Countries dependent on exports of commodities like metals or oil could face long-term growth challenges from the collapse in prices, the IMF said on Monday.
The IMF said that the broad decline in commodity prices after the boom of the 2000s is mainly a cyclical pain for producers, their incomes soaring and now falling in tandem with prices.
POTENTIAL LIMITED
However, in its new World Economic Outlook report, the IMF said that the price slump could also result in lower investment in future production, limiting these countries growth potential.
The fund said many exporting countries have been better prepared for the current slump, saving more of their earnings in preparation for an industry slowdown, and letting their currencies adjust to the market, resulting in less violent swings.
They face, on average, the loss of about 1 percentage point of growth annually over the period from this year to 2017, with oil and gas exporters hit much harder, the IMF said.
Some domestic spending to support growth could help, but that impact on broader economic growth will be limited.
OPTIONS
Instead, such governments should focus as much on structural reforms to improve productivity in their commodity sectors, including opening up bottlenecks and improving inefficiencies.
“Policymakers must be realistic about growth potential in commodity-exporting economies,” the IMF said, warning that this slowdown “could even be larger than those experienced in past episodes.”
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