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1、Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized 2025 The World Bank1818 H Street NW,Washington DC 20433Telephone:202-473-1000;Internet:www.worldbank.orgSome rights reservedThis work is a product of the staff of The World Bank.The fi nd

2、ings,interpretations,and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent.The World Bank does not guarantee the accuracy of the data included in this work.The boundaries,colors,denominations,and oth

3、er information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.Rights and PermissionsThe material in this work is subject to copyright.Because The World Bank encoura

4、ges dissemination of its knowledge,this work may be reproduced,in whole or in part,for noncommercial purposes as long as full attribution to this work is given.AttributionPlease cite the work as follows:“World Bank.2025.Liberia Country Economic Memorandum World Bank.”All queries on rights and licens

5、es,including subsidiary rights,should be addressed to World Bank Publications,The World Bank Group,1818 H Street NW,Washington,DC 20433,USA;fax:202-522-2625;e-mail:pubrightsworldbank.orgMarch 2025Table of ContentsAcronyms and Abbreviations.iAcknowledgments.iiExecutive Summary.ivChapter 1:Drivers of

6、Growth.11.1 A brief history of the Liberian economy.11.2 Past drivers of growth.21.3 Policy contribution to growth.111.4 Future drivers of growth.121.4.1 Business-as-usual growth scenario.131.4.2 Growth scenario with reforms.161.4.3 Growth ambitions and structural reforms .191.5 Conclusion.19Chapter

7、 2:Trade as a catalyst for growth .202.1 Introduction.212.2 Liberias trade performance and specialization .212.2.1 Declining export openness and high volatility.222.2.2 Increasing export concentration .232.2.3 Exploring new export markets .252.2.4 Extinction of existing export products in traditiona

8、l markets.262.2.5 Shifting composition of imports and source countries .272.3 Identifying export opportunities.282.3.1 Low-risk opportunities.282.3.2 High-risk opportunities.292.4 GVC participation and determinants of trade.292.4.1 Liberias increasing participation in GVCs.292.4.2 Fundamental and po

9、licy-related determinants of trade .31Chapter 3:Leveraging Liberias Agro-processing Potential.393.1 Introduction.403.2 Diversification and upgrading opportunities.403.3 Leveraging the potential of agro-processing.443.3.1 Value-adding activities in agribusiness .443.3.2 Selection of promising value c

10、hains .453.3.3 Policy implications .56Chapter 4:Microeconomic Foundations of Growth.594.1 Introduction.604.2 A conceptual framework for pathways to growth.614.3 Firm-level productivity:setting the priorities.614.3.1 Upgrading the growth of existing firms .634.3.2 Facilitating the growth of more prod

11、uctive firms.654.3.3 Encouraging investment in new firms.674.4 Upgrading the institutional framework for investment promotion and facilitation.71LIST OF FIGURESFigure 1:Liberias economic trajectory since independence .ivFigure 2:Trend in total factor productivity .vFigure 3:Baseline and reform scena

12、rios .viFigure 4:Summary of policy recommendations.viiiFigure 5:Trajectory of Liberias economy since independence.1Figure 6:Contribution to GDP growth(2014-2023).3Figure 7:GDP per capita and GDP per person employed in Western and Central Africa .4Figure 8:Labor market indicators in Liberia and Weste

13、rn and Central Africa.4Figure 9:Shapley decomposition of per capita GDP growth and labor productivity growth(2004-2022).5Figure 10:Trend in sectoral value added per worker and share of employment(2004-2022).6Figure 11:Contribution to GDP growth by production factor(2014-2019).7Figure 12:Trends in hu

14、man capital wealth and human capital index .8Figure 13:Trend in physical capital per worker.9Figure 14:Trend in total factor productivity.10Figure 15:Policy contribution to economic growth .11Figure 16:Historical,baseline and reform scenarios,constant 2015 US$.12Figure 17:Share of the population in

15、poverty at$2.15 per day(2017 PPP).12Figure 18:Assumptions on mining production and export.14Figure 19:Baseline headline GDP growth and decomposition of GDP per capita growth.15Figure 20:GDP per capita growth and decomposition of incremental growth in ambitious reform scenario.18Figure 21:Impact of s

16、tructural reforms on annual growth.19Figure 22:Export to GDP ratio versus GDP per capita.22Figure 23:Exports of goods and services,Liberia,2004-2021.23Figure 24:Export product concentration in Liberia and peers.24Figure 25:Technological classification of goods exports,Liberia,2002-2022.25Figure 26:E

17、xport growth 2011-21,percent,Liberia vs.world,top 8 markets(excl.ships).25Figure 27:Decomposition of export growth,Liberia,2009-11 to 2019-21(in percentage).26Figure 28:Imports by broad economic category in Liberia.27Figure 29:Share of consumer goods in total imports in Liberia and comparators.27Fig

18、ure 30:Liberias top exported products featuring RCA.29Figure 31:High-risk opportunities for export growth from Liberias product space.29Figure 32:GVC participation rates for Liberia and comparator countries(in percent).30Figure 33:GVC participation by sector,Liberia,2015 .30Figure 34:Different polic

19、y priorities underpin the transitions across types of GVC participation.31Figure 35:Natural capital endowment per head and FDI,Liberia and comparators.32Figure 36:Tariffs in Liberia and comparators.33Figure 37:NTM usage,Liberia and peer countries,2014.34Figure 38:Services Trade Restrictions Index(ST

20、RI)in Liberia and comparators(2021).35Figure 39:Ad valorem trade costs(%),Liberia and comparator,2018.35Figure 40:WTO TFA implementation in Liberia and comparators,2022.36Figure 41:Trade facilitation indicators for Liberia and comparators,2022.36Figure 42:Logistics Performance Index,Liberia and peer

21、s,2010 to 2023.37Figure 43:Logistics Performance Index by sub-indicator,Liberia and peers,2018.37Figure 44:Liberias revealed comparative advantage,by product,1995-2021.41Figure 45:Economic Complexity Index(ECI)score and ranking for Liberia and comparators,1995-2021.41Figure 46:Economic Complexity Ou

22、tlook(ECO)score and ranking for Liberia and comparators,1995-2021.42Figure 47:Liberias low-complex products identified in the periphery of the product space.42Figure 48:Liberias pathways to economic complexity and diversification.43Figure 49:Types of agribusiness value chains.44Figure 50:Agricultura

23、l value chains.45Figure 51:Summary of agricultural value chains potential.45Figure 52:Quarterly palm oil production,annual exports,and RCA.46Figure 53:Palm processing score card.47Figure 54:Quarterly cocoa production,annual exports,and RCA.49Figure 55:Cocoa processing score card.50Figure 56:Quarterl

24、y rubber production,annual exports,and RCA.51Figure 57:Rubber processing score card.52Figure 58:Liberias cassava market outlook,2024-2034.53Figure 59:Cassava processing score card.54Figure 60:Liberias rice market outlook,2024-2034.55Figure 61:Rice processing score card.55Figure 62:Ranking of constra

25、ints to the development of agricultural value chains.56Figure 63:Birds eye view of the special agro-industrial processing zone.57Figure 64:Impact of EU deforestation regulation on Liberian exports .58Figure 65:Firm-level productivity and productivity growth.62Figure 66:Firm performance in Liberia an

26、d selected benchmark countries.63Figure 67:Firm investment and capacity utilization,Liberia and selected benchmark countries.63Figure 68:Obstacles most cited by firms in Liberia.64Figure 69:Domestic credit to private sector(%of GDP).64Figure 70:Access to electricity in Liberia and selected benchmark

27、 countries(%of population).64Figure 71:Access to internet in Liberia and selected benchmark countries.65Figure 72:Most important obstacles cited by exporting and non-exporting firms in 2017(%of firms).65Figure 73:Most important obstacles cited by top 10%and bottom 10%of firms by productivity in 2017

28、(%of firms reporting them).66Figure 74:BTI scores for competition and anti-corruption policy,Liberia and comparator countries .67Figure 75:Business density in Liberia and comparator countries.67Figure 76:Global Entrepreneurship Index(GEI),Liberia and comparators.68Figure 77:FDI stock in Liberia and

29、comparator countries.70Figure 78:Regulatory quality and government effectiveness in Liberia and comparator countries.72BOXESBox 1:Summary of macro-and micro-challenges to growth identified in the African Development Banks Growth Diagnostic Study for Liberia(2023).10Box 2:Policies to develop the palm

30、 oil industry:The case of Indonesia.48Box 3:Promoting entrepreneurship in Africa.69Box 4:Liberias open-door policy:An analysis.71Box 5 Institutional Framework for Boosting InvestmentThe Case of Senegal.74TABLESTable 1:Overview of growth drivers under baseline and reform scenarios.16References .75App

31、endix.79Liberia Country Economic MemorandumiBTIBertelsmann Transformation IndexCBLCentral Bank of LiberiaCCDRCountry Climate and Development ReportCOIComplexity Outlook IndexCOMESACommon Market for Eastern and Southern Africa EACEast African CommunityECIEconomic Complexity IndexECOWASEconomic Commun

32、ity of West African StatesEUEuropean UnionFDIForeign Direct InvestmentGBVGender-Based ViolenceGDPGross National ProductGNIGross National IncomeGREATGovernance Reform and Accountability Transformation ProjectGVCGlobal Value ChainHCIHuman Capital IndexHCWHuman Capital WealthICTInformation and Communic

33、ation TechnologyILOInternational Labor OrganizationIMFInternational Monetary FundLECLiberia Electricity CompanyLLCLimited Liability CompanyLPILogistics Performance IndexLTGMLong Term Growth ModelMFPDMinistry of Finance and Development PlanningNICNational Investment CommissionNRFNational Road FundNTM

34、Non-Tariff MeasureOECDOrganization for Economic Cooperation and DevelopmentPIAPlateforme Industrielle dAdtikop PPPPublic Private PartnershipPWTPenn World TablesREDD+Reducing Emissions from Deforestation and Forest DegradationSAIPZSpecial Agro-Industrial Processing ZoneSMESmall and Medium-sized Enter

35、priseTFATrade Facilitation AgreementTFITrade Facilitation IndicatorsTFPTotal Factor ProductivityTVETTechnical and Vocational Education and TrainingUNMILUnited Nations Mission in LiberiaUSUnited StatesUSDAUnited States Department of AgricultureWBESWorld Bank Enterprise SurveyWDIWorld Development Indi

36、catorsWTOWorld Trade OrganizationAcronyms and AbbreviationsLiberia Country Economic MemorandumiiThe report was written by a World Bank team led by Mamadou Ndione.The team included Gweh Gaye Tarwo,Arthur Galego Mendes,Guido Damonte,Steven Michael Pennings,Alari Hasanatu Ijileyoh Mahdi,Neema Mwingu,De

37、borah Elisabeth Winkler,Karlygash Dairabayeva,Ileana Cristina Constantinescu,Mwenda Kazadi,Alain DHoore,Rose Mungai.The report was prepared under the guidance of Robert R.Taliercio,Country Director for Ghana,Liberia,and Sierra Leone,and Abebe Adugna,Regional Director for Africa West and Central.The

