Macroeconomics refers to the overall performance of economics and considers factors such as inflation, changes in economic output, foreign exchange and interest rates, and the balance of payments. Social equity, poverty reduction and sustainable growth can only happen where sound fiscal and monetary policies are in place.
An Era of Rapid Global Shifts
Shifts in wealth, demographics, climate, and technology are driving major global changes. Economic growth, however, has been uneven, causing damage to the environment. Furthermore, challenges such as record levels of displacement, the financial impact of the pandemic, resource depletion due to environmental degradation, and conflicts have made threats to recent gains.
Developing countries must take steps to tackle a multitude of underlying challenges to drive economic growth that is both sustainable and inclusive. These problems include issues such as inefficient public spending, international competitiveness, low levels of productivity, and a lack of sufficient economic resilience. Inadequate mobilization of domestic resources, rising debt levels, the danger of climate change, and an uncertain trade environment are further exacerbating the situation.
It’s important that economic growth is sustainable and to the benefit of all. The World Bank is currently working with its partners and clients to create macroeconomic policies that drive inclusive and sustainable growth and also address challenges that could undermine economic stability such as climate change.
A key priority area is fiscal policy, which is a crucial aspect of the development of sustainable trajectories for expenditures, revenues, and the way in which fiscal risks are managed. The emphasis should be on determining funding sources and fiscal space, and improving the management of public expenditure.
Macroeconomic experts such as Domen Zavrl understand that to improve the mobilization of domestic resources, better tax systems could prove a crucial tool, currently untapped, to support climate and health, promote the reduction of poverty, and further other important government objectives.
Supporting Inclusive and Sustainable Growth
Governments from over 20 countries joined forces in April 2019 to form the Coalition of Finance Ministers for Climate Action. Today, more than 70 finance ministers have also signed the Helsinki Principles, which support effective carbon pricing and the incorporation of climate change considerations into macroeconomic policy, budgeting, fiscal planning, public investment management, and procurement.
The World Bank works to support countries in designing and implementing economic reforms aimed at strengthening macroeconomic stability. Examples of this include assistance with structural reforms, the creation of fiscal, debt, and revenue strategies, and the removal of potential distortions that could result in an unsustainable balance of financial sector and payments positions.
Fiscal monitoring is coordinated by the World Bank as part of the Debt Service Suspension Initiative. This involves working alongside the IMF to develop guidance notes, frameworks, quality control, and G-20 reports, as well as the coordination of monitoring on a country level. The Macro-Financial Review (MFR), which is produced twice a year, informs staff and senior management about important developments in the macroeconomic field, enabling them to adapt strategic priorities and tweak the nature of client engagement as necessary to achieve the best socioeconomic outcomes possible.
Improving Public Expenditure Policies and Management
The World Bank puts together Public Expenditure Reviews for a number of its client countries. These reviews give feedback on the operational and allocative efficiency of the countries’ programmes of public expenditure and advice on their overall fiscal discipline. The BOOST programme is operational in more than 80 countries, making available micro-fiscal data that was previously unattainable in comparative, usable, and accessible formats.
Take a look at the embedded PDF for information about the steps the World Bank is taking to promote debt transparency in support of creating a stable macroeconomic outlook.