• World Must Prioritize Productivity Reforms to Revive Medium-Term Growth – Independent Newspaper Nigeria

    World must prioritize productivity reforms to revive medium-term growth independent newspaper nigeria - nigeria newspapers online
    • 5Minutes – Read
    • 928Words (Approximately)

    The world economy faces a sobering real­ity. The global growth rate—stripped of cy­clical ups and downs—has slowed steadily since the 2008-09 global financial crisis. Without policy intervention and leveraging emerging tech­nologies, the stronger growth rates of the past are unlikely to return.

    Faced with several head­winds, future growth pros­pects have also soured. Global growth will slow to just above 3 percent by 2029, according to five-year ahead projections in our latest World Economic Outlook. Our analysis shows that growth could drop by about a percentage point be­low the pre-pandemic (2000-19) average by the end of the de­cade. This threatens to reverse improvements to living stan­dards, and the unevenness of the slowdown between richer and poorer nations could limit the prospects for global income convergence.

    A persistent low-growth scenario, combined with high interest rates, could put debt sustainability at risk—restrict­ing the government’s capacity to counter economic slowdowns and invest in social welfare or environmental initiatives. Moreover, expectations of weak growth could discourage investment in capital and tech­nologies, possibly deepening the slowdown. All this is exacerbat­ed by strong headwinds from geoeconomic fragmentation, and harmful unilateral trade and industrial policies.

    EXPOSED!! POPULAR ABUJA DOCTOR REVEALED HIDDEN SECRET ON HOW MEN CAN NATURALLY AND PERMANENTLY CURE POOR ERECTION,QUICK EJACULATION, SMALL AND SHAMEFUL MANHOOD WITHOUT SIDE EFFECTS. EVEN IF YOU ARE HYPERTENSIVE OR DIABETIC ..STOP THE USE OF HARD DRUG FOR SEX!! IT KILLS!

    However, our latest anal­ysis shows that there’s hope. A variety of policies—from improving labor and capi­tal allocation across firms to tackling labor shortages caused by aging populations in major economies—could collectively rekindle medi­um-term growth.

    The key drivers of econom­ic growth include labor, capi­tal, and how efficiently these two resources are used, a con­cept known as total factor pro­ductivity. Between these three factors, more than half of the growth decline since the crisis was driven by a deceleration in TFP growth. TFP increases with technological advances and improved resource allo­cation, allowing labor and capital to move toward more productive firms.

    Resource allocation is cru­cial for growth, our analysis shows. Yet, in recent years, increasingly inefficient dis­tribution of resources across firms has dragged down TFP and, with it, global growth.

    Much of this rising misal­location stems from persistent barriers, such as policies that favor or penalize some firms irrespective of their produc­tivity, that prevent capital and labor from reaching the most productive companies. This limits their growth potential. If resource misallocation hadn’t worsened, TFP growth could have been 50 percent higher and the deceleration in growth would have been less severe.

    Two additional factors have also slowed growth. Demographic pressures in major economies, where the proportion of working-age population is shrinking, have weighed on labor growth. Meanwhile, weak business investment has stunted capi­tal formation.

    Medium-Term Pressures

    Advertisement

    Demographic pressures are set to increase in most of the major economies, accord­ing to United Nations projec­tions, causing an imbalance in world labor supply and dampening global growth. The working-age population will increase in low-income and some emerging econ­omies, whereas China and most advanced economies (excluding the United States) will face a labor squeeze. By 2030, we expect the growth rate of the global labor supply to slide to just 0.3 percent—a fraction of its pre-pandemic average.

    Some resource misalloca­tion may correct itself over time, as labor and capital grav­itate toward more productive firms. This will go some way toward mitigating the TFP slowdown even as structural and policy barriers continue to slow the process. Techno­logical innovation may also lessen the slowdown.

    But overall the pace of TFP growth is likely to continue to decline, driven by challenges such as the increasing dif­ficulty of coming up with technological breakthroughs, stagnation in educational at­tainment, and a slower pro­cess by which less developed economies can catch up with their more developed peers.

    Absent major technolog­ical advances or structural reforms, we expect global economic growth to reach 2.8 percent by 2030, well below the historical average of 3.8 percent.

    Reviving Global Growth

    Our analysis evaluates the impact of policies on labor supply and resource alloca­tion, set against the backdrop of the rapid advance of artifi­cial intelligence, public debt overhang, and geoeconomic fragmentation.

    We examine scenarios fea­turing ambitious, but achiev­able, policy shifts that address resource misallocation by im­proving the flexibility of prod­uct and labor markets, trade openness, and financial de­velopment. We also consider policies aimed at enhancing labor supply or productivity by reforming retirement and unemployment benefits, sup­porting childcare, expanding re-training and re-skilling programs, and improving in­tegration of migrant workers, as well as the removal of so­cial and gender barriers.

    Our findings indicate that the benefits of increasing la­bor force participation, inte­grating more migrant work­ers into advanced economies, and optimizing talent alloca­tion in emerging markets are comparatively modest.

    By contrast, reforms that enhance productivity and ful­ly leverage AI are key for re­viving growth in the medium term. Our analysis suggests that focused policy actions to enhance market competition, trade openness, financial ac­cess, and labor market flexi­bility could lift global growth by about 1.2 percentage points by 2030. The potential of AI to boost labor productivity is uncertain but potentially sub­stantial as well, possibly add­ing up to 0.8 percentage points to global growth, depending on its adoption and impact on the workforce.

    In the long run, innova­tion-driven policies will be crucial to sustaining global growth.

    See More Stories Like This