38、team worked under the close supervision of Sandeep Mahajan,Practice Manager for Africa West and Central,and Stefano Curto,Lead Country Economist for Ghana,Liberia,and Sierra Leone.The team was supported by Joseph Massa Koilor,Irene Sitienei,and Pinar Baydar.The report benefitted from peer review gui

39、dance provided by Fulbert Tchana-Tchana,Samer Naji Matta,and Richard Record.Many other colleagues in the World Bank provided insights and suggestions to the report including Runyararo Gladys Senderayi,Utz Johann Pape,Paul Andres Corral Rodas,Abdoullahi Beidou,Bobby Eric Musah,Alonso Sanchez,Binta Be

40、atrice Massaquoi,Kadir Osman Gyasi,Kelvin Doesieh,and Shafick Hoossein.As a light pilot under the CEM 3.0,the report benefitted also from Ekaterina Vostroknutova and Lazar Milivojevic,CEM 3.0 tools,training sessions and experience sharing.The team is grateful to participants in consultation meetings

41、 with the Ministry of Finance and Development Planning,the Central Bank of Liberia,the Economic Adviser of the President,as well as representatives from the private sector,non-governmental organization community,and development partners.The team is also grateful for financial support from the Umbrel

42、la Facility for Trade Trust Fund.AcknowledgmentsLiberia Country Economic MemorandumiiiLiberia Country Economic Memorandumivi.Liberia is one of the poorest countries on the planet,ranking 180th out of the 190 countries in the World Banks development database.Based on the national poverty line,59 perc

43、ent of Liberians were poor in 2016,the latest year for which household survey data is available.According to World Bank estimations,about 6 out of 10 Liberians continue to live in poverty.Broader welfare measures tell a similar story:Liberia ranked 177th out of 193 countries on both the UN Human Dev

44、elopment Index and the UN Gender Inequality Index in 2022.Low human development is exemplified by Liberias score of 0.32 on the World Banks measure of human capital,suggesting that a newborn child will only reach 32 percent of their potential productivity as an adult under current conditions of heal

45、thcare and education.Poverty is more prevalent in rural areas and its incidence increases with distance from the capital Monrovia,highlighting Liberias severe spatial challenges.Rapid population growth,deforestation,and the accelerating impacts of climate change are degrading the countrys abundant n

46、atural capitala dynamic which,in turn,is increasingly tied to the persistence of poverty.Pervasive food insecurity contributes to the high rate of child stunting and to malnutrition more generally.Inadequate sanitation heightens the risk of communicable disease.ii.Liberias predicament exemplifi es t

47、he consequences of the natural resource trapwhereby a narrow,commodity-based development model prompts recurring cycles of stagnation and recovery(Figure 1).Vulnerability to shocks has repeatedly derailed Liberias economic growth and development.The single biggest shock in the countrys history came

48、with the outbreak of civil unrest in 1979 and an ensuing coup detat,which led to two decades of civil war.A legacy of entrenched inequality,underpinned by rents from natural resource extraction,contributed to the conflict.Real GDP per capita collapsed and Liberia lost its middle-income status.Growth

49、 resumed once peace was reestablished in 2003,but the country was again hit by a succession of shocks,including collapse in commodity prices,the Ebola epidemic in 2014,the withdrawal of UN peacekeepers in 2018 which removed a key source of foreign exchange and consumer demand,and then COVID-19 pande

50、mic in 2020.Although growth resumed once more starting in 2021,real GDP per capita has broadly stagnated since peace was reached in 2003,with modest growth in the fi rst decade nearly off set by decline in the subsequent decade.iii.Historical fl uctuation in total factor productivity(TFP)highlights

51、Liberias economic challenges and its struggle to keep pace with peers(Figure 2).The recovery of TFP in Liberia in the post-confl ict decade occurred at a time of rebuilding and potential for growth,refl ecting eff orts to stabilize the economy and improve effi ciency.However,the decline in productiv

52、ity between the Ebola epidemic(2014)and the COVID-19 pandemic underscores Liberias vulnerability to external shocks.Executive SummaryFigure 1:Liberias economic trajectory since independence 5223,658665Closed door policyOpen door policyOpen door policyConfict Post-confictPost-confictPost-confict60560

53、523605001,0001,5002,0002,5003,0003,5004,0001847185518631871187918871895190319111919192719351935194319511959196719751975198319911999200720152023Source:World Bank staff computations(per capita GDP in 2015 constant US$)Executive SummaryLiberia Country Economic Memorandumviv.Transitioning from cyclical

54、stagnation to sustainable,inclusive growth through structural transformation is the key to reducing poverty and building shared prosperity.Liberia needs to enact five significant transformations to create the conditions for long-term development,thus fostering economic expansion,employment creation,

55、and poverty alleviation.The fi rst transformation involves fundamentally reshaping Liberias macro-economy.This entails substantially increasing domestic savingsboth public and privatereducing the current account defi cit,and mobilizing domestic resources.Greater availability of domestic capital will

56、 facilitate a steady increase in the provision of public goods,such as roads,electricity,and telecommunication networks.Stronger domestic revenue mobilization will facilitate investments in human capital through higher-quality and more accessible education and healthcare.Second,Liberia must diversif

57、y away from over-reliance on the mining sector.Diversifi cation can be facilitated by focusing on manufacturing industries where Liberia has a distinct comparative advantage,such as agro-processing.By investing in these sectors,Liberia can create a more balanced economy that is less susceptible to f

58、l uctuations in commodity prices and external market shocks.Third,the economy must shift towards activities better aligned with the employment needs of an expanding urban population.This entails increasing output in both the services and manufacturing sectors.By focusing on sectors whose products an

59、d services are in high demand and have potential for growth,Liberia can create more job opportunities and improve the livelihoods of its fast-growing urban population.Investing in skills development and vocational training programs can help prepare the workforce for employment in these sectors.The f

60、ourth transformation entails transitioning from a state-centric mindset to recognizing the private sector as the primary driver of economic expansion and job creation.By fostering entrepreneurship,removing barriers to business growth,and cultivating an investment-friendly climate,Liberia can unleash

61、 the creativity and dynamism of the private sector in areas such as technology,agriculture,and infrastructure.This entails streamlining bureaucracy and implementing policies targeting small and medium-sized enterprises.Finally,the government must implement deep policy and institutional reforms to mo

62、dernize the public sector.Priorities include ensuring consistency in contract enforcement,safeguarding property rights for all,and strengthening governmental institutions and governance frameworks.Combating corruption is essential for ensuring equitable and effi cient public services and governance.

63、By prioritizing transparency,accountability,and the rule of law,Liberia can build trust in the government and foster a level playing fi eld for businesses.v.The progress that the current government,elected in October 2023,is able to make on structural reforms and capital investment over the coming f

64、ive years will greatly impact Liberias Figure 2:Trend in total factor productivity02040608010012014016019801985199019952000200520102015BeninCte dIvoireGambiaGhanaGuineaGuinea-BissauLiberiaSenegalSierra LeoneSource:PWT,USDA,and World Bank staff computationsTFP trends(index 1980=100)Executive SummaryL

65、iberia Country Economic Memorandumvilonger-term economic outlook.This outlook will,in turn,determine the prospects for sustained poverty reduction and shared prosperity.The World Bank has developed a set of long-term scenarios for the economy,outlined in this study,that illustrate just how much is a

66、t stake for Liberia.vi.Under a“business as usual”baseline scenario,where current policies continue indefi nitely,Liberia would not be on track to meet its ambitious goal of achieving middle-income status by 2030.In the baseline scenario,GDP growth is projected to average 5.5 percent per year through

67、 2029consistent with the near-term outlooks of the World Bank and IMFbefore gradually converging to its estimated long-term potential growth rate(under current policies)of about 4 percent through 2050.Crucially,education quality is assumed to stagnate while enrollment rates remain low.Child stunting

68、 also does not improve.This stagnation in human capital holds down potential increases in labor productivity.Under these baseline assumptions,Liberias real per capita GDP grows modestly and does not reach the middle-income threshold of US$1,000 until around 2050.This outcome would nevertheless repre

69、sent a sharp break with the overall stagnation in per capita incomes experienced over the past two decades.However,it would fall far short of Liberias aspirations,and would likely be viewed as disappointing by a large majority of Liberians.vii.Liberia has the potential to perform much better over th

70、e medium to long run if credible reforms are implemented now to start transforming the economy,modernizing the public sector,and improving governance.Based on the experience of peer and aspirational countries for Liberia,a highly ambitious reform program could potentially:(i)double the rate of proje

71、cted annual productivity growth in the non-mining sector to 2 percent,compared with the 1 percent assumed in the baseline,(ii)extend the average duration of schooling from the current four years to 10 years,and raise Liberias quality of education score from 0.53 to 0.65,(iii)boost Liberias stunting

72、and adult survival rates to the 75th percentile of its peer group,and(iv)improve the effi ciency of public investment to 70 percent from the assumed baseline of 60 percent.Higher investment,both public and private,is projected to contribute approximately one percentage point to annual GDP growth in

73、the high-ambition scenario.Such a scenario envisages accelerated market reforms that could elevate private investment to 18 percent of GDP,mirroring Vietnams trajectory in the 1980s-1990s.Public investment is projected to reach 12 percent of GDP,aligning with Ethiopia and approaching half of Chinas

74、level.viii.Liberia could potentially attain lower middle-income status before 2040 in such an ambitious reform scenario,while per capita GDP could reach US$2,000 in real terms by 2050(Figure 3).In the ambitious reform scenario,per capita GDP is projected to grow approximately 3.3 percent faster in t

75、he long run relative to the baseline scenariobearing in mind that the specifi cs of any modeling exercise are highly sensitive to the assumptions made,and a wide range of outcomes is possible.More eff ective policies and buff ers to improve resilience will be important to enhance the response to fut

76、ure negative shocks,including from the impacts of global climate change.Figure 3:Baseline and reform scenarios 1,1002,200650194519514509501,4501,9502,45020002005201020152020202520302035204020452050HistoricalBAUReformsBarclay-Tubman open door policy Source:World Bank staff computations(Constant 2015

77、US$)Executive SummaryLiberia Country Economic Memorandumviiix.The extent to which long-term growth reduces poverty and boosts shared prosperity will hinge on the effectiveness of government policies and programs to enhance resilience and inclusion.GDP growth alone will not be enough to sustainably r

78、educe poverty.The structure of growth also matters:the poor must be able to participate fully in the economic growth process.As per the 2023 Poverty Assessment,a concerted effort is needed to break the poverty cycle through better access to basic services that promote human capital development,the p

79、rovision of social safety nets to protect against shocks,and measures to raise agricultural productivity.Increasing connectivity by reducing Liberias huge infrastructure gap is also critical.x.A solid foundation for long-term growth requires macro-economic stability and fi scal sustainability.The am

80、bitious reform scenario assumes raising public investment from 10 percent of GDP in the baseline to 12 percent,through stronger domestic revenue mobilization and improved expenditure management.This entails building buff ers by maximizing revenue generation from the mining industry,rationalizing tax

