MACROECONOMIC DEVELOPMENTS IN LIDCS: 2014 REPORT by the International Monetary Fund examining 11 States, including Haiti.

 

Box 1. Falling Behind

While most LIDCs have recorded sustained growth since 2000, there is a sizeable group of countries (almost one-fifth of the total) that did not record any increase in output per capita over the period.

 

The weak performance occurred across several macro and structural indicators. Over 2000–13, these 11 countries have been less successful in reducing inflation, attracting FDI, developing the financial markets, and improving social indicators, such as the level of educational attainment.

 

A common feature to all countries in the group is that they are fragile states—countries either with very weak institutions or significantly affected by conflict over the period. The role of fragility in hampering growth is easy to understand in countries affected by sustained internal conflict and political instability over an extended period (such as Côte d’Ivoire, Guinea-Bissau, Comoros, and Yemen). Natural disasters, such as the massive 2010 earthquake in Haiti, result in loss of life, can account for sizeable shocks to output, and have persistent effects. Over the long-term, however, weak institutions and recurrent political instability play a key role in explaining Haiti’s weak performance as the poorest country in the Western Hemisphere. But a review of the country listing shows that bad policy choices, unlinked to fragility, can also produce income contraction over time, as in Zimbabwe (which experienced hyperinflation) and Eritrea (a tightly regulated/controlled economy).

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1 In terms of total GDP growth, all 11 countries had average growth rates in the bottom quartile of the LIDC group (less than 3.5 percent).

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