Dutch Disease

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Dutch Disease

The phenomenon in which the manufacturing sector of a country declines when it begins to make significant profits from the exploitation of a natural resource. For example, if a country suddenly discovers oil and sells it on the international market, it may see a decline in the competitiveness of its manufacturing companies. It is thought that the Dutch disease comes from the fact that the sale of the natural resource leads to a stronger currency, which makes the country's exports more expensive and causes scaling down in manufacturing.