81、 expenditures,and implementing the planned value-added tax.Additionally,increasing the effi ciency of public spending is imperative,including by aligning resource allocation with policy goals to ensure prudent and eff ective use of public funds.xi.Institutional and policy reforms are essential to mo

82、dernize the public sector,and ensure that Liberias institutions can lead the countrys transformation.Institutional and policy reforms need to aim for:(i)a systemic overhaul of the business climate to promote private investment,innovation and job creation;(ii)the delivery of higher-quality,more effi

83、cient core public services to raise the level of human capital,notably in education and health;and(iii)increases in the effi ciency and scale of public investmentsfi nanced increasingly by domestic resourcesto address infrastructure bottlenecks,including in power,roads and telecoms/digitalization.Th

84、e fi ght against corruption must also be more incisive.xii.A more attractive business climate will stimulate the deployment of private capital and foster economic activity beyond mining.In the ambitious reform scenario,private investment would grow from 12 percent of GDP in the baseline to 18 percen

85、t,through stronger FDI policies and expansion of domestic credit.Establishing a robust legal and regulatory framework for public-private partnerships is essential to complement public investment in critical infrastructure such as roads,energy,and telecommunications.Reducing barriers to new companies

86、 through simplifi ed legal and administrative procedures,such as those for company registration and foreign investment,can foster innovation and productivity.Eff ective implementation of the reform agenda requires a coordinated approach and the restructuring of existing institutions.Soliciting input

87、 from the business sector and addressing regulatory gaps are crucial steps.xiii.Harnessing Liberias comparative advantage in agro-processing and pursuing open trade can help sustain higher growth over the medium and long term.Liberia should prioritize investments in value addition within agricultura

88、l value chains by focusing on sectors where it has a clear competitive advantage,and gradually advance on the technological complexity ladder.Promising agro-processing sub-sectors include palm oil,cocoa,rubber,cassava,and rice.Over the long run,expanding markets and sustaining productivity growth hi

89、nges on greater economic integration and trade liberalization,particularly with Liberias ECOWAS counterparts.By improving trade facilitation and connectivity,Liberia can overcome its geographical isolation and foster trade and value chain integration,enabling more productive firms to benefit from ne

90、w market opportunities.Executive SummaryLiberia Country Economic MemorandumviiiFigure 4:Summary of policy recommendationsPolicy areaKey objectivesRecommended upfront actionsShort to Medium TermMacroeconomic stability&fi scal sustainability Increase domestic revenue mobilization and improve public ex

91、penditure management Maximize revenue generation from mining Rationalize tax expenditures Implement value-added tax Align resource allocation with policy goals Ensure transparency of all government transactionsPublic sector modernization Improve delivery of core public services Promote private secto

92、r development Scale up impact of public investment Initiate policy and institutional reforms to support:(i)improvements in the quality and accessibility of education and healthcare,(ii)overhaul of the business climate,and(iii)investments to narrow the infrastructure gapAnti-corruption Reverse the cu

93、rrent upward trend in the perception of corruption Implement legislative changes that grant the Anti-Corruption Commission direct prosecutorial authority and oversight of asset declaration and verifi cationOverhauling the business climate Stimulate private investment(both domestic and foreign),innov

94、ation and job creation Establish robust framework for PPPs Reduce barriers to entry for new companies Coordinate approaches across government agencies Solicit input from the business sector,and address regulatory gapsxiv.The key policy recommendations to escape the natural resource trap and transiti

95、on to sustained,inclusive growth are summarized in Figure 4.This comprehensive reform agenda operationalizes the fi ve transformations presented earlier.Analysis in this report underscores the near-term importance of:(a)continued progress on macroeconomic stability and fi scal sustainability,(b)deep

96、er policy and institutional reforms to modernize the public sector and combat corruption,and(c)an overhaul of the business environment.With progress in these core areas,achieving signifi cant improvements in educational and health outcomes and narrowing the infrastructure gapidentifi ed as key drive

97、rs of medium-term growthbecomes feasible.Finally,actions taken now to leverage trade opportunities and strengthen value chains in sectors where Liberia has signifi cant potential are vital to sustaining higher economic growth over the medium to long term.Policy recommendations to improve governance,

98、public investment and service delivery;develop critical infrastructure;and mainstream climate action into the policy agendaall summarized in this reportare addressed in more detail in other recent World Bank diagnostic and project reports on Liberia.Each policy area can be addressed through both nea

99、r-term measures,and follow-on measures over the medium and longer term.The distinction in Figure 4 between“short,medium,and long term”is primarily one of sequencing as well as timeframe for expected impacts on economic growth.Executive SummaryLiberia Country Economic MemorandumixMedium TermImproving

100、 quality and accessibility of education and healthcare Raise average years of schooling from 4 to 10,and increase quality of education score from 0.53 to 0.65 Reduce child stunting rate from 30%to 15%,and increase adult survival rate to 80 percent Introduce incentive packages for female teachers and

101、 quotas to increase women in leadership roles in education Enact national school quality standards Roll out TVET programs Establish code of conduct against school-related GBV Accelerate priority health and nutrition programs Ring-fence public spending on healthcare Increase availability and producti

102、vity of health workers Improve effi ciency,transparency and accountability of the health systemPolicy areaKey objectivesRecommended upfront actionsMedium TermNarrowing the infrastructure gap Support sustainable economic growth while addressing Liberias unique spatial challenges Promote private secto

103、r solutions and maximize public fi nancing for investment Accelerate expansion of electricity access and regional integration Restructure Liberia Electricity Company Improve road planning and management Operationalize National Road Fund Coordinate national digitalization initiatives,diversify intern

104、ational connectivity,and scale up broadband infrastructure Promote digital payments systems and data protocols Introduce a national program for digital literacy and ICT skillsMedium to Long TermPrioritize investments in agricultural value chains Diversify the economy and create new job opportunities

105、 Expand agro-processing by focusing on sectors where Liberia possesses clear competitive advantageAdvance economic integration and trade liberalization Expand markets for Liberian products and drive productivity increases Improve trade facilitation and connectivity Enhance quality of trade-related i

106、nstitutionsFully harness digital revolution Accelerate structural transformations Continuously upgrade legal and regulatory environment,aligning with ECOWAS countriesIntegrating Climate ChangeMainstream climate action into the policy agenda Shift to integrated approaches encompassing climate fi nanc

107、e,readiness and coordination Invest in infrastructure with climate risks and opportunities in mind,including scaling up electrifi cation,decarbonizing the power sector,and increasing resilience of transport networks Invest in human capital to enhance social resilience and reduce dependency on natura

108、l wealth Shift toward sustainable land use,emphasizing community benefi ts from natural capital Eliminate barriers to eff ective implementation of REDD+Figure 4:Summary of policy recommendations(cont.)Executive SummaryLiberia Country Economic MemorandumxCHAPTER 1DRIVERS OF GROWTHLiberia Country Econ

109、omic Memorandum11.1 A brief history of the Liberian economyLiberia is Africas oldest independent democratic republic.The country was founded by former slaves from the US who came to settle in 1822.It was declared an independent democratic republic in 1847.The countrys economy has been on a seemingly

110、 unending cycle of stagnation,expansion,and contraction.From independence until the mid-1930s,real income per inhabitant remained relatively stagnant,hovering around US$600 in 2015 constant US dollar terms,with minor and temporary deviations.During this time,the primary policy objective of successiv

111、e governments was to uphold the countrys sovereignty and ensure the survival of the state,amidst the challenges of the colonial era.From the mid-1930s to the mid-1970s,Liberia experienced four decades of sustained economic expansion.Real income per capita surged sixfold from US$565 in 1935 to US$3,6

112、58 in 1974.Remarkably,Liberias GDP per capita not only slightly surpassed that of Thailand or Egypt,but exceeded that of China,Indonesia,Vietnam,and India by over 80 percent.Historical accounts frequently made comparisons between Liberia and Japan in the 1950s.The origin of such comparisons can be t

113、raced back to the Monthly Bulletin of Statistics published by the UN in May 1962,which highlighted Liberias economic growth rate in the preceding decade as the second-fastest globally,trailing only Japan.1 This impressive growth stemmed from a deliberate open-door policy that attracted substantial f

114、oreign direct investment in mining,industry,and agriculture.In the process,Liberias predominantly agrarian economy underwent a transformation,becoming heavily reliant on iron ore and rubber exports,thereby making it highly vulnerable to commodity price shocks.1 This information was reaffi rmed in a

115、1966 study of Liberias economy by economists from Northwestern University,led by Robert Clower.In the mid-1970s Liberia entered a prolonged economic decline,culminating in the civil war of the 1990s and early 2000s.From its peak in 1974 to its lowest point in 1995 during the civil war,per-capita inc

116、ome plummeted by an astonishing 93 percent.By 2003,despite a notable rebound,Liberia had fallen to nearly the bottom position globally in terms of income,ranking just ahead of the Democratic Republic of Congo,with its GDP per capita merely one-fi fth that of Egypts.The end of the civil war heralded

117、a period of economic rejuvenation,marked by impressive growth in the fi rst post-war decade.From 2004 to 2013,the nation enjoyed robust annual economic growth of 7.4 percenta rate at which income doubles in just 10 yearsdriven by surging commodity prices(such as for rubber and iron ore),an infl ux o

118、f foreign aid as part of the“peace dividend,”and increased foreign investment.Enclave industries in the mining(gold,diamonds,and iron ore)and tree-crop(rubber,cocoa,and palm oil)subsectors were key drivers of growth,predominantly fueled by foreign direct investment(FDI),which supported export-orient

119、ed production with minimal domestic value addition.1.DRIVERS OF GROWTHFigure 5:Trajectory of Liberias economy since independence1847184718732023194519501951195519591959196019611964 19661966 196819711974197519761979197919811983198919901990199319931994199419951995199519961996199720032003-60.0-40.0-20.

120、00.020.040.060.080.0100.005001,0001,5002,0002,5003,0003,5004,000GDP per capita growthGDP per capita(2015 constant US$)Source:WDI and Leigh Gardner(Sovereignty without Power)Chapter 1.Drivers of growthLiberia Country Economic Memorandum2However,the recovery was short-lived.Between 2014 and 2020,Liber

121、ia faced several external shocks,including the Ebola virus outbreak,a collapse in global iron ore and rubber prices,the withdrawal of UN peacekeeping forces,and the onset of the COVID-19 pandemic.These factors led to sustained economic stagnation,culminating in an economic downturn in 2019 and 2020.

