New Report: Institutional and Policy Reforms Needed to Boost Economic Growth and Development in Liberia

The World Bank today launched its flagship report, the Liberia Country Economic Memorandum, titled “Escaping the Natural Resource Trap: Pathways to Sustainable Growth and Economic Diversification in Liberia.” This report provides an in-depth analysis of Liberia’s economic outlook and examines on how the country’s vulnerability to external shocks has influenced its sustainable growth and development. Its insights can help to inform strong delivery on the ARREST Agenda for Inclusive Development (AAID).

Liberia’s faces the challenge of a “natural resource trap” whereby a narrow, commodity-based development model has led to repeated cycles of stagnation and recovery. The country remains vulnerable to shocks due to weak drivers of long-term prosperity, such as human capital, wealth accumulation, and productivity, which has undermined the country’s economic growth potential. The study finds that a “business-as-usual” scenario would yield modest growth, insufficient for achieving middle-income status by 2030 and substantially reducing poverty. Real per capita GDP will grow modestly, and Liberia will not reach the middle-income threshold of US$1,000 until around 2050.

“Institutional and policy reforms are essential to modernize the public sector and provide Liberia with the institutions needed to lead the transformation,” said Georgia Wallen, World Bank Liberia Country Manager. “In line with the ambitions of the AAID, these reforms would entail a systemic overhaul of the business climate to promote private investment, innovation and job creation; delivery of higher quality, more efficient core public services to raise the level of human capital, notably in education and health; and increasing the efficiency and scale of public investments in power, roads and telecoms/digitalization.”

The report suggests that Liberia should undergo five significant transformations to create the necessary conditions for long-term development that can foster economic expansion, employment creation, and poverty alleviation for Liberians. These transformations involve fundamentally reshaping Liberia’s macro-economy; shifting away from over-reliance on the mining sector towards activities better aligned with the labor demands and employment needs of an expanding urban population; transitioning from a state-centric mindset to recognizing the private sector as the primary driver of economic expansion and job creation; and implementing deep-seated policy and institutional reforms to modernize the public sector.

The report further highlights Liberia’s potential for better performance and outcomes over the medium to long-term provided ambitious and credible reforms are implemented now to begin transforming the economy, modernizing the public sector, and improving governance. A high-ambition reform program could double annual productivity growth in the non-mining sector. These reforms involve improvements in education and health metrics by extending the expected years of schooling from 4 to 10 years, enhancing education quality, reducing stunting, and increasing adult survival rates. It also entails efficiency of public services. Additionally, reforms that support increases in private and public investments, reaching 18 percent and 12 percent of GDP respectively, could drive real GDP growth up by approximately one percentage point. As a result, Liberia could attain lower middle-income status before 2040, create jobs, and real per capita GDP potentially reaching US$2,000 by 2050.

Distributed by APO Group on behalf of The World Bank Group.