Abundant natural resources may hinder economic growth, study finds.
Abundant natural resources can actually slow down economic growth by reducing the demand for capital, leading to lower growth rates. However, countries that make institutional reforms to allocate capital more efficiently can increase both the quantity and quality of new investments, which can sustain growth. Research from 85 countries between 1965-98 shows that having a lot of natural resources can hinder economic growth by crowding out physical capital and slowing down the development of the financial system. But some countries have managed to overcome these challenges through economic and structural reforms, leading to high growth rates despite their reliance on natural resources.