export restrictions, and fostering environ- mentally and socially sustainable mining, BOLIVIA Key conditions and including lithium. Besides its high exposure to climate-relat- challenges ed risk, Bolivia is also exposed to volatile commodity prices, exacerbated by the Table 1 2021 Bolivia entered the pandemic with limited Russia-Ukraine conflict. Although high Population, million 11.8 policy space and suffered a deep recession. commodity prices may reduce macroeco- GDP, current US$ billion 40.4 An underdeveloped private sector, poorly nomic imbalances, they may also increase GDP per capita, current US$ 3416.1 targeted social programs, a weak health food inflation, hitting the poor and those a 4.4 International poverty rate ($1.9) system, and political polarization have vulnerable to falling into poverty the a 9.0 worsened the crisis and slowed recovery. most. Additionally, declining gas produc- Lower middle-income poverty rate ($3.2) a 21.6 After a one-year political transition, the tion and fuel subsidies could prevent Bo- Upper middle-income poverty rate ($5.5) Gini index a 43.6 new authorities have aimed to resume a livia from fully capitalizing on the up- School enrollment, primary (% gross) b 98.5 state-led development strategy, including surge in oil prices. Finally, with half of b 71.5 expenditure stimulus and import substitu- the population fully vaccinated as of Feb- Life expectancy at birth, years tion. However, with limited access to ex- ruary 2022, Bolivia is still exposed to new Total GHG Emissions (mtCO2e) 126.1 ternal financing, the Government has had waves of infection. Source: WDI, Macro Poverty Outlook, and official data. to moderate expenditure. a/ Most recent value (2020), 2011 PPPs. b/ Most recent WDI value (2019). Given high public debt and exchange rigidity, a credible plan to address the fiscal imbalances is critical. Consolidation Recent developments The economy continues to recover from could rely on improving spending effi- ciency while supporting the most vulner- After falling 8.7 percent in 2020, the econ- the pandemic-induced recession. Growth able and improving access to quality ser- omy grew by an estimated 6.1 percent in and poverty reduction are expected to vices. Public expenditure efficiency could 2021 due to improving external conditions, slow down in the medium term as in- be enhanced by rationalizing public in- eased mobility restrictions, and recovering creasing public debt and declining inter- vestment, including in public enterprises, public investment. The recovery was led improving public procurement, strength- by mining exports and non-tradable sec- national reserves may restrict expansion- ening coordination across levels of gov- tors, such as construction and transport. ary efforts. Bolivia's medium-term ernment, and improving targeting of so- Urban unemployment declined from a prospects could be strengthened by ce- cial programs. peak of 11.6 percent in July 2020 to 5.4 per- menting confidence in macroeconomic Fostering private and foreign investment cent in December 2021, back to pre-pan- management, boosting public sector effi- will be critical to stabilize gas exports demic levels. The recovery in employment and ignite new medium-term sources helped reduce poverty in 2021, mainly dri- ciency to enhance service delivery and of growth and employment. The in- ven by rural areas, despite the end of emer- protect the poor and vulnerable, and fos- vestment climate could be improved by gency transfers in early 2021. tering private investment to ignite new reducing red tape, removing tax dis- By the second quarter of 2021, informality sources of growth and employment. tortions, modernizing labor regulations, remained high, particularly among youth, improving logistics, easing agricultural and 60 percent of households reported FIGURE 1 Bolivia / Public debt FIGURE 2 Bolivia / Actual and projected poverty rates and real private consumption per capita Percent of GDP Poverty rate (%) Real private consumption per capita (constant LCU) 100 60 3500 50 3000 80 2500 40 60 2000 30 1500 40 20 1000 10 500 20 0 0 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 0 International poverty rate Lower middle-income pov. rate 2003 2006 2009 2012 2015 2018 2021 2024 Upper middle-income pov. rate Real priv. cons. pc Sources: Central Bank of Bolivia and Ministry of Economy and Public Finance. Source: World Bank. Notes: See Table 2. MPO 1 Apr 22 lower income than before the pandemic. annual inflation remained under 1.0 per- capital expenditure would be constrained Moreover, 23 percent of households indi- cent, below the regional standard, as the by limited access to external