, climate represent 45 and 57 percent of the ities (+5.6 percent). As a result, poverty change and regional insecurity. total income and consumption of the is expected to decrease slightly from 28.1 poor, respectively. percent to 27.4 percent despite inflation FIGURE 1 Mauritania / Evolution of main macroeconomic FIGURE 2 Mauritania / Actual and projected poverty rates indicators and real GDP per capita Percent Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 10 -6 80 100000 8 70 90000 -8 80000 6 60 -10 70000 4 50 60000 -12 2 40 50000 -14 30 40000 0 30000 -16 20 -2 20000 10 10000 -4 -18 2021 2022 2023e 2024p 2025p 2026p 0 0 GDP growth (lhs) 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Primary fiscal balance (lhs) International poverty rate Lower middle-income pov. rate Current account balance (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 260 Oct 24 being halved, to 2.7 percent. Poverty inci- The Central Bank of Mauritania main- The US$3.65-a-day poverty rate is expected dence slowly recovered its downward tra- tained a tight monetary policy and con- to fall to 26.9 and 25.9 percent in 2025 and jectory in 2024, after rising post-COVID. tinued to absorb substantial liquidity. The 2026 respectively, in line with lower infla- Over the first six months of 2024, the fiscal Ouguiya depreciated by 0.9 percent tion and higher value-added per capita balance registered a surplus of 0.3 percent against the dollar (as of end-July) with growth in all sectors. Similarly, poverty is of GDP, compared to a deficit of 0.9 per- the introduction of the new foreign ex- expected to decline in urban and rural areas cent of GDP over the same period in 2023, change platform in December 2023. The in 2025 to 11.5 and 41.3 percent, respectively. and to a deficit of 2.4 percent over the full financial sector remained sound with This decline should continue in 2026. year 2023. This surplus was driven by a strengthened regulations. The fiscal deficit will narrow to an av- combination of higher tax revenues, lower erage of 1 percent of GDP in 2025-2026, current transfers, and lower spending on supported by higher revenue mobiliza- goods and services. Debt-to-GDP ratio fell tion, lower energy subsidies, and lower to 47.2 percent of GDP in 2023 and is ex- Outlook current transfers. Budgetary pressures pected to further decrease in 2024. External from the government’s ambitious public debt remains sustainable, and the risk of Growth will pick up in 2025-2026, aver- investment program remain. debt distress is moderate. aging 7.6 percent (4.8 percent per capita) Risks to the outlook remain elevated. A The CAD improved to 9.1 percent of supported by the start of gas production slowdown in FDI inflows due to a delay GDP in 2023, reflecting lower imports of and exports, higher public investments, an in the second and third phases of the capital goods, oil, and food. The trade improved net external position, and sus- GTA project, and a slowdown in the main balance improved further in the first half tained private demand. The industrial sec- trading partners’ growth, would weigh of 2024, supported by lower food im- tor and services will remain the main dri- on medium-term growth, fiscal and ex- ports, lower imports in the extractive in- vers of the real GDP growth on the supply ternal prospects. Mauritania is also ex- dustry, and higher exports of fish and side. Average inflation is projected to stabi- posed to various climatic shocks such as iron ore. The CAD, projected at 7.9 per- lize around 2 percent with lower food and drought and floods, which affect human cent of GDP for 2024, will be financed oil prices. The CAD is projected to aver- capital, household incomes, and agricul- mostly by Foreign Direct Investments age 8 percent of GDP with gas exports and tural production. Regional insecurity in (FDI) in the extractive industry. lower imports in the extractive industry. the Sahel remains a risk. TABLE 2 Mauritania / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 0.7 6.8 6.5 6.5 7.8 7.5 Private consumption 3.3 3.9 4.2 4.6 4.8 5.0 Government consumption 26.8 14.3 10.6 8.4 7.1 6.9 Gross fixed capital investment 12.1 3.4 -15.3 9.3 7.4 7.1 Exports, goods and services -12.9 16.8 3.5 8.6 12.3 10.6 Imports, goods and services -3.3 15.3 -1.5 5.0 4.6 3.6 Real GDP growth, at constant factor prices 0.0 9.8 4.3 6.5 7.8 7.5 Agriculture -2.9 8.7 -1.0 1.5 1.6 1.6 Industry -11.5 12.5 5.8 8.4 10.8 9.6 Services 10.7 8.6 5.8 7.5 8.4 8.4 Inflation (consumer price index) 3.6 9.6 4.9 2.7 2.0 2.0 Current account balance (% of GDP) -8.5 -17.0 -9.1 -7.9 -8.5 -7.4 Net foreign direct investment inflow (% of GDP) 11.5 14.7 8.0 5.1 4.9 4.5 Fiscal balance (% of GDP) 2.3 -3.8 -2.4 -1.5 -1.0 -1.0 Revenues (% of GDP) 23.0 24.7 22.5 23.3 24.1 24.6 Debt (% of GDP) 52.4 48.5 47.2 44.9 45.0 45.3 Primary balance (% of GDP) 3.1 -3.0 -1.4 -0.5 -0.2 -0.2 a,b International poverty rate ($2.15 in 2017 PPP) 5.6 5.9 6.2 6.3 6.3 6.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 26.0 27.7 28.1 27.4 26.9 25.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 67.8 69.2 69.5 68.7 67.2 65.4 GHG emissions growth (mtCO2e) 2.8 2.9 3.2 3.2 3.4 3.4 Energy related GHG emissions (% of total) 31.3 31.6 32.2 32.8 33.7 34.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2019-EPCV. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 261 Oct 24 To surmount these challenges, Mauritius would need to prioritize productivity-en- MAURITIUS Key conditions and hancing reforms, foster women’s participa- tion in the workforce, and bolster macroeco- challenges nomic resilience. This includes building fis- cal buffers by enhancing revenue collec- Table 1 2023 Over the past 50 years, the island archi- tion and optimizing social spending, im- Population, million 1.3 pelago of Mauritius has transitioned from proving the quality of education, and fos- GDP, current US$ billion 14.6 a low-income to an upper-middle-income tering private sector-led innovation. GDP per capita, current US$ 11553.5 country. Sustained average growth of 4–6 a 1.8 Lower middle-income poverty rate ($3.65) percent in the decades before the a 13.5 COVID-19 pandemic allowed it to reach Upper middle-income poverty rate ($6.85) Gini index a 36.8 high-income status in 2020 briefly. Strong Recent developments School enrollment, primary (% gross) b 102.9 growth and the focus on social programs Life expectancy at birth, years b 73.5 helped the country reduce poverty rates Real GDP grew by 6.4 percent in 2024Q1, Total GHG emissions (mtCO2e) 7.2 from 19 percent to 11 percent between driven by residential investments and fi- 2012 and 2019. More recently, the swift nancial services, which grew by 60 percent Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2017), 2017 PPPs. post-pandemic economic rebound and 6.1 percent, respectively, while higher b/ WDI for School enrollment (2021); Life expectancy demonstrated the country’s resilience, international tourist arrivals supported de- (2022). made possible by decisive health and fis- mand for transport and accommodation cal responses amid a supportive business services. However, lower purchase orders environment. Poverty is projected to have due to external competition and labor fallen to around 9 percent by 2024 after shortages led to declining goods exports. a dramatic increase to 16 percent during Higher labor demand from tourism, con- COVID-19 in 2020. struction, and the financial sectors resulted Mauritius’ economy is expected to grow To achieve high-income status, Mauri- in a decline in unemployment to 6.3 per- by 5.6 percent in 2024, supported by a tius must overcome its structural chal- cent in 2024Q1. Youth unemployment has pick-up in tourism and investment in re- lenges, such as an aging population declined 10 percentage points to 18.8 per- sponse to easing labor regulations for for- and labor shortages, which have weak- cent between 2022Q1 and 2024Q1, while eigners. Inflation is projected to fall to 4.9 ened export competitiveness. As an is- female labor participation has increased land economy, Mauritius is also increas- from 41.9 to 48.5 percent in the same peri- percent by year-end, aided by lower com- ingly vulnerable to climate shocks, par- od. Recent policies to foster women partic- modity prices. The poverty rate is project- ticularly droughts and tropical cyclones. ipation in the labor force include the exten- ed to decline from 10 percent in 2023 to 8 Social spending commitments amidst an sion of maternal and paternal leave by two percent by 2025. Export challenges and aging demographic are straining fiscal weeks and three weeks, respectively. resources, limiting the fiscal space to in- Inflation has declined despite the tem- fiscal pressures pose downside risks to vest in productive capital projects, sup- porary spike in the aftermath of Cyclone growth and fiscal sustainability. porting climate adaptation efforts, and Belal in January 2024, due to moder- deploying countercyclical policies to ation in global commodity prices and mitigate shocks. lower inflation in key trading partners. FIGURE 1 Mauritius / Real GDP growth and sectoral FIGURE 2 Mauritius / Actual and projected poverty rates contributions to real GDP growth and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 12 25 500000 450000 8 20 400000 4 350000 15 300000 0 250000 10 200000 -4 150000 Agriculture 5 100000 -8 Industry 50000 Services -12 0 0 Gross value added at basic prices 2012 2014 2016 2018 2020 2022 2024 2026 -16 Lower middle-income pov. rate Upper middle-income pov. rate 2019 2020 2021 2022 2023e 2024f 2025f 2026f Real GDP pc Sources: National Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 262 Oct 24 Consequently, headline and core inflation gains contributed to a lower overall tax expected to cause the government bud- fell to 4.3 and 3.7 percent in July 2024, revenue growth of 8.7 percent, almost get deficit to remain around 5 percent of down from 10.5 and 6.7 percent last year. half of the target of the FY23/24 Budget GDP. In 2025, real GDP growth is ex- Recently the BOM reduced the policy rate (15.6 percent). As a result, the budget pected to gradually converge to the long- from 4.5 percent to 4 percent. deficit rose to 5.5 percent of GDP, ex- term trend and ease to about 4.4 per- The decrease in goods exports led to the ceeding the target by 1.2 percentage cent, with inflation expected to reach 4.2 widening of the current account deficit points. Consequently, the public debt-to- percent. With growth expected to be sus- to USD 179 million in 2024Q1, up from GDP ratio increased to 77.6 percent from tained, the poverty rate is projected to fall USD 89 million in the same period last an anticipated 74.5 percent. to about 7 percent by 2026. year. The re-routing of funds by global Risks to the outlook are balanced. The eas- business companies to other countries al- ing of global financing conditions could so contributed to net foreign direct in- lead to higher financing flows. Fair and vestment outflows of USD 320 million in Outlook transparent elections can strengthen stabil- 2024Q1. These factors contributed to a 4.9 ity and further support private-sector in- percent rupee depreciation against the US The near-term outlook is generally posi- vestment. On the downside, sluggish glob- dollar in the first half of 2024, with the tive, with real GDP expected to reach 5.6 al economic growth could affect the de- BOM intervening to stabilize the foreign percent in 2024. Growth is expected to be mand for Mauritius’ exports. Weather exchange market. Nevertheless, the cen- supported by higher international tourist shocks would weaken growth and gener- tral bank maintained adequate reserves, arrivals, sustained public investments, and ate inflationary and fiscal pressures. with gross official reserves standing at social spending despite lower exports of Enhancing the investment climate and bol- USD 7.9 billion in July 2024, equivalent to goods. The more relaxed requirements for stering financial service integrity, includ- 12 months of import cover. foreign professionals to work in Mauritius ing by strengthening currency convertibil- As the general election approaches, fiscal are expected to narrow the skills gap over ity and the anti-money laundering frame- policy is expected to remain expansion- the medium term and support private in- work, could attract private capital for cli- ary. In FY23/24, spending rose by 12.9 vestments. Annual inflation is projected to mate adaptation and energy transitions. percent and is expected to increase by settle at 4.2 percent in 2024, supported by Additionally, gradual fiscal consolidation 17 percent in FY24/25. Underperformance a softening in global commodity prices. is necessary to build fiscal buffers for in taxes on income, profits, and capital However, the ongoing fiscal expansion is macroeconomic resilience. TABLE 2 Mauritius / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f a Real GDP growth, at constant market prices 3.3 8.9 7.0 5.6 4.4 3.8 Private consumption 3.0 3.3 3.2 3.7 3.5 4.0 Government consumption -2.2 6.4 -4.7 3.4 4.1 4.9 Gross fixed capital investment 13.9 7.8 31.0 14.1 9.0 6.1 Exports, goods and services 11.5 40.2 -1.3 1.7 3.8 1.1 Imports, goods and services 7.3 10.2 1.8 2.1 4.8 3.0 Real GDP growth, at constant factor prices 4.0 9.4 7.0 5.6 4.4 3.8 Agriculture 7.3 5.5 13.6 6.3 3.1 1.6 Industry 10.9 6.8 10.5 8.7 6.7 5.5 Services 2.2 10.3 5.9 4.7 3.9 3.4 Inflation (consumer price index) 4.0 10.8 7.0 4.2 3.5 3.8 Current account balance (% of GDP) -13.0 -11.1 -5.5 -5.3 -4.3 -4.1 Net foreign direct investment inflow (% of GDP) -21.1 -72.3 -2.9 -2.0 -1.3 -1.3 b Fiscal balance (% of GDP) -9.4 -5.2 -5.2 -5.6 -5.4 -5.3 Revenues (% of GDP) 24.9 24.9 23.7 24.5 24.5 24.4 b Debt (% of GDP) 88.0 80.9 78.5 79.1 76.4 74.7 b Primary balance (% of GDP) -6.7 -2.7 -2.5 -2.7 -2.6 -2.5 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.1 1.7 1.3 1.1 0.8 0.7 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.3 12.7 10.4 9.0 7.9 7.0 GHG emissions growth (mtCO2e) 4.6 4.3 3.1 4.0 3.3 4.3 Energy related GHG emissions (% of total) 59.8 60.7 60.8 61.2 61.3 61.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Historical demand-side data is being revised due to a consistency problem. b/ Fiscal balances are reported in fiscal years (July 1st - June 30th). For the purpose of this report, the fiscal year data has been converted to calendar year data. c/ Calculations based on 2017-HBS. Actual data: 2017. Nowcast: 2018-2023. Forecasts are from 2024 to 2026. d/ Projection using neutral distribution (2017) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 263 Oct 24 services. This hampers medium-term growth prospects and poverty reduction. MOZAMBIQUE Key conditions and Additional financing constraints include a high risk of public debt distress, the lack of challenges access to international markets, and a shal- low domestic market. Table 1 2023 Mozambique experienced strong econom- A more resilient and inclusive economic Population, million 33.9 ic growth before 2016, with an average model is essential to create jobs, reduce GDP, current US$ billion 21.0 growth rate exceeding 7 percent between poverty, and manage vulnerabilities to GDP per capita, current US$ 618.2 2000 and 2015. However, multiple shocks shocks. Reducing wage bill pressures, en- a 74.5 International poverty rate ($2.15) between 2016 and 2021, including the hid- hancing spending efficiency, and improv- a 88.6 den debt crisis, cyclones, COVID-19, and ing debt management are crucial for fiscal Lower middle-income poverty rate ($3.65) a 50.3 conflict in northern Mozambique, severely sustainability. In parallel, managing future Gini index School enrollment, primary (% gross) b 121.2 impacted economic activity and reversed LNG revenue streams effectively, improv- Life expectancy at birth, years b 59.6 poverty reduction. ing access to finance, and addressing in- Total GHG emissions (mtCO2e) 115.6 The economy remains heavily reliant on frastructure and regulatory challenges are natural resources, with extractive indus- critical for job creation, structural transfor- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2019), 2017 PPPs. tries driving growth. Agriculture, which mation, and reducing fragility, particularly b/ Most recent WDI value (2022). employs over 72 percent of the popula- given the upcoming elections. tion, suffers from low productivity and high vulnerability to climatic shocks, con- tributing to high and entrenched rural poverty. Frequent natural disasters un- Recent developments dermine economic activity and food se- Economic growth is expected to slow to curity, exacerbating poverty, which was GDP growth decelerated to 3.9 percent 4.0 percent in 2024 due to subdued activ- projected at 74.7 percent in 2023 when in the first half of 2024 (H1-2024), down ity in agriculture and extractive sectors. measured by the US$2.15 poverty line. from 6.2 percent in H1-2023, due to lower Despite fiscal consolidation efforts, pres- High underemployment and inequality growth contribution by the extractives are significant barriers to economic inclu- and agriculture sectors. Gas production at sures remain from a high wage bill and sion, while the informal sector, encom- the Coral South facility, which started in rising debt service. Growth is projected to passing over 80 percent of the labor force, 2022, attained its maximum capacity in stay at 4 percent over the medium term, dominates the labor market, leaving many 2023, and remain at those levels in 2024. with poverty declining slightly from 74.7 workers without social protection. Growth in the agricultural sector declined Despite recent fiscal consolidation efforts, from 4.6 percent in H1-2023 to 1.4 percent to 73.4 percent. Risks include global mar- fiscal pressures remain elevated. The wage this year, largely due to heavy rains at the ket volatility, natural disasters, the con- bill, pensions, and debt-service costs end of Q1-2024. flict in northern Mozambique, and slower amounted to nearly 90 percent of tax rev- nflation continued to decline, owing to progress on fiscal consolidation. enues during 2021-2023, limiting resources a combination of lower global oil and for non-salary spending on education, food prices and a stable exchange rate. health, social protection, and other vital The Central Bank reduced the benchmark FIGURE 1 Mozambique / Real GDP growth and sectoral FIGURE 2 Mozambique / Actual and projected poverty contributions to real GDP growth rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 6 100 35000 5 90 30000 80 4 25000 70 3 60 20000 2 50 40 15000 1 30 10000 0 20 5000 10 -1 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 Real GDP pc Sources: National Bureau of Statistics and World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 264 Oct 24 interest rate from 17.25 to 14.25 percent loans. This settlement does not materially deficit is expected to be financed primar- between January and July 2024, as in- affect debt sustainability. ily through a combination of foreign di- flation eased. However, average commer- rect investment inflows related to these cial rates have remained above 20 per- megaprojects and potential drawdowns cent, partly due to the high mandatory re- on foreign exchange reserves. serve requirement rate on local currency Outlook The fiscal deficit is projected to narrow deposits of 39 percent. from 4.3 to 1.3 percent of GDP between The external sector position has slightly Economic growth is expected to moderate 2023 and 2026, contingent on consolida- improved in H1-2024 with the current ac- to 4 percent in 2024 due to a lower con- tion measures that are expected to in- count deficit narrowing from $1.5 billion tribution of the extractives sector. In the crease revenue by 1.8 percentage points, to $1.3 billion due to higher volume of gas medium term, the economy is projected to strengthen tax compliance, and control exports and lower capital goods imports. maintain a 4 percent growth rate support- expenditure, including the implementa- This deficit was mainly financed by foreign ed by the recovery in agriculture after the tion of a fiscal rule limiting wage bill direct investment into the extractive sector, climate shocks of H1-2024 and growth in growth, and the adequate management of amounting to $1.5 billion in H1-2024. Con- services. Inflation is projected to decrease arrears. This rule could reduce the wage sequently, gross international reserves from 7.1 to 2.8 percent during 2023-2026, bill from 15.2 to 13.6 percent of GDP over rose from 2.7 to 3.2 months of imports. owing to low and stable global prices. De- the forecast period. Public debt is forecast- The fiscal deficit including grants has re- spite an expected reduction in the poverty ed to slightly decline from 97.5 to 95.7 per- mained roughly stable, from MZN 14,963 rate, from 74.7 to 73.4 percent, the total cent of GDP between 2024 and 2026. million in H1-2023 to MZN 14,267 million number of individuals living in poverty is The outlook is subject to substantial down- in H1-2024 due to increasing grants and projected to increase by 1.7 million due to side risks related to extreme climate income tax revenue. Public debt is as- rapid population growth. events, a slower pace or reversal in the im- sessed as sustainable in a forward-looking The current account deficit is expected plementation of fiscal reforms due to the sense, with total public debt at 94 percent to widen from 14.8 percent to 28.8 per- upcoming presidential elections, and de- of GDP as of December 2023. In June cent of GDP between 2024-2026, driven terioration of the security situation in the 2024, the government of Mozambique by higher imports of goods linked to north. A worsening fiscal stance may in- reached an agreement with creditors to megaprojects, while exports are projected crease the risk of debt refinancing and settle the remaining 2014-15 disputed to remain stable. The current account rollover of domestic debt. TABLE 2 Mozambique / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 2.4 4.4 5.4 4.0 4.0 4.0 Private consumption 5.8 7.2 9.1 4.9 6.7 6.8 Government consumption -4.0 5.1 6.7 3.6 -1.1 1.7 Gross fixed capital investment 0.7 23.8 -43.0 8.9 8.3 4.6 Exports, goods and services 16.8 26.5 -5.3 3.0 3.0 3.0 Imports, goods and services 9.7 30.9 -25.2 6.5 6.8 6.4 Real GDP growth, at constant factor prices 2.4 4.5 6.0 4.0 4.0 4.0 Agriculture 3.4 5.5 3.8 3.0 3.2 3.2 Industry 1.7 4.6 13.8 3.0 3.0 3.0 Services 2.1 3.7 3.1 5.3 5.2 5.0 Inflation (consumer price index) 6.4 10.3 7.1 3.1 2.8 2.8 Current account balance (% of GDP) -22.6 -36.4 -11.6 -14.8 -22.3 -28.8 Net foreign direct investment inflow (% of GDP) 31.4 13.0 12.0 9.8 14.1 14.4 a Fiscal balance (% of GDP) -4.5 -4.1 -4.3 -2.4 -1.1 -1.3 Revenues (% of GDP) 26.9 27.8 29.0 29.9 30.5 31.2 Debt (% of GDP) 104.4 96.8 93.9 97.5 98.7 95.7 a Primary balance (% of GDP) -2.1 -1.2 -0.6 0.5 1.8 1.6 b,c International poverty rate ($2.15 in 2017 PPP) 76.1 75.6 74.7 74.4 73.8 73.4 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 89.3 89.1 88.7 88.6 88.4 88.2 GHG emissions growth (mtCO2e) 3.7 0.2 3.3 1.3 1.3 1.4 Energy related GHG emissions (% of total) 10.1 9.6 12.0 12.8 13.6 14.