Economic Updates and Modeling
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Publication
Syria Economic Monitor, Summer 2023: The Economic Aftershocks of Large Earthquakes
(Washington, DC: World Bank, 2023-09-01)Twelve years into a devastating civil war, a one-in-two-century earthquake devastated northwestern Syria. The 7.6 Richter scale shock was the deadliest in Syria after the one that hit Aleppo in 1822. Using novel data sources, such as big data, this Syria Economic Monitor analyzes what happens to a conflict-affected economy in the months following a large natural disaster. The earthquake created large human losses and physical damages in the most contested areas of the country. The earthquake also had significant socioeconomic impacts, exacerbating preexisting vulnerabilities. However, funding shortfall and humanitarian constraints impede response efforts. As a consequence, economic contraction in Syria is likely to deepen further post-earthquake. -
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Timor-Leste Economic Report, July 2023: Ways to Harvest Prosperity
(Washington, DC: World Bank, 2023-08-25)Timor-Leste’s economy continued its recovery in 2022, expanding by 3.9 percent, fueled by public consumption and investment. Private investment rose from an exceptionally low level while net exports continued to be a drag on growth. Headline inflation soared in March 2023 at 9.6 percent, spurred by significant increases in food and non-food prices. High inflation is part of a global trend driven by prices of tradable goods. Within Timor-Leste, the government’s policy of enforcing higher excise taxes on tobacco products, implementing import taxes, and applying excises to sugar and sugary beverages, partially drove the inflationary trend. To advance a reform agenda, the new government may want to consider institutionalizing fiscal consolidation through robust fiscal rules. Both revenue mobilization and expenditure rationalization efforts should not only be maintained but also enhanced. Given that significant increases in public spending have had a limited impact on Timor-Leste’s medium-term economic growth, it is possible to sustain growth levels with a reduced budget. -
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Iran Economic Monitor, Spring/Summer 2023: Moderate Growth amid Economic Uncertainty - With a Special Focus : The Gendered Impact of the COVID-19 Crisis on the Labor Market in Iran
(Washington, DC: World Bank, 2023-08-22)The Iran Economic Monitor (IEM) provides an update on key economic developments and policies. It examines these economic developments and policies in a longer-term and global context and assesses their implications for the outlook for thecountry. The IEM’s coverage ranges from the macroeconomy to financial markets to indicators of human welfare and development. Iran’s economy continued to grow moderately for the third consecutive year in 2022/23, albeit at a slower pace than in the previous year. Real gross domestic product (GDP) grew by 3.8 percent in 2022/23, driven by expansions in services and manufacturing. Despite sanctions, the oil sector also expanded, aided by the tighter global oil markets. Favorable weather conditions helped the agriculture sector to marginally grow after the contractionsin previous years. On the expenditure side, private consumption was the main driver of GDP growth. Government consumption contracted to contain the budget deficit following a sharp expansionary policy in 2021/22. Meanwhile, exports and importsboth increased, and strong investment in machinery drove investments up, while construction investment marginally improved. However, the economy continuesto face growth constraints notably related to the economic sanctions, restricted access to external markets and to the latest technology, and much needed foreign investment. The Special Focus of the report highlights the scarring effects of the COVID-19 pandemic, documenting the marked deterioration in labor market outcomes. Despite sizeable government interventions to sustain the economy, in the first year of the pandemic (2021/22), approximately 1 million Jobs were lost, and labor force participation contracted by 3 percentage points. Iranian women were the most affected: two out of three jobs lost between 2019/20 and 2020/21 were previously held by women. The gendered impact of the crisis contributed to widening Iranian’s women disadvantage in the labor market. Most importantly, the gains in femalelabor force participation slowly accumulated since 2011 vanished. Consistent with what is observed in other countries, women with young children were the most affected by the crisis. The combined effect of school closures and unequal intra-household allocation of care responsibilities, associated with prevailing gender norms, pushed Iranian women with children out of the labor force. Whether or not these trends will be reversed as the management of the COVID-19 pandemic is normalized and the economy recovers from the crisis remains an important policy question. -
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Taking Stock, August 2023: Making Public Investment Work for Growth
