Assessment and recommendations

Natural resource-intensive economies – often defined as economies in which natural resources account for more than 10% of gross domestic product (GDP) and 40% of exports – face some unique competitive advantages, a number of often debated disadvantages and some risks that do not typically confront regions where the primary sector is less prominent. They are a strong source of export revenue and are quite often somewhat sheltered from international competition, as competitiveness is based chiefly on having the relevant deposits. The widely cited disadvantages associated with such regions include exposure to volatile international commodity prices, potential limits on increased production, and potentially low entrepreneurial and innovative activity. These problems are linked to other risks, particularly so-called “Dutch disease” pressures, which can undermine the development of non-resources tradables, political economy concerns about the impact of resource dependence on institutions, and the potential generation of greater regional inequality. Taken together, these factors are believed by many to result in lower long-term growth.