Promoting structural change and institutional development
November 2023
Low-income countries (LICs) have been facing an increasingly challenging external environment: slowing global growth under the ongoing COVID-19 crisis; sharp declines with high volatility in commodity prices, affecting many commodity producers; and tighter external funding conditions. These developments have led to worries about a prolonged growth slowdown, pushing structural reforms to the top of the policy agenda in LICs and making the study of structural transformation and diversification more important than ever. In addition, making successful progress on many reforms requires to strengthen governance and tackle any issues of corruption. What follows is a brief description of how the topic and the work on promoting structural change and institutional development has evolved over the four phases of the FCDO-IMF partnership on research on the macroeconomics of LICs.
- Under phase 1 (March 2012 to March 2015), the research focused on growth through diversification and structural transformation. A major achievement from this phase is constructing a new publicly available diversification toolkit that enables country authorities, IMF country teams, and interested researchers and analysts to assess more carefully the potential for further transformation and quality upgrading in LICs. Other achievements include: policy papers on Economic Diversification in LICs: Stylized Facts and Macroeconomic Implications and Sustaining Long-run Growth and Macroeconomic Stability in Low-income countries—The Role of Structural Transformation and Diversification; and a conference on Diversification and Structural Transformation for Growth and Stability in Low-Income Countries. For a list of all the work produced under phase 1, see the reports for year 1, year 2, and year 3 of the FCDO-IMF partnership.
- Under phase 2 (April 2015 to March 2017), the focus was to extend the diversification toolkit to include services exports, and look at the link between gender and diversification. The focus was also to expand training on how to use the diversification toolkit. Some of the achievements under phase 2 include a working paper on World Trade in Services: Evidence from A New Dataset, another working paper on Gender Equality and Economic Diversification, and a policy paper on From Ambition to Execution: Policies in Support of Sustainable Development Goals. For a list of all the work produced under phase 2, see the reports for year 4, and year 5 of the FCDO-IMF partnership.
- Under phase 3 (April 2017 to March 2020), the research plan was three-fold: first, to encourage greater uptake of the Diversification Toolkit developed under phase 1 and 2, as well as increase its value through some enhancements; second, to construct a comprehensive database on structural reforms and policies to understand better which policies have delivered inclusive growth and facilitated structural transformation; and third, to study strategies for maintaining growth in the weaker external environment, including through strengthening governance. Some of the achievements under phase 3 include: applications of the diversification toolkit on Sub-Saharan Africa, Guinea-Bissau, and Vanuatu; a paper on Structural Reforms and Elections: Evidence from a World-Wide New Dataset, and a high level conference on Global Transformations: Challenges and Opportunities for Developing Economies. For a list of all the work produced under phase 3, see the report for year 6, year 7, and year 8 of the FCDO-IMF partnership.
- Under the current phase—phase 4 (April 2020 to March 2025), we will look into diversification and their important interactions with development and industrial policies. Another area of work will look into automation and the changing landscape of structural transformation in LICs. We will also look at state fragility and the economic consequences and shock mitigation. For a list of all the work produced under phase 4, see the upcoming reports for years 9-13.
For a list of products that have been produced under each of the four phases of the FCDO-IMF partnership, see the box on outputs on the left-hand side.