Box I.2
Prospects for the least developed countries
Growth in the economies of the least developed countries (LDCs) will continue to exceed the global average, with an expected acceleration from 5.3 per cent in 2014 to 5.7 per cent in 2015 and 5.9 per cent in 2016. Major drivers for this performance will be an anticipated improving external environment, which helps underpin growth through trade and financial flows; continued strong investment in infrastructure and natural resource projects; and, in some cases, the reconstruction after conflicts or natural disasters. Despite this positive headline performance, meaningful economic and social development remains a challenge for many LDCs, given a number of factors including: the often low starting point for growth; institutional shortfalls; the exposure to numerous risks, including public health crises such as the recent Ebola epidemic, or adverse weather patterns; and the lack of basic services and infrastructure despite, in some cases, significant public financial resources from commodity exports.
Within a wide range of performances, the highest growth rate among LDCs in 2015 is forecast for the Democratic Republic of the Congo. Major factors are a mining sector that is strengthening from investment in new capacities, infrastructure investment, and higher agricultural output due in part to better access to inputs. Similar dynamics are also playing out in other LDC forecasts for 2015. For example, in Ethiopia, the agricultural sector will underpin growth by 7.5 per cent, while in Tanzania, natural resource investment, notably in the gas sector, will lead to an economic expansion by 7.2 per cent. In Bangladesh, the economy will continue its multi-year streak of solid growth of more than 6 per cent in 2015 and 2016, driven by strong external demand for textile products and robust domestic demand.
By contrast, numerous LDCs face particularly pronounced growth challenges. The Ebola crisis (see box IV.3 in chapter IV) has taken a severe humanitarian toll in Guinea, Liberia and Sierra Leone and created a significant drag on economic growth. Even in the absence of an exceptional crisis, all three countries feature weak and strained public health systems, creating high vulnerability to crisis scenarios. Meanwhile, Equatorial Guinea will register a contraction of its economy by 1.6 per cent in 2015, which will mark the third consecutive year of declining gross domestic product (GDP). Falling oil output combined with lower oil prices is crimping other sectors of the economy, such as construction, with the lack of any positive offsetting factors, thus highlighting the vagaries of an overreliance on the natural resource sector. In Yemen, growth of GDP is estimated to have decreased by more than half to 2.1 per cent in 2014, with a moderate acceleration in growth to 3.7 per cent expected in 2015. Political instability has led to disruptions in oil output, reducing oil revenues by about one third in the first half of 2014. The non-oil sector has performed better, but still below potential, owing to the general instability.
Taken together, despite the overall solid headline growth picture for LDCs, the underlying situation and performance of many LDCs underscore numerous pressing problems and the need to reinforce effective policy measures in this regard. First, countries with strong reliance on resource-extracting industries need to further strengthen their efforts to diversify their economic structure and thus reduce their vulnerability to external shocks. This is especially relevant in the context of the decline in oil prices as well as the price of various other commodities. Effective policies in this respect, both in terms of funding and expertise, include the promotion of higher-value-added activities, the support of small and medium-sized enterprises and investment in better education programmes. Second, as illustrated by the Ebola outbreak, any meaningful and lasting development progress requires as a foundation the sufficient and stable provision of basic public services. This includes, first and foremost, not only a functioning health-care system, but also sufficient energy supply and viable transportation linkages. Last, the international community should redouble its efforts to deliver on the commitment of financial and other types of assistance to the LDCs