4.3.2 - Factors influencing growth and development

Cards (10)

  • Impact of economic factors in different countries:
    • primary product dependency
    • volatility of commodity prices
    • savings gap: Harrod-Domar model
    • foreign currency gap
    • capital flight
    • demographic factors
    • debt access to credit and banking
    • infrastructure
    • education/skills
    • absence of property rights
  • Primary Product Dependency:
    • Some countries heavily rely on the export of primary products (e.g., minerals, agricultural goods).
    • Vulnerable to price fluctuations, as demand and prices for primary products can be volatile.
  • Volatility of Commodity Prices:
    • Commodity-dependent economies face instability due to price swings.
    • Price fluctuations can impact government revenues, economic stability, and development plans.
  • Savings Gap (Harrod-Domar Model):
    • The Harrod-Domar model explains the relationship between savings, investment, and economic growth.
    • A savings gap occurs when domestic savings are insufficient to support desired investment levels, hindering growth.
  • Foreign Currency Gap:
    • A foreign currency gap arises when a country's imports exceed its foreign exchange reserves.
    • It can lead to trade deficits, currency depreciation, and economic instability.
  • Capital Flight:
    • Capital flight occurs when investors move assets out of a country due to economic instability or unfavorable conditions.
    • It depletes a country's resources and can lead to financial crises.
  • Demographic Factors:
    • Population growth, age distribution, and workforce skills impact economic development.
    • A youthful population can be a demographic dividend if properly harnessed for economic growth.
  • Debt:
    • High levels of public or external debt can lead to debt servicing burdens, reducing resources for development.
  • Access to Credit and Banking:
    • Limited access to credit and banking services can hinder investment, entrepreneurship, and economic growth.
  • Infrastructure:
    • Infrastructure development (transport, energy, telecommunications) is vital for economic growth and competitiveness.
    • Low levels of infrastructure make it hard for businesses to trade and set up within the country, for example if there are a lack of roads. It makes their services and production less reliable. However, the development of infrastructure can be expensive and tends to conflict with environmental goals.