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Figure includes once-off capital gains revenues in 2017, estimated at 2.7 percent of GDP. b/ Calculations based on 2019-IOF. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 265 Oct 24 natural resource sector, slow job creation, and skills scarcities. Most of the working NAMIBIA Key conditions and population is engaged in low-skilled work in the informal sector. challenges Namibia’s path to more inclusive growth and poverty reduction necessitates a com- Table 1 2023 Sound macroeconomic management and prehensive reform agenda to improve a 2.6 Population, million positive spillovers from the commodity su- skills and boost productivity, and encour- GDP, current US$ billion 12.4 per cycle helped Namibia reach upper age more private sector investment outside GDP per capita, current US$ 4742.8 middle-income status in 2009. The econ- the natural resources sectors. This could b 15.6 International poverty rate ($2.15) omy expanded at a robust pace during spur a structural shift away from the cur- b 33.3 2010-2015, averaging above 5 percent, an- rent growth model based on a large state Lower middle-income poverty rate ($3.65) b 57.3 chored by high investment rates, growing footprint and on extractives, which entails Upper middle-income poverty rate ($6.85) Gini index b 59.1 demand for services, and fiscal stimulus. a high vulnerability to volatile commodity School enrollment, primary (% gross) c 133.0 Resource wealth has been used to increase prices. Large mega projects in the mineral c 58.1 access to public services, including health and energy sector that could materialize Life expectancy at birth, years and education, and expand social protec- over the coming years offer an opportunity Total GHG emissions (mtCO2e) 25.7 tion, allowing for steady progress in to boost economic development via build- Source: WDI, Macro Poverty Outlook, and official data. poverty reduction. Based on the interna- ing value chains. a/ Latest official estimates. Preliminary results from the 2023 census suggest a population of 3.0 million vs the 2.6 tional poverty line of $2.15 per day (2017 million used here. PPP), the poverty rate declined from 35.9 b/ Most recent value (2015), 2017 PPPs. percent in 2003/04 to 15.6 percent in 2015/ c/ Most recent WDI value (2022). 16. A structural break in growth occurred Recent developments starting in 2016, driven by the end of the commodity cycle, the completion of major Namibia’s economy continued to expand GDP growth is projected to gather pace, investment projects, drought, and fiscal in 2024H1 although at an estimated lower supported by foreign direct investment consolidation. The COVID-19 shock exac- pace. A severe drought, declining mineral inflows, a rebound in exports, and the erbated these challenges. Real per capita in- revenues, and slowing foreign direct in- dissipation of drought effects. Lower in- come growth was negative over 2016-2020. vestment (FDI) from the highs in 2023 Notwithstanding the progress made since contributed to the lower growth. Mining flation and monetary easing should also independence, many social indicators activity, which accounted for up to half of support domestic consumption. Subdued continue to lag those of peers, and there GDP growth in recent years, is growing investment outside the capital-intensive are significant spatial and gender dispar- at a moderate pace. Non-mining activity industrial sector and skills gaps are ex- ities. Poverty is high for Namibia’s level continues to recover but output in sever- pected to continue to weigh on job cre- of development, and the country ranks al job-rich sectors including construction, amongst the most unequal in the world manufacturing, and financial services re- ation. The poverty rate is projected at (Gini index at 59.1 in 2015). Structurally mains below pre-COVID-19 levels. 17.2 percent in 2024 under the interna- high unemployment, which is estimated Household consumption is recovering tional poverty line of $2.15 per day. at above 20 percent, is explained in part from low levels in 2023, as inflation is eas- by low private investment outside the ing, but a weak labor market, high interest FIGURE 1 Namibia / Current account balance and foreign FIGURE 2 Namibia / Actual and projected poverty rates and direct investment real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 30 80 70000 20 70 60000 10 60 50000 0 50 40000 40 -10 30000 30 -20 20000 20 -30 10 10000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2019 2020 2021 2022 2023 2024 0 0 Goods trade Services trade 2009 2011 2013 2015 2017 2019 2021 2023 2025 Non-trade balance Current account International poverty rate Lower middle-income pov. rate FDI inflows Upper middle-income pov. rate Real GDP pc Sources: National Statistics Agency and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 266 Oct 24 rates, and low savings continue to weigh of an easing cycle. Headline inflation due to the anticipated decline in SACU on household demand. slowed to 4.9 percent in 2024H1 from 6.5 revenues, the fiscal deficit is expected to The current drought lowered agricultural percent in 2023H1. reach 4.9 percent of GDP in FY2025/26. crop yields and worsened food insecurity, The public debt ratio is projected to de- leading the Government to declare a State cline given steady economic growth and of Emergency in May. About 1.4 million the Government’s plan to pay off at least people face high levels of acute food in- Outlook two-thirds of the $750 million Eurobond security, more than twice the number es- maturing in October 2025 using savings timated in mid-2023. Growth is expected to slow to 3.1 percent from its sinking fund. A favorable cycle for Southern African in 2024 before increasing over the medium The risks to the economic outlook are bal- Customs Union (SACU) revenues, which term. Slower growth in 2024 is driven by anced. The FDI outlook is favorable but increased 72 percent, continues to support weaker export demand, the impact of with a high degree of uncertainty around external and fiscal balances, with the fis- drought, tight monetary conditions, and the timing and implementation of large- cal deficit narrowing to 3.6 percent of base effects. Through 2025-2026, invest- scale industry projects, including the $10 GDP in FY2023/24. The SACU revenue ment growth is projected to remain firm billion Hyphen green hydrogen project windfall was absorbed into higher expen- with significant upside potential. House- and the development of offshore oil fields diture. The public debt ratio declined to hold spending growth is expected to in- which have not reached FID. These invest- 69 percent of GDP, helped by robust GDP crease, supported by lower inflation and ments could be transformational, bringing growth, but remains high relative to the monetary policy easing. Headline inflation substantial revenues to finance infrastruc- peer country average. is expected to stabilize around 4.5 percent ture and education. Downside risks stem Lower diamond sales and FDI-related im- in the medium term. In the context of an from climate shocks, challenges in the di- ports caused the current account deficit to uneven recovery and drought, which has amond sector, and global geopolitical ten- widen to 19.4 percent of GDP in 2024Q1. affected the well-being of subsistence sions which would impact exports nega- FDI inflows helped finance the deficit. farmers, poverty is expected to remain tively. Lack of fiscal discipline could un- Monetary policy remained broadly high at 17.2 percent in 2024 based on the dermine efforts to continue to reduce the aligned with the South African Reserve $2.15 per day international poverty line. high public debt-to-GDP ratio and high-in- Bank’s restrictive stance although the Bank The increase in government expenditure terest payments. Given the expected fall in of Namibia lowered its policy rate by 25 is expected to be limited in 2025, includ- SACU revenues, containing public expen- basis points in August, signaling the start ing in the public wage bill. However, diture remains a priority. TABLE 2 Namibia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.6 5.3 4.2 3.1 3.7 3.9 Private consumption 14.6 9.5 4.7 5.2 5.5 5.6 Government consumption 1.3 0.6 1.0 1.4 0.7 0.5 Gross fixed capital investment 18.0 10.0 69.3 10.3 10.7 11.1 Exports, goods and services -2.1 22.9 14.1 1.2 4.6 4.8 Imports, goods and services 20.2 23.0 22.7 6.1 7.5 7.5 Real GDP growth, at constant factor prices 1.5 4.6 4.0 3.1 3.7 3.9 Agriculture 1.6 1.7 -3.4 -1.9 1.1 2.0 Industry 0.5 11.3 9.2 4.7 5.5 6.0 Services 1.9 2.2 2.7 3.0 3.1 3.1 Inflation (consumer price index) 3.6 6.1 5.9 4.6 4.5 4.5 Current account balance (% of GDP) -11.4 -12.9 -14.8 -15.1 -15.1 -14.5 Net foreign direct investment inflow (% of GDP) 6.7 8.4 21.2 10.5 10.9 11.0 Fiscal balance (% of GDP) -8.5 -5.3 -3.6 -4.3 -4.9 -4.6 Revenues (% of GDP) 29.6 30.3 34.8 34.6 31.6 30.4 a Debt (% of GDP) 72.7 70.5 70.1 69.0 68.1 66.8 Primary balance (% of GDP) -3.9 -0.8 1.8 0.9 -0.1 0.1 b,c International poverty rate ($2.15 in 2017 PPP) 19.7 18.6 17.8 17.2 16.9 16.5 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 38.0 36.8 36.0 35.6 35.0 34.5 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.3 61.1 60.1 59.7 59.0 58.4 GHG emissions growth (mtCO2e) 1.9 2.6 1.0 2.7 3.3 3.5 Energy related GHG emissions (% of total) 14.8 15.0 15.6 15.8 16.0 16.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Refers to Public and Publicly Guaranteed debt. b/ Calculations based on 2015-NHIES. Actual data: 2015. Nowcast: 2016-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2015) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 267 Oct 24 allowed two shipments of oil to be loaded and exported to China before preventing NIGER Key conditions and additional shipments. In response, Nige- rien authorities have shut down the challenges pipeline and stopped oil production for exports since mid-June. Table 1 2023 Niger’s economy is agriculture depen- Population, million 27.2 dent and vulnerable to climate shocks. GDP, current US$ billion 16.7 With low productivity and high popula- GDP per capita, current US$ 613.9 tion growth, around half of the popula- Recent developments a 50.6 International poverty rate ($2.15) tion lives in extreme poverty, aggravated a 83.1 by gender disparities and weak human The political crisis in 2023 is estimated Lower middle-income poverty rate ($3.65) a 96.3 capital development. to have reduced GDP growth to 2.0 per- Upper middle-income poverty rate ($6.85) Gini index a 32.9 Niger’s relative stability in the Sahel cent in 2023 (-1.7 percent per capita). School enrollment, primary (% gross) b 65.0 had led to a significant increase in in- Growth in 2024 is expected to recover b 62.1 ternational development assistance and with the sanctions lifted in February 2024 Life expectancy at birth, years investment. This changed with the mili- and the resumption of financing. Howev- Total GHG emissions (mtCO2e) 52.9 tary coup on July 26, 2023, which led to er, the expected boost from large-scale oil Source: WDI, Macro Poverty Outlook, and official data. ECOWAS and WAEMU economic sanc- exports has been dampened. Growth in a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). tions, border closures lasting nearly 7 2024 is projected at 5.7 percent (1.8 per- months, and a pause in development cent per capita), based on an expected assistance. On January 28, 2024, in a total oil production of 11.2 million bar- joint communiqué, Burkina Faso, Mali rels, compared to 9.1 percent growth if and Niger announced their ‘immediate’ oil production had reached 16.6 million Growth in 2024 is expected to recover withdrawal from ECOWAS. The three barrels. On the supply side, in addition to 5.7 percent (1.8 percent per capita) countries remain members of WAEMU. to industry (oil), agriculture is expected with the sanctions lifted in February Subsequently, on July 6, 2024, the three to contribute 2.6 percentage points (pps) 2024 and resumption of financing. countries signed the Treaty establishing to growth. Exports, driven by oil, is ex- the Confederation of Sahel States. These pected to be the main driver on the de- However, the expected boost from oil ex- events have heightened political and mand side (+4.5 pps), followed by private ports has been dampened by the trade policy uncertainty. consumption (+2.6 pps). dispute with Benin, which has also With the completion of the Niger-Benin Trade disruptions due to the border clo- pushed up food prices. The outlook is pipeline, oil production was expected to sure with Benin have fueled an increase in subject to downside risks, including a rise from 15,000 to 107,000 barrels/day by food prices, leading the year-on-year infla- 2024, increasing the importance of oil in tion rate to rise from 1.7 percent in June prolonged trade dispute, impacts of the exports, revenues, and GDP, and provid- 2023 to 15.5 percent in June 2024. The an- Economic Community of West African ing revenues to Benin. The land border nual average inflation rate is expected to States (ECOWAS) withdrawal, climate with Benin remains closed as of mid-Sep- reach 8.5 percent. shocks, and worsening insecurity. tember, with Nigerien authorities citing se- Despite higher inflation, the extreme pover- curity concerns. The Beninese authorities ty rate is projected to decrease to 47.5 percent FIGURE 1 Niger / Real GDP growth and contributions to real FIGURE 2 Niger / Actual and projected poverty rates and GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 15 120 400000 350000 10 100 300000 5 80 250000 60 200000 0 150000 40 -5 100000 20 50000 -10 2021 2022 2023 2024 2025 2026 0 0 Priv. cons. Govt. cons. GFCF 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Exports Imports Statistical disc. International poverty rate Lower middle-income pov. rate Inventories GDP Upper middle-income pov. rate Real GDP pc Source: World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 268 Oct 24 in 2024 due to positive agriculture growth. on the regional market, albeit at higher Inflation is projected to remain high at an However, 13.1 percent of the population rates, exceeding 9 percent for 12-month average of 5.4 percent over 2025-26, partly is facing severe food insecurity, around bills. The clearance was assisted by a due to higher import costs. The regional 300,000 people are internally displaced US$400 million loan from China secured inflation rate is expected to align with due to insecurity, and floods in August de- by oil exports; the pause in oil exports WAEMU target by 2025, while regional re- stroyed thousands of homes and led to complicates the repayment. serves are expected to rise gradually, sup- hundreds of deaths. ported by the resumption of international The Central Bank of West African States bond issuances, recovering exports and (BCEAO) has kept its policy interest rates monetary policy easing in the Euro Area. unchanged since December 2023 at 3.5 per- Outlook Despite projected higher inflation in cent for liquidity calls and 5.5 percent for 2025-26, the extreme poverty rate is pro- the marginal lending facility. The WAE- GDP growth is expected to average 6.5 jected to decrease significantly to 42.5 per- MU inflation rate has been on a down- percent over 2025-2026, supported by oil cent by 2026, driven by the strong GDP ward trend since peaking in 2022 but re- production and exports (scaling up in and agriculture output growth projections. mains above the 1 to 3 percent WAEMU 2025) and improvements in agricultural The outlook remains subject to significant target, at 4.4 percent y/y in July 2024, output due to an expansion in irrigated downside risks, including a deterioration and regional foreign exchange reserves land. This assumes the security situation of the security situation, commodity price remain low, covering only 3.5 months of doesn’t deteriorate and an orderly volatility and climatic shocks. An ECOW- import in 2024Q1. ECOWAS withdrawal that limits negative AS withdrawal that has gaps in agree- Given lower than expected oil revenues, impacts to lower trade with non-WAEMU ments could lead to larger disruptions in the fiscal deficit in 2024 is expected to re- ECOWAS states. As domestic financing the free movement of goods, services, cap- main above the WAEMU target at 4.4 per- is expected to remain costly, the fiscal ital, and labor and could have spillover ef- cent of GDP. At the end of April 2024, deficit is expected to narrow and average fects onto trade in the WAEMU zone. the government had accumulated CFAF 3.6 percent over 2025-2026, with public However, if new trade opportunities are 701.8 billion in external and domestic/ debt declining to 50.6 percent by 2026. realized, these negative impacts could be regional debt arrears. However, by the The current account deficit is projected mitigated. Sustained or escalated tensions end of June, Niger had cleared CFAF to narrow and average 4.1 percent over between Benin and Niger could lead to 533.8 billion and resumed bond issuances 2025-26 on the back of oil exports. higher trade costs and delay oil exports. TABLE 2 Niger / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.4 11.5 2.0 5.7 8.5 4.6 Private consumption -0.2 7.0 3.5 3.8 4.6 4.7 Government consumption 9.8 -1.2 -7.0 3.5 2.9 1.2 Gross fixed capital investment 7.7 21.1 -10.4 4.0 7.6 2.8 Exports, goods and services 6.7 14.4 -8.1 45.2 39.1 9.2 Imports, goods and services 6.9 6.5 -12.0 13.3 10.1 4.1 Real GDP growth, at constant factor prices 1.0 11.6 2.1 5.7 8.5 4.6 Agriculture -5.1 27.0 3.1 6.5 6.8 5.2 Industry 4.1 -0.9 3.9 12.1 5.6 3.4 Services 5.4 4.9 0.1 1.1 12.2 4.5 Inflation (consumer price index) 2.9 3.9 3.7 8.5 6.7 4.2 Current account balance (% of GDP) -7.8 -9.8 -9.3 -8.3 -3.8 -2.9 Net foreign direct investment inflow (% of GDP) 2.1 3.9 3.2 1.6 1.7 1.7 Fiscal balance (% of GDP) -3.4 -6.8 -5.4 -4.4 -3.9 -3.2 Revenues (% of GDP) 18.2 14.9 10.5 10.9 11.4 11.1 Debt (% of GDP) 51.3 51.7 54.7 53.3 51.3 50.6 Primary balance (% of GDP) -2.2 -5.6 -4.5 -3.8 -3.5 -2.8 a,b International poverty rate ($2.15 in 2017 PPP) 50.6 48.4 48.4 47.5 44.2 42.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 83.1 81.8 81.7 81.0 78.8 78.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 96.3 95.5 95.5 95.2 94.2 93.9 GHG emissions growth (mtCO2e) 5.0 5.0 4.0 4.7 5.0 4.7 Energy related GHG emissions (% of total) 7.4 8.1 7.8 8.0 8.4 8.