Countries such as Mozambique, Guinea-Bissau and São Tomé and Príncipe should diversify exports

diversify-exports

Developing and low-income countries, such as Mozambique, Guinea-Bissau and São Tomé and Príncipe, should seek to diversify their economies and exports, said the IMF in a recently released report.

The report on Low Income Developing Countries that are exporters of raw materials said these countries remain under “significant economic pressure”, with anemic growth, large fiscal imbalances and weak foreign reserve positions”.

The document added that countries whose exports are more diversified “are generally better off”, although some of them have been affected by the decline in remittances, by natural disasters and conflicts and the impact of contraction of macro-economic stabilization programmes”.

The document warns that the strong adjustment of commodity prices puts low income countries in a critical long-term economic situation, but said that those countries remain stable, “if they have a diversified portfolio of exports of raw materials”.

The IMF admits that the main conclusions of the report are already known and include the countries that depend on exports of raw materials remaining in economic difficulties as commodity prices are now entering the third year of continued decline, and increased public debt levels, resulting from an increase in loans and debt issues to offset the decline in revenue. The IMF divides countries with lower incomes into three broad categories: the fuel exporters, those with non-combustible raw materials and those with diversified exports.

In the fuel exporters, for example, the GDP increased from average growth of 5.7% in 2014 to a contraction of -1.6% in 2016 and the budget deficit rose from 1.9% of GDP in 2014 to 5.5% in 2016.

In the countries exporting noncombustible raw materials the decrease was significantly lower, with the growth rate of GDP falling from 5.3% in 2014 to 2.8% in 2016 and the budget deficit increasing from 2.3% of GDP in 2014 to 3.8% in 2016.

The final group, in turn, kept its economic growth rates from 6.4% in 2014 to 6.1% in 2016, with the budget deficit to increasing slightly, from 3.8% in 2014 to 4.6% in 2016.

Source: MacauHub

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