current
Public Investment Benefits
Public investment can significantly boost economic growth in EMDEs, especially when coupled with fiscal space and efficient government spending.
Timeframe
near-term
Detailed Analysis
The report highlights the important role of public investment in stimulating economic growth, particularly in EMDEs. It finds that scaling up public investment by 1% of GDP can increase the level of GDP by more than 1.5% over the medium term. This impact is amplified when countries have the fiscal space to increase public spending and a track record of efficient public investment. The report emphasizes that public investment, while accounting for just a quarter of total investment in developing economies on average, can be a powerful policy lever. The analysis reveals that the impact on private investment is also substantial, growing by as much as 2% over five years. These benefits are maximized when two criteria are met: sufficient fiscal space and a history of efficient public investment. The report suggests that public investment can boost economic growth and facilitate private investment, particularly in developing economies where public investment plays a crucial role.
Context Signals
Public investment accounts for a quarter of total investment in developing economies.
A 1% of GDP increase in public investment can lead to a >1.5% increase in GDP.
Private investment can grow by 2% over five years following increased public investment.
Edge
Targeted public investment in green technologies and digital infrastructure could accelerate the transition to a sustainable and inclusive economy.
Public investment can be used strategically to attract foreign direct investment and foster innovation.
Effective public-private partnerships can leverage private sector expertise and resources to maximize the impact of public investment.