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 269 Oct 24 creating a more favorable environment for business expansion and job creation. NIGERIA Key conditions and However, for Nigeria to achieve faster and sustained progress, it must also ad- challenges dress structural constraints that impede inclusive growth, including weak gover- Table 1 2023 Nigeria's economic outlook has improved nance, poor infrastructure, limited access Population, million 225.5 due to recent macroeconomic reforms, to electricity and connectivity, insecuri- GDP, current US$ billion 363.6 but overcoming structural barriers is es- ty, significant trade restrictions, and poor GDP per capita, current US$ 1612.6 sential to drive faster and more inclusive human development outcomes. a 30.9 International poverty rate ($2.15) growth. Maintaining momentum on re- a 63.5 forms is crucial. Authorities have followed Lower middle-income poverty rate ($3.65) a 90.8 through on their commitment to stop mon- Upper middle-income poverty rate ($6.85) Gini index a 35.1 etizing the deficit and are implementing Recent developments School enrollment, primary (% gross) b 86.7 measures to increase non-oil tax revenues. b 53.6 The Central Bank of Nigeria (CBN) is Growth slowed from 3.3 percent in 2022 Life expectancy at birth, years maintaining a tighter monetary policy and to 2.9 percent in 2023, due to weak crude Total GHG emissions (mtCO2e) 397.6 a unified, market-driven exchange rate. oil production, policy missteps including Source: WDI, Macro Poverty Outlook, and official data. Given increased poverty together with currency demonetization in Q1-2023, and a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). worsening food insecurity partly driven by spillovers from 2022 floods. In H1-2024 high food inflation, the Government is growth was modest at 2.9 percent. Ser- rolling out temporary, targeted cash trans- vices, especially financial and telecommu- fers aimed at supporting 15 million recip- nications, continue to drive growth. The ients and their families through NGN oil sector also contributed to growth al- Nigeria has undertaken difficult but nec- 75,000 in three tranches (directly benefiting though production remains significantly essary reforms to turn around its develop- over 67 million Nigerians). below potential. ment trajectory after policy missteps and While macro stabilization is essential and With rising inflation, the CBN raised the multiple shocks which have deepened and currently underway, by itself it is in- monetary policy rate by 850 basis points sufficient to enable Nigeria to reach its between February and September 2024, in- broadened poverty. Positive results are growth potential. Sustained efforts and creased the cash reserve ratio from 32.5 to beginning to show. Inflation is decreasing the establishment of a credible track 50 percent, conducted open market opera- after reaching a peak high, the fiscal posi- record are necessary to achieve sustained tions, and halted deficit financing. Year-on- tion is improving, and foreign exchange progress. Economic growth has struggled year inflation thus declined from 33.4 per- reserves have steadily grown. To main- to keep pace with population growth, cent in July 2024 to 32.15 percent in Au- contributing to poverty exacerbated by gust. However, labor incomes have not tain momentum, Nigeria must contain double-digit inflation. Measures such as kept pace, pushing an additional 14 mil- inflation, boost non-oil revenues, and monetary tightening, exchange rate flex- lion Nigerians into poverty in 2024. An es- avoid deficit monetization to support ibility, and revenue-driven fiscal adjust- timated 47 percent of Nigerians now live in growth and fiscal stability. ments are rebuilding confidence in the poverty (or below the international pover- coherence and sustainability of policies, ty line of US$2.15 2017 PPP). FIGURE 1 Nigeria / Oil price, exports, government FIGURE 2 Nigeria / Real GDP growth and sectoral revenues, and real GDP growth contributions to real GDP growth Percent, percent of GDP US$/bbl Percent 20 110 5 90 4 15 70 3 10 50 2 5 30 1 10 0 0 -10 -1 -5 -30 -2 2015 2017 2019 2021 2023 2025 2021 2022 2023 2024f 2025f 2026f Real GDP growth (lhs) Real GDP growth (lhs) Revenues (lhs) Revenues (lhs) Agriculture Oil Industry Oil price (rhs) Oil price (rhs) Non-oil Industry Services Exports (lhs) Exports (lhs) GDP (factor prices) Sources: Nigerian National Bureau of Statistics, WDI, and World Bank. Sources: Nigerian National Bureau of Statistics and World Bank. MPO 270 Oct 24 The Federal Government's fiscal deficit reforms, controls inefficient expenditures, narrowed from 6.2 percent of GDP in and adopts a plan to gradually phase out the H1-2023 to 4.4 percent in H1-2024 dri- Outlook implicit gasoline subsidy. This also relies on ven by higher non-oil revenues due avoiding a return to multiple exchange rate to the removal of implicit foreign ex- GDP growth is expected to increase to 3.7 regimes and sector-specific implicit subsi- change subsidies and reforms enhancing percent by 2026 with a 2.1 percent pop- dies. The fiscal deficit is estimated to narrow revenue transparency and accountability ulation growth, highlighting the need for to 3.7 percent of GDP in 2026 with an im- from Government Owned Enterprises significantly higher per capita growth to proved debt trajectory. and Ministries, Departments and Agen- boost living standards. Agricultural out- A current account surplus is projected at cies. Revenue growth was accompanied put is estimated to steadily pick up. Oil 3.0 percent in 2026. While oil export rev- by restrained expenditures. Despite this, production should increase towards year- enues are anticipated to decline due to public and publicly guaranteed debt is end. Non-oil industrial sector may experi- lower global prices and pledged crude oil projected to rise from 49 percent of GDP ence modest yet steady growth, with on- obligations, rising non-oil exports from a in 2023 to 51 percent in 2024 due to FX going structural challenges. Growth is es- more competitive exchange rate and re- unification which affects external debt timated to be driven by services. Despite duced oil imports from increased domestic valuation. However, public debt levels the September petrol hike, disinflation is refining, are expected to partially offset remain sustainable, though susceptible projected in coming years averaging 18.1 this. Remittances are projected to return to shocks. percent in 2026 due to monetary tighten- to their 2020 levels, helped by the unified, The current account surplus increased to ing. Consequently, poverty is estimated at market-reflective FX rate. 1.7 percent of GDP in 2023 and rose to 5.8 52 percent in 2026. Reforms to protect the A slower-than-expected disinflation could percent in Q1-2024 due to lower petrole- poorest against inflation and boost liveli- worsen food insecurity, while adverse um and non-petroleum products imports. hoods through more productive work are weather may reduce agricultural output, Financial account balance improved in key for Nigerians to escape poverty. A increase food prices, and exacerbate pover- 2023 and may further increase in 2024, tight monetary stance while avoiding re- ty. Increasing non-oil revenues and safe- driven by stronger foreign direct and liance on ways and means remains crucial guarding oil revenues is important. Avoid- portfolio investments. Gross reserves in- for moderating inflation. ing deficit monetization will help rebuild creased from US$32.9 bn end-2023 to A positive fiscal outlook is anticipated if the confidence, manage inflation, and reduce US$36.3 bn in August 2024. government implements its ambitious tax borrowing costs. TABLE 2 Nigeria / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.6 3.3 2.9 3.3 3.5 3.7 Real GDP growth, at constant factor prices 3.4 3.1 2.7 3.3 3.4 3.6 Agriculture 2.1 1.9 1.1 1.5 1.9 2.2 Industry -0.5 -4.6 0.7 0.9 2.5 2.7 Services 5.6 6.7 4.2 4.9 4.4 4.5 Inflation (consumer price index) 17.0 18.8 24.7 31.7 23.5 18.1 Current account balance (% of GDP) -0.8 0.7 1.7 4.5 3.6 3.0 Net foreign direct investment inflow (% of GDP) -1.2 0.1 -0.6 -1.2 -1.2 -1.0 Fiscal balance (% of GDP) -6.6 -4.6 -5.3 -4.3 -4.5 -3.7 Revenues (% of GDP) 6.7 6.8 7.6 10.5 10.3 11.2 Debt (% of GDP) 38.8 40.3 49.1 51.1 49.9 48.6 Primary balance (% of GDP) -3.9 -1.6 -1.8 -0.3 -0.6 -0.2 a,b International poverty rate ($2.15 in 2017 PPP) 35.6 37.1 41.4 47.2 50.7 52.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 67.2 68.7 72.1 76.2 78.2 79.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.1 92.0 92.8 94.0 94.5 94.4 GHG emissions growth (mtCO2e) 1.4 2.1 2.2 3.2 2.2 2.9 Energy related GHG emissions (% of total) 37.5 38.3 38.6 39.3 39.5 40.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-LSS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 271 Oct 24 RWANDA Key conditions and Recent developments challenges After averaging 8.2 percent in 2022-2023, real GDP increased by 9.7 percent in the Table 1 2023 From 2009 to 2019, Rwanda’s GDP per first quarter of 2024, driven by robust pri- Population, million 14.1 capita increased at a rate of 4.5 percent vate consumption—reflecting the creation GDP, current US$ billion 13.7 per year, surpassed only by Ethiopia of more than half a million jobs, year-on- GDP per capita, current US$ 974.4 among Sub-Saharan African (SSA) year (y-o-y)—and strong investment. On a 52.0 International poverty rate ($2.15) economies. Rwanda has also achieved sub- the supply side, growth was driven by the a 78.0 stantial gains in educational attainment, continued expansion in services and in- Lower middle-income poverty rate ($3.65) a 92.2 health services delivery, and access to ba- dustry in 2023 and the recovery in food Upper middle-income poverty rate ($6.85) Gini index a 43.7 sic services. However, the economy faces production in early 2024. School enrollment, primary (% gross) b 134.9 major constraints. The heavy emphasis on The National Bank of Rwanda’s (NBR) b 67.1 public investment has neither generated tighter monetary stance, along with im- Life expectancy at birth, years sufficient jobs nor resulted in rapid gains provements in domestic food production Total GHG emissions (mtCO2e) 8.3 in productivity. The Human Capital Index and lower commodity prices, have con- Source: WDI, Macro Poverty Outlook, and official data. (HCI) places Rwanda 160th out of 174 tained inflationary pressures. NBR hiked a/ Most recent value (2016), 2017 PPPs. b/ Most recent WDI value (2022). countries. The highest food inflation in 15 the policy rate by 50 basis points in Au- years (63 percent in March 2023) triggered gust 2023 to 7.5 percent (Figure 1). Infla- by insufficient rainfall, likely affected poor tion fell to 5.0 percent year-on-year in Au- Rwanda’s strong economic momentum households and highlighted the impor- gust 2024 from the peak of 22.7 percent in tance of increasing productivity in agricul- November 2022. Food and non-alcoholic continued in 2024 with 9.7 percent ture to improve incomes of rural house- beverages inflation is at 1.6 percent (y-o- growth in the first quarter—led by ser- holds and food availability and security for y) in August 2024. Lower food inflation vices, manufacturing, and food produc- the country. Moving Rwanda to the next eased the pressure on household bud- tion. Inflationary pressures have eased stage of development will require greater gets, especially the poor. The franc de- reliance on private sector investment to en- preciated against the U.S. dollar by about due to improvements in domestic food hance economic activity, raise incomes, 18 percent in 2023. Fearing the inflation- production, and lower commodity and provide the financing needed to ad- ary effect of this depreciation, the NBR prices, and the tight monetary policy dress infrastructure shortfalls, and to in- has doubled its dollar sales to commercial stance by the central bank. Real GDP crease the responsiveness of poverty to banks to US$10 million per week from growth is projected at 7.7 percent on economic growth. Critical areas to enable US$5 million. In Dec. 2023, official foreign rapid private sector development, include reserves were 6 percent higher than in average in 2024–2025. Poverty is pro- enhancing competition, building firms’ ca- Dec. 2022 due to the disbursements of the jected to decrease by 1.4 pp between pabilities, increasing access to finance, fos- World Bank’s development policy financ- 2024 and 2026 driven by solid growth tering development and diffusion of infor- ing (US$125 million) and IMF’s program in private consumption. mation and communication technologies, (US$138.8 million). International reserves and innovation. remained adequate at about 4.1 months of FIGURE 1 Rwanda / Headline and core inflation and central FIGURE 2 Rwanda / Actual and projected poverty rates and bank rate real private consumption per capita Percent Poverty rate (%) Real private consumption per capita (constant LCU) 35 100 700000 Inflation (CPI) 30 Core inflation 90 600000 Central bank rate 80 25 70 500000 20 60 400000 50 15 300000 40 10 30 200000 20 5 100000 10 0 0 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 -5 International poverty rate Lower middle-income pov. rate Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Jul-24 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 Table 2. MPO 272 Oct 24 imports at end-2023, despite the widening investment and favorable agricultural con- It is critical to reduce electricity subsidies current account deficit. ditions. After weak performance in the last in a way that keeps electricity affordable The FY24 (July 1, 2023-June 30, 2024) two years, agriculture is expected to re- for low-income households. The authori- budget envisages a temporary fiscal ex- bound due to favorable weather. The Man- ties are also planning to strengthen the pansion to cushion the effects of recent ufacture and Build to Recover Program oversight, governance, and risk manage- floods. Reconstruction spending is esti- will support growth in construction and ment of state-owned enterprises. The gov- mated at around 3 percent of GDP over manufacturing activities. Continued ernment also intends to improve revenue the next five years, of which two-thirds growth in global tourism demand will administration and cut tax rates while will be disbursed in FY24–FY25. The re- support the services sector. Driven by av- broadening the tax base through measures sulting creation of jobs in construction is erage growth in private consumption of 3.8 in the Medium-Term Revenue Strategy. expected to benefit lower-income house- percent a year in 2024-2026, poverty is pro- Under this baseline, public debt would peak holds. Despite this, the government re- jected to decline to 47.0 percent in 2026. at 76 percent of GDP in 2024 before gradual- mains committed to fiscal prudence The current account deficit is projected to ly improving over the medium term. through improved domestic revenue mo- remain large in 2024 due to increased im- The outlook is subject to substantial down- bilization, spending rationalization, and ports required for the post-flood recon- side risks. An intensification of the conflict increased transparency and efficiency. Re- struction and for the large airport con- in the Middle East could lead to further lying largely on concessional loans to fi- struction project. Sustained strong foreign disruptions to the global economy, thus af- nance the deficit, Rwanda’s public debt is direct investment inflows and concessional fecting Rwanda through a reduced global sustainable despite increases in the stock financing will cover external financing demand for its exports. Limited access to to an estimated 71.6 percent of GDP in needs. Inflation is expected to gradually concessional resources and lower external 2023. Poverty is projected to stand at 48.4 return within NBR’s medium-term infla- demand fueled by monetary tightening in percent in 2024. tion rate target of 5 percent with symmet- advanced economies pose further down- ric boundaries of ± 3. side risks. The main risk on the domestic The government is committed to prudent front is linked to the increasing frequency fiscal management. In the FY24–FY26 bud- of weather and climate shocks, which Outlook get framework, the government projects could disrupt agricultural output, again spending cuts largely through streamlin- negatively affecting incomes and food se- GDP is projected to grow at 7.7 percent on ing and gradually reducing subsidies par- curity for rural households, and reigniting average in 2024–26, driven by strong private ticularly those related to energy and fuel. inflationary pressures on food. TABLE 2 Rwanda / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 10.9 8.2 8.2 7.6 7.8 7.5 Private consumption 6.0 12.1 8.0 4.5 6.8 6.8 Government consumption 13.7 10.6 3.1 14.6 10.1 8.1 Gross fixed capital investment 9.6 -12.6 4.5 15.0 10.7 7.2 Exports, goods and services 2.4 29.4 25.8 13.1 11.2 11.2 Imports, goods and services 2.7 17.9 14.4 12.6 10.9 8.9 Real GDP growth, at constant factor prices 10.6 7.8 8.6 7.6 7.8 7.5 Agriculture 6.4 1.6 1.7 6.6 5.5 5.4 Industry 13.3 5.0 10.2 9.5 9.3 9.0 Services 11.9 12.2 11.2 7.3 8.3 7.9 Inflation (consumer price index) 1.1 12.1 15.4 6.8 5.0 5.0 Current account balance (% of GDP) -11.1 -9.7 -11.9 -11.3 -10.1 -10.2 Net foreign direct investment inflow (% of GDP) 2.1 2.4 3.3 3.9 4.4 4.5 Fiscal balance (% of GDP) -8.4 -6.3 -5.2 -5.2 -5.2 -5.2 Revenues (% of GDP) 25.9 24.5 22.8 22.8 22.8 22.8 Debt (% of GDP) 74.4 69.9 73.0 76.0 75.1 72.0 Primary balance (% of GDP) -6.4 -4.2 -3.0 -3.0 -3.0 -3.0 a,b International poverty rate ($2.15 in 2017 PPP) 51.1 49.6 48.7 48.4 47.7 47.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 77.5 76.5 76.0 75.8 75.3 74.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 92.0 91.7 91.6 91.5 91.4 91.2 GHG emissions growth (mtCO2e) 5.3 2.1 1.5 4.1 3.9 4.2 Energy related GHG emissions (% of total) 29.1 28.3 27.5 28.6 28.9 29.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2010-EICV-III and 2016-EICV-V. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026. b/ Projection using average elasticity (2010-2016) with pass-through = 0.25 based on private consumption per capita in constant LCU. MPO 273 Oct 24 basic services, and social protection, which exacerbates economic and climate- SÃO TOMÉ AND Key conditions and related shocks. As a result, the poorest bear the brunt of these shocks amid ris- challenges PRÍNCIPE ing living costs and struggle to meet their daily needs. São Tomé and Príncipe (STP) is a small STP’s energy sector has been a key con- two-island state located in the Gulf of straint to growth and a source of fiscal and Table 1 2023 Guinea off the coast of Central Africa. debt vulnerabilities, as approximately 97 Population, million 0.2 The country is home to a vast untapped percent of electricity generation relies on GDP, current US$ billion 0.7 natural wealth, including beaches, rain- expensive fuel imports. Following the loss GDP per capita, current US$ 2949.4 forests, and a biodiversity that offers of a preferential credit purchase arrange- International poverty rate ($2.15) a 15.7 unique opportunities for growth. These, ment with Angola, STP faced an unprece- a 45.0 however, are hampered by structural dented energy crisis in 2023, which para- Lower middle-income poverty rate ($3.65) a challenges typical of small island states, lyzed economic activity for several weeks. Upper middle-income poverty rate ($6.85) 79.7 a such as limited institutional capacity, lack Contingent liabilities related to the energy Gini index 40.7 of productive diversification, high import SOE’s debt are estimated at around 31.1 b 109.6 School enrollment, primary (% gross) dependence, low economies of scale, and percent of GDP. b 68.8 Life expectancy at birth, years high vulnerability to climate shocks. Total GHG emissions (mtCO2e) 0.4 Economic growth has been primarily dri- Source: WDI, Macro Poverty Outlook, and official data. ven by an unsustainable public invest- a/ Most recent value (2017), 2017 PPPs. b/ Most recent WDI value (2022). ment growth model financed through of- Recent developments ficial development assistance, in the form of concessional loans and grants. Mean- In the first half of 2024, real GDP growth is while, the private sector remains weak, estimated to have slightly improved rela- Growth recovery has been modest since mainly concentrated in tourism activities tive to 2023 as electricity supply improved 2022, constrained by low energy supply, and agricultural exports, including cocoa, and the tourism sector recovered. Tourism and declining external financing. It is palm oil, and coffee. The decline and services exports increased by 44 percent in volatility of external financing have fur- the first quarter (Q1) year-on-year. Howev- projected at 1.1 percent in 2024 and to ther slowed down economic growth. Per- er, lower external financing than projected gradually improve in the medium-term sistent energy shortages, climate shocks, in the budget weighed negatively on eco- supported by tourism, agriculture, and and the high volatility of fuel and food nomic activity, and escalating living costs renewed external financing. In 2024, the prices—triggered by global geopolitical led to strikes for higher wages in several poverty rate is estimated at 15.7 percent, turmoil—also hamper growth. sectors. The largest palm oil producer Weak GDP per capita gains in recent faced a paralyzing two-month strike in Q1, indicating