WASHINGTON, April. 7, 2015.- The growth potential in the world was very concerned after the financial crisis of 2007-2009 and is likely to remain low for years, implying that interest rates would likely remain low for some time, according to a study International Monetary Fund released Tuesday.
The potential growth, which measures the rate at which economies can grow over time without bumping into obstacles inflation, and was slowing in richer economies before the financial crisis due to the aging of the population and a decline in technological innovation.
But declines in the growth of private investment and employment in these countries reduced the potential annual growth to 1.3 percent between 2008 and 2014, half a percentage point lower than before the crisis, according to the IMF study.
The document, part of the biannual World Economic Outlook IMF could do that discussions focus on how to boost economic growth when the directors of central banks around the world gather in Washington next week for spring meetings of the IMF and the World Bank.
In the next five years, annual potential growth advanced economies should grow 1.6 percent, still below the rates of pre-crisis growth, making it more difficult to reduce the high public and private debt, the IMF said.
With interest rates low, “economic policy in advanced economies could again be confronted with the problem of lower limit of zero if adverse impacts growth materialize,” said the IMF.
The company also said the weakness of the demand in the euro area and Japan could lead to an even lower potential growth than projected. The study is published before the global economic forecasts from the IMF, to be released next week.
In emerging markets, the potential annual growth fell to 6.5 percent between 2008 and 2014, about 2 percentage points lower than before the crisis, and cede further to 5.2 percent in the next five years to the extent that the population ages, the structural constraints contain capital growth and productivity slows.
A projected growth potential for China fall, the second largest economy, could be even deeper insofar as it passes from one driven by investment to consumption-based economy, the IMF said.
The IMF called rich economies to support demand and investment, including more funding for research and development and infrastructure.
Emerging economies should also raise spending on infrastructure, will get rid of excessive regulation and improve the quality of education, he said.
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