122、Consequently,per-capita GDP fell by 15.4 percent cumulatively,pushing the fraction of the population living on less than US$2.15 and US$3.65 per day(in 2017 PPP)to one-third and two-thirds by 2020,respectively.This eff ectively nullifi ed almost half of the preceding gains in per capita income.The c

123、ountry is currently on the mend,yet concerns about sustainability persist.Since late 2019,authorities have made signifi cant strides in restoring macroeconomic stability and improving growth prospects.The economy showed resilience with a growth rate of 5.0 percent in 2021,4.8 percent in 2022,and 4.6

124、 percent in 2023,even amid Russias invasion of Ukraine and global economic uncertainty.This chapter explores the primary factors infl uencing Liberias economic growth between 2004 and 2023,the fi rst two decades after the countrys civil confl ict.It also employs a forward-looking approach to identif

125、y potential drivers of future growth,and outlines two distinct scenarios for the Liberian economy:a business-as-usual path(the baseline),which assumes a continuation of past trends;and a reform path,that presumes the successful implementation of reforms targeting the growth drivers identifi ed.1.2 P

126、ast drivers of growthSince the mid-1930s,Liberias economic model has heavily relied on its abundant natural resources.Exports have predominantly been composed of rubber,timber,and iron ore,making these commodities the backbone of the national economy.This resource-driven approach has provided signif

127、i cant revenue streams but has also made the economy vulnerable to fl uctuations in global commodity prices.Such dependence has implications for economic stability and development,often limiting diversifi cation and the growth of other sectors.As global dynamics shift towards sustainability and tech

128、nological innovation,it becomes increasingly important for Liberia to explore economic diversifi cation to reduce its vulnerability to external shocks and foster long-term growth.In the decade up to mid-2024,the countrys economic trajectory showed a worrisome pattern of stagnation.After a notable re

129、covery between 2004 and 2013,the economy experienced minimal growth,with an average annual rate of only 1.2 percent between 2014 and 2023.Factoring in population growth,this translated to no expansion at all:instead,the economy contracted by an average of 0.8 percent per year,and real GDP per capita

130、,measured in constant 2015 US$terms,declined to US$665 in 2023 from US$724 in 2013.During this period,all sectors of Liberias economy exhibited weak performance,with services in particular declining by 0.4 percent per year on average.The Ebola outbreak,the withdrawal of the United Nations Mission in

131、 Liberia(UNMIL),and the COVID-19 pandemic signifi cantly impacted all sectors,but especially those concentrated in urban areas.Agriculture,the backbone of Liberias economy,experienced only marginal growth of 2.2 percent per year on average,which closely mirrored the growth rate of the rural populati

132、on.This modest growth can be attributed mainly to the prevalence of subsistence agriculture,primarily focused on rice and cassava production.Conversely,the industrial sector showed the strongest growth,averaging 3.5 percent annually,driven primarily by gold mining and,to a lesser extent,construction

133、.However,manufacturing remained largely stagnant over the decade,indicating a need for further development and diversifi cation.Chapter 1.Drivers of growthLiberia Country Economic Memorandum3Figure 6:Contribution to GDP growth(2014-2023)-4.0-3.0-2.0-1.00.01.02.03.04.05.06.020142015201620172018201920

134、20202120222023PrimarySecondary ServicesGDP Source:MFDP,CBL,IMF,and WB calculationSupply side-20.0-15.0-10.0-5.00.05.010.015.020.02014201520162017201820192020202120222023ExportsImportsPublic investmentPrivate investmentGovernment consumptionPrivate consumptionGDPDemand sideOn the demand side,the prim

135、ary driver of economic growth was the surge in gold exports,accompanied by a signifi cant reduction in imports following the withdrawal of UNMIL.Although government consumption modestly contributed to growth,it relied heavily on extensive donor support during the Ebola crisis.Throughout this period,

136、fi scal management remained challenging,leading to a decline in public investmentprimarily due to weak domestic revenue mobilization and a high level of government consumption.Despite the relatively high infl ow of FDI,private investments contribution to growth remained marginal,owing to low domesti

137、c saving rates and weak fi nancial intermediation.Furthermore,despite a consistently large infl ow of remittances,private consumption experienced an average annual decline of 0.5 percent,refl ecting decreased household income associated with the departure of UNMIL.Labor productivity and employment d

138、ynamicsCompared to other countries in Western and Central Africa,Liberia faces signifi cant challenges that have curtailed its economic growth and development.The contraction in Liberias GDP per capita over the past decade has widened the gap between the country and many of its regional peers.Liberi

139、a now ranks in the bottom quartile by revenue per inhabitant in Western and Central Africa.Its real per capita GDP is only about one-quarter the level of Cote dIvoire(US$2,430),one-third the level of Ghana(US$2,031),and about two-thirds the level of Guinea(US$994).In the region,Liberias per capita G

140、DP exceeds those of the Central African Republic(US$365),Niger(US$545),and Guinea-Bissau(US$622),which however have reduced the gap with Liberia over the past decade.Furthermore,it is slightly above the levels of Chad(US$590)and Sierra Leone(US$627),which have experienced more severe economic contra

141、ctions than Liberia.Output per worker has been the primary contributor to per capita GDP growth,but it dropped in the wake of the Ebola epidemic of 2014.In the post-confl ict era,per capita GDP rose by 20 percent overall.However,this growth was not steady:a surge of 35 percent in the fi rst post-con

142、fl ict decade was partially off set by an 11 percent decline in the subsequent decade.Shifts in per capita growth were primarily driven by fl uctuations in labor productivity.At US$3,300 in constant 2017 PPP terms,Liberias output per worker is now the lowest in Western and Central Africaequal to rou

143、ghly one-quarter of the regional average or of the level in aspirational peers such as Senegal,Ghana,and Cte dIvoire,and to about two-thirds the level in structural peers such as Sierra Leone.Chapter 1.Drivers of growthLiberia Country Economic Memorandum4Figure 7:GDP per capita and GDP per person em

144、ployed in Western and Central AfricaGabonGabonEquatorial GuineaCabo VerdeNigeriaCote dIvoireLower middle incomeGhanaAfrica Western and CentralCongo,Rep.Sub-Saharan Africa MauritaniaSenegalGuineaTogoLiberiaLiberiaSierra LeoneSierra LeoneGuinea-BissauChadNiger-8.0-6.0-4.0-2.00.02.04.06.001,0002,0003,0

145、004,0005,0006,0007,000Growth in GDP per capita GDP per capita in 2022(constant 2015 US$)Source:WDI and WB calculationGDP per capitaGabonEquatorial GuineaMauritaniaCabo VerdeLower middle incomeCote dIvoireGhanaSenegalSenegalSenegalAfrica Western and CentralCongo,Rep.Sub-Saharan Africa BeninCote dIvoi

146、reBeninCote dIvoireGuineaTogoSierra LeoneChadLiberia-8.0-6.0-4.0-2.00.02.04.06.0010,00020,00030,00040,00050,00060,000Growth in GDP per person employedGDP per person employed in 2022(constant 2017 PPP$)GDP per person employedFigure 8:Labor market indicators in Liberia and Western and Central AfricaPe

147、rcent505560657075808590951002000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022Employment rateParticipation rateParticipation rate,male Participation rate,femaleWorking age population ratioSource:ILO,WDI and WB calculationDependency,employment,&participation in LiberiaCongo,Rep.TogoSierra Le

148、oneGhanaEquatorial GuineaEquatorial GuineaLiberiaCameroonGambia,TheBeninSub-Sub-SubSaharan AfricaNigeriaCabo VerdeCentral African RepublicGuinea-BissauBurkina FasoBurkina FasoCote dIvoireGabonLow incomeGuineaNigerChadIDA onlyWorldIDA totalSenegalMauritaniaMali0.05.010.015.020.025.030.035.040.045.050

149、.055.060.065.070.075.080.0Gender gap in labor participationLabor force participation rate,total Gender gap vs.female labor participation in AFWOver the past decade,Liberia has experienced modest yet positive change in dependency ratio,labor market participation,and employment rate.With a predominant

150、ly young population(people under the age of 15 account for an estimated 44 percent of the population),Liberia mirrors the demographic profi le of many African countries.The dependency ratio,which includes both young and elderly dependents,gradually declined from 85.7 percent in 2012 to 78 percent in

151、 2022.This shift suggests a decreasing burden on the working-age population,which itself has been expanding at a faster rate than the total population.Such a trend indicates growing potential for income generation and development.Liberia has the highest labor-market participation rate in Western and

152、 Central Africa,averaging 77 percent among those aged 15 and above over the past decade.This high level of participation refl ects strong engagement in the labor force,although disparities exist between gendersfemale participation lags behind male participation by 9 percentage points,Furthermore,the

153、 employment rate has been on an upward trajectory,with the notable exception of the COVID-19 pandemic period,which disrupted economic activity globally.According to the International Labor Organization(ILO),the unemployment rate has remained relatively stable,hovering around 3 percent.These trends u

154、nderscore a slow but positive evolution of the economic landscape in Liberia,marked by increasing labor force participation and a gradually decreasing dependency ratio.However,the gender gap in labor market participation must be addressed to harness the full potential of the labor force and foster s

155、ustainable economic growth.Chapter 1.Drivers of growthLiberia Country Economic Memorandum5The examination of factors that infl uence productivity in Liberia points to several important dynamics:1.Sectoral productivity drives growth:Productivity within each sector plays a signifi cant role in driving

156、 overall economic growth.This highlights the importance of enhancing productivity across various sectors to stimulate overall economic performance.2.Post-confl ict trends have been mixed:The positive trajectory of the fi rst decade post-confl ict was nearly completely off set during the second decad

157、e,as progress reversed or stagnated.Understanding the reasons for this trend is crucial for designing targeted interventions that promote sustainable economic development and improve productivity outcomes.3.Labor reallocation has not made a positive impact:Static labor reallocation,whereby workers r

158、emain in the same sector instead of transitioning to more productive sectors,had a detrimental eff ect on growth in the two decades following the confl ict.In addition,data suggests a shift of labor from rural agricultural activities to urban informal services.However,this has not contributed to any

159、 improvement in productivity as the service sector that has witnessed declining productivity.The challenges associated with static labor reallocation,rural-urban migration,and declining productivity in certain sectors require comprehensive policy responses.These may include investments in education

160、and skills development,promoting innovation and technological adoption across sectors,improving infrastructure and access to fi nance,and creating an enabling business environment to spur entrepreneurship and formal job creation.Additionally,eff orts to enhance agricultural productivity and support

161、rural development can help mitigate the negative consequences of rural-urban migration while fostering inclusive growth.Trends in labor productivity and employment by sector point to signifi cant ineffi ciencies in the allocation of resources within the economy.Notably,four key points emerge:1.The i

162、ndustrial sector has enjoyed sustained productivity growth since 2004.This can be attributed to signifi cant investments in the mining sector,which has likely led to technological advancement,improved effi ciency,and higher value-added per worker.2.The industrial sector employs a limited and stagnan

163、t share of the workforce.Despite its relatively high productivity,the industrial sector only accounts for approximately 10 percent of total employment.This suggests a disparity between productivity gains and employment opportunities in industry,and potential ineffi ciencies in labor allocation.Furth

164、ermore,industrys share of total employment has remained stagnant over a prolonged period,pointing to limited capacity to absorb additional labor or other structural constraints within the sector.Figure 9:Shapley decomposition of per capita GDP growth and labor productivity growth(2004-2022)-20.0-10.