stagnation in poverty reduc- years combined with limited job oppor- negatively impacting exports—palm oil tion efforts. Risks result from lower exter- tunities, hindered poverty reduction, and accounts for about 29 percent of merchan- nal financing, slow energy reforms, and exacerbated the vulnerability of the poor- dise exports. In addition, the education climate shocks. est. A defining characteristic of poverty sector was paralyzed for 38 days, adverse- in STP is the limited access to education, ly affecting approximately 80,000 children. FIGURE 1 São Tomé and Príncipe / Gross international FIGURE 2 São Tomé and Príncipe / Actual and projected reserves poverty rates and real GDP per capita Millions, US$ Months of next year imports Poverty rate (%) Real GDP per capita (constant LCU) 100 10 100 19000 90 9 90 18500 80 8 80 18000 70 7 70 17500 60 6 60 17000 50 5 50 16500 40 4 40 16000 30 3 30 15500 20 15000 20 2 10 14500 10 1 0 14000 0 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2010 2012 2014 2016 2018 2020 2022 2024f International poverty rate Lower middle-income pov. rate Gross international reserves Import coverage (rhs) Upper middle-income pov. rate Real GDP pc Sources: São Tomé and Príncipe authorities' data; IMF and World Bank Source: World Bank. Notes: see Table 2. staff estimates. MPO 274 Oct 24 Inflationary pressures have started to slow living on less than US$2.15/day in 2024, anticipated fiscal consolidation, along with down from Q2, as the Central Bank tight- indicating persistent poverty challenges. the full impact of VAT implementation, is ened liquidity conditions. As a result, in- expected to improve STP’s fiscal position flation declined from a peak of 19.2 percent in the medium term. Public debt is also ex- year-on-year (y-o-y) in April 2024 to 12.2 pected to moderately decrease. However, percent y-o-y in July, and the monetary Outlook the lack of fiscal space could limit short- base contracted by 7.2 percent from Jan- term social spending and constrain imme- uary to July. The fiscal position remained Real GDP growth is projected to gradu- diate poverty alleviation efforts. constrained, especially due to low external ally increase in the medium term, reach- The CAD is projected to decline to 7.2 grants and high-fuel-related imports. De- ing 3.6 percent by 2026. This outlook percent of GDP in 2024, and 5.5 per- spite a slight improvement in the current is expected to be driven by the im- cent in 2026, supported the implemen- account deficit (CAD) in Q1, international plementation of energy reforms to en- tation of expected energy reforms and reserves continued to decline to finance en- hance energy efficiency, which in turn, subsequent decline in fuel demand, a ergy imports, putting at risk the country’s should help strengthen tourism and oth- stronger tourism sector, and fiscal con- fragile macroeconomic situation and its ca- er economic activities, and by agricul- solidation. International reserves remain pacity to import. Credit to the private sec- tural exports. Externally funded invest- weak, covering 2.8 months of prospec- tor remained low in the first half of 2024, ments, such as the rehabilitation of the tive imports, but are projected to im- following a strong contraction in 2023. main coastal road, improving coastal ar- prove in the medium term with the re- The labor market remained depressed, eas, and upgrading fishing vessels will sumption of external financing and the with the unemployment rate estimated at also support growth. However, increas- implementation of energy reforms. 14.2 percent in 2023, affecting women and ing emigration will continue to drain la- Nonetheless, limited progress is expected youth the most, and STP suffers from ris- bor and skills away from the primary in terms of poverty alleviation, with the ing levels of emigration. Adverse macro- and tertiary sectors, thereby limiting poverty rate projected to decrease only fiscal conditions coupled with high infla- stronger economic growth. slightly to 15.5 percent by 2026. tion continued to affect the livelihoods Inflation is projected to gradually decline Risks to the outlook include postponed of the poorest, straining households’ pur- to 7.5 percent by 2026, thanks to tighter external financing disbursements, slow chasing power. Approximately 15.7 per- monetary policy, fiscal consolidation, and implementation of energy reforms, and cent of the population is projected to be declining global commodity prices. The climate shocks. TABLE 2 São Tomé and Príncipe / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 1.9 0.2 0.4 1.1 3.3 3.6 Real GDP growth, at constant factor prices 2.6 1.2 -1.1 1.1 3.3 3.6 Agriculture -0.3 -13.6 -12.4 -9.5 -7.6 3.4 Industry -6.4 6.4 -7.0 3.3 9.5 4.9 Services 5.0 1.5 1.1 1.5 2.7 3.3 Inflation (consumer price index) 8.2 18.0 21.1 16.1 12.0 7.5 Current account balance (% of GDP) -19.2 -14.7 -12.2 -7.2 -5.9 -5.5 Net foreign direct investment inflow (% of GDP) 3.9 23.9 5.1 4.3 5.7 6.5 Fiscal balance (% of GDP) -4.7 -4.6 0.1 -2.0 0.1 0.4 Revenues (% of GDP) 19.8 25.5 22.0 20.4 21.5 21.6 Debt (% of GDP) 77.8 68.8 49.0 43.6 38.7 35.1 Primary balance (% of GDP) -4.5 -4.0 0.8 -0.9 1.0 1.1 a,b International poverty rate ($2.15 in 2017 PPP) 15.4 15.6 15.7 15.7 15.6 15.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 44.6 44.8 45.0 45.1 44.9 44.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 79.0 79.3 79.6 79.8 79.5 79.2 GHG emissions growth (mtCO2e) 1.3 0.5 0.1 -0.1 0.3 0.6 Energy related GHG emissions (% of total) 36.6 36.5 36.3 36.0 35.9 35.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU. b/ Actual data: 2017. Nowcast: 2018-2023. Forecasts are from 2024 to 2026. MPO 275 Oct 24 public expenditure management, stronger revenue mobilization, tapping into inter- SEYCHELLES Key conditions and national climate funds, and reforms to address climate risks. challenges While the country has an unemployment rate of 3.2 percent and has nearly elim- Table 1 2023 Seychelles is a small archipelagic coun- inated extreme poverty, pockets of so- Population, million 0.1 try with 121,355 citizens and has the cioeconomic vulnerability remain, with GDP, current US$ billion 2.1 highest GNI per capita in Africa. The 25.3 percent of the population classified GDP per capita, current US$ 17499.1 economy achieved high-income status in as poor based on the national poverty a 0.5 International poverty rate ($2.15) 2015, supported by successful macroeco- line (US$267 per person/month). Grow- a 1.2 nomic and structural reforms and dri- ing substance abuse, teenage pregnancy, Lower middle-income poverty rate ($3.65) a 6.7 ven largely by a dynamic tourism sec- and violence against women compound Upper middle-income poverty rate ($6.85) Gini index a 32.1 tor. However, the island state faces in- these challenges and put the youth at School enrollment, primary (% gross) b 97.6 tensifying vulnerabilities due to its lim- risk, thus undermining efforts to build b 73.8 ited economic diversification, insularity, human capital. Life expectancy at birth, years small size, remoteness, susceptibility to Total GHG emissions (mtCO2e) 0.9 climate shocks, and social challenges. A Source: WDI, Macro Poverty Outlook, and official data. high dependence on tourism and fish- a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). eries, as well as on imports, creates Recent developments vulnerability to external shocks. These shocks are transmitted through disrup- Growth is estimated at 3.2 percent in tions in international travel and tourism 2023, with services contributing 2.7 per- demand, fluctuations in fishing stocks, centage points. Tourist arrivals in- The economy is expected to grow by 3.7 and volatility in the prices of essential creased by 5.7 percent but remained 9 percent in 2024, driven by tourism, goods, such as food and fuel. percent below pre-pandemic levels. The telecommunications, and construction. As a small island state, Seychelles is in- telecommunications sector grew by 15 Commitment to fiscal consolidation is creasingly vulnerable to adverse climate percent, reflecting improved service of- effects. Most disasters are triggered by ferings. New hotel and resort projects, expected to result in a primary surplus monsoon rains, floods, and land- along with renovations, spurred a 7 per- by enhancing revenue mobilization slides—as was the case in December cent growth in the construction sector. through new tax measures and by man- 2023, when these hazards, combined with Earnings from tourism account for 46 aging public debt to bolster economic re- an explosion in an industrial zone, trig- percent of GDP and 42 percent of ex- silience. While the nation navigates so- gered the declaration of a state of emer- ports. However, continued reliance on gency and resulted in damages estimated imports widened the current account cial challenges and climate risks, upcom- at 2.2 billion rupees (7.4 percent of GDP). deficit to 7.2 percent of GDP in 2023 ing flight routes and the 2025 elections Over $670 million (4 percent of GDP) is from 6.8 percent in 2022. Despite this, present both opportunities and uncer- needed annually to address climate risks foreign reserves increased by 6.7 percent tainties for sustained growth. and build resilience. This requires an in- to US$682 million compared to 2022, crease in fiscal space, through prudent covering 3.8 months of imports. FIGURE 1 Seychelles / Real GDP growth and sectoral FIGURE 2 Seychelles / Actual and projected poverty rates contributions to real GDP growth and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 16 12 300000 12 10 250000 8 8 200000 4 6 150000 0 4 100000 -4 Agriculture 2 50000 -8 Industry Services 0 0 -12 Gross value added at basic prices 2013 2015 2017 2019 2021 2023 2025 -16 International poverty rate Lower middle-income pov. rate 2019 2020 2021 2022 2023e 2024f 2025f 2026f Upper middle-income pov. rate Real GDP pc Sources: National Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 276 Oct 24 Public sector salaries were revised up in expected to be 7.6 percent in 2024, down 2023, increasing total average earnings by from 8 percent in 2023. 4.6 percent, compared to the 0.1 percent Outlook Continued fiscal consolidation is expected growth in 2022. The continued recovery in to yield a primary surplus of 1.0 percent tourism contributed to an increase in an- The economy is projected to grow by 3.7 of GDP in 2024. The reduction in VAT re- nual average employment by 2.2 percent, percent in 2024, driven by tourism, funds, particularly those related to hotel following growth of 8.1 percent in 2022. telecommunications, and construction. constructions and renovations, could in- Concurrently, households benefited from New flight connections, especially be- crease business tax revenue, further sup- a 1 percent decline in prices in 2023, due tween the United Arab Emirates and ported by revised tax rates and improved to exchange rate appreciation. Core infla- Madagascar through Seychelles are ex- compliance. Particularly, the tourism sus- tion remained negative at -0.9 percent yet pected to boost tourism and trade. Re- tainability levy introduced in 2023 is ex- headline inflation increased to 0.4 percent liance on imports is anticipated to result in pected to increase revenue by 0.7 percent by mid-2024 due to utility tariff hikes and a current account deficit of 7.3 percent of of GDP in 2024, reflecting a full year of higher freight costs associated with the GDP in 2024, with an average of 8.4 per- compliance. Additionally, amendments to Red Sea crisis. Falling prices prompted the cent over the medium term. A financial ac- the transfer pricing regulations will sup- Central Bank to reduce its monetary policy count surplus, stemming from net direct port revenue collection efforts. rate from 2.0 percent to 1.75 percent in investments, is expected to help finance Risks to the outlook include higher global April 2024 to support economic growth. the current account deficit. The anticipated commodity prices, external tourism shocks, The more expansive monetary policy increase in utility tariffs and modest cur- and climate impacts. Upside risks include stance is expected to boost credit, which rency depreciation are unlikely to exert stronger tourism growth and higher public grew by 7.4 percent in 2023. significant upward pressure on inflation, investment. However, global conflicts and The government remains focused on en- which is projected at 1.2 percent in 2024 competition in the tourism sector pose addi- hancing fiscal resilience and debt sustain- and 2.9 percent over the medium term. tional risks, alongside domestic challenges ability through fiscal consolidation efforts Hence, the Central Bank intends to main- in monetary policy transmission, climate that began in 2021. These efforts have yield- tain an accommodative monetary policy, change impacts on coastal infrastructure, ed a primary surplus of 1.7 percent of GDP while closely monitoring foreign currency and risky behaviors of the youth. Political and an overall deficit of 1.2 percent of GDP inflows and the valuation of the rupee. tensions ahead of the September 2025 elec- in 2023, helping bring down public debt to Consequently, the poverty rate at $6.85/ tions could result in policy uncertainty and 58.4 percent of GDP by the end of 2023. day (upper-middle-income poverty line) is escalate the aforementioned risks. TABLE 2 Seychelles / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 0.6 14.9 3.2 3.7 4.1 3.5 Private consumption 11.8 5.8 2.7 1.6 3.9 3.7 Government consumption -1.7 -12.9 12.0 6.9 1.5 0.5 Gross fixed capital investment -22.8 6.9 -1.7 16.6 16.7 7.9 Exports, goods and services 20.7 26.7 1.3 1.3 1.8 2.8 Imports, goods and services 19.0 8.7 2.1 2.6 3.5 3.2 Real GDP growth, at constant factor prices 0.6 14.9 3.2 3.7 4.1 3.5 Agriculture 17.8 21.0 4.7 4.6 4.6 4.6 Industry -13.4 8.1 2.1 3.6 3.8 3.1 Services 3.2 16.0 3.3 3.6 4.1 3.5 Inflation (consumer price index) 9.8 2.7 -1.1 1.2 2.3 3.0 Current account balance (% of GDP) -9.0 -6.8 -7.2 -7.3 -7.8 -8.4 Net foreign direct investment inflow (% of GDP) 9.4 10.9 13.2 11.0 13.1 13.4 Fiscal balance (% of GDP) -5.8 -1.4 -1.2 -1.4 -0.9 -0.7 Revenues (% of GDP) 33.2 30.0 32.5 33.6 34.7 34.6 Debt (% of GDP) 73.6 61.1 58.4 61.0 60.6 58.2 Primary balance (% of GDP) -2.9 0.6 1.7 1.0 1.5 1.6 a,b International poverty rate ($2.15 in 2017 PPP) 0.6 0.7 0.7 0.6 0.6 0.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.5 2.2 1.6 1.5 1.3 1.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 7.7 8.4 8.0 7.6 7.2 6.8 GHG emissions growth (mtCO2e) 2.2 7.1 6.5 6.7 6.8 6.6 Energy related GHG emissions (% of total) 77.5 78.1 78.5 78.9 79.1 79.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-HBS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2018) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 277 Oct 24 one-year treasury bills, is owed to com- mercial banks, posing significant rollover SIERRA LEONE Key conditions and risk. The energy sector remains a signif- icant constraint on growth and presents challenges a substantial fiscal risk, particularly with the increasing arrears owed to indepen- Table 1 2023 Sierra Leone continues to face signifi- dent power producers (IPPs). Population, million 8.8 cant challenges that have impeded sus- GDP, current US$ billion 6.4 tained growth and structural transfor- GDP per capita, current US$ 726.3 mation. Over the past decade, the coun- International poverty rate ($2.15) a 26.1 try has experienced periods of robust Recent developments a 64.3 growth interrupted by shocks—the twin Lower middle-income poverty rate ($3.65) a 89.9 shocks of Ebola and commodity price Growth surprised on the upside in 2023 Upper middle-income poverty rate ($6.85) Gini index a 35.7 collapse between 2014-15, natural dis- reaching 5.7 percent, up from 5.3 percent School enrollment, primary (% gross) b 151.7 asters (flooding and mudslides), the in 2022, driven by strong industrial per- b 60.4 COVID-19 pandemic, and Russia’s inva- formance, mostly in iron ore production, Life expectancy at birth, years sion of Ukraine. These shocks eroded which more than compensated for a Total GHG emissions (mtCO2e) 10.7 the gains made and, together with pol- slowdown in agriculture and services. In- Source: WDI, Macro Poverty Outlook, and official data. icy missteps, caused GDP growth to vestment and exports supported growth a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). slow down and worsened macroeco- on demand side while private consump- nomic conditions. Since 2020, economic tion remained weak, adversely affected woes have sparked intermittent protests by high inflation’s impact on household and political strife, including a contest- purchasing power. ed election in June 2023 and an attempt- Despite improvements in the primary The economy continues to face signifi- ed coup in November 2023, although deficit in 2023, domestic revenue stood cant challenges from both global and do- political calm has been reestablished. at 7.4 percent of GDP, one of the lowest mestic sources. Despite showing re- Despite a pickup in GDP growth since in the world. Overall deficit decreased silience amid concurrent shocks, policy 2021, the economy is facing headwinds only slightly—to 4.9 percent from 5.3 from structural weaknesses and policy percent in 2022—due to higher-than- slippages have exacerbated macroeco- slippages. Weak domestic revenue collec- budgeted expenditures on security, nomic conditions and worsened living tion, expenditure overruns, and signifi- clearance of arrears, and interest pay- standards. While efforts to restore stabil- cant losses in the electricity sector have ments. The deficit was mainly financed ity have made modest progress, there is fed high inflation (topping 50 percent in domestically as revenues, despite im- a clear need for more robust macroeco- 2023) and rising borrowing costs. The provement, remained low. The debt-to- risk of public debt distress remains el- GDP ratio declined from 53.5 percent to nomic management and cohesive policies evated due to heightened liquidity risks 46.2 percent, as high inflation reduced to sustain growth momentum and from servicing both external and domes- the real value of debt. achieve lasting macroeconomic stability. tic debt. Two-thirds of the debt is exter- Monetary policy has been tightened to nal, mainly owed to multilaterals, while tackle inflation, which remains elevated domestic debt, primarily in the form of despite moderating to 25.5 percent by FIGURE 1 Sierra Leone / Real GDP growth and contributions FIGURE 2 Sierra Leone / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 50 100 9.0 40 90 8.0 30 80 7.0 20 70 6.0 10 60 5.0 0 50 4.0 -10 40 3.0 -20 30 20 2.0 -30 10 1.0 -40 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0.0 Gov. cons. Exports GFCF 2011 2013 2015 2017 2019 2021 2023 2025 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 Table 2. MPO 278 Oct 24 August 2024. The Bank of Sierra Leone’s committed to fiscal consolidation, includ- (BSL) purchase of government securities ing improvements in public financial man- expanded base money growth, although Outlook agement, cash management, and ongoing this has slowed as the BSL unwinds these reforms in wage bill management and the purchases. Banks remain heavily exposed Growth is projected to slow to 4.3 per- energy sector. While the cost of domestic to sovereign risk as government securi- cent in 2024 due primarily to declining debt remains elevated, public debt is ex- ties account for about 40 percent of bank global iron ore prices impacting the min- pected to decrease as a share of GDP, financial assets. ing sector, the main driver of growth. reaching 38.3 percent by 2026. The current Driven by strong iron ore exports and Over the medium term, growth is expect- account deficit is projected to narrow to 4 moderated import growth the current ac- ed to converge to its long-run potential percent, driven by improved trade balance count deficit (CAD) slightly narrowed to 5 of 4.7 over 2025-26, underpinned by a and increased external inflows. percent of GDP in 2023 from 5.4 percent in resurgence in the service sector and im- While persistent inflation has eroded con- 2022. The CAD was primarily financed by proved agricultural productivity. The re- sumers' purchasing power, poverty pro- foreign direct investments, but the CAD’s covery in services will be supported by jections indicate a declining trend as in- financing overall was partial, causing in- the easing of inflation which is expect- flation slows. To ensure sustained pover- ternational reserves to decline to 1.8 ed to boost household consumption and ty reduction, Sierra Leone must promote months of imports by July 2024 from 2.6 enhance retail trade. The agricultural sec- inclusive growth, strengthen social pro- months of imports in 2023. tor will be bolstered by the government's tection systems, and implement more tar- In 2018, the international extreme poverty flagship 'Feed Salone' initiative to attain geted interventions, especially as demo- rate, measured at US$2.15 per person per food self-sufficiency. graphic pressures intensify. day (2017 PPP), was 26.1 percent. Rising The fiscal deficit is projected at 3.2 percent This outlook is subject to several downside food prices have likely intensified house- of GDP in 2024 (0.5pp above target) due to risks. Deviation from the current consoli- hold deprivations to the point where many incomplete implementation of all revenue dation effort would undermine fiscal and families are now facing hunger. Current measures in the 2023 and 2024 finance acts debt sustainability. External risks stem poverty projections will be revised as they and expenditure pressure from the energy from global commodity prices, global de- under-estimate upward pressures on utility. In the medium term, the deficit is mand, and higher imported inflation. poverty, by not considering the impact of expected to decline to 1.3 percent of GDP Weather shocks may constrain agricultural inflation on purchasing power. by 2026 assuming the authorities remain growth and poverty reduction. TABLE 2 Sierra Leone / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.9 5.3 5.7 4.3 4.7 4.7 Private consumption 5.8 7.4 1.8 4.4 4.7 4.9 Government consumption 3.2 -0.7 0.5 2.8 2.8 4.9 Gross fixed capital investment 2.4 22.2 12.8 15.3 16.8 17.8 Exports, goods and services 69.8 9.0 7.0 6.8 7.3 7.3 Imports, goods and services 24.0 15.8 9.3 12.5 13.5 14.9 Real GDP growth, at constant factor prices 5.9 5.3 5.7 4.3 4.7 4.7 Agriculture 2.2 3.0 2.4 2.4 3.0 3.0 Industry 8.0 9.9 14.4 7.0 7.1 7.1 Services 8.2 5.4 4.7 4.5 4.8 4.9 Inflation (consumer price index) 11.9 27.0 46.7 30.5 20.0 12.6 Current account balance (% of GDP) -5.0 -5.4 -5.1 -4.3 -4.1 -4.0 Net foreign direct investment inflow (% of GDP) 4.9 4.7 3.1 5.0 6.1 8.4 Fiscal balance (% of GDP) -3.9 -5.3 -4.9 -3.2 -2.2 -1.3 Revenues (% of GDP) 12.4 10.9 10.4 11.7 12.6 13.4 Debt (% of GDP) 48.6 53.5 46.2 43.1 41.5 38.3 Primary balance (% of GDP) -2.2 -3.5 -2.5 -0.9 -0.2 0.4 a,b International poverty rate ($2.15 in 2017 PPP) 25.1 24.2 23.2 22.7 22.0 21.