The Fund has just released its annual report. Noticeably, the Fund’s work has grown in recent years to take into account not only standard indicia of growth, but also 21st century concerns like gender and wealth inequality.
Arguably the section raising most red flags was the report’s section on the fall of productivity in the global economy. That section, which builds on an earlier IMF paper, “Gone with the Headwinds: Global Productivity,” as well as an article in the March 2017 issue of Finance & Development, made mention of the fact that global productivity—which was already in decline in advanced economies prior to the crisis—has still