funding. In cated running out of food during the pre- economy continued to underperform, and the absence of substantial fiscal reforms, vious month, affecting the rural poor and fixed exchange rate and frozen fuel prices public debt is projected to increase from 81 families with children the most. repressed imported inflation. percent in 2021 to 85 percent by 2024. The fiscal deficit fell from a peak of 12.7 The Government is expected to support percent of GDP in 2020 to 9.3 percent in the fixed exchange rate regime, limiting its 2021 due to the rebound of tax and hy- expansionary efforts. High commodity drocarbon revenues and a lower-than-ex- Outlook prices will help achieve sizable current ac- pected recovery of public investment; the count surpluses despite the stagnation of introduction of a permanent wealth tax The economy is expected to grow 3.9 per- gas exports. However, capital outflows had limited impact. However, with limit- cent in 2022 as some sectors continue to and smuggling may continue to erode in- ed external funding, the Government con- recover. Although the Government man- ternational reserves. tinued to tap into Central Bank and pen- aged to refinance the bulk of 2022 and Declining international reserves and sion funds financing. 2023 bonds, limited access to additional emerging inflationary pressures, including Despite low gas export volumes, the trade external financing is expected to limit fis- those emerging from higher international balance reached a sizable surplus in 2021 cal spending which, combined with weak food prices in 2022, are expected to curb due to recovering mining exports and private and foreign investment, is expect- expansionary monetary policies, including higher commodity prices. Notwithstand- ed to push growth to below 3.0 percent Central Bank funding to the public sector. ing the trade surplus, increasing remit- in the medium term. Additionally, with The limited fiscal space and categorical de- tances, and the SDR allocation, interna- declining international reserves and the sign of social programs may undermine ef- tional reserves declined to a low of 5.1 Government requiring funding, domestic forts to protect the poor and vulnerable months of imports by the end of 2021 ow- credit to the private sector is projected to from a surge in food prices. ing to low foreign investment, smuggling, slow down. Long-term effects of the pandemic, in- and capital outflows. The fiscal deficit is projected to remain cluding human capital losses due to After a prolonged loan deferment, do- above 7.0 percent in 2022 as the increase school closures, remote learning, and mestic credit to the private sector re- in the fuel subsidy will partially offset food insecurity, are a concern and affect mained dampened partially due to uncer- the effect of higher hydrocarbon rev- the poor and vulnerable the most, limit- tainty in the private sector after the pan- enues. However, it is expected to con- ing reductions in inequality and upward demic. Despite increasing money supply, verge to 5.3 percent of GDP by 2024 as intergenerational mobility. TABLE 2 Bolivia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 2.2 -8.7 6.1 3.9 2.8 2.7 Private Consumption 3.7 -7.9 5.3 4.1 2.9 2.8 Government Consumption 3.8 -2.8 5.4 4.2 -0.6 -0.3 Gross Fixed Capital Investment -3.5 -25.9 11.9 4.4 5.3 4.8 Exports, Goods and Services -1.8 -18.8 15.4 4.1 3.1 3.1 Imports, Goods and Services 1.5 -25.0 15.7 5.1 3.3 3.3 Real GDP growth, at constant factor prices 2.4 -8.4 6.4 3.5 2.5 2.7 Agriculture 5.3 3.1 1.8 4.0 4.0 4.0 Industry 0.1 -11.8 9.6 2.9 2.5 2.5 Services 3.4 -9.3 5.8 3.8 1.9 2.4 Inflation (Consumer Price Index) 1.8 0.9 0.7 3.9 3.5 3.5 Current Account Balance (% of GDP) -3.4 -0.4 2.5 2.8 1.5 0.6 Net Foreign Direct Investment (% of GDP) -0.6 -2.8 0.7 0.9 0.9 0.9 Fiscal Balance (% of GDP) -7.2 -12.7 -9.3 -7.1 -5.9 -5.3 Debt (% of GDP) 58.6 78.1 80.8 80.3 83.4 84.6 Primary Balance (% of GDP) -5.8 -11.2 -7.7 -5.4 -4.1 -3.5 a,b International poverty rate ($1.9 in 2011 PPP) 3.2 4.4 4.0 3.7 3.6 3.5 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 7.8 9.0 8.3 7.8 7.6 7.4 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 19.9 21.6 20.2 19.3 18.8 18.4 GHG emissions growth (mtCO2e) 0.3 -1.5 1.1 0.6 0.6 0.6 Energy related GHG emissions (% of total) 17.1 15.7 16.4 16.9 17.3 17.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. a/ Calculations based on SEDLAC harmonization, using 2008-EH and 2020-EH.Actual data: 2020. Nowcast: 2021. Forecasts are from 2022 to 2024. b/ Projection using average elasticity (2008-2020) with pass-through = 0.87 based on private consumption per capita in constant LCU. MPO 2 Apr 22