Economic Resilience Strategies Under Global Market Uncertainty: A Development Perspective

Global markets are increasingly uncertain, and developing countries bear a greater burden of that uncertainty. This paper identifies which economic resilience instruments most effectively mitigate growth loss under rising uncertainty and whether their efficacy varies with the degree of exposure. An illustration of this effect is obtained through a sample of 60 developing countries. Growth loss due to a global shock is regressed on the uncertainty exposure index, export diversification, financial inclusion, digital infrastructure, fiscal buffers, and aid for trade, with interaction between uncertainty and diversification. The model accounts for 88 percent of the variance in growth loss. Exposure increases growth loss by 0.05 percentage points per point in the index. At the same time, diversification, digital infrastructure, and fiscal buffers significantly mitigate growth loss, and diversification moderates the exposure impact by more than half. Strong strategy combinations help to avoid 1.0 percentage points more of growth loss and achieve faster recovery by 1.9 quarters than weak combinations. The findings imply that in the case of development resilience is created through complementary investments into structure and institutions, depending on the degree of exposure.