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 63.5 62.7 61.8 61.3 60.6 60.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 89.6 89.2 88.8 88.6 88.3 88.0 GHG emissions growth (mtCO2e) 8.1 3.2 1.6 1.6 1.7 1.8 Energy related GHG emissions (% of total) 10.7 10.4 10.3 10.3 10.4 10.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2011-SLIHS and 2018-SLIHS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. b/ Projection using point-to-point elasticity (2011-2018) with pass-through = 0.4 based on GDP per capita in constant LCU. MPO 279 Oct 24 and continue policy implementation. This includes accelerating domestic revenue SOMALIA Key conditions and mobilization reforms, improving the ef- fectiveness of spending in social sectors, challenges containing the wage bill, efficient security spending, advancing Public Finance Man- Table 1 2023 The economy continued to rebound from agement reforms, and further strengthen- a 15.8 Population, million a severe five-season drought. Progress in ing of debt management. Macroeconomic b 11.0 GDP, current US$ billion state- and institution building has been stability and development in Somalia re- GDP per capita, current US$ 694.6 further strengthening the growth environ- ly on a sustained and substantial flow of c 37.0 Gini index ment. Further progress hinges on contin- concessional finance. c 25.0 ued reform progress, the security situation School enrollment, primary (% net) d 56.1 (including international support following Life expectancy at birth, years Total GHG emissions (mtCO2e) 42.6 the end of the African Union Transition Source: WDI, Macro Poverty Outlook, and official data. Mission), and building buffers against Recent developments a/ Estimates based on 2013 population estimates by UNF- shocks to which Somalia is currently high- PA and assume an average annual population growth of ly exposed. Multiple and overlapping cli- In 2023, sustained favorable rains im- 2.8%. b/ Somalia revised GDP series, released in June 2024. mate-related and external shocks have in- proved agricultural production and led to c/ Somalia Integrated Household Budget Survey 2022 terrupted the country’s growth trajectory better food security and higher private (SNBS, 2023). and slowed the transition from fragility. consumption. Exports recovered faster d/ Most recent WDI value (2021). Real GDP growth averaged only 2.1 per- than imports, as livestock exports re- cent annually in 2019–23 with an average bounded. Private sector credit growth con- negative real GDP per capita growth of tributed to strengthening investment, par- 0.7 percent. Growth does not generate ticularly in construction and real estate. Economic growth continues to accelerate, the jobs needed to reduce poverty. As a Remittances increased significantly, bol- albeit at a modest pace, supported by im- result, poverty remains high and wide- stered by the moderation of global infla- proved agriculture production, private spread, with recurrent shocks increasing tion and the uptick in economic growth in the risk of more people falling into pover- several host countries. The trade deficit is consumption, and exports. Real GDP ty. Somalia experienced a multitude of estimated to slightly narrow to 60.2 per- growth is expected to rise to 4.4 percent shocks between 2020 and 2022. These cent of GDP in 2024 compared to 62.6 per- in 2024, from 4.2 percent in 2023. Con- shocks more often impacted poorer cent in 2023, as livestock exports im- tinued favorable rains and declining glob- households and poorer regions. Projec- proved. Consequently, the current account tions based on GDP per capita growth deficit is estimated to narrow to 9.0 percent al commodity prices are contributing to suggest that poverty increased from 71 of GDP in 2024, from 10.8 percent in 2023. further easing of inflation. Nevertheless, percent in 2019 to 74 percent in 2022, Food and fuel prices have been moder- recurrent shocks and insecurity remain based on the US$2.15/day poverty line. ating and with them inflation, with July significant threats to growth prospects Now that Somalia has graduated from the 2024 inflation at 5.5 percent (y-o-y) com- Heavily Indebted Poor Countries (HIPC) pared to 6 percent in July 2023. Annual and sustained poverty reduction. Initiative, it will be essential for the author- average inflation is expected to slow ities to maintain macroeconomic stability down to 4.6 percent in 2024, in line with FIGURE 1 Somalia / Federal government revenue sources FIGURE 2 Somalia / Actual and projected poverty rates and and wage bill real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 120 720 7 710 100 6 700 80 690 5 680 4 60 670 3 40 660 2 650 20 1 640 0 630 0 2017 2019 2021 2023 2025 2019 2020 2021 2022 2023 2024 2025 2026 International poverty rate Lower middle-income pov. rate Domestic revenue Grants Fed. gov. wage bill Upper middle-income pov. rate Real GDP pc Sources: Somalia authorities and World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 280 Oct 24 the easing of global commodity prices, Inflation is expected to continue a down- improved agricultural production, and ward trend to around 3.6 percent over the the de facto dollarization of the economy. Outlook medium term as fuel and food prices slow The easing of inflation together with the down. The current account deficit is esti- absence of a drought in 2023-24 is pro- Real GDP growth is expected to acceler- mated to widen gradually owing to Soma- jected to make poverty revert down to 72 ate to 4.4 percent in 2024, from 4.2 per- lia's dependence on major imports for con- percent by 2024. cent in 2023, and to pick up to 4.5 per- sumer and investment goods as well as its The fiscal surplus is estimated at 0.3 per- cent in the medium term, as structural limited export capacity. cent of GDP in 2024, supported by higher reforms pay off and public and private Higher per capita growth, lower inflation, grants and prudent spending. Domestic investment scale up. The outlook is also and increasing incomes due to improved revenue remains exceptionally low but is anchored on the continued recovery of rains are expected to reduce poverty in the slowly improving due to the strengthening the agriculture sector, which will im- medium term, albeit slowly. The reduction of customs administration, broadening of prove household incomes, food security, in poverty is expected to accelerate in 2025 the tax base, and digitization of taxes on and exports. Foreign direct investment is and 2026, reaching a poverty rate of 70 per- road use and rental income. The govern- expected to trend upward in the medium cent in 2026, down from 72 percent in 2024. ment’s expenditures grew at a slower pace term, following HIPC Completion Point. However, poverty will remain amongst compared to revenue and were driven by Remittances are projected to increase, the highest in Sub-Saharan Africa. Acceler- an increased wage bill, and security and bolstered by the moderation of global in- ating the pace of poverty reduction will re- social services spending. With limited fis- flation and the upgrade of the growth quire macroeconomic stability, enhanced cal space, capital spending accounted for outlook in several host countries. How- security, and reduced conflict, and policy only 0.3 percent of GDP in 2024. External ever, the outlook is subject to downside interventions that focus on increasing hu- debt is expected to decline to 5.6 percent risks, including climate shocks, intensi- man capital, creating jobs, and strengthen- of GDP in 2024, down from 6.4 percent in fied domestic insecurity, and regional ing climate resilience, especially for rural 2023, following HIPC relief in 2023. geopolitical pressures. and nomadic livelihoods. TABLE 2 Somalia / Macro poverty outlook indicators (percent of GDP unless indicated otherwise) a 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 3.5 2.7 4.2 4.4 4.5 4.5 CPI inflation (annual percentage change) 4.6 6.8 6.1 4.6 4.0 3.6 Current account balance -7.3 -8.2 -10.8 -9.0 -11.2 -11.2 Trade balance -50.9 -62.5 -62.6 -60.2 -57.4 -55.7 Private remittances 22.3 21.0 21.6 20.1 19.9 20.1 Official grants 18.1 26.8 21.3 23.6 19.6 17.9 b Fiscal balance -0.8 -0.1 0.2 0.3 -0.2 -0.9 Domestic revenue 2.4 2.6 3.0 2.6 3.1 3.6 External grants 1.5 4.5 3.7 4.6 3.0 1.6 Total expenditure 4.8 7.2 6.6 6.9 6.3 6.0 Compensation of employees 2.6 2.5 2.7 2.7 2.7 2.6 External debt 41.4 37.5 6.4 5.6 5.8 7.0 c,d International poverty rate ($2.15 in 2017 PPP) 73.6 73.6 72.9 72.2 71.3 70.5 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 91.6 91.6 91.3 90.9 90.5 90.0 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 98.8 98.9 98.8 98.7 98.6 98.6 GHG emissions growth (mtCO2e) -0.8 -1.1 -0.1 1.1 1.7 1.1 Energy related GHG emissions (% of total) 1.4 1.5 1.5 1.4 1.4 1.4 Source: World Bank, IMF, and FGS. Emissions data sourced from CAIT and OECD. Notes: e = estimate; f = forecast. a/ GDP baseline estimates 2021-23 are by Somalia National Bureau of Statistics (SNBS, June 2024). b/ Federal Government of Somalia (FGS). c/ Calculations based on Takamatsu et al. (2022) “Rapid Consumption Method and Poverty and Inequality Estimation in Somalia Revisited.” Actual data: 2017. Nowcast: 2021–23. Forecasts are from 2024–26. d/ Projection using neutral distribution (2017) with pass-through = 1 (High) based on GDP per capita in constant LCU. MPO 281 Oct 24 binding structural constraints to growth. Recent successes in the network industries, SOUTH AFRICA Key conditions and notably electricity, have demonstrated that opening markets to competition and en- challenges suring a just transition to protect the poor- est against adjustment costs could help Table 1 2023 South Africa’s economy expanded by an generate faster and more inclusive growth. Population, million 60.4 average of 0.8 percent over the period The 2024 general elections ushered in a GDP, current US$ billion 380.7 2014-2023, below the population growth shift in the political landscape with the GDP per capita, current US$ 6301.5 rate, leading to a decline in real income per ANC losing its parliamentary majority for a 20.5 International poverty rate ($2.15) capita to its 2007 level. A series of struc- the first time in the democracy era. A Gov- a 40.0 tural constraints on the supply side of ernment of National Unity (GNU) has Lower middle-income poverty rate ($3.65) a 61.6 the economy (infrastructure bottlenecks, been in office since June 2024. Upper middle-income poverty rate ($6.85) Gini index a 63.0 weak business environment, low produc- School enrollment, primary (% gross) b 98.1 tivity) and a decline in the efficiency of b 61.5 fiscal policy have hindered economic Life expectancy at birth, years Total GHG emissions (mtCO2e) 513.2 growth. Higher public spending, mainly Recent developments on wages, has not translated into faster Source: WDI, Macro Poverty Outlook, and official data. economic growth while contributing to a Economic growth has remained modest a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2021); Life expectancy rapid increase in public debt, which at 0.4 percent (y/y) in the first half of (2022). reached 74.1 percent of GDP in 2023, up 2024. While energy supply has stabilized, from 42.8 percent a decade ago. with no rotational load shedding since On the social front, access to basic ser- late March 2024, political uncertainty as- vices increased in the post-apartheid pe- sociated with the May elections affected Despite the decline in power cuts since riod, but weak state capacity has limited private sector spending. GDP growth in- further progress. In the context of low creased to 0.4 percent q/q in 2024Q2 early 2024, the medium-term growth tra- economic growth, the unemployment after stagnation in the previous quarter, jectory remains hampered by several sup- rate (32.4 percent in 2023) and inequality mainly underpinned by financial services ply-side structural constraints (infra- (Gini index of 63) remain among the which contributed 0.3 percentage points structure bottlenecks, weak business envi- world’s highest. More than 8 million peo- and smaller contributions from other sec- ple are unemployed, most for more than tors. On the spending side, higher house- ronment, low productivity). Given a large a year. Weak job creation has hampered hold and government consumption were government debt burden, expenditure re- poverty reduction. About 63 percent of partly offset by weaker investment and straint remains critical to safeguarding the population is estimated to live below net exports. fiscal sustainability. As a result of slow the $6.85 upper-middle-income threshold Reflecting the weak growth environment, growth, progress on social outcomes is in 2024, corresponding to 2.2 million the unemployment rate increased for a more poor people than in the pre- third successive quarter reaching 33.5 per- expected to remain limited, with the pro- cent in 2024Q2 and 42.6 percent when us- COVID-19 period. jected upper-middle-income poverty rate To improve economic and social outcomes, ing the expanded definition that includes hovering at about 63 percent. greater urgency is needed to address discouraged workers. FIGURE 1 South Africa / Fiscal balance and debt FIGURE 2 South Africa / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 80 0 70 82000 National government debt (lhs) 70 Fiscal balance (rhs) 60 80000 -2 60 50 78000 -4 50 40 76000 40 -6 30 74000 30 20 -8 20 10 72000 -10 10 0 70000 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 0 -12 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 Upper middle-income pov. rate Real GDP pc Sources: National Treasury and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 282 Oct 24 Headline inflation eased to 5.3 percent in increasing from 38.2 million in 2024 to 38.9 2024H1, down from 6.6 in 2023H1. How- million in 2026. ever, the high food inflation episode of Outlook The current account deficit is expected to 2022-2023 represents a persistent shock to widen in the medium term, reaching 2.8 the households, as their vulnerability to GDP growth is expected to reach 1.1 per- percent of GDP by 2026, largely owing to hunger increased from 19 percent to 22 cent in 2024, before increasing to 1.5 per- less favorable terms of trade and stronger percent over this period. To anchor infla- cent in 2025 and 1.7 percent in 2026. In- import growth. The deficit is expected to tionary expectations, monetary policy has creased electricity supply and implemen- be financed by capital inflows. remained restrictive. However, the SARB tation of ongoing reforms in the transport Fiscal policy is expected to be prudent, reduced its policy rate by 25 basis points sector are expected to boost economic ac- aiming to stabilize debt by 2026. However, to 8.00 percent in September, beginning tivity. Household consumption is expected this will require containing expenditure an easing cycle. to rebound starting in 2025, supported by pressures, including on the wage bill, sup- National government expenditure in- the stabilization of inflation. Headline in- port to SOEs, and new unfunded initia- creased 3.7 percent y/y while revenue was flation is expected to stabilize around 4.5 tives such as health insurance. The fiscal up 2.7 percent in the first quarter of FY2024/ percent, reducing cost of living pressures deficit is expected to widen marginally to 25. The government has since received the and giving room for the SARB to reduce its 5.9 percent of GDP in 2025, before narrow- first tranche payout from its GFECRA ac- policy rate further. Investment is projected ing with the end of budgetary support for count at the SARB, amounting to 1.1 per- to rebound from 2025 onwards in the con- Eskom. The debt ratio is projected to reach cent of GDP. This account captures FX re- text of lower interest rates and a slight in- 77.6 percent in 2026. serve valuation gains and losses due to crease in aggregate demand. Risks to the outlook are significant. An un- Rand movements, which the government Progress on social outcomes is expected to certain pace of implementation of structural will use to reduce debt. The fiscal deficit is remain limited given modest job creation. reforms, weaker trading partner growth, a estimated at 5.8 percent of GDP in FY2024/ The poverty rate, based on the upper mid- sustained period of high global interest rates, 25, similar to the FY2023/24 level, while na- dle-income poverty line, is expected to re- and climate shocks are among the key risks. tional government debt is estimated at 74.7 main at about 63 percent between 2024 and Government expenditure restraint will be percent of GDP during this period. 2026—with the absolute number of poor criticalto safeguard fiscal sustainability. TABLE 2 South Africa / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 5.0 1.9 0.7 1.1 1.5 1.7 Private consumption 6.2 2.5 0.7 0.8 1.6 1.6 Government consumption 0.6 0.6 1.9 1.0 -0.1 -0.1 Gross fixed capital investment -0.4 4.8 3.9 0.9 4.3 4.3 Exports, goods and services 9.7 6.8 3.7 0.6 2.8 3.0 Imports, goods and services 9.6 15.0 3.9 -1.2 3.1 3.1 Real GDP growth, at constant factor prices 4.7 1.9 0.7 1.1 1.5 1.7 Agriculture 5.6 2.0 -4.8 -2.1 2.5 2.5 Industry 6.5 -2.6 -0.4 0.0 1.2 1.8 Services 4.0 3.4 1.2 1.6 1.6 1.6 Inflation (consumer price index) 4.5 6.9 6.0 4.8 4.5 4.5 Current account balance (% of GDP) 3.7 -0.5 -1.6 -1.5 -2.6 -2.8 Net foreign direct investment inflow (% of GDP) 9.5 1.7 1.7 1.5 1.6 1.6 a Fiscal balance (% of GDP) -4.6 -3.6 -5.8 -5.8 -5.9 -4.2 Revenues (% of GDP) 27.7 28.0 27.2 27.2 27.2 27.3 Debt (% of GDP) 67.6 70.5 74.1 74.7 76.8 77.6 Primary balance (% of GDP) -0.4 0.9 -0.8 -0.6 -0.6 1.0 b,c International poverty rate ($2.15 in 2017 PPP) 21.7 21.5 21.5 21.5 21.4 21.4 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 41.4 41.1 41.1 41.1 41.1 40.9 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.8 62.6 62.6 62.6 62.6 62.5 GHG emissions growth (mtCO2e) 1.6 0.7 -1.5 1.3 1.6 1.7 Energy related GHG emissions (% of total) 76.7 76.7 76.2 76.2 76.2 76.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ The Eskom debt-relief arrangement is reported above the line, in expenditures. b/ Calculations based on 2014-LCS. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2014) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 283 Oct 24 IMF-backed reforms, beginning in 2021, fostered macroeconomic stability and re- SOUTH SUDAN Key conditions and vived the non-oil private sector. However, the disruption in oil production and ex- challenges ports undermined economic stability and reversed the gains from exchange rate re- Table 1 2023 More than a decade after independence, forms and higher oil prices. Extreme Population, million 11.1 South Sudan’s development prospects re- poverty is widespread, with more than 70 GDP, current US$ billion 4.6 main constrained by fragility, heavy re- percent of the population living on less GDP per capita, current US$ 418.0 liance on oil revenue and external financ- than US$2.15 per day based on projections a 67.3 International poverty rate ($2.15) ing, and limited state capacity to deliver from the most recent available data. Food a 86.5 public services. Acute humanitarian and insecurity is acute, affecting 9 million peo- Lower middle-income poverty rate ($3.65) a 96.6 macroeconomic challenges have been fur- ple (78 percent of the population), exacer- Upper middle-income poverty rate ($6.85) Gini index a 44.1 ther compounded by the conflict in neigh- bated by high food prices and floods. Ad- School enrollment, primary (% gross) b 81.9 boring Sudan that has disrupted the flow ditionally, 2 million people are internally b 55.6 of oil through pipelines in Sudan. These displaced, while 2.1 million remain Life expectancy at birth, years developments fuel a macroeconomic and refugees in neighboring countries. The Total GHG emissions (mtCO2e) 68.1 fiscal crisis, given that oil accounts for conflict in Sudan has also led to over 700 Source: WDI, Macro Poverty Outlook, and official data. nearly all exports and about 90 percent of thousand Sudanese refugees and South a/ Most recent value (2016), 2017 PPPs. b/ WDI for School enrollment (2021); Life expectancy government revenues. Fiscal capacity to Sudanese returnees entering the country, (2022). counter the large decline in oil production intensifying the humanitarian crisis. The or global oil and food price shocks remains country is highly vulnerable to climate highly constrained by severe challenges in shocks reflected in the increased severity, the governance of oil sector revenues and durations, and spread of annual floods. A significant drop in oil production de- weak fiscal discipline. Furthermore, the limited fiscal resources are used to repay railed economic growth, despite better non-concessional debts or flow to the se- harvests. Food insecurity and extreme curity sector. South Sudan remains at high Recent developments poverty remain high because of high infla- risk of both external and domestic debt tion, climate and external shocks, declin- distress, with a substantial downside risk Macroeconomic conditions have signifi- on sustainability and falling into debt dis- cantly deteriorated over the past year with ing official development assistance, struc- tress. Critical social expenditures are main- the economy contracting by an estimated turally weak governance, inadequate ser- ly financed by humanitarian official devel- 7.8 percent in FY2023/24. While the agri- vice delivery, and localized conflict. The opment assistance that is under pressure cultural sector, mainly crop production, conflict in Sudan poses acute risks to due to competing global needs. The 2018 expanded by 1.8 percent, the non-agricul- macroeconomic stability, exacerbating fis- peace agreement ended five years of civil tural sector has been affected by height- war; however, the transition period for its ened political uncertainty, lower trade cal pressures and pressing humanitarian flows, and higher food inflation due to sig- full implementation has been repeatedly needs. A loss of momentum in the politi- extended, including the recent two-year nificant currency depreciation in recent cal transition could amplify these risks. extension to February 2027. months. The oil sector has come under FIGURE 1 South Sudan / Exchange rate developments FIGURE 2 South Sudan / Actual and projected poverty rates and real GDP per capita SSP/USD Percent Poverty rate (%) Real GDP per capita (constant LCU) 4500 300 120 3500 4000 Spread (rhs) 250 100 3000 3500 Official EXR (lhs) 2500 3000 Parallel EXR (lhs) 200 80 2500 2000 150 60 2000 1500 1500 100 40 1000 1000 50 20 500 500 0 0 0 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 M -20 M -21 M -22 M -23 De 20 Se 21 De 21 Se 22 De 22 Se 23 De 23 24 Ju 21 Ju 22 Ju 23 Ju 24 International poverty rate Lower middle-income pov. rate p- n- p- n- p- n- p- n- - - - - c c c c ar ar ar ar Se Upper middle-income pov. rate Real GDP pc Sources: Bank of South Sudan and World Bank. Source: World Bank. Notes: see Table 2. MPO 284 Oct 24 pressure following damages to the discretionary exemptions and improved The pressure on the current account is ex- pipeline in Sudan and heightened geo-po- compliance, as well as due to high infla- pected to increase due to continued decline litical tensions in the Red Sea. Since Feb- tion. Preliminary fiscal outturns exceed- in oil revenues, higher debt-service obliga- ruary 2024 oil production plunged to ed outlays by 36 percent, with overall tions, and a decline in international aid. 50,000bpd from 150,000 previously. More- spending increasing by 50 percent, main- Putting the economy on a sustainable over, Petronas International Corporation, ly due to higher operational and capital growth path requires the full implementa- the main operator of South Sudan’s oil expenditures. As a result, the fiscal deficit tion of the 2018 peace accord and the orga- fields, submitted a request for arbitration reached 3 percent of GDP. Further, the nization of fair and transparent elections. to ICSID against the government of South FY25 draft budget envisages a deficit Currently, the transitional period is ex- Sudan over the takeover of its assets by the amounting to 45 percent of the total ex- tended to February 2027, and elections are state-owned Nilepet. penditures, with no clear financing plans. postponed to December 2026. Meanwhile, Inflation soared to 107 percent in July, as The current account balance deteriorated ensuring budget credibility and disci- the South Sudan pound depreciated, sup- following the decline in oil export rev- plined execution, refraining from moneti- ply shortages intensified, including due to enues, while partly cushioned by reduced zation of fiscal deficit, are critical to restor- sharply lower cross border trade of essen- imports and large net transfers, mainly hu- ing macroeconomic stability, improving tial food items mainly from Uganda, and manitarian aid flows. governance, and fostering inclusive growth. as transport costs increased. Loss of rev- Extreme poverty is expected to remain enue led the government to return to high at over 70 percent in the medium deficit monetization. As a result, since the term as real growth prospects are limited beginning of 2024, the official exchange Outlook in the short-term. This underscores the rate depreciated by 89 percent, and the urgency of fiscal and public financial premium in the parallel market widened Real GDP is expected to decline by 11.4 management reforms to generate bud- to 75 percent. percent in FY2024/25, due to the drop in getary resources to increase social expen- In FY2023/24, fiscal pressures proved oil production and uncertainty regarding ditures. While digital solutions to mod- more significant than anticipated. Despite future production. The non-oil sector`s re- ernize tax administration, efforts to ex- lower oil production in the second half bound is expected to be constrained by pand the tax base and to strengthen the of FY24, oil revenues increased by 23 floods that disrupt agricultural produc- management and transparency of oil rev- percent in nominal terms while non-oil tion. Growth is projected to rebound to 6 enues could help, fiscal pressures are ex- revenues rose by 91 percent, helped by percent in FY2025/26, predicated on oil pected to remain substantial given sizable an increase in custom valuation exchange output recovery and non-oil activities debt-service obligations, the need to clear rate from SSP90 to SSP300, which re- gradually picking up, supported by easing legacy arrears, and increase social and mains substantially low, suspension of inflation and increased public spending. humanitarian expenditures. TABLE 2 South Sudan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -5.1 -2.3 -1.3 -7.8 -11.4 6.1 Real GDP growth, at constant factor prices -5.1 -2.3 -1.3 -7.8 -11.4 6.1 Agriculture -4.0 -1.8 -1.7 1.8 1.8 2.5 Industry -2.3 -4.8 -4.3 -17.2 -26.5 8.7 Services -9.7 1.7 3.6 3.5 2.9 4.8 Inflation (consumer price index) 43.1 22.0 18.0 35.0 47.0 24.6 Current account balance (% of GDP) -5.5 4.6 5.1 3.2 -3.3 -1.6 Net foreign direct investment inflow (% of GDP) 0.9 0.9 0.8 0.6 1.1 0.8 Fiscal balance (% of GDP) -6.8 -5.9 1.8 -3.1 -7.1 -2.4 Revenues (% of GDP) 30.9 28.8 28.8 28.4 21.0 29.0 Debt (% of GDP) 57.6 56.9 40.3 43.3 52.3 49.9 Primary balance (% of GDP) -4.4 -3.8 2.8 -2.4 -6.2 -1.6 a,b International poverty rate ($2.15 in 2017 PPP) 67.5 68.8 69.7 73.0 77.1 75.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 86.6 87.6 88.1 89.9 92.0 91.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 96.7 97.1 97.3 97.8 98.4 98.2 GHG emissions growth (mtCO2e) -5.6 0.3 1.0 0.9 0.8 1.1 Energy related GHG emissions (% of total) 2.8 2.8 2.8 2.6 2.4 2.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2016-HFS-W3. Actual data: 2016. Nowcast: 2017-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 285 Oct 24 South Sudan in 2011. Sudan lost 75 per- cent of its revenues (mostly from crude SUDAN Key conditions and oil exports, as oil fields are located in South Sudan) compounding macroeco- challenges nomic vulnerabilities and fragility and GDP growth averaged -1.3 percent dur- Table 1 2023 The conflict between the Sudanese ing 2011-18. Economic activity continued Population, million 48.1 Armed Forces (SAF) and the Rapid Sup- to decline over the period 2018-22, af- GDP, current US$ billion 109.3 port Forces (RSF), which started in April fected by growing political instability, GDP per capita, current US$ 2271.2 2023, has intensified despite peace negoti- hyperinflation amid currency pressures, a 15.3 International poverty rate ($2.15) ations. The death toll has risen, and food and fiscal deficit monetization. Efforts to a 49.7 insecurity has reached alarming levels, stabilize the economy, rein in subsidies, Lower middle-income poverty rate ($3.65) a 86.2 affecting over half of Sudan’s population and unify the exchange rate sparked a Upper middle-income poverty rate ($6.85) Gini index a 34.2 (25.6 million) with 2 percent (755,000) at nascent economic recovery that was de- School enrollment, primary (% gross) b 77.8 catastrophic risk of famine. Recent floods railed by the COVID pandemic and by b 65.6 in the eastern region have exacerbated the 2021 military intervention that halted Life expectancy at birth, years the humanitarian crisis, leading to a ma- debt relief efforts under HIPC and sus- Total GHG emissions (mtCO2e) 126.1 jor Cholera outbreak, as declared by the pended foreign assistance inflows. As a Source: WDI, Macro Poverty Outlook, and official data. Minister of Health. result, over the last decade, average per a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2018); Life expectancy The conflict has severely damaged Su- capita growth was negative. (2022). dan’s economy, affecting industry, agri- culture, and the oil sector, while halting education and destroying health facilities in affected areas. About 10 million peo- Recent developments Sudan’s humanitarian crisis has wors- ple are internally displaced, and over 2 million have fled to neighboring coun- The conflict has caused a collapse in do- ened with famine, widespread infrastruc- tries. The collapse of government institu- mestic demand and economic activity, ture destruction, trade disruptions, and tions has disrupted public spending, and eroding state capacity and spreading to 12 million displaced due to the conflict. the exodus of people has reduced tax previously safe regions like Gazira, Sen- The economy is expected to shrink to two- base and caused a sharp decline in rev- nar, and White Nile States. This has dis- enues due to decreased economic activity rupted agriculture and trade, exacerbat- thirds of its pre-conflict size after a sec- and demand. ing food insecurity and displacement. ond year of double-digit contraction, with The economy had already been on a Low crop production seriously threatens a sharp rise in poverty. The loss of pro- downward trajectory pre-conflict due to food availability. The severe impact of the ductive capacity and human capital will a multitude of shocks that were exac- conflict on the telecommunications infra- likely hinder post-conflict recovery and erbated by political crises. Weak invest- structure and fuel supply has resulted in ment in physical and human capital dur- extensive outages, isolating people and have lasting effects on poverty. disrupting aid. There are some indica- ing the oil boom years (2000-2010) and stalled structural reforms exacerbated the tions that trade is being redirected socio-economic impact of the secession of through new routes to Egypt, Port Sudan, FIGURE 1 Sudan / Real GDP growth and sectoral FIGURE 2 Sudan / Actual and projected poverty rates and contributions to real GDP growth real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 5 120 800 700 0 100 600 80 -5 500 60 400 -10 300 40 Agriculture -15 200 Industry 20 Services 100 -20 GDP growth 0 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 -25 International poverty rate Lower middle-income pov. rate 2018 2019 2020 2021 2022 2023 2024 2025 2026 Upper middle-income pov. rate Real GDP pc Sources: National Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 286 Oct 24 and South Sudan to bypass conflict. Gold destruction of supply capacity. Extreme exports through official channels recov- poverty is expected to remain high at ered to $428 million in the first quarter Outlook around 64 percent in the medium term. of 2024, but this is still far below the Over the medium term, the fiscal outlook pre-conflict average of $2.3 billion. Ex- The outlook remains highly uncertain. The is expected to face continued challenges, ports through informal channels are like- economy is anticipated to further contract marked by a widening fiscal deficit, with a ly to remain significant and serve as a key by 15.1 percent in 2024, following an esti- rise in expenditures, to 9.8 percent of GDP, source of financing during the conflict. mated 20.1 percent contraction in 2023, re- despite a projected uptick in revenues to Inflation soared to 194 percent year-on- flecting a large decline in private consump- 6.2 percent of GDP by 2026. The external year by July 2024, among the highest tion and investment. On the supply side, current account deficit is estimated to globally, driven by rising food, fuel a major driver is the damage to the ser- widen to -3.2 percent of GDP in 2024 due prices, rents, goods shortages, and cur- vices sector (medical, educational, telecom- to a decline in primary and secondary in- rency depreciation, with the parallel mar- munications, retail and wholesale services), comes. It will deteriorate further to 17.5 ket rate dropping from SDG 561/US$ at which is mostly concentrated in Khartoum. percent of GDP in 2025, with a marginal the end of 2022 to SDG 2260/US$ in July In the event of a cessation of conflict, eco- improvement to 14.1 percent of GDP by 2024. All fuel in Sudan is now imported nomic indicators would start improving. 2026. This is partly due to an anticipated due to the shutdown of the Khartoum Assuming that conflict ends in the next increase in gold exports as the government refinery (Al-Jaili). The World Food Pro- several months, a modest recovery of 1.3 regains control over mines, although the gram food basket average price tripled percent could happen in 2025, and the econ- recovery of imports is expected to outpace between the first half of 2023 and the omy would grow further by 2.9 percent that of the exports as domestic capacity same period of 2024. in 2026. This scenario assumes improve- takes time to rebound. Public debt is ex- Most banks relocated their headquarters to ments in security, as well as improvements pected to remain elevated due to ongoing Port Sudan, operating with reduced capac- in macroeconomic fundamentals and a re- fiscal challenges and the absence of debt ity, with one bank sanctioned by the US sumption in international funding. Even in relief under the HIPC initiative. in January for funding conflict. Extreme this positive scenario, real GDP would stay The economic outlook faces considerable poverty incidence, the share of the popula- well below pre-conflict levels. risks from stalled peace talks, posing a tion living on less than $2.15 per day, has Although slowing, inflation is expected to threat to recovery efforts by worsening almost doubled from 33 percent in 2022 to remain in double-digits reflecting contin- fiscal imbalances and deterring foreign 64 percent in 2024. ued currency pressures and broad-based investment and aid. TABLE 2 Sudan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices -1.9 -1.0 -20.1 -15.1 1.3 2.9 Private consumption -0.9 -0.8 -18.0 -17.3 -0.9 1.4 Government consumption -9.6 1.9 -36.5 -4.3 11.6 17.3 Gross fixed capital investment -2.1 1.2 -20.0 -22.9 -1.5 1.8 Exports, goods and services 8.0 12.0 -39.9 36.4 18.8 5.0 Imports, goods and services -0.5 8.7 -22.3 -25.7 -10.8 8.0 Real GDP growth, at constant factor prices -1.9 -1.0 -20.0 -15.1 1.3 2.9 Agriculture -0.6 1.0 -16.3 -7.6 1.5 1.2 Industry -0.7 -0.7 -19.7 -13.1 -1.1 1.1 Services -3.9 -3.0 -23.7 -24.2 3.3 6.6 Inflation (consumer price index) 359.7 164.2 65.8 180.2 89.4 33.1 Current account balance (% of GDP) -7.3 -6.0 -0.6 -3.2 -17.6 -14.1 Net foreign direct investment inflow (% of GDP) -1.6 -1.3 -0.7 -1.4 -1.2 -1.1 Fiscal balance (% of GDP) -0.3 -1.7 -3.8 -3.2 -3.5 -3.5 Revenues (% of GDP) 10.5 10.0 4.8 3.4 4.5 6.2 a Debt (% of GDP) 215.6 183.6 167.3 146.5 147.4 134.9 Primary balance (% of GDP) -0.3 -1.4 -3.7 -3.2 -3.5 -3.5 b,c International poverty rate ($2.15 in 2017 PPP) 28.3 30.3 45.6 56.7 57.3 57.1 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 65.3 67.4 79.8 86.2 86.6 86.5 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 92.2 92.8 96.1 97.6 97.6 97.6 GHG emissions growth (mtCO2e) 1.6 -0.3 -1.8 -0.6 0.5 2.2 Energy related GHG emissions (% of total) 17.2 17.0 15.2 15.9 16.9 18.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Debt projections do not include any restructuring achieved during the HIPC process. b/ Calculations based on 2014-NBHS. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2014) with pass-through = 1 (Med (0.87)) based on GDP per capita in constant LCU. MPO 287 Oct 24 since mid-2023. While the exchange rate premium has remained below 10 percent TANZANIA Key conditions and and is estimated to have narrowed more recently thanks to strong export perfor- challenges mance, it is important for Tanzania to build on its strong foundations of sound macro- Table 1 2023 Tanzania has successfully navigated recent economic policies, including both fiscal Population, million 67.4 external and weather-related shocks, in- and monetary policies, and facilitate a GDP, current US$ billion 78.1 cluding the COVID-19 crisis, tightening of well-functioning forex market by remov- GDP per capita, current US$ 1158.8 global financing conditions, and protract- ing the distortions. a 44.9 International poverty rate ($2.15) ed droughts and more frequent floods. a 74.3 Sound macroeconomic fundamentals have Lower middle-income poverty rate ($3.65) a 92.3 underpinned the robust post-pandemic re- Upper middle-income poverty rate ($6.85) Gini index a 40.5 bound. The primary drivers of this growth Recent developments School enrollment, primary (% gross) b 95.5 have been rising gross fixed investments, b 66.8 particularly in public infrastructure, and In the first quarter of 2024, GDP growth Life expectancy at birth, years expanding modern sectors such as indus- accelerated to 5.6 percent year-on-year (y- Total GHG emissions (mtCO2e) 167.2 try and services. o-y) building on 5.1 percent in 2023. Source: WDI, Macro Poverty Outlook, and official data. However, growth has not been sufficiently Leading indicators affirm that the econ- a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2022). inclusive and has not led to a commensu- omy has maintained this strong momen- rate poverty reduction. Limited structural tum in the second quarter. On the supply transformation has kept two-thirds of Tan- side, growth was primarily driven by the Tanzania’s growth has remained resilient zanian workers in the agriculture sector, industry and services sectors, including which accounts for less than 30 percent of manufacturing, electricity, construction, accompanied by low Inflation. Fiscal and total economic output. The recent flood- tourism, trade, and financial services. current account deficits are narrowing on ing and other climate-related hazards have Growth in agriculture declined to 3.1 per- the back of improved tax collection and highlighted the need to enhance agricul- cent, compared to 5 percent in Q1 of strong trade performance. Pressures in the tural productivity and strengthen its re- 2023 and 4.2 percent in 2023, amid weath- silience to maintain economic growth and er-induced shocks including protracted foreign exchange market persist. The medi- poverty reduction. These challenges also droughts followed by frequent floods. um-term outlook is positive, with GDP require fast-tracking the reforms for en- Inflation declined from 3.3 percent in Ju- growth expected to align more closely with hancing Tanzania’s private sector invest- ly 2023 to 3.0 percent in July 2024 (y- its long-term potential, supported by ongo- ments and expanding spending on human o-y), well below the Bank of Tanzania’s ing structural reforms and improved busi- development and social protection for (BoT) medium-term target of 5 percent. more inclusive and sustainable growth. Despite low and slowing inflation, the ness environment. However, risks remain, Disequilibrium in the foreign exchange Bank of Tanzania continued to tighten including delays in the completion of struc- market has emerged as another near-term its monetary policy stance to restore the tural reforms, climate-related shocks, and a concern. Despite a greater exchange rate equilibrium in forex market. Following weakened global economic environment. flexibility and tight monetary policy, a par- the hike in the policy rate by 50 ba- allel exchange rate market has emerged sis points, the growth rate of extended FIGURE 1 Tanzania / Real GDP growth and sectoral FIGURE 2 Tanzania / Actual and projected poverty rates contributions to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 7 100 2.5 6 90 80 2.0 5 70 4 60 1.5 50 3 40 1.0 2 30 1 20 0.5 10 0 2020 2021 2022 2023e 2024f 2025f 2026f 0 0.0 Agriculture Industry 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 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 Source: World Bank staff estimates and projections (2020-2026). Source: World Bank. Notes: see Table 2. MPO 288 Oct 24 broad money (M3) decelerated to 12.2 Poverty, measured at the international are expected to reduce current account percent in May. poverty line of US$2.15 a day, is estimated deficit further to 2.6 percent of GDP in 2024 Tanzania’s fiscal position has strength- to be on a declining trajectory to reach 42.9 and further to 2 percent by 2026. ened, despite a 0.3 percentage points in- percent in 2024, down by 0.5 percentage Poverty is expected to decline further from crease in interest payment as a share of points since 2023. 