(Washington, DC: World Bank, 2023-08-10)The latest Taking Stock report shows that Vietnam’s economic growth slowed from 8% in 2022 to 3.7% in the first half of 2023. It forecasts a moderate growth of 4.7% in 2023, gradually accelerating to 5.5% in 2024 and 6.0% in 2025. However, the economy faces external and domestic headwinds. Vietnam has ample fiscal space and a proactive fiscal policy supporting short-term demand, removing barriers to the implementation of public investment, and addressing infrastructure constraints can help the economy achieve these targets and promote long-term growth. The report’s special chapter studies Vietnam’s public investment management and how it can contribute to the goal of becoming a high income economy. To harness the power of public investment, the report recommends that Vietnam sustain its level of investment, improve the quality of the proposed project, and address deficiencies in public investment management and inter-governmental fiscal institutions. -
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Kingdom of Eswatini Economic Update, August 2023: Raising the Game with Efficient State-Owned Enterprises
(Washington, DC: World Bank, 2023-08-07)Eswatini’s economy has been characterized by persistent low growth, high fiscal deficits, and unprofitable state-owned enterprises (SOEs). Without significant reform, the country is unlikely to achieve its socioeconomic aspirations, and poverty and unemployment are likely to remain high. These problems are exacerbated by the difficult external environment, with subdued global demand and volatile international prices. In this context, the government of Eswatini recognizes that the country needs a series of policy reforms to unleash the potential of the private sector. It also needs to improve the efficiency of SOEs in strategic sectors, which deliver services to many businesses and households. This report is divided into two parts. Part 1 discusses recent economic developments in the global and domestic economy and assesses Eswatini’s short and medium-term prospects. Part 2 reviews the role that SOEs can play in the government's efforts to enhance economic performance. It assesses both their contribution to the economy and their limitations to suggest directions for reform. -
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Pacific Economic Update, August 2023: Recovering in the Midst of Uncertainty - Special Focus : Harnessing the Benefits of Pacific Migration
(Washington, DC: World Bank, 2023-08-03)The global economic recovery remains fragile, creating choppy seas for the recovering Pacific. While global conditions have gradually improved since the pandemic and spillovers from Russia’s invasion of Ukraine, progress on reducing inflation in major economies has proven more challenging than expected. Given that all Pacific countries are net importers, this has resulted in persistently high imported inflation. The speed of monetary policy tightening by major central banks has slowed, but easing is unlikely in the near term. Aggregate demand in major trading partners of the Pacific (particularly Australia and New Zealand) remains lackluster. This could limit demand for travel and tourism services and other income sources such as remittance and commodity exports. Despite uncertainties in the global economic recovery, Pacific economies are expected to see ongoing expansion in 2023 and 2024. Fiji led the Pacific’s post-COVID-19 recovery with open borders and a strong rebound in 2022 and is now on track to reach its pre-pandemic output level in 2023. Ongoing recovery expectations in the Pacific are broadly in line with March 2023 World Bank projections except for Tuvalu and Palau, where growth has been revised down given weaker than expected outcomes in construction and tourism. In 2023, Pacific growth is expected to reach 3.9 percent and then moderate to 3.3 percent in 2024 as the initial post-COVID-19 rebound dissipates and the region moves towards its long-term trend growth of 2.6 percent. Nonetheless, uncertainty remains high and depends on whether a soft landing can be achieved among key trading partners as they battle ongoing inflation. Inflation remained stubborn across the Pacific at an average of over 6.7 percent in 2022, a substantial increase from the 1.5 percent average during 2019-2021. This has increased the risk of vulnerable populations falling into poverty. In line with global trends, Pacific inflation is expected to decline to an average of 6.0 percent in 2023 and gradually subside thereafter. -
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Iraq Economic Monitor, Spring/Summer 2023 - Reemerging Pressures: Iraq’s Recovery at Risk (With a Special Focus on Financial Intermediation in Iraq)
(Washington, DC: World Bank, 2023-07-31)Iraq’s economy continued its recovery after the sharp, pandemic-induced recession in 2020 but growth constraints in the oil sector have reemerged. After moderating in 2022, consumer price inflation ticked up in early 2023, fueled by the depreciation of the Iraqi dinar in the parallel market. Fiscal and external account balances benefitted from the oil windfall in 2022 but this trend significantly moderated in early 2023. The new budget is excessively expansionary, and lacks the structural reforms that Iraq needs to develop a vibrant and sustainable economy. The economic outlook remains subject to significant risks, largely due to deep structural challenges. Urgent implementation of financial sector reforms and modernization of its banking sector architecture, currently major barriers to economic diversification, are a critical condition to bolster the private sector and unlock much-needed job creation. Financial access in Iraq is amongst the lowest in the world, with only 19 percent of adults owning a bank account, highlighting a significant underutilized source of financing. Crucially, lack of financing remains the top constraints for small and medium enterprises and firms operating in the informal