August 12, 2013Doug Hadden
FreeBalance Customers on the Road to Governance Success, Part 5
Carlos Lipari, FreeBalance Advisory Services
Economists tend to agree that investment is a fundamental variable for long-term economic growth but the quality of investment can also change over time, allowing a country to do “more with less” (or the other way around). This is an area where good Governance and PFM play a relevant role. Nevertheless, if we have major changes in investment levels such changes tend to be followed by significant increases or decreases in the economic growth rate. Investment is very important to understand what is going in the economy and what is likely to happen in the years to come.
Note:In the investment averages computed for FreeBalance countries we had to exclude a few countries due to lack of data. Those countries are the following: Mongolia, Sierra Leone, Afghanistan, Antigua & Barbuda and Guyana. Despite some data limitations, evidence seems to point out for the fact that FreeBalance countries also tend to invest more than the regions where they operate in.
Also according to the IMF latest data, it is interesting to notice that 81 countries out of 172 are expected to invest between 20 to 30% of the GDP in 2013. This is the mode. Approximately 80% of the countries nowadays invest between 10 and 30% of the GDP. Economies like China (which invests almost 50% of its GDP) are clearly outliers that contribute to push-up the World Average. Also, gross investment includes both gross private and public investments. Good PFM is one of the variables that can help directly to boost Public Investments and, indirectly, to increase Private Investment.
- Introduction to the Study
- Government Revenue
- Government Expenditures
- Government Gross Debt
- Country Investment
- Real Investment Growth Rates
- Government Effectiveness
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