Slow global growth affecting low-income countries, IMF says

The International Monetary Fund (IMF) has said that slowing global growth over the last 18 months have impacted negatively on low-income developing countries.
IMF in a new study noted that the global slowdown was due to the dramatic drop in the prices of commodity even as it added that worst hit are commodity-dependent exporting countries (especially oil exporters) compared to countries that are more diversified in their exports saying they have benefited from lower prices and continue to record robust growth.
“While the global economic environment has weakened, especially in regard to commodity prices, the effects on low-income countries has varied with differences in country-specific exposures and domestic policy conditions. Policy responses need to be tailored to country circumstances,” said Seán Nolan, Deputy Director of the IMF’s Strategy, Policy, and Review Department of the Fund.
While countries like Cambodia, Nicaragua, and Senegal have benefited, terms-of-trade losses are disproportionally high for some large oil exporters like Nigeria, the report noted.
The report further noted that economic vulnerabilities in low-income developing countries have increased steadily over the past two years, with some 40 percent of countries now deemed to be highly vulnerable to growth shocks, up from 25-30 percent in recent years and the highest level recorded since the global financial crisis.
According to the Fund, key drivers have been the drop in commodity prices, which has led to weaker fiscal and external balances, along with the gradual erosion of policy buffers over time. The report emphasizes the need for commodity exporters to adjust to what is expected to be an extended period of relatively low commodity prices and to strengthen fiscal and external positions over time.
“Low income developing countries will need significant external financial support for national programs to adapt to climate change-otherwise, attaining ambitious development objectives will be very difficult over the longer term,” said Seán Nolan.