Major emerging markets like China are behind much of a productivity decline.
The report on the IMF's five-year growth outlook shows a decline in forecasts dating back to the 2008 global financial crisis. Half of the recent productivity decline versus the average from 2000-2019 comes from “total factor productivity” or how resources are allocated within and across firms. The IMF said that means there’s some reason for optimism that policy changes can undo some of the decline. Smaller working-age populations and weak investment are also factors.
"This highlights the urgent need for policies and structural reforms that enhance growth by improving capital and labor allocation to more productive firms, enhancing labor force participation, and harnessing the potential of artificial intelligence, the Fund said. "Such measures are critical, especially in light of challenges such as high public debt and geoeconomic fragmentation, which could further constrain global growth."
