Potential growth in emerging market economies to decline to 5.2% - IMF
Baku, Azerbaijan, Apr. 8
By Azad Hasanli - Trend:
In emerging market economies, potential growth is expected to decline further, from an average of about 6.5 percent during 2008-2014 to 5.2 percent during 2015-2020, said the analytical review World Economic Outlook of the International Monetary Fund (IMF) posted on its website.
"The decline is the result of population aging, structural constraints affecting capital growth, and lower total factor productivity growth as these economies get closer to the technological frontier," said the review.
Potential growth in advanced economies is expected to increase slightly, from an average of about 1.3 percent during 2008-2014 to 1.6 percent during 2015-2020, according to the forecasts of IMF.
"These reduced prospects for potential growth in the medium term, compared to those preceding the crisis, raise new policy challenges," said the review. "In both advanced and emerging market economies, lower potential growth will make it more difficult to maintain fiscal sustainability."
It is also likely to be associated with low equilibrium real interest rates, so that monetary policy in advanced economies may again be confronted with the problem of the zero lower bound if adverse growth shocks materialize, according to the review.
Increasing potential output is a policy priority for advanced and emerging market economies, IMF analysts said.
"The reforms needed to achieve this objective vary across countries," said the review. "In advanced economies, continued demand support is needed to offset the effects of protracted weak demand on investment and capital growth as well as on unemployment. Structural reforms and greater support for research and development are key to increasing supply and innovation."
In emerging market economies, higher infrastructure spending is needed to remove critical bottlenecks, and structural reforms must be directed at improving business conditions and product markets and fostering human capital accumulation, according to IMF.
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