Potential growth, below the pre-crisis rates … – The Economist

The international organization committed to raising infrastructure spending and realize structural reforms.

The potential growth in developed and emerging economies will not recover pre-crisis levels for at least the next five years, warns the International Monetary Fund (IMF), which warns that this lower potential make it more difficult to maintain fiscal stability.

In Chapter III of its report “Global Economic Prospects”, the international institution serves to underscore the dependence of the potential growth and evolution of the population of working age and changes in the labor participation rate and the increase in capital.

“The potential growth in advanced economies is likely to increase slightly but remain below pre-crisis rates in the medium term,” the IMF, which attributes this trend to an aging population and the slow increase of capital formation as production and investment is gradually recovering from the crisis.

So, the IMF estimated potential growth in developed economies, which had begun to decline before the crisis could reach an average of 1.6% between 2015 and 2020 from 1.3% between 2008 and 2014. “This growth is well below 2.25% for the period 2011-2007″, adds the institution.

In the case of emerging economies, the IMF estimates that the potential growth will slow to an average of 5.2% between 2015 and 2020, compared with 6.5% estimated for the period 2008-2014.

“Unlike previous crises, the global financial crisis has been associated not only with a reduced level of potential activity in advanced and emerging economies, but also with a persistent fall in the growth rate” refers Fund.

In this regard, the institution warns that these lower prospects for potential growth in the medium term compared to those recorded before the crisis “generate new challenges.”

“Both advanced and emerging markets, lower growth potential make it harder to maintain fiscal sustainability, “says the company, which considered likely that this situation is accompanied by low real interest rates steady, which in advanced economies can return to raise the issue of “zero bound” if adverse shocks to growth materialize.

The IMF says that enhance the growth potential is a priority for all economies. So, recommends that countries advanced measures to support demand to offset the effects of prolonged weakness in demand on investment, capital growth and unemployment.

“They are fundamental structural reforms and a greater support for research and development to increase the supply and innovation, “notes the IMF.

In the case of emerging economies, the institution committed to increase spending on infrastructure and undertake structural reforms aimed to improve business conditions and product markets.