Thanks to high commodity prices and a prudent macroeconomic policy, economic growth in Bolivia averaged 4.9 percent between 2004 and 2014. The favorable economic context reduced moderate poverty from 59 percent in 2005 to 39 percent in 2014, while the Gini Index fell from 0.60 to 0.47 in the same period.
Due to a more challenging international context, GDP growth decreased from 5.5 percent in 2014 to 4.8 percent in the first half of 2015. Domestic demand remained strong given that the delayed effect of oil prices on natural gas export prices mitigated the decline in fiscal income. The effect of low commodity prices on domestic demand was also contained by the important cushions accumulated during the boom. International reserves decreased by US$2.1 billion in 2015, but they remain high at nearly US$13 billion, whereas fiscal savings are approximately 25 percent of GDP and public debt is less than 40 percent of GDP.
In an effort to maintain strong growth, assure continued poverty reduction and improve access to basic services, the Government of Bolivia approved the National 2016-2020 Economic and Social Development Plan in early 2016. With this plan, the government aims to maintain growth at an average rate of 5 percent between 2016 and 2020, reducing extreme poverty from 17 percent to 10 percent. To this end, the plan includes an extensive public investment program funded in part by savings accumulated during the economic boom and with new external financing. Investment areas include infrastructure, hydrocarbon exploration and thermal and hydroelectric energy generation. The plan also calls for increased private sector activity and foreign direct investment.
In light of the international context, the government’s ambitious development agenda faces structural challenges. Despite the important cushions accumulated during the economic boom, prudent management is needed to maintain macroeconomic stability. Public spending efficiency must be improved to ensure that it generates new private investments and increases the coverage and quality of public services. Consolidating the country’s position as an exporter of natural gas in the region requires joining forces with the private sector to expand proven gas reserves. It is also critical to attract investments in sectors that have been traditionally less attractive for private investors, such as mining, agriculture and manufacturing.
Last Updated: Apr 11, 2016