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Key Areas of Economic Analysis of Projects

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Introduction

The economic analysis of projects helps identify and select public investments that will sustainably improve the welfare of beneficiaries and a country as a whole. This 2^nd edition pamphlet¹ outlines key areas of economic analysis. It emphasizes that analysis begins at the first stages of project identification, during country strategy studies and programming, and continues iteratively throughout the project cycle. Economic analysis is coordinated with institutional, financial, environmental, social and poverty analyses, forming an integral part of investment appraisal.

Part I of the pamphlet summarizes the principles and key areas of analysis needed to appraise the economic feasibility of every project. The detailed assessment methods are outlined in ADB’s Guidelines for the Economic Analysis of Projects (1997). Part II summarizes the main issues to be addressed in each of the 10 key areas of analysis (AAs). Part III outlines the stages of the project cycle when analyses need to be carried out.

In practice, each sector, situation and set of problems to be addressed is different. Basic principles of analysis need to be followed, although analytical approaches and data requirements need to be adapted to different circumstances. Selecting the appropriate level of analysis to inform project decision-making is key to sound economic analysis.

The pamphlet is intended to help ADB staff, consultants and Developing Member Country (DMC) counterpart staff apply the principles of project economic analysis at each stage of the project development process.

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