165、00.010.020.030.040.02004-20132014-20222004-2022Change in labor productivityChange in employment rateChange in participation rateChange in dependency ratePer capita growthSource:ILO,WDI and WB calculationContribution to per capita GDP growth-20.0-10.00.010.020.030.040.02004-20132014-20222004-2022With

166、in-sector productivity changeStatic reallocationDynamic reallocationChange in labor productivityContribution to labor productivity growthChapter 1.Drivers of growthLiberia Country Economic Memorandum6Figure 10:Trend in sectoral value added per worker and share of employment(2004-2022)1,0001,5002,000

167、2,5003,0003,5002004200720102013201620192022AgricultureIndustryServicesTotal Source:ILO,WDI and WB calculationValue added per worker(constant 2015 US$)0.010.020.030.040.050.060.02004200620082010201220142016201820202022AgricultureIndustryServices Share in employment3.Productivity in the services secto

168、r has been declining,particularly since the Ebola epidemic.This may be attributed to disruption in economic activity,reduced consumer demand,and challenges in service delivery during the Ebola epidemic and the COVID-19 pandemic.4.Employment has been shifting from agriculture to services.Despite decl

169、ining productivity in the services sector,there is evidence of a persistent shift of labor from agricultural activities to servicesskipping over industrial employmentassociated with rural-to-urban migration.This suggests that while there may be employment opportunities in urban areas,the quality of

170、jobs and productivity levels within the informal services sector need improvement.This shift in employment patterns also implies also that while productivity may be declining in services,factors such as urbanization and perceived opportunities in urban areas are infl uencing labor mobility.Unpacking

171、 the Drivers of ProductivityLabor has consistently been the primary positive contributor to economic growth in Liberia since 2014.This fi nding is consistent with demographic trends,as the working-age population has been expanding at a faster rate than the total population.The substantial contributi

172、on of labor to growth underscores the importance of harnessing the potential of the workforce through the provision of employment opportunities and skill development initiatives.Moreover,while human capital(a concept related to the skills and knowledge of workers)has also had a positive impact on gr

173、owth,its contribution has been comparatively smaller than that from the sheer number of available workers.Enhancing human capital through education,training,and healthcare initiatives remains crucial for sustaining long-term economic development and improving productivity.Meanwhile,foreign investmen

174、t,particularly in the iron ore sector,experienced a signifi cant uptick between 2010 and 2013 but slowed down thereafter.Domestic investment,on the other hand,has been constrained by low domestic savings rates,a challenging business environment,and weak fi nancial intermediation.Encouraging both for

175、eign and domestic investment through policy reforms and incentives could help stimulate economic growth and diversify the economy away from over-reliance on specifi c sectors.Notably,Total Factor Productivity(TFP)and capital accumulation have provided negative contributions to growth.This suggests c

176、hallenges related to technological innovation,effi ciency,and investment dynamics.Addressing them requires policies aimed at promoting innovation,improving infrastructure,and enhancing the business environment to attract investment.Chapter 1.Drivers of growthLiberia Country Economic Memorandum7Impro

177、ving Human Capital Human capital has contributed positively to growth over the past decade,but its impact could be substantially amplifi ed.Human capital encompasses the skills,knowledge,and health that people accumulate throughout their lives,enabling them to realize their potential as productive m

178、embers of society.According to data from the Penn World Table(PWT)and the World Banks The Changing Wealth of Nations report(2021),Liberia features both shortfalls and relative strengths in human capital compared with its regional peers.The latter report estimates Liberias human capital wealth(HCW)2

179、at US$24 billion in 2018,or US$5,000 per person(a signifi cant number in a country where income per person falls below US$700,but far below the global average of US$101,000),equal to 42.0 percent of the countrys total wealth.Within West Africa,Liberias HCW per capita is higher than those of Niger an

180、d Guinea,but below the levels of Nigeria,Ghana,and Senegal.The volatility of Liberias HCW per capita,which mirrors the trend in income per capita,refl ects the countrys enduring economic challenges.HCW per capita is estimated to have risen from US$2,900 to US$5,000 between 2011 and 2014,then stagnat

181、ed until 2018.This stagnation and the impact of successive shocks,notably the post-Ebola economic downturn,highlight the vulnerability of 2 Human capital wealth estimates the value of the expected future labor income that could be generated over the lifetime of the current working population.human c

182、apital development to general economic and fi scal conditions.The Ebola outbreak not only had a devastating impact on the health of Liberias population,but also lasting eff ects on the economy by reducing labor earnings and future labor income expectations.A range of indicators confi rm that human c

183、apital levels are low in Liberia,albeit comparable with those of peers in Western Africa.Liberia scored 1.8 on the Penn World Table Human Capital Index(PWT HCI),3 slightly above Senegal(1.8),Sierra Leone(1.6),The Gambia(1.7),and Cte dIvoire(1.7).From 1999 to 2019,Liberias PWT HCI score grew by 0.8 p

184、ercent per year on average to 1.8,but remains well below the scores of Ghana(2.5)and Zambia(2.7),and on par with Benin and Rwanda.The slow growth of PWT HCI in Liberia is a critical concern,and suggests that the country is lagging behind some of its African peers in eff orts to enhance its human cap

185、ital at a feasible pace.On the other hand,the World Banks Human Capital Index(WB HCI)quantifies the level of human capital that a child born today is expected to attain by age 18,given the typical health and education outcomes in the country where she lives.On this index,Liberia has a score of 0.32,

186、meaning that a child born in the country today is expected to reach 32 percent of her potential productivity if current conditions in education and health persist.This has profound implications for the countrys economic future.The fact that Liberias future GDP per capita could be more than three tim

187、es higher than currently projected with improvements in health and education(Liberia Human Capital Assessment,2021)underscores the critical need for investments in these areas.Moreover,the gender-specifi c HCI estimates reveal a slight advantage for girls over boys in Liberia,with the human capital

188、level attained by age 18 projected to be 3 percent higher for the former.3 The PWTs human capital index is based on the average years of schooling from Barro and Lee(BL,2013)and an assumed rate of return to education,based on Mincer equation estimates around the world(Psacharopoulos,1994).Figure 11:

189、Contribution to GDP growth by production factor(2014-2019)-5.0-3.0-1.01.03.05.07.09.011.013.0CtedIvoireBeninGuinea Senegal Ghana Guinea-BissauGambia LiberiaSierraLeoneHuman capitalPhysical capitalTotal factor productivitySource:Penn World Table and WB calculationChapter 1.Drivers of growthLiberia Co

190、untry Economic Memorandum8Figure 12:Trends in human capital wealth and human capital index 2,0002,5003,0003,5004,0004,5005,0005,5006,0006,50010,00012,00014,00016,00018,00020,00022,00024,0002000200220042006200820102012201420162018In 2018 constant US$Millions,constant 2018 USDHuman capital wealthHuman

191、 capital wealth per capita(RHS)Source:The Changing Wealth of Nations 2021Human capital wealth indicators1.01.21.41.61.82.02.22.42.62.81980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019Human capital indexBeninCte dIvoireGambiaGhanaZambiaRwandaLiberiaSenegalSierra LeoneHuman capital

192、 indexSource:Penn World Table 10To capitalize on its human capital for economic growth,Liberia needs to invest more strategically in education and healthcare.This includes not only expanding access to these services but also focusing on their quality to ensure they eff ectively contribute to the dev

193、elopment of skilled,knowledgeable,and healthy populations.Policies aimed at stabilizing the economy and insulating it from external shocks will also be crucial in maintaining steady progress in human capital development.Moreover,investment in secondary education should aim to produce a workforce equ

194、ipped with mid-level skillsfor instance,through Technical and Vocational Education and Training(TVET)(Box 1).Better Equipping the Workers Physical capital has contributed negatively to GDP growth over the last decade.Physical capital,which includes the machinery,infrastructure,and technology that wo

195、rkers use to produce goods and services,is a critical factor in enhancing labor productivity.Capital per worker declined by 58 percent in Liberia between 1980 and 2012,impacting productivity and economic growth.This trend reversed in recent years thanks to new foreign investment in the mining sector

196、 and in agricultural concessions,as well as to donor-fi nanced projects.However,even with a 26 percent recovery since 2012,capital per worker has only reached 54 percent of its 1980 level.This suggests that,despite recent improvements,Liberian workers still struggle to access the tools and technolog

197、y they need to be more productive.For a regional comparison,capital per worker in Liberia is on par with Guinea,but signifi cantly lower than in Ghana,Cte dIvoire,and Senegal.The situation in the agricultural sector is particularly concerning.Although agriculture is a crucial part of Liberias econom

198、y and a primary source of livelihood for a large portion of the population,its workers remain poorly equipped.Limited irrigation coverage and scarcity of machinery underline the pressing need for substantial investment in agricultural infrastructure and technology.A lack of basic agricultural infras

199、tructure and equipment not only hampers productivity and food security but also limits the sectors potential contribution to economic growth and poverty reduction.To address these challenges,a multifaceted approach is needed.Prioritizing investments in physical capital across key sectors,especially

200、agriculture,can signifi cantly enhance labor productivity and economic growth.This includes expanding access to modern agricultural technologies,improving irrigation systems,and providing farmers with the necessary tools and equipment.Additionally,fostering a conducive environment for both domestic

201、and foreign investment in various sectors can accelerate the recovery and expansion of the physical capital base.The inadequacy of domestic resource mobilization,especially against the backdrop of a high investment-to-GDP ratio,underscores the countrys macroeconomic fragility and dependence on subst

202、antial external fi nancing to maintain high investment levels and stimulate growth.Chapter 1.Drivers of growthLiberia Country Economic Memorandum9Improving the Ef ciency of the Economy Economic growth can also stem from advances in technology or from the effi cient use of existing resources.The grow

203、th in the productivity of resources,or Total Factor Productivity(TFP),has been an important driver of GDP growth for many countries.However,the TFP growth rate in Liberia during 20142019 was negative,implying that overall effi ciency in combining inputs(such as labor and capital)to produce output de

204、creased.Historical fl uctuations in TFP highlight Liberias struggle to maintain consistent growth and effi ciency,compared with its peers.From low levels in the 1980s,comparable to those in Benin,Ghana,Senegal,and Sierra Leone,Liberias TFP dropped signifi cantly during the civil war.It recovered in

205、the fi rst post-confl ict decade,amid eff orts to stabilize the economy and enhance effi ciency.However,another decline between the Ebola epidemic and the COVID-19 pandemic underscores the vulnerability of Liberias economy to external shocks.Such downturns not only hinder growth but also exacerbate

206、the productivity gap with neighboring countries,which have shown improvement over the same period.For policymakers,addressing the TFP gapwhich is especially pronounced in agricultureinvolves identifying and tackling its root causes,and implementing targeted strategies in coordination with the privat

207、e sector,international partners,and civil society.Relevant measures could include:(i)investing in infrastructure and technology,particularly to enhance agricultural productivity through modernized practices and to facilitate access to markets;(ii)building strong,transparent,and efficient institution

208、s to support economic activity,attract investments,and foster a conducive business environment;(iii)investing in education and training to improve the workforces skills and capabilities across agriculture,manufacturing,and services;and(iv)developing strategies to enhance economic resilience against

209、external shocks,including diversifying the economy,building emergency response capabilities,and establishing social safety nets.Also,engaging more actively with neighboring countries to benefit from regional growth dynamics,share best practices,and foster cross-border trade and investment can all co

