World Bank releases Global Economic Prospects Report

Posted 13 Jun 2024

2 min read

Report called for a significant acceleration in public investments by Emerging Markets and Developing Economies (EMDEs) to meet their development goals.

Key highlights

Investment Level

Public investment averages about 25% of total investment in the median EMDE.
Public investment in these economies has experienced a historic slowdown in the past decade

Benefits

Economic growth: Increasing public investment by 1% of GDP can boost GDP by over 1.5% and raise private investment by 2.2% in the medium term.
- However, public investment may also crowd out private investment, especially when fiscal space is limited and additional fiscal stimulus raises sovereign risk and borrowing costs for the private sector
Sustainability of growth: Public investment can be critical in delivering public goods or services that may not be privately profitable, such as public health care and education.

Recommendations

“Three Es” package of policy priorities to harness the benefits of public investment include:

Expansion of fiscal space: Improve tax collection efficiency, enhance fiscal frameworks, and curtail unproductive spending.
Efficiency of public investment: Tackling corruption, and poor governance, facilitating public-private partnerships, etc.
Enhanced global support: Coordinated financial support and effective technical assistance are imperative for structural reforms.

About Public Investment

Public investment usually refers to gross fixed capital formation (total value of acquisitions, less disposals, of fixed assets) by the state, whether through central or local governments or publicly owned industries or corporations.
It encompasses physical or tangible investment in infrastructure (such as transport, telecommunications, and buildings), but in a broader sense, it can include human or intangible investment in education, skills, and knowledge.