42.9 percent in 2024 to 41.6 percent by 2026 GDP. The overall fiscal deficit declined driven by a positive macroeconomic out- from 4.0 percent of GDP during the first look and the government’s continued im- 11 months of FY2022/23 to 3.3 percent of plementation of reforms and interventions GDP during the first 11 months of FY2023/ Outlook aimed at enhancing agricultural produc- 24, driven by improved tax collections cou- tivity, developing human capital, and pled with spending restraint in primary The growth is projected at 5.4 percent in strengthening business environment for expenditure. Primary fiscal deficit de- 2024, accelerating further over the medium more inclusive growth and job creation. clined from 2.1 percent of GDP to 1.2 per- term to 6 percent and translating into a 3.1 Medium-term risks are skewed towards cent over the same period. percent annual growth in GDP per capita. the downside. These include trade and Bolstered by favorable terms of trade, the This will be underpinned by robust public investment fragmentation risks due to current account deficit narrowed from 4.2 investment, improved business environ- heightened geopolitical tensions, weak- percent of GDP in Q1-2023 to 2.4 percent of ment, and enhanced export competitive- er-than-expected global economic GDP in Q1-2024. Net foreign direct invest- ness. Inflation is anticipated to remain be- growth, incomplete implementation of ment inflows continued to recover after a tween 3 and 4 percent over the medium Tanzania’s structural reforms, and in- long period of decline and are currently es- term. Fiscal deficit is expected to narrow tensifying spillovers from climate-relat- timated at around 2 percent of GDP. De- to 3.4 percent of GDP in 2024, thanks to ed disasters. On the upside, the com- spite strengthened external conditions and strengthened revenue mobilization and mencement of a flagship LNG project a greater flexibility of the exchange rate strong fiscal discipline, and medium-term to commercialize natural gas discover- resulting in over 12 percent depreciation fiscal and debt outlook remains positive. ies, combined with decisive policy mea- of the Tanzanian shilling against the USD Domestic financing is expected to play a sures to improve the business environ- during the past one year, the tensions in larger role in the overall deficit financing ment and reinforce private-public part- the foreign exchange markets that over the medium term. Ongoing structural nerships, could boost investment sen- emerged in 2023 have persisted albeit with reforms aimed at strengthening export timent, create numerous high-quality a relatively low parallel market premium. competitiveness and the business climate jobs, and further spur economic growth. TABLE 2 Tanzania / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 4.3 4.6 5.1 5.4 5.8 6.2 Private consumption 2.3 4.6 2.2 3.0 3.2 3.5 Government consumption 9.0 8.4 10.7 7.2 8.3 5.6 Gross fixed capital investment 7.8 9.6 5.7 5.8 7.6 8.9 Exports, goods and services 5.2 10.2 13.2 12.9 8.6 7.3 Imports, goods and services 9.6 23.7 7.5 6.3 6.1 5.7 Real GDP growth, at constant factor prices 4.3 4.6 5.1 5.3 5.8 6.2 Agriculture 3.7 3.3 3.6 3.8 4.0 4.8 Industry 4.1 4.3 4.8 5.1 6.0 6.3 Services 4.8 5.6 6.2 6.4 6.7 6.9 Inflation (consumer price index) 3.7 4.3 3.8 3.2 3.4 3.7 Current account balance (% of GDP) -3.4 -7.3 -3.8 -2.6 -2.5 -2.0 Net foreign direct investment inflow (% of GDP) 1.7 1.9 2.1 2.0 2.2 2.5 Fiscal balance (% of GDP) -5.3 -3.7 -4.1 -3.4 -3.3 -2.8 Revenues (% of GDP) 14.1 15.2 14.9 15.5 15.5 15.8 Debt (% of GDP) 39.6 42.5 44.6 48.4 48.2 47.9 Primary balance (% of GDP) -3.6 -1.9 -2.0 -1.2 -1.2 -0.7 a,b International poverty rate ($2.15 in 2017 PPP) 44.3 44.0 43.5 42.9 42.3 41.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 73.8 73.6 73.2 72.8 72.3 71.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.7 91.3 90.9 90.4 89.8 89.1 GHG emissions growth (mtCO2e) 2.7 0.4 0.8 1.0 1.1 1.2 Energy related GHG emissions (% of total) 13.5 13.4 13.4 13.4 13.6 13.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2013- and 2018-HBS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. b/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 289 Oct 24 TOGO Key conditions and Recent developments challenges Growth is expected to reach an estimated 5.3 percent in 2024 (2.9 percent in per capi- Table 1 2023 Despite facing a series of shocks since ta terms). On the supply side, a robust Population, million 9.1 the COVID-19 pandemic, Togo’s econo- agriculture season and sustained services GDP, current US$ billion 9.2 my has shown resilience, with growth sector activity have helped support GDP per capita, current US$ 1013.6 recovering to an average of 6.1 percent growth, while industrial activity has a 26.6 International poverty rate ($2.15) between 2021 and 2023. Nevertheless, shown signs of deceleration, suggesting a 58.8 high inflation (averaging 5.8 percent that a weak global environment and slow- Lower middle-income poverty rate ($3.65) a 86.8 over the period 2021-23) and consider- ing demand from neighboring countries Upper middle-income poverty rate ($6.85) Gini index a 37.9 able disparities in economic opportuni- have taken a toll. Aggregate demand is School enrollment, primary (% gross) b 122.5 ties and access to basic services between supported by robust private investment b 61.6 rural and urban areas continued to hin- and strengthening consumer spending as Life expectancy at birth, years der progress in reducing poverty, in- inflation moderates, but should slow from Total GHG emissions (mtCO2e) 9.8 equality, and fragility in Togo. While 2023 due to fiscal consolidation efforts, Source: WDI, Macro Poverty Outlook, and official data. fiscal stimulus measures helped support weak global demand, and regional uncer- a/ Most recent value (2021), 2017 PPPs. b/ Most recent WDI value (2022). growth in the post-COVID period, fiscal tainties. Indeed, the government has consolidation efforts are now urgently stepped up its efforts to boost revenues needed to put public finance back on a and reduce spending, particularly on sustainable trajectory. With the coun- goods and services and public subsidies. try grappling with increasing regional However, elevated security spending, new Growth is expected to moderate in uncertainty and insecurity, and climate economic and social infrastructure invest- 2024-25 to an average of 5.4 percent, stress, fostering more inclusive growth ments, and the effect of a one-off recapi- reflecting fiscal consolidation and sub- and boosting the resilience of vulner- talization of the state-owned bank UTB are dued global demand. Reforms and slow- able populations will require imple- expected to maintain the fiscal deficit at a menting a growth-friendly fiscal con- still elevated 6.1 percent of GDP in 2024 ing inflation will support private con- solidation strategy that preserves pri- (4.5 percent when excluding the recapital- sumption and investment, while cuts in ority investments and social programs, ization of UTB). Households’ purchasing public spending and revenue mobiliza- and pursuing structural reforms to power has been supported by moderating tion efforts will bring the fiscal deficit bolster private investment and job cre- inflation since 2023 but an uptick in food back to 3 percent of GDP by 2025. ation. Embracing climate-smart agri- price inflation around mid-2024 warrants cultural practices and developing sus- close monitoring. In this context, the ex- Rising insecurity, geopolitics, and cli- tainable agriculture value chains will treme poverty rate (<$2.15 in 2017 PPP) is mate shocks represent downside risks, be particularly critical to reduce the expected to slightly decline to 26.2 percent with faster reform implementation an rural-urban divide and accelerate in 2024 from 27.2 percent in 2023. upside risk. structural transformation in the face of The Central Bank of West African States climate change. (BCEAO) has kept its policy interest rates FIGURE 1 Togo / Real GDP growth and contributions to real FIGURE 2 Togo / Actual and projected poverty rates and GDP growth real GDP per capita Percent change Poverty rate (%) Real GDP per capita (constant LCU) 8 100 700000 90 6 600000 80 70 500000 4 60 400000 50 2 300000 40 30 200000 0 20 100000 -2 10 2022 2023 2024e 2025f 2026f 0 0 Net Exports Private investment 2018 2020 2022 2024 2026 Public investment Government consumption International poverty rate Lower middle-income pov. rate Private consumption GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 290 Oct 24 unchanged since December 2023 at 3.5 industrial sector and a recovery in con- on the revenue side. The appointment of percent for liquidity calls and 5.5 percent sumer spending as inflationary pressures a new government in August 2024 should for the marginal lending facility. The continue to taper down. Exports will pro- help anchor those consolidation efforts. WAEMU Inflation rate has been on a vide an additional boost from 2025 on- While external debt risks remain moderate, downward trend since peaking in 2022 wards as the global economy regains some elevated domestic debt continues to imply but remains above the 1 to 3 percent strength. The current account deficit is ex- a high risk of overall debt distress until WAEMU target, at 4.4 percent y/y in July pected to narrow gradually to 3.4 percent 2026. The poverty rate is projected to de- 2024, and regional foreign exchange re- in 2026, mostly driven by accelerating ex- cline to 23.5 percent in 2026, supported by serves remain low, covering only 3.5 ports. The regional inflation rate is ex- rising GDP per capita and easing inflation. months of import in 2024Q1. pected to align with WAEMU target by The outlook is subject to downside risks, 2025, while regional reserves are expect- including spillovers from the crisis in the ed to rise gradually, supported by the re- Sahel region, and rising insecurity in the sumption of international bond issuances, North that could weigh on investment, Outlook recovering exports and monetary policy trade, and public finance. Unforeseen cli- easing in the Euro Area. mate shocks could also impact food se- Growth is expected to strengthen margin- Fiscal consolidation efforts to reduce the curity and amplify fragility risks. Upside ally in 2025, to 5.4 percent, and more sig- fiscal deficit to 3 percent of GDP by 2025 risks include faster reform implementa- nificantly in 2026, to 5.8 percent (3.5 per- will be significant in the short term. These tion, resolution of regional uncertainties, cent per capita). This modest acceleration efforts will mostly be driven by deceler- and an easing of financing conditions that will be supported by ongoing and planned ating capital spending on the expenditure could stimulate investment more than private investment projects, notably in the side, as well as by tax and customs reforms currently anticipated. TABLE 2 Togo / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.0 5.8 6.4 5.3 5.4 5.8 Private consumption 12.0 4.7 4.3 5.8 5.4 5.3 Government consumption 0.2 7.2 6.3 2.7 4.3 4.3 Gross fixed capital investment -0.4 11.3 12.0 4.7 4.5 6.6 Exports, goods and services 8.8 2.8 6.8 3.9 6.8 7.8 Imports, goods and services 14.3 5.3 5.8 4.0 5.4 6.2 Real GDP growth, at constant factor prices 5.3 6.3 6.6 5.3 5.4 5.8 Agriculture 3.3 5.1 4.2 4.3 4.5 5.0 Industry 5.8 6.4 6.7 4.2 6.8 6.1 Services 6.0 6.8 7.6 6.1 5.2 6.0 Inflation (consumer price index) 4.5 7.5 5.3 3.5 3.0 2.7 Current account balance (% of GDP) -0.9 -3.0 -3.3 -3.6 -3.5 -3.4 Net foreign direct investment inflow (% of GDP) 0.3 0.3 0.4 0.4 0.5 0.5 Fiscal balance (% of GDP) -4.7 -8.3 -6.6 -6.1 -3.0 -3.0 Revenues (% of GDP) 17.1 17.8 18.2 18.5 18.4 18.5 Debt (% of GDP) 64.8 67.1 67.3 68.0 66.4 64.4 Primary balance (% of GDP) -2.5 -5.8 -4.4 -3.8 -0.6 -0.7 a,b International poverty rate ($2.15 in 2017 PPP) 26.6 27.5 27.2 26.2 24.9 23.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 58.8 56.7 55.9 54.8 52.7 51.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 86.8 83.6 83.0 82.2 81.3 80.1 GHG emissions growth (mtCO2e) 1.0 2.6 2.5 5.0 5.1 5.2 Energy related GHG emissions (% of total) 25.4 24.5 22.9 23.3 23.9 24.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 291 Oct 24 shift spending into social sectors and in- vest more in human capital, alongside UGANDA Key conditions and measures to reduce inequality and strengthen resilience. Finally, Uganda challenges needs to maintain prudent macroeco- nomic management alongside structural Table 1 2023 Intensifying shocks and faltering mo- policies to both avoid real appreciation Population, million 48.6 mentum behind policy reform create and loss of competitiveness once oil rev- GDP, current US$ billion 42.0 challenges for sustaining economic enues start flowing in and to build re- GDP per capita, current US$ 864.8 growth and reducing poverty in Ugan- silience to climate shocks. a 42.1 International poverty rate ($2.15) da. A large share of the population a 71.8 (42.1 percent in 2019) is below the Lower middle-income poverty rate ($3.65) a 91.1 poverty line (US$2.15 2017 PPP per Upper middle-income poverty rate ($6.85) Gini index a 42.7 day), while human capital and in- Recent developments School enrollment, primary (% gross) b 105.5 frastructure deficits have limited the b 63.6 country’s growth potential and social Growth is estimated to reach 6.0 percent Life expectancy at birth, years welfare improvement. The challenge of in FY24 (July 1, 2023–June 30, 2024) from Total GHG emissions (mtCO2e) 57.6 creating productive jobs for the almost 5.3 percent in FY23, despite global eco- Source: WDI, Macro Poverty Outlook, and official data. one million working-age Ugandans en- nomic instability, geopolitical tensions, a/ Most recent value (2019), 2017 PPPs. b/ Most recent WDI value (2022). tering the labor market every year and regional conflicts. Growth is sup- is pressing. Although services sector ported by favorable weather conditions, constitutes a large share of GDP, it investments in the oil sector, and has created few jobs, mainly informal progress on implementation of the Parish and low-skilled. Two-thirds of the jobs Development Model. The first phase of The Ugandan economy recorded acceler- are in the agriculture sector which is this new government strategy established ated growth, supported by continued in- prone to natural disasters and climate and fully capitalized 10,585 Savings and vestment momentum. Headline inflation shocks are becoming more frequent Credit Cooperatives in FY23 and dis- declined sharply driven by moderating and severe, while adaptation remains bursed 877 billion shillings in loans to limited due to low capacity. 880,000 households. Industrial sector (25 food prices, monetary policy tightening, To promote economic growth and re- percent of the economy) remained the and relative stability in the exchange rate. duce poverty over the medium term, top contributor to growth, followed by On the external side, the current account the Ugandan economy needs to struc- services (44 percent of the economy). deficit widened and pressures on the FX turally transform and shift labor into Thanks to an oil-related construction reserves increased. Uncertainty created a more productive employment. First, boom, Foreign Direct Investment (FDI) reforms should stimulate private sec- reached US$2.3 billion during the first by passing of the Anti-Homosexuality tor investments by reducing the cost nine months of FY24. Act in May 2023 is weakening the exter- of doing business, fostering access to Headline inflation declined to 3.2 percent nal financing landscape, however, FDI finance, and promoting the uptake of on average in FY24 from 8.8 percent in inflows continued in the Mining sector. digital and other innovative technolo- FY23 and is below the target of 5.0 per- gies. Second, the government could cent. This is due to declining food prices, FIGURE 1 Uganda / Real GDP growth and contributions to FIGURE 2 Uganda / Actual and projected poverty rates and real GDP growth real private consumption per capita Percent, percentage points Poverty rate (%) Real priv cons per capita (constant mil. LCU) 6 100 2.5 5 90 80 2.0 4 70 3 60 1.5 2 50 40 1.0 1 30 0 20 0.5 -1 10 9M- 9M- 9M- 9M- 9M- 0 0.0 FY2019/20 FY2020/21 FY2021/22 FY2022/23 FY2023/24 2009 2011 2013 2015 2017 2019 2021 2023 2025 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: Uganda Bureau of Statistics. Source: World Bank. Notes: see Table 2. MPO 292 Oct 24 monetary policy tightening, targeted fis- becomes operational, CAD would im- cal consolidation, and relative stability in prove. Export growth is likely to benefit the exchange rate. Prices of food crops Outlook from the roll-out of reforms envisaged un- grew by only 3.3 percent in FY24 com- der the African Continental Free Trade pared to 22.7 percent in FY23. Consis- Growth is accelerating supported by agri- Agreement and improvement in trade lo- tent with decreasing food inflation, a culture and services and the outlook for gistics. FDI flows are projected to remain household phone survey in March 2024 FY25 is improving to 6.2 percent. Over strong in the near term. showed a reduction in households affect- the medium term, growth is projected to Anticipated oil revenues could help reduce ed by food price increases to 46 per- significantly accelerate to 10.8 percent in poverty to 40.1 percent in 2026 from 41.3 cent, down from 73 percent the previ- FY26 as oil production starts and later re- percent in 2024. However, the actual pace ous year. Nonetheless, food insecurity re- turns to around 6 percent as the oil pro- of poverty reduction will depend on how mains a significant issue, particularly for duction plateaus. Growth will be also dri- well households can manage and recover the most vulnerable. Poverty projections ven by a recovery in tourism. The relat- from financial shocks. Effective use of oil for 2024 showed that just over 4 out of ed projects, such as the Tilenga and King- revenues to improve social protection, in- every 10 Ugandans were poor in 2024 fisher oil fields, the East Africa Pipeline, frastructure, and human capital is crucial as measured by the US$2.15 2017 PPP and the Kabalega International Airport for sustained poverty alleviation. poverty line. are already attracting large foreign and A global economic slowdown, geopoliti- The primary balance decreased to 1 domestic private investment. cal tensions, and regional instability re- percent of GDP in FY24, reflecting an The primary balance is expected to dete- main major risks. Middle East conflict es- underperformance of development ex- riorate slightly in FY25, followed by a 0.5 calation may disrupt the global econo- penditure, whose execution fell short percent surplus in FY26. The government’s my, reducing demand for Ugandan ex- by 20.5 percent of the approved bud- domestic revenue mobilization strategy is ports. The 2026 elections may undermine get. The share of development spend- expected to yield 0.5 and 1.3 percent of budget credibility, with fiscal slippages, ing in GDP decreased by 0.3 percent- GDP in FY25 and FY26, respectively. Debt higher-than-planned borrowing, and dis- age points in FY24. Revenues slightly is expected to increase in FY25 to 52.1 per- torted social spending. Inflationary pres- decreased, due to lower-than-anticipat- cent of GDP before decreasing to 47.9 per- sures could lead to tighter monetary ed revenues from the value added tax cent in FY26. policy, constraining businesses, and in- and excise duty, partly because of the The current account deficit (CAD) is ex- comes. The tourism sector faces risks lower-than-expected gains from imple- pected to remain elevated in the near term from health crises and travel restrictions menting digital tax stamps. The fiscal reflecting capital imports for oil produc- while climate-related droughts and deficit was financed by domestic and tion. Over the medium term, once oil ex- floods threaten agriculture, potentially external borrowing. ports come on-stream and the oil refinery exacerbating poverty. TABLE 2 Uganda / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 3.4 4.7 5.3 6.0 6.2 10.8 Private consumption 4.2 3.4 4.4 5.6 5.8 8.7 Government consumption 6.1 -17.4 5.1 6.2 5.3 7.2 Gross fixed capital investment 5.1 20.1 5.5 7.4 8.1 15.3 Exports, goods and services 2.6 -18.6 7.0 8.2 8.4 10.8 Imports, goods and services 8.6 -8.9 3.2 8.4 9.0 8.5 Real GDP growth, at constant factor prices 3.4 4.7 5.3 6.0 6.1 10.8 Agriculture 3.8 4.4 5.0 5.1 5.4 5.8 Industry 3.4 5.4 3.9 5.3 5.6 12.6 Services 3.3 4.4 6.3 6.8 6.8 12.3 Inflation (consumer price index) 2.5 3.7 8.8 3.2 4.6 5.0 Current account balance (% of GDP) -10.2 -7.9 -7.2 -8.4 -7.7 -5.9 Net foreign direct investment inflow (% of GDP) 2.1 3.1 5.9 6.0 6.3 5.3 Fiscal balance (% of GDP) -9.5 -7.4 -5.0 -4.8 -5.7 -2.6 Revenues (% of GDP) 14.7 14.2 15.0 14.3 14.8 16.1 Debt (% of GDP) 49.6 50.7 48.3 50.6 52.1 47.9 Primary balance (% of GDP) -6.8 -4.6 -2.0 -1.0 -1.4 0.5 a,b International poverty rate ($2.15 in 2017 PPP) 42.2 42.1 41.8 41.3 40.6 40.