210、ntribute to raising productivity.Figure 13:Trend in physical capital per worker05,00010,00015,00020,00025,00030,00035,00019801985199019952000200520102015Capital per worker(constant 2017 US$)BeninCte dIvoireGambiaGhanaGuineaGuinea-BissauLiberiaSenegalSierra LeoneSource:Penn World Table 10All sectors0

211、5001,0001,5002,0002,5003,0003,5004,000198019851990199520002005201020152020Agriculture capiatl per worker(constant 2015 US$)BeninCte dIvoireGambiaGhanaGuineaGuinea-BissauLiberiaSenegalSierra LeoneAgricultureSource:USDA and authors calculationChapter 1.Drivers of growthLiberia Country Economic Memoran

212、dum10Figure 14:Trend in total factor productivity02040608010012014016019801985199019952000200520102015BeninCte dIvoireGambiaGhanaGuineaGuinea-BissauLiberiaSenegalSierra LeoneSource:Penn World Table,USDA Economic Research Service,and WB calculationTFP trends(Index 1980=100)406080100120140160180200220

213、240198019851990199520002005201020152020BeninCte dIvoireGambiaGhanaGuineaGuinea-BissauLiberiaSenegalSierra LeoneAgriculture TFP(Index 1980=100)The primary constraint to growth in Liberia identifi ed by AfDB is insuffi cient human capital to realize the countrys growth potential.Addressing the challen

214、ge of inadequate human capital requires the development of a comprehensive education fi nancing framework,which acknowledges the interdependence of tertiary education and investments in high school education.Moreover,investment in secondary education should aim to produce a workforce equipped with m

215、id-level skills,for instance,through Technical and Vocational Education and Training(TVET).It is also vital to align the growth of the labor force with the evolving demands of the economy.Overall,the macroeconomic landscape of Liberia over the past decade has been marked by a signifi cant disparity

216、between investment and domestic savings,resulting in a notable trade defi cit and balance-of-payments defi cit.The inadequacy of domestic resource mobilization,especially against the backdrop of a high investment-to-GDP ratio,highlights the dependence on substantial external fi nancing to maintain h

217、igh investment levels and stimulate growth.Eff ective monitoring and anticipation of such vulnerabilities are crucial.Therefore,strengthening public sector capacity is critical to the formulation and implementation of prudent macroeconomic policies that can mitigate vulnerabilities and foster sustai

218、nable growth.Moreover,economic actors in Liberia face several micro-level risks and challenges that impede their ability to generate private profi ts,thereby restricting national economic growth.The key micro-level challenges identifi ed include:a.The diffi culty in accessing land,which poses signif

219、i cant barriers to business expansion and investment.b.Limited access to fi nancing at reasonable costs.c.Persistent issues with corruption control,aff ecting business operations and investment confi dence.d.Low productivity and minimal employment creation among most Liberian fi rms,which are typica

220、lly small,informal,and lack scale.e.The isolated nature of productive activities conducted by larger fi rms in the mineral and export-oriented sectors,which have limited linkages to the broader economy.Shortcomings in the fi nancial landscape signifi cantly impact the private sectors ability to gene

221、rate returns,and act as a major impediment to growth.Specifi c challenges in this area include:a.The high cost and limited supply of credit to the private sector,relative to regional benchmarks.b.The fi nancial systems limited resources,attributed to a low domestic savings rate.Analysis reveals a st

222、rong negative correlation between the lending rate and private investment.c.Minimal private capital infl ows,predominantly in the form of FDI into export-oriented sectors,compared with regional peers.Source:Economic Governance and Knowledge Management Vice Presidency(ECVP).2023.Liberia Growth Diagno

223、stic Study.African Development Bank.Abidjan,Cote dIvoire.Box 1Summary of macro-and micro-challenges to growth identifi ed in the African Development Banks Growth Diagnostic Study for Liberia(2023)Chapter 1.Drivers of growthLiberia Country Economic Memorandum111.3 Policy contribution to growthBeyond

224、standard decomposition,analyses of past growth episodes suggest that Liberias growth rates could be explained by changes in key structural factors such as infrastructure,government size,trade openness,export diversifi cation,fi nancial depth,and human capital;macro-political stability factors such i

225、nfl ation,fi nancial crises,growth volatility,and political events;as well as external factors such as commodity terms of trade.Structural improvements contributed approximately 0.9 percentage points(ppts)to Liberias average annual growth rate of 2.8 percent between 2000 and 2019.4 Infrastructure re

226、building,urbanization,fi nancial deepening,and export diversifi cation were crucial,accounting for nearly 90 percent of structural contributions to growth.Structural improvements in Liberia were on par with those in peer countries such as Guinea,Guinea Bissau,and Senegal.Macroeconomic and political

227、instability aff ected economic growth.Recent improvements in monetary policy,with the substantial reduction of the infl ation rate and stabilization of the exchange rate,are positive steps towards sustainable growth.Domestic factors were the primary drivers of growth,with external infl uences playin

228、g a minimal role.This trend is particularly interesting given Liberias high dependency on commodity exports.The countrys resilience to global commodity price fl uctuations can be attributed to its high level of dollarization,and the growing share of gold in its export portfolio.The small contributio

229、n of external factors indicates that Liberia is not leveraging adequately its trade and FDI potential to promote economic growth,or,to put it positively,that the country can lean more on foreign contributions to grow faster and better.Liberias economic growth trends between 2000 and 2019 are a testa

230、ment to the critical role of structural improvements as well as macroeconomic and political stability.The countrys focus on rebuilding infrastructure,encouraging urbanization,deepening financial systems,and diversifying exports has laid a solid foundation for growth.Additionally,Liberias ability to

231、maintain economic resilience despite its dependency on commodity exports highlights the stabilizing role of its dual currency system,and the importance of export diversifi cation to accelerate growth.Figure 15:Policy contribution to economic growth-1.0-0.50.00.51.01.52.02.53.03.52000-20042005-200920

232、10-20142015-2019Structural Stabilization External Source:CEM3.0 Growth Correlates Tool.Note:The Growth Correlates Tool is part of the ongoing effort to improve the CEM process to better identify policies that accelerate economic growth and job creation.The tool is detailed in Chapter 1,on macroecono

233、mic and policy diagnostic,of the new CEM3.0 Country Growth and Jobs Report.The analysis builds on the approach by Araujo et al.(2016)and Wacker,Beyer,and Moller(forthcoming)and provides insights into country-specific growth episodes.Structural,stabilization,and external contributions-0.50.00.51.01.5

234、2.02.53.03.52000-20042005-20092010-20142015-2019MacroFinanceInfrastructureTrade and FDIDemographyTemp.volatilityPoliticalGrowth contributions of diff erent policy innovations4 To study past growth episodes beyond standard decomposition analysis,the report examines the extent to which a countrys grow

235、th rates could be explained by changes in key macroeconomic variables-structural factors(e.g.,infrastructure,government size,trade openness,export diversifi cation,fi nancial depth,human capital),macro-political stability(e.g.,infl ation,fi nancial crises,growth volatility,political events),and exte

236、rnal factors(e.g.,commodity terms of trade).Although the tool provides only descriptive correlations,these variables can usually be linked with policies,making the approach informative from a policy perspective.The methodology follows a standard approach from empirical growth literature,and estimate

237、s panel regressions of a countrys per capita income level as a function of growth correlates.Chapter 1.Drivers of growthLiberia Country Economic Memorandum121.4 Future drivers of growthThis section applies the World Bankss Long-Term Growth Model(LTGM)to assess Liberias economic growth prospects betw

238、een 2024 and 2050.5 The LTGM(Pennings 2016)is a simple growth model,developed in the spirit of the Solow-Swan growth model(1956).It uses investment,savings and productivity as building blocks,and ties them to economic growth.Applying the LTGM to Liberias economic forecast from 2024 to 2050 off ers a

239、 comprehensive overview of the potential trajectories of the countrys economy based on current trends and potential reform scenarioswhile setting a foundation for policy recommendations and strategic planning.The LTGM predicts a gradual deceleration of Liberias annual rate of GDP growth,from around

240、5.5 percent in the 2020s to approximately 4.5 percent in the long term.This slowdown refl ects the natural transition of the economy as it matures,with substantial volatility driven by the extractive sector,and particularly by gold mining.By 2050,it is projected that GDP per capita will reach US$1,0

241、80(in 2015 US dollars)or US$2,160 in PPP terms.Concurrently,the poverty rate is expected to decline from 60 percent in 2023 to 23 percent by 2050,marking a better performance relative to Liberias peer countries.However,the baseline scenario would fall far short of Liberias national aspirations and w

242、ould 5 For more information,see the Long-Term Growth Model website:www.worldbank.org/LTGM.likely be viewed as disappointing by a large majority of Liberians.By 2030,half of the population is projected to still be poor(Figure 17).The model identifi es population growth and the depletion of gold reser

243、ves as signifi cant headwinds to economic growth.Given the diffi culty of addressing these challenges through direct policy measures,the LTGM underscores the need for comprehensive economic reforms to catalyze growth.A suite of ambitious economic reforms could potentially elevate Liberias long-term

244、growth rate by 3.3 percentage points over the baseline scenario.Such reforms would position Liberias GDP per capita at US$2,000 by 2050,categorizing the country as a top performer among its peers.In the medium term,the emphasis should be on reforms that enhance private investment and basic infrastru

245、cture,areas expected to yield the most signifi cant impact on growth.Over the longer term,the focus should shift towards education reforms(particularly,improving schooling rates),and boosting non-mining TFP,both critical for sustained economic development.The model also suggests that high iron ore p

246、rices could contribute positively to growth,especially should the government adopt a high-tax approach for mining concessions and reinvest windfall profi ts eff ectively.Figure 16:Historical,baseline and reform scenarios,constant 2015 US$1,1002,200650194519514509501,4501,9502,45020002005201020152020

247、202520302035204020452050HistoricalBAUReformsBarclay-Tubman open door policy Source:World Banks staff estimates based on the LTGM and Leigh Gardner(Sovereignty without Power)Figure 17:Share of the population in poverty at$2.15 per day(2017 PPP)2020506030401002020252030203520402045205023%4%BaselineRef

248、ormPercentSource:World Banks staff estimates based on the LTGMNote:The line in dashed black(left panel)presents GDP per capita from 1935 to 1975 under Barclay and Tubman and the fi rst years of Tolbert.Edwin J.Barclay and William V.S.Tubman were the 18th and 19th presidents of Liberia.Barclay served

249、 as president of Liberia from 1930 until 1944.Tubman was the countrys longest-serving president,holding the role from 1944 to 1971.Chapter 1.Drivers of growthLiberia Country Economic Memorandum13Ambitious reforms already fueled growth in Liberia in the past,notably during the Barclay and Tubman admi

250、nistrations from 1935 to 1970.Gardners estimates suggest that per capita GDP saw a substantial rise threefold from US$650 in 1937 to US$2,100 by 1963.This represents an average annual increase of 5 percent over more than three decades.Historically signifi cant,this period marked the fi rst time Libe

