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Chapter 2: Economic Growth in Developing Countries

Chapter Highlights

Economic recovery is proceeding along two tracks. Advanced economies are experiencing subdued growth with high unemployment, while many fast-growing emerging economies are seeing inflation pressures build amid some signs of overheating. Projections put annual global growth at about 4.5 percent in 2011 and 2012. But sustaining the global recovery demands divergent policy responses: in the advanced economies, redressing fiscal imbalances and repairing and reforming financial systems; in the emerging economies, facilitating external rebalancing and checking overheating pressures, in many cases allowing further exchange rate appreciation, and in some, more ambitious fiscal tightening.

Good policies among low-income countries contributed to strong growth before the crisis. The policy buffers established then also allowed for active countercyclical policies that softened the impact of the crisis and drove a relatively rapid return to precrisis growth rates. To substantially reduce poverty and meet the MDGs, however, low-income and other developing countries need to grow faster and to rebuild buffers so as to guard against future shocks. In addition to strong, well-designed policies in the countries themselves, international cooperation is required to restore a global economic environment conducive to poverty reduction and development and to provide adequate assistance, with special attention to the most vulnerable countries.

For the latest economic outlook discussed in this report, please refer to the IMF's World Economic Outlook April 2011.



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