Economic Diversification in a Digital Economy

Abstract

In many developing countries export earnings account for a large percentage of the country Gross Domestic Product (GDP), government revenues and expenditures and public investment. High dependency on a limited number of commodities for export increases the economy vulnerability to price fluctuations in the global markets. Not only instability in export earnings reduces the ability of the economy to finance development, but also increases uncertainty about future growth. Economic diversification underscores the importance of productivity growth to balance development and reduce dependency on international markets.

The new economy, driven by digital technologies could help developing countries diversify output and foster economic growth. Building capacity for digital development enhances the country capabilities to promote innovation, create knowledge and disseminate information. Digital networks increase communication as well as allow people, regions and nations to collaborate and share information aiming at fostering growth and sustaining development. For developing countries, external knowledge enhances the economy readiness to diversify output, create employment opportunities and improve global competitiveness.