251、ria managed to attract substantial foreign direct investment,thanks largely to an ambitious open-door policy.1.4.1 Business-as-usual growth scenarioBaseline Mining ProjectionsLiberias mining sector has expanded signifi cantly in recent years,and could continue to do so off the back of abundant iron

252、ore reserves.Over the past decade,mining exports have seen substantial growth,with the value of gold and iron ore exports collectively rising from less than 1 percent of GDP in 2010 to 20 percent in 2022.Information about the countrys underground gold reserves6 is relatively scarce and often unrelia

253、ble.According to estimates from the Ministry of Mines and Energy,Liberia possesses reserves of approximately 120 metric tons(4 million troy ounces)of gold and 8 billion metric tons of iron ore.While current production rates suggest that Liberias iron ore reserves could last thousands of years,its go

254、ld reserves are projected to be depleted by the 2040s.Commodity prices have been highly volatile over time.The history of gold prices has been one of ups and downs,with periods of surges,notably in the 1970s and 2000s,interspersed with occasional dips,while generally maintaining a long-term upward t

255、rend.In this model,price projections for gold follow the forecast outlined in the Commodity Markets Outlook(World Bank 2023)until 2025,stabilizing at US$1,600 per troy ounce as of 2050.The price of iron ore surged in the 2000s and early 2010s,then sharply declined in 2014-15.Future projections for i

256、ron ore prices align with 6 The same term,gold reserves,applies to a form in which central banks keep its gold,as a store of value or to face foreign payments.Here we are referring to mining resources,not monetary ones,hence the“underground”qualifi er.the forecast from the Commodity Markets Outlook,

257、indicating a gradual return to the estimated long-run price of US$60 per metric ton by 2050.Iron ore production in Liberia is anticipated to soar,with the value of exports stabilizing at 8 percent of GDP in the medium term.From 5 million metric tons(MMt)in 2020,iron ore production is projected to re

258、ach 15 MMt by 2045.Iron ore exports were equal to 10 percent of GDP in 2020,before slightly declining.They are expected to stabilize at 8 percent of GDP in the medium term,aligning with projections by the International Monetary Fund.Gold production is projected to peak in 2030,before declining sharp

259、ly due to a rapid depletion of reserves.Production is expected to more than double by 2030,from 5 to 12 metric tons per year,as per the authorities projection under their IMF program and the mining group Tuzon&Dudges production schedule from 2024 to 2034.However,production is anticipated to plummet

260、to 2 metric tons per year by 2040,refl ecting small new discoveries and the subsequent depletion of reserves.Consequently,gold exports,which constituted 8 percent of GDP in 2020,are forecast to decrease to approximately 2 percent by 2040.Overall,initially robust growth in the mining sector will slow

261、 down gradually due to the depletion of gold reserves,leading to a contraction in the sectors share of GDP over time.Rapid sectoral growth is anticipated throughout the 2020s(refer to Appendix Figure 2,Panel II),followed by deceleration in the 2030s as a result of the decline in gold production.None

262、theless,growth is projected to pick up again in the 2040s due to the expansion of iron ore production.As a result,the Liberian economy is forecast to undergo signifi cant diversifi cation away from the mining industry during the 2030s and 2040s,with the mining sectors contribution to GDP contracting

263、 from 21 percent in 2030 to 8 percent in 2050.Chapter 1.Drivers of growthLiberia Country Economic Memorandum14Baseline Non-mining ProjectionsThe baseline projection for non-mining economic activity in Liberia assumes conservatively the continuation of recent trends until 2050.This section provides a

264、 concise overview of these trends and explains their extrapolation into the future.Furthermore,it outlines key economic characteristics of Liberia.For a more comprehensive understanding,readers can refer to the Technical Appendix,which off ers a detailed description of the model and its calibration

265、to Liberia.Population growth is anticipated to decelerate,while the working-age population is forecast to expand as a share of the total population.The baseline scenario integrates demographic projections based on the 2022 population census and the International Labor Organizations(ILO)labor market

266、projections for Liberia,projecting a slowdown in annual population growth from 3 percent in 2020 to 2 percent by 2050.Concurrently,it anticipates a rise in the working-age population(as a percentage of the total population)from 55 percent in 2020 to 64 percent by 2050.Both trends are poised to bolst

267、er per capita growth.Furthermore,building upon recent patterns,the labor force participation rate is assumed to remain broadly constant,at 77 percent of the working-age population until 2050,in line with data from the World Bank World Development Indicators(WDI).In this scenario,Liberias education q

268、uality remains stagnant amid persistently low enrollment rates.Data from the Human Capital Index(HCI,World Bank 2018)indicates a lack of progress in education quality over time,prompting the baseline assumption of constant quality until 2050.Although the average number of years of pre-tertiary schoo

269、ling among the workforce rose in recent years,reaching 4.4 years in 2015(Barro and Lee 2013),it is projected to decline to 4 years for younger cohorts(aged 0 to 19 as of 2020).Moreover,health conditions are assumed to remain constant,with adult survival rates at 78 percent and the proportion of chil

270、dren not stunted at 69 percent(HCI).The LTGM HC extension forecasts a baseline human capital level relatively stable until 2050,with a slight decline in the 2030s due to the infl ux of less educated young people into the workforce.Investment in physical capital remained strong throughout the 2010s b

271、ut is expected to stabilize at 22 percent of GDP,even with anticipated increases in mining-related FDI.Total investment surged after 2010 as the country recovered from the Second Liberian Civil War,peaking at 57 percent of GDP in 2013 with around three-quarters attributed to private investment.Howev

272、er,the average level of investment between 2000 and 2019,excluding the FDI peak from 2011 to 2014,was more moderate.Looking ahead,total investment is projected to remain at 20 percent of GDP until 2050,with private investment representing Figure 18:Assumptions on mining production and exportPercent0

273、24681012200020102020203020402050BACIBaseline(LTGM)Long-run simulationsHistorical ShorttermSource:World Banks estimates based on the LTGMIron exports,%of GDPTuzon&Dudge Fproduction schedule0246810121416200020102020203020402050BACIIMF Article IV(Sept 22)BaselineLong run simulationsHistoricalShort term

274、Production of gold,metric tonsChapter 1.Drivers of growthLiberia Country Economic Memorandum1512 percent.A signifi cant portion of private investment is expected to stem from a surge in FDI in the mining sector,aimed at tripling iron ore production.Finally,TFP growth has historically shown extreme v

275、olatility,but is projected to stabilize at an annual rate of 1 percent.From 2023 to 2026,non-mining TFP growth is expected to align with the authorities projection of non-mining GDP growth.During this period,TFP growth is estimated to range between 0 and 2.5 percent.Subsequently,non-mining TFP growt

276、h is forecast to converge to 1 percent by 2030.The 1 percent target is derived from historical non-mining TFP growth in Liberia which,despite its volatility,stabilized at that level in the 2000s following the Second Liberian Civil War.Baseline GDP GrowthIn the business-as-usual scenario,GDP growth i

277、s anticipated to average 5.5 percent per year in 2024-2029,before gradually slowing down to a sustainable rate of 4.5 percent in the long run.In the short term,Liberias GDP trajectory closely aligns with the existing medium-term forecasts.Relatively rapid growth in the late 2020s can be attributed t

278、o signifi cant mining projects and other demand-related shocks.However,by the 2030s,Liberias economy is anticipated to decelerate to its long-term potential growth rate of 4 percent.The outlook for per capita GDP growth is less optimistic due to rapid population expansion.GDP per capita growth is fo

279、recast to average 3.4 percent in the latter half of the 2020s but is expected to decline to 2.3 percent in the long term.Consequently,GDP per capita is projected to approximately double from US$665 in 2023 to approximately US$1,080 by 2050.In the long run,Liberias growth is projected to be primarily

280、 driven by the non-mining sector,as the economy moves away from its heavy reliance on the extractive industry.The non-mining sector,which is the main source of jobs and labor income,exhibits more consistent and faster growth on average,reaching 5 percent per year over 2025-2050(refer to Appendix Fig

281、ure 2,Panel I for detailed visualization).A breakdown of growth factors reveals that the expansion of the non-mining sector is propelled by robust investment and gains in TFP,which collectively contribute to a growth boost of over 2.7 percentage points.Conversely,the contribution of the mining secto

282、r gradually diminishes over time,declining from over 2 percentage points in the short term to 0.5 percentage points by the 2040s.The rapid pace of population growth emerges as a signifi cant impediment to per capita growth,exerting a considerable drag on growth of minus 1.4 percentage points in the

283、2040s.Additionally,the depletion of gold reserves presents a notable obstacle to growth,until the sector ultimately vanishes in the early 2040s.Figure 19:Baseline headline GDP growth and decomposition of GDP per capita growthPerentOld baselineWDI (World Bank)2010-20 averageLong-run simulationsBaseli

284、ne(LTGM)-3-2-10123456789201020152020202520302035204020452050Historical Shortterm Source:World Bank estimates based on the LTGMAnnual growth rate,percentage-3-2-1123Percent456Avg 2025-50Avg 2025-29Average 2030sAverage 2040sReserves of goldMining TFP&InvestmentNon-mining public investmentNon-mining pr

285、ivate investmentWorking-age pop.growth Population growthNon-mining TFP growthGDP per capita growthContribution of each variable,pptsChapter 1.Drivers of growthLiberia Country Economic Memorandum16Liberias current trajectory,as per the baseline scenario,is not on track to meet the countrys ambitious

286、growth targets.In the baseline projection,Liberias Gross National Income(GNI)per capita is expected to rise from US$570 in 2023 to US$944 by 2050substantially short of Liberias target to reach the lower-middle-income threshold of$1,000 per capita by 2030.Importantly,this baseline scenario is not und

287、uly pessimistic.In fact,Liberias income growth over 2025-2050 is anticipated to align with the median long-term growth rate of peer countries at similar stages of development(referenced in Appendix Figure 2,Panel III).Notably,Liberias projected growth rate is in between those of the Democratic Repub

288、lic of Congo(DRC)and Sierra Leone,two African countries with comparable per capita incomes in 2020.According to World Bank reports(2023b and forthcoming for the DRC and Sierra Leone,respectively),Liberia is expected to outperform the DRC,with a 7 percent relative gain in GNI per capita by 2050,versu

289、s a 20 percent loss relative to Sierra Leones baseline growth path over the same period.Achieving lower-middle-income status by 2030 will require concerted eff orts to enhance productivity,stimulate investment,improve human capital,and foster a conducive business environment,among other initiatives.