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 71.7 71.8 72.0 72.4 72.8 73.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 90.9 91.0 91.5 92.4 93.3 94.3 GHG emissions growth (mtCO2e) 1.5 2.5 3.0 3.0 3.2 4.3 Energy related GHG emissions (% of total) 18.0 19.0 20.1 21.1 22.1 23.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2016-UNHS and 2019-UNHS. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. b/ Projection using point-to-point elasticity (2016-2019) with pass-through = 0.7 based on private consumption per capita in constant LCU. MPO 293 Oct 24 Zambia saw remarkable economic growth rates during the commodity Supercycle be- ZAMBIA Key conditions and tween 2000 and 2010, supported by debt relief, which translated into significant in- challenges creases in income per capita and kept pub- lic finances in check. However, as the min- Table 1 2023 Zambia is a resource-rich and landlocked ing boom faded, and despite the expan- Population, million 20.6 nation strategically positioned in central sionary fiscal policies of the 2010s, the GDP, current US$ billion 28.2 Southern Africa. It is seeking to exploit economy lacked resilience, and growth GDP per capita, current US$ 1370.9 several economic opportunities and its could not be sustained, severely reducing a 64.3 International poverty rate ($2.15) pivotal geographic location to improve average income per capita. Inefficient pub- a 81.0 livelihoods and tackle high poverty and lic investment and widening fiscal deficits, Lower middle-income poverty rate ($3.65) a 93.2 unemployment. With a population of ap- exacerbated by poor state-owned enter- Upper middle-income poverty rate ($6.85) Gini index a 51.5 proximately 20 million and a total land prise (SOE) performance, did little to sup- School enrollment, primary (% gross) b 94.8 area of 752,610 square kilometers, Zambia port or diversify economic growth. b 61.8 has a low population density of around Life expectancy at birth, years 26 people per square kilometer. While the Total GHG emissions (mtCO2e) 89.8 country is sparsely populated overall, a Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2022), 2017 PPPs. significant portion of its population resides Recent developments b/ Most recent WDI value (2022). in urban areas. Since 2011, Zambia has been categorized as a lower middle-in- As Zambia's economy was still rebounding come country, but its long-term aspiration from the COVID-19 recession, it faced a se- is to become an industrialized upper mid- vere drought exacerbated by El Niño, im- dle-income nation by 2030. With prudent pacting 9.8 million people across 84 dis- management, the country's abundant nat- tricts. The climatic disaster has slowed A severe drought has impacted 9.8 mil- ural resources can contribute to sustained down real GDP growth to 2.2 percent year- lion people, with 6.6 million requiring ur- and inclusive growth, create fiscal space on-year (y-o-y) in the first quarter of 2024, gent relief. Real GDP growth is projected for investments in human capital and cli- down from 4.0 percent in the correspond- mate adaptation, alleviate poverty, and re- ing period in 2023. The slowdown in to decelerate to 2.0 percent in 2024, wors- duce its debt burden. growth reflects a contraction in the agricul- ening extreme poverty. This is despite However, the country faces significant tural sector and subdued administrative progress made in debt restructuring and challenges that have historically hindered and support services, despite some gains an increase in copper prices. From 2025, sustained, inclusive growth, job creation, in the mining industry. Copper production growth is expected to rebound, driven by economic transformation, and wide- increased by 6.3 percent in the first half of spread prosperity. Due to weak linkages 2024, driven by rising prices and advanta- foreign direct investment spurred by de- between capital-intensive extractives and geous open pit mining conditions during mand for energy transition minerals, and the mainstay subsistence agriculture sec- unusually dry rainy season. However, this economic reforms. tor, it has struggled to diversify eco- uptick barely cushioned the fall in exports. nomic production away from the heavy Still, a steeper drop in imports, spurred by dependence on mining—mainly copper. the increased expense of importing under FIGURE 1 Zambia / Real GDP growth and contributions to FIGURE 2 Zambia / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 8 100 8500 90 6 80 8000 70 4 60 7500 2 50 40 7000 0 30 20 6500 -2 10 0 6000 -4 2010 2012 2014 2016 2018 2020 2022 2024 2026 2019 2020 2021 2022 2023 2024f International poverty rate Lower middle-income pov. rate Agriculture Industry Services GDP growth Upper middle-income pov. rate Real GDP pc Source: World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 294 Oct 24 a depreciating exchange rate, along with Konkola Copper Mine. Additionally, In- a rise in grants from cooperating partners ternational Resources Holdings secured and remittances, largely for crisis re- Outlook a 51 percent stake in the previously sponse, supported the current account. At distressed Mopani Copper Mine. These end-June, gross international reserves in- Annual real GDP growth is projected to developments are anticipated to bolster creased to 4.3 months of imports from 3.9 decelerate to 2.0 percent in 2024, down copper production towards the aspira- months in March 2024, reflecting the front- from an average of 5.7 percent in tion of 3 million tons annually, further loaded disbursement by the IMF under the 2002-2023 which was thanks to firmer supported by the robust global shift to- augmented ECF program. services. The deceleration is happening wards low-carbon energy and the recent Despite contractionary monetary policy despite a rebound in copper prices and overhaul of the mining fiscal regime. By and fiscal prudence, exchange rate depre- progress on external debt restructuring, end-2023, Zambia had received mining ciation and reduced food supply pushed hence worsening extreme poverty. Fac- investment pledges exceeding US$5 bil- inflation to 15.5 percent by August 2024, tors impeding growth include an elec- lion on new and expansion projects that above the Bank of Zambia's target range of tricity generation deficit surpassing 1,000 are expected to boost investments and 6–8 percent. In June 2024, the authorities megawatts and resulting in daily power services related to mining and support submitted a revised 2024 budget to Par- outages of more than 17 hours due to future exports and FX earnings from liament in consultation with the IMF, al- historically low water levels in major the sector. Still, the outlook is subject lowing a one-time primary deficit at 0.7 dams, and a 53.7 percent annual reduc- to significant downside risks, including percent of GDP in 2024. This came with a tion in maize production in 2024. The adverse climate events, a sudden glob- reprioritization of spending towards crit- economy is expected to rebound with al downturn that could worsen exter- ical livelihood support, postponement of growth projected to average 6.3 percent nal and fiscal challenges, escalating food planned public service recruitments, and annually in 2025–26. The outlook as- and energy prices, and a potential de- request for additional external financing to sumes increased mining production, the cline in mining output due to lower provide fiscal support in response to the effective implementation of reforms, the ore grades. The risk of lagging elec- drought. The completion of debt restruc- restoration of debt sustainability, and the tricity supply may constrain the antic- turing with non-bonded commercial cred- normalization of rainfall patterns, which ipated expansion in mining, while the itors, in addition to official creditors and will enhance electricity generation and use of tax incentives to stimulate invest- Eurobond holders, will support restoring boost agriculture. ment could accelerate the already high debt sustainability. Zambia remains in In August 2024, the authorities reversed a tax expenditures, potentially undermin- debt distress since its default on Eu- contested liquidation and reinstated ing the mining sector's contribution to robonds in November 2020. Vedanta Resources as operator of the fiscal revenues. TABLE 2 Zambia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 6.2 5.2 5.4 2.0 6.1 5.9 Private consumption 6.0 5.6 5.7 2.0 7.3 6.0 Government consumption 7.6 6.7 7.3 7.4 5.9 6.2 Gross fixed capital investment 5.4 4.5 5.3 0.8 7.5 7.0 Exports, goods and services 4.6 4.6 3.3 2.5 3.8 4.0 Imports, goods and services 2.5 4.0 4.5 2.3 5.2 4.0 Real GDP growth, at constant factor prices 6.4 5.4 5.7 2.0 6.2 5.9 Agriculture 6.9 -11.0 -15.9 -23.8 27.4 13.3 Industry 7.1 -2.2 1.7 -1.6 3.8 5.0 Services 5.9 12.0 10.0 5.7 5.9 5.8 Inflation (consumer price index) 22.0 11.0 10.9 15.0 12.1 7.0 Current account balance (% of GDP) 11.9 3.8 -1.9 0.0 6.9 5.8 Net foreign direct investment inflow (% of GDP) 3.1 0.6 -0.1 3.9 4.5 4.3 Fiscal balance (% of GDP) -8.1 -7.8 -6.5 -6.1 -2.8 -3.4 Revenues (% of GDP) 22.4 20.4 21.5 21.4 21.8 21.8 a,b International poverty rate ($2.15 in 2017 PPP) .. 64.3 63.7 63.8 62.8 62.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 81.0 80.5 80.6 79.9 79.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 93.2 93.0 93.0 92.7 92.4 GHG emissions growth (mtCO2e) -3.1 0.6 0.9 1.1 1.4 1.3 Energy related GHG emissions (% of total) 9.2 9.6 10.3 11.1 12.3 13.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2022-LCMS-VIII. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2022) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 295 Oct 24 debt sustainability, a balanced approach is needed that includes increased domes- ZIMBABWE Key conditions and tic resource mobilization, fiscal consolida- tion, improved public debt management, challenges growth-enhancing structural reforms, and resolution of external arrears. Table 1 2023 Macroeconomic vulnerabilities and a diffi- Poverty reduction has been constrained Population, million 16.7 cult business environment raise the cost of by structural factors including macroeco- GDP, current US$ billion 35.2 doing business increasing informality and nomic volatility, dependence on low-pro- GDP per capita, current US$ 2114.0 limiting the pace of structural transforma- ductivity agriculture combined with a a 39.8 International poverty rate ($2.15) tion. The 2024 El-Nino-induced drought high correlation between weather shocks a 64.5 triggered a state of National Disaster sig- and agricultural production, low cover- Lower middle-income poverty rate ($3.65) a 85.0 nificantly affecting agriculture, an impor- age of social assistance programs, and Upper middle-income poverty rate ($6.85) Gini index a 50.3 tant sector that largely depends on rainfed high inequality in income and human School enrollment, primary (% gross) b 95.8 crops. The investment climate is further capital endowment. b 59.4 hampered by inadequate electricity sup- Life expectancy at birth, years ply, as the drought has resulted in power Total GHG emissions (mtCO2e) 117.4 shortages at the Kariba hydro-power sta- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2019), 2017 PPPs. tion. Hence, after the 2021 COVID-19 re- Recent developments b/ Most recent WDI value (2022). bound, growth has slowed down, though it remains above the average of the Sub-Sa- Robust agricultural production and min- haran Africa region. ing investments fueled the post-COVID re- Public debt remains high and unsustain- covery, with real GDP growth at 6.1 per- able, and a new challenge is emerging as cent in 2022 and 5.3 percent in 2023. How- GDP growth in 2023 is at 5.3 percent the government ramps up US$ denomi- ever, macroeconomic instability—high in- and is projected to slow to 2 percent in nated domestic borrowing. The takeover flation and exchange rate volatility—have 2024 due to weak agriculture on the back of the central bank’s external debt by the constrained growth potential. In 2023, re- of severe drought conditions. While the Treasury and a large capital transfer to serve money increased by 18 folds, and the Mutapa Investment Fund (8 percent Zimbabwe dollar (ZWL) inflation hit 700 introduction of a new currency, ZiG, in of GDP)—the government’s new SOE percent. Following a steep decline of the April 2024 moderated inflationary pres- holding company—heightened debt and ZWL in the first few months of 2024, the sures and the exchange rate instability, fiscal pressures in 2023. Further, limited ZWL was replaced by the ZiG. Inflationary uncertainties of the ZiG, and high levels revenues combined with increased pressures have moderated since the intro- of domestic debt dominated in US$ pose spending led to a significant primary duction of the ZiG. Monthly inflation has deficit and elevated debt. Additional fis- remained below 2 percent between May macroeconomic risks. Poverty is expected cal pressures arose from the need to deal and August 2024. Yet, there is a risk for to increase due to the severe droughts of with El Nino led drought. Despite lim- renewed inflationary pressures from ex- the 2023/24 agricultural season. ited new external borrowing, risks re- change rate depreciation. The ZiG is under main elevated due to continued borrow- considerable pressure. While the official ing on non-concessional terms. To restore exchange rate initially stayed stable, the FIGURE 1 Zimbabwe / Official and parallel market exchange FIGURE 2 Zimbabwe / Actual and projected poverty rates rate, parallel premium and real GDP per capita ZiG/US$ Parallel Premium (percent) Poverty rate (%) Real GDP per capita (constant LCU) 35 150 100 7 Parallel rate 90 30 Interbank rate 6 125 80 Parallel premium 25 70 5 100 60 4 20 50 75 3 40 15 30 2 50 10 20 1 10 5 25 0 0 2011 2013 2015 2017 2019 2021 2023 2025 0 0 International poverty rate Lower middle-income pov. rate 4/8/24 5/8/24 6/8/24 7/8/24 8/8/24 9/8/24 Upper middle-income pov. rate Real GDP pc Sources: Zimstat, WDI, and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 296 Oct 24 parallel market exchange rate depreciated to remittances (around 6 percent of GDP to increase significantly due to ZiG’s low rapidly, resulting in a parallel premium in 2022 and 2023). inflation. The current account is projected that exceeded 120 percent at its peak. In re- to be in deficit due to drought-related sponse, the central bank devalued the cur- higher imports, and lower exports from rency in late September, bring the parallel weak commodity prices but is expected to premium down to 26 percent (Figure 1). Outlook return to a surplus in 2025. In the medium The fiscal deficit increased in 2023 to 14 term, current account improvements will percent of GDP, due to subdued revenue GDP growth is expected to slump to 2 per- be driven by increased lithium mining ac- mobilization, and the one-off transfer to cent in 2024 due to El Niño-induced tivities and a recovery in gold production. the Mutapa Fund. Between 2022 and 2023, droughts, lower mining prices, and macro- Poverty is expected to increase due to Zimbabwe’s debt-to-GDP ratio declined economic instability. Agricultural produc- the severe drought of 2023/24. The wards from 100.6 to 96.6 percent, in part because tion is expected to fall by over 20 percent. experiencing drought contain almost half of exchange rate dynamics. During the first Ongoing power shortages have con- of the population and more than 40 per- half of 2024, fiscal pressures have also tributed to decreased industrial growth cent of the food poor. Food consumption moderated, in part because of the Trea- and disrupted crops that depend on irriga- comprises 48 percent of the total expen- sury’s renewed effort towards fiscal con- tion. The increase in parallel market pre- diture of poor households, compared to solidation along with tax enhancing mea- mium limits formal sector production and 36 percent of non-poor households. Thus, sures. The adoption of the ZiG resulted al- demand and brings uncertainty to the new poor households will be relatively more so in a revenue windfall from low infla- currency. Growth is projected to recover to affected by the decline in yields and tion. The significant contraction of the agri- 6.2 percent in 2025 once the influence of increase in prices due to the drought, culture sector due to the drought will have the drought begins to wane and ongoing as low-value agriculture is largely au- severe consequences on rural incomes and investment initiatives start to increase min- tarkic (only about 15 percent of rural food security. ing and manufacturing production. households that grew maize in 2017 sold Trade deficit increased in 2023, reflecting The fiscal deficit is anticipated to decrease it). The drought-stricken wards also have a decline in mineral exports and an in- to 2.9 percent in 2024, down from 14 per- a significant share of the working-age crease in imports (particularly for fuel cent in 2023. This is due partly due to a adults employed in agriculture. This will and fertilizer). Yet, the country continued compression in discretionary spending, lead to a fall in agricultural income and to enjoy a current account surplus in and capital spending ratio returning to its worsened food security, especially among 2023, for the fourth year in a row, thanks historical average. Revenue is anticipated agricultural households. TABLE 2 Zimbabwe / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023 2024e 2025f 2026f Real GDP growth, at constant market prices 8.5 6.1 5.3 2.0 6.2 4.8 Private consumption 9.2 5.1 -0.1 3.4 7.0 5.0 Government consumption 58.9 70.1 13.9 1.0 -4.3 1.1 Gross fixed capital investment 12.8 21.8 14.4 -4.7 14.9 8.4 Exports, goods and services 47.0 43.4 -8.4 1.2 4.2 4.5 Imports, goods and services 61.5 54.0 -11.0 2.0 6.5 5.1 Real GDP growth, at constant factor prices 8.4 6.2 5.5 2.0 6.2 4.8 Agriculture 17.5 6.2 6.3 -21.2 23.6 7.0 Industry 6.4 5.2 3.2 4.1 4.5 4.5 Services 7.7 6.9 6.7 6.1 4.2 4.5 Inflation (consumer price index) 94.1 160.2 257.0 6.0 8.4 5.0 Current account balance (% of GDP) 1.3 0.9 0.4 -0.1 0.8 1.1 Net foreign direct investment inflow (% of GDP) 0.9 1.0 1.6 1.3 1.4 1.5 Fiscal balance (% of GDP) -2.2 0.1 -14.0 -2.9 -1.7 -1.6 Revenues (% of GDP) 15.3 16.6 14.6 18.5 17.5 17.5 Debt (% of GDP) 58.4 100.5 96.6 87.2 77.0 75.8 Primary balance (% of GDP) -2.1 0.2 -13.9 -2.4 -0.9 -1.1 a,b International poverty rate ($2.15 in 2017 PPP) 41.4 39.8 38.4 38.6 36.8 35.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 65.8 64.5 63.3 63.3 61.4 60.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 85.6 85.0 84.6 84.6 83.8 83.1 GHG emissions growth (mtCO2e) 1.5 1.3 0.7 -0.5 -0.7 -0.2 Energy related GHG emissions (% of total) 10.5 11.0 11.4 10.6 10.3 10.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2019-PICES. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 297 Oct 24 Macro Poverty Outlook 10 / 2024