WASHINGTON, D.C.: Countries dependent on exports of commodities like metals or oil could face long-term growth challenges from the collapse in prices, the International Monetary Fund (IMF) warned on Monday (Tuesday in Manila).
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.
But the IMF said, in its new World Economic Outlook report, that the price slump could also result in lower investment in future production in these countries, limiting their 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 1.0 percentage point of growth annually over the 2015-2017 period, 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.
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.”