sector, undermining private sector-led growth and job creation. As this report’s Special Focus highlights, this is in part due to the banking sector structure and operations, which is dominated by undercapitalized state-owned banks with weak institutional capacities that primarily provide financing to public sector entities and state-owned enterprises. The private commercial banking sector is weak and has limited capacity to support financial intermediation and is geared towards maximizing revenues from the foreign exchange auctions. Furthermore, the non-banking financial sector is nascent with small and underdeveloped capital markets, unregulated Micro Finance Institutions, and an underdeveloped insurance sector. To tackle these challenges, the sector’s reform priorities include institutional reforms in state-owned banks and incentivizing digital financial services to increase financial intermediation and promote financial inclusion in Iraq. The full implementation of these reforms can help restore public confidence in the financial sector and help mobilize Iraq’s wealth towards solving the pressing development challenges of the country. -
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Tajikistan Economic Update, Summer 2023: Focusing On Boosting Private Sector Dynamism In Tajikistan
(Washington, DC: World Bank, 2023-07-31)Private sector participation in the Tajik economy is relatively large, but dynamism is very low. Analysis with micro-level data points to multiple weaknesses: low entry rate, low productivity, limited integration to trade, low incidence of innovation, and limited capabilities. Also revealing is that private firms struggle to grow as they age. All these aspects reflect a business environment that does not reward the more efficient firms or those with the highest growth potential. The Covid-19 effects brought additional challenges to this low-level equilibrium scenario with shocks in sales and financial distress. The silver line aspect stems from the increasing use of digital technologies. Still, the apparent digital divide regarding firm size poses questions on the real implications for future productivity performance. Against this backdrop, and to tackle the long-term weaknesses of the private sector in Tajikistan, it is crucial to remove barriers that prevent the reallocation of resources towards more productive firms so that the private sector becomes more efficient and able to generate more and better jobs. In this case, and to prioritize measures that maximize effects on aggregate demand in the short-medium-run, it is crucial to give precedence to structural policies that remove impediments to firm entry and expansion of the private sector. Three sets of barriers deserve particular attention: (i) barriers to competition, (ii) barriers to foreign direct investment, and (iii) trade barriers. These barriers must be tackled together because they all reinforce each other regarding firms' competitiveness. -
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Equatorial Guinea Economic Update, 1st Edition: Reforming Fossil Fuel Subsidies
(Washington, DC: World Bank, 2023-07-28)This is the first edition of the Economic Update for Equatorial Guinea. This report presents recent economic developments in Equatorial Guinea as well as the medium-term economic outlook and risks (Chapter 1), followed by a detailed exploration of a specific topic (Chapter 2). This edition focuses on fuel subsidies and advises on fuel subsidy reform options and mitigation measures by drawing on lessons from international experience. The objectives of the Equatorial Guinea Economic Update are to: (i) strengthen the analytical underpinnings of the policy dialogue; and (ii) contribute to an informed debate on policy options to enhance macroeconomic management and development outcomes. -
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Liberia Economic Update, June 2023: Getting Rice Right for Productivity and Poverty Alleviation
(Washington, DC: World Bank, 2023-07-28)In the last two years, Liberia’s economic performance has improved. Inflation remained in single digits despite high global food and fuel prices and a relaxation in monetary and fiscal policies. Liberia’s poverty rate is projected to have declined slightly in the last two years as GDP growth rebounds and inflation moderates. On the external side, Liberia’s current account balance improved in 2022, thanks to the continued increase in mining export earnings. The increase in gold export in 2022 offset the increase in imports. Liberia’s medium-term economic outlook is positive, but uncertainties remain. Even as it has been trying to recover from a decade of weak economic and social performance, Liberia’s overall productivity and economic efficiency remain low, especially in vital sectors of the economy, including agriculture. Demographic trends, economic growth, and a strong preference for rice are the main drivers of demand. Yet, Liberia produces only one-third of its rice needs due to several constraints, including limited access to technology, inefficient farming practices, low public and private investments, and a fragmented value chain, among other factors that have kept productivity low. Amid low production, the increase in imported rice prices continues to fuel food insecurity, poverty, and vulnerabilities in Liberia. Domestic production would need to triple to satisfy local demand, but increasing production would require significant investments in the rice sector, as well as policy actions. This report provides some broad directions for policies.