290、1.4.2 Growth scenario with reformsThis section examines targeted reforms that Liberia could deploy to bolster its growth potential.The proposed reform package focuses on enhancing the productivity and growth of Liberias non-mining sector.This strategic choice does not directly address the issue of d

291、epleting gold reserves,a signifi cant constraint to the mining sectors growth potential.Instead,the reforms aim to substantially elevate the relative productivity of the non-mining sector over an extended period,thereby attracting extra investment away from mining and reducing reliance on the extrac

292、tive sector.The selection of growth drivers is informed by the performance of countries with GNI per capita similar to Liberias,encompassing both structural and aspirational benchmarks(refer to Appendix Table 1).Consequently,the impact of each reform is influenced by Liberias responsiveness to speci

293、fic growth drivers and its comparative standing relative to its peers.The reforms under consideration include:(a)growth in non-mining TFP,(b)development of human capital,(c)enhancement of investment,(d)increase in labor force participation,and(e)improvement of infrastructure efficiency.The discussio

294、n outlines two potential reform pathways:moderate and ambitious.Given the objective of achieving lower-middle-income status by 2030,this analysis prioritizes the ambitious reform scenario,despite the challenges associated with its implementation.Table 1 provides a snapshot of these reforms,while the

295、 fi ndings and implications are detailed in Appendix Tables 2 and 3.Table 1:Overview of growth drivers under baseline and reform scenarios(1)Growth driver(2)Baseline(3)Moderate reformAmbitious reformA.Non-mining TFP(growth rate)1%1.5%2%B.Human capital(growth rate)0%0.75%1.75%Expected schooling4 year

296、s7 years10 years Quality of education0.53 score0.6 score0.65 score Adult survival rate78%As baseline80%Non-stunted rate70%As baseline85%C.Investment(%of GDP)22%As baseline30%Private 12%As baseline18%Public 10%As baseline12%D.Labor force participation Female 73%As baselineAs baseline Male 81%As basel

297、ine85%E.Infrastructure Effi ciency Index0.6As baseline0.7Source:World Bank estimates based on the LTGM.Chapter 1.Drivers of growthLiberia Country Economic Memorandum17Increasing non-mining TFP through advancements in innovation,education,market effi ciency,infrastructure,and governance,could elevate

298、 Liberias annual GDP growth by 1 percentage point through to 2050a considerable diff erence.This scenario foresees a signifi cant boost to non-mining TFP growth,which is anticipated to reach 2 percent per year by 2035mirroring Botswanas achievements in the 1960s and 1970s,when its income levels were

299、 comparable to those in Liberia today.This would place Liberia alongside the top achievers in its peer group.The immediate correlate of a 1 percentage point increase in non-mining TFP growth is a 1 percentage point rise in non-mining GDP.While the overall growth impact starts smaller(adding only 0.1

300、 percentage point to GDP in 2025-2029),it gains momentum over time as the non-mining sector expands.Furthermore,enhanced TFP fosters indirect benefi ts,including higher-quality and increased investments,which in turn contribute to the non-mining sectors advancement.As a result,this reform is expecte

301、d to accelerate GDP growth by an average of 1.1 percentage points in the 2030s,with the growth diff erential widening to 1.4 percentage points in the 2040s.Improvements in health and education are projected to elevate Liberias GDP growth by approximately half a percentage point through 2050,with the

302、 bulk of this enhancement attributed to advancements in education.Currently,Liberias educational participation rates and learning outcomes lag signifi cantly behind those of its peers,indicating considerable room for improvement through education system reforms.Such reforms aim to extend the average

303、 duration of pre-tertiary education from four to 10 years,reaching the median level among the peer group,and to elevate quality of education from a score of 0.5 to 0.65,positioning Liberia in the 75th percentile among peers.On health,Liberias metrics are near the group average.Thus,it is assumed tha

304、t health reforms could boost the proportion of non-stunted children and improve adult survival rates to the 75th percentile within the peer group.These reforms are expected to reach full effi cacy by 2025 for children aged zero to four at that time and for those born afterward,with tangible impacts

305、on growth materializing approximately 15 years later,as these better-educated and healthier individuals enter the labor force.Enhanced schooling rates are anticipated to add 0.7 percentage points to GDP growth in the 2040s alone.Incorporating improvements in the quality of education could introduce

306、an additional gain of 0.4 percentage points.When educational and health reforms are implemented together,they could collectively boost GDP growth by 1.2 percentage points every year during the 2040s,averaging an annual increase of 0.5 percentage points from 2025 to 2050.Enhancing the business enviro

307、nment to spur private investment,alongside increased public investment,is projected to contribute approximately 0.7 percentage points to Liberias GDP growth through 2050.Currently,Liberias private investment levels rank above the 75th percentile among its peers,indicating exceptionally high levels o

308、f private sector activity.Ambitious market reforms could potentially elevate private investment from its current baseline of 12 percent to 18 percent of GDP,following a trajectory similar to that of Uganda over the past two decades,though still signifi cantly below Vietnams performance during the 19

309、80s and 1990s.Public investment could also rise to 12 percent of GDP,aligning with Togo but lower than Ethiopias and far below Chinas historical levels.These reforms are expected to drive substantial growth initially,potentially adding 1.2 percentage points to GDP growth during the 2030s.However,wit

310、hout simultaneous productivity-enhancing reforms,the effi ciency of these investments is likely to diminish over time,reducing growth increments to half a percentage point by the 2040s.This highlights that investment alone cannot sustain long-term growth,as diminishing returns on both public and pri

311、vate investments necessitate complementary reforms for sustained impact.Chapter 1.Drivers of growthLiberia Country Economic Memorandum18The potential for elevating female labor force participation(FLFP)is relatively constrained in Liberia,and the expected economic impact of reforms focused on increa

312、sing male labor force participation(MLFP)would be minimal.With current baseline assumptions placing FLFP at 73 percent and MLFP at 81 percent,Liberias FLFP already exceeds the 75th percentile of its peer group,and its MLFP surpasses the median.The proposed reform targets an MLFP rate of 85 percent b

313、y 2035.While such an increase would enlarge the labor force,in the absence of complementary reforms it would only enhance economic growth by 0.1 percentage points through to 2050.This highlights the importance of holistic reform strategies that encompass not just labor participation,but also product

314、ivity and sectoral diversifi cation to signifi cantly impact economic growth.Enhancing the effi ciency of public investment management to improve infrastructure effi ciency presents a modest,yet consistent opportunity to boost growth.At present,only 60 percent of public investment in Liberia eff ect

315、ively translates into useful capital,below the median of similar countries.By setting an ambitious target to increase the effi ciency of new public capital to 70 percent by 2035,Liberia would position itself in the 75th percentile among its peers.Such a reform would incrementally raise GDP growth by

316、 an average of 0.1 percentage points annually through to 2050.A comprehensive reform package addressing all identifi ed growth drivers simultaneously could accelerate Liberias GDP growth by 2.5 percentage points per year through 2050,predominantly through enhancements in the non-mining sector.The ho

317、listic approach encompassing reforms in non-mining TFP growth,human capital development,investment enhancement,labor force participation expansion,and infrastructure effi ciency improvement,is projected to exert a profound infl uence on the countrys long-term economic trajectory.The cumulative eff e

318、ct of these reforms is anticipated to culminate in the mid-2040s,with an additional annual growth spurt reaching 3.6 percentage points.This peak refl ects the maturation of most reforms alongside the tangible impacts of educational advancements.Subsequently,the growth increment is expected to slight

319、ly adjust,stabilizing at around 3.3 percentage points by 2050,as outlined in Figure 20.With ambitious reforms,Liberia is positioned to reach the lower-middle-income threshold before 2040.By 2050,these reforms could elevate GNI per capita to nearly US$1,775,marking an impressive cumulative growth of

320、more than 300 percentequal to nearly 90 percent more than in the baseline scenario.A signifi cant contributor in this projection is the expansion of the non-mining sector.This ambitious growth trajectory would not only transform Liberias economy but also position it prominently among its Figure 20:G

321、DP per capita growth and decomposition of incremental growth in ambitious reform scenarioPercentBaseline2.3%Moderate reforms3.6%Ambitious reforms5.5%012345672020202520302035204020452050 Long-run simulationsShortterm Source:World Bank estimates based on the LTGMAnnual growth rate,percentage0.00.51.01

322、.52.02.5Percent3.03.54.02020202520302035204020452050Private investmentPublic investmentHC educationHC healthTFPLabor force participationInfrastructure efciencyContribution of each reform,pptsChapter 1.Drivers of growthLiberia Country Economic Memorandum19peers.Specifi cally,Liberias projected growth

323、 would surpass the 75th percentile within the distribution of comparable countries,ranking it alongside success stories such as Cape Verde in the 1980s and 1990s,and Botswana in the 1960s and 1970s.1.4.3 Growth ambitions and structural reforms This section highlights the importance of structural ref

324、orms in enhancing long-term GDP growth.It employs the World Banks Growth Ambition and Structural Reforms Tool,which aims to pinpoint structural reforms that drive GDP growth by analyzing their eff ects on capital accumulation,labor utilization,and TFP or effi ciency individually.The cumulative impac

325、t of these supply-side channels is then assessed to provide a comprehensive view of potential growth trajectories.The key areas of structural reform considered include:regulatory quality,labor market regulation,taxation,fi nancial development,trade openness,government eff ectiveness,and telecommunic

326、ations infrastructure.For Liberia,telecommunications infrastructure,regulatory quality,and government eff ectiveness emerge as the reform areas with the greatest potential to help narrow the GDP per capita gap with aspirational peers such as Cte dIvoire,Ghana,and Senegal over the next 20 years(Figur

327、e 21).In the face of limited administrative capacity,it is imperative for Liberia to prioritize the reforms most likely to help propel the country into a higher income bracket.Emphasis on such reforms will not only enhance productivity and attract investment but also ensure that Liberia takes meanin

328、gful strides towards inclusive development and poverty reduction.1.5 ConclusionLiberias economy is deep into a natural resource trap,primarily due to heavy reliance on a few key commodities such as rubber,iron ore,timber,and gold for economic output and export revenues.This concentration on natural

329、resources has made the economy highly vulnerable to price volatility,perpetuating a cycle of economic instability which deters investment in other sectors.This dependency has also stifl ed the development of more stable and diverse industries,leading to economic stagnation in non-extractive sectors

330、such as manufacturing and services.Additionally,the presence of a dual currency system and high levels of dollarization have further complicated the economic landscape.Liberia needs to shift its economic model and focus on reforms that boost productivity outside the mining sector.Sustainable growth

331、can only be accelerated through enhanced investment and exports in non-mining sectors.This approach will require strategic changes in policy and a concerted eff ort to diversify the economy,improving resilience and reducing dependence on inherently haphazard global commodity markets.Figure 21:Impact

332、 of structural reforms on annual growthTelecom infrastructure(TE)Governmentefectivenes(TE)Labor marketregulations(L)Financialdevelopment(K)1.81.61.41.21.00.80.60.40.2-0.2-0.412345Tradeopenness(K)Trade rate(L)Regulatory quality(TE,L)Distance between Liberia and Cote dIvoire(0/10=mi/max)0.00.00.0-1-2-

333、3-4-5Source:World Bank CEM3.0 Growth Ambition and Structural Reform ToolIndividual impact and channel at work4.43.93.42.92.41.91.40.89-0.133.860.000.020.061.491.530.90.4-0.1TelcominfrastructureindexRegulatoryqualityLabor marketregulationsTradeopennessToptax ratesTotalGovernmentefectivenessAggregated impactLiberia Country Economic Memorandum20CHAPTER 2TRADE AS A CATALYST FOR GROWTH Liberia Country