• Briefing
  • 15 February 2016

Impact of falling natural resource prices on the poorest countries

The International Monetary Fund (IMF)’s latest World Economic Outlook (WEO) database and report (released October 2015 and January 2016) have highlighted falling economic growth in low income countries, principally due to continued decline in energy and mineral prices.

Increased supply and falling demand for energy and mineral commodities has seen prices tumble − for example, a barrel of oil that was US$110 in June 2014 is now around US$30 today. This has impacted significantly on economic growth prospects for the poorest countries that rely on exporting these commodities, and is a trend predicted to continue for years to come. Combined with this, government revenue from these resources has declined significantly in almost all of these countries. The IMF also found that the benefits of price falls have not been fully realised in the developing countries that are importers of these goods, constraining potential growth there also.

This reduced economic growth and government income has the potential to undermine progress in poverty alleviation in the poorest countries in the world. It is crucial that governments dependent on resource revenue broaden their tax base in a progressive way and make spending more efficient, whilst prioritising poverty reducing expenditure.

This briefing draws on the latest IMF data to assess the economic growth projections in countries with the highest depth of extreme poverty globally, before examining how government revenue is being impacted in developing countries that are defined as ‘resource rich’ and the responses they have pursued.

Photo credit: Al Jazeera English.