IB Economics 4. the Global Economy Questionbank

Nepal is a landlocked country in South Asia with an estimated population of 29 million. Agriculture remains central to the economy, accounting for about 27% of gross domestic product (GDP) and employing a sizeable proportion of the workforce. However, the country also relies heavily on tourism and remittances from migrant workers abroad, which make up more than 25% of Nepal’s total GDP. Nepal has been seeking to diversify its economy through foreign direct investment (FDI) in energy, infrastructure, and services.

In 2020, Nepal’s GDP stood at US$29.3 billion. By 2021, it had increased to US$30.5 billion, partly due to post-pandemic economic recovery and continued growth in the tourism sector. Official unemployment figures in Nepal are relatively low, but underemployment remains a major issue, especially in rural areas. The country’s Gini coefficient is estimated at 0.32, indicating moderate income inequality, though rural–urban disparities still persist. Nepal’s tax system includes both direct and indirect taxes; the highest marginal rate for personal income tax is approximately 30%.

The tourism sector is vital. Trekking permits, especially for the Annapurna, Everest, and Langtang regions, represent a key source of government revenue. Due to recent changes in permit fees and fluctuations in tourism numbers, local businesses have experienced varying levels of income from trekking-related services.

Table 1: Labour market data in Nepal (2021)

Table 2: Trekking permit data for Nepal

Albania is a country in Southeastern Europe with an estimated population of about 2.8 million in 2022. The Albanian economy has been transitioning from a centrally planned system to a market-based system and has experienced positive real GDP growth in recent years. Tourism is a significant contributor to Albania’s GDP, and the government has intensified efforts to promote the country’s attractions along its Adriatic and Ionian coasts.

In 2022, Albania’s unemployment rate was around 12%, partly due to structural challenges in the economy. The government operates a progressive personal income tax system, with rates ranging from 0% up to 23%. Corporate income tax is set at 15%. Value-added tax (VAT) on most goods and services stands at 20%.

Albania’s trade balance remains negative, as the country’s main exports (textiles, footwear, and mineral fuels) have not kept pace with imports (machinery, food, and manufactured goods). The government has embarked on several infrastructural projects to attract foreign investment and reduce transport costs, including a newly announced US$200 million investment in highways. Economists estimate the marginal propensity to consume (MPC) in Albania to be about 0.8.

Table 1: Selected Macroeconomic Indicators for Albania

Vietnam is an emerging economy in Southeast Asia that has seen rapid industrialization over the past decade. The nation relies heavily on its manufacturing sector, which contributes significantly to its export earnings. However, certain domestic sectors, such as the heavy metals industry, have struggled to remain competitive against lower-priced imports. In 2023, the Vietnamese government considered various trade protection measures to support local steel producers who claimed that foreign firms were selling products below the cost of production in the domestic market.

Steel is a vital component for the construction and automotive industries in Vietnam. To address the surge in imports, the government implemented a trade barrier to increase the domestic price and reduce the volume of imports. While this measure was welcomed by local mill owners, representatives from the construction sector warned that increased costs for raw materials could lead to project delays and higher housing prices.

Table 1: Macroeconomic Indicators of Vietnam (2020–2023)

Case Study: Germany’s Economy and Energy Transition in the Early 2020s

Germany, as Europe’s largest economy, has historically relied on its robust industrial sector, strong exports of machinery and automobiles, and high-value-added manufacturing. During the early 2020s, it faced a combination of opportunities and challenges. On the one hand, demand for German exports remained high in global markets, supported by a reputation for quality engineering. On the other hand, supply chain disruptions in semiconductors and rising energy prices, partly triggered by shifts in international energy markets and global uncertainties, weighed on industrial output.

In 2022, Germany recorded a nominal GDP of US$4.4 trillion, with real GDP growth at 1.8% a deceleration from the 2.5% reported in 2021. Average inflation rose to 7.5% in 2022, up from 3.2% the previous year. Some macroeconomists attributed this spike in inflation to a combination of higher global commodity prices, labor shortages, and an expansionary fiscal stance aimed at countering pandemic-related slowdowns. In addition, rising household disposable incomes contributed to higher consumer spending, adding demand-side pressure on the price level. The government’s budget deficit reached 3.8% of GDP in 2022, spurred by increased health expenditures and targeted subsidies for certain industries, especially those transitioning to greener production methods.

A core focus of German policy has been the energy transition (“Energiewende”), which aims to phase out nuclear power while boosting renewable energy sources such as wind and solar. The government introduced new subsidies for households installing solar panels and for firms adopting more energy-efficient processes. Although these measures have helped reduce emissions, critics argue they impose higher short-term production costs on businesses. In 2022, approximately 46% of Germany’s electricity came from renewables, illustrating a notable increase compared to 35% five years earlier. Nevertheless, some economists worry about energy security, cautioning that reliance on imported natural gas may expose the economy to price volatility.

Economic Developments and Challenges in Ethiopia

Ethiopia, located in the Horn of Africa, has undergone rapid economic transformation in recent years. From 2015 to 2022, the country’s real GDP growth averaged approximately 7.5% per annum, largely driven by an expansion in the services sector and increased investment in infrastructure. Coffee remains Ethiopia’s largest export commodity, accounting for about 25% of total export earnings. Yet, recurring droughts, coupled with a high population growth rate of nearly 2.7% per year, have heightened concerns about food security and rural poverty.

Government programs, such as the Growth and Transformation Plans (GTP I and GTP II), have prioritized industrialization, infrastructure development, and agricultural modernization. Although these programs stimulated some growth in the manufacturing sector, limited foreign currency reserves and inflationary pressures have posed major challenges. Ethiopia’s inflation rate peaked at around 35% in 2021 due to a combination of supply shocks, global commodity price increases, and expansionary monetary policy. The National Bank of Ethiopia has since adopted tighter monetary measures to reduce inflation. However, small businesses complain that tighter credit availability hinders their operations.

Despite sustained growth, Ethiopia’s Human Development Index (HDI) remains relatively low, indicative of widespread poverty and inequality. An estimated 22% of the population lives below the national poverty line, while rural areas struggle with underemployment and limited access to clean water. The government has attempted to address these issues through rural electrification programs, improvements in primary education, and targeted social protection schemes. Nevertheless, inequality persists, and rising urban living costs make life difficult for low-skilled workers in cities. Furthermore, frequent currency devaluations have increased the cost of imported inputs for domestic industries, prompting calls for greater export diversification beyond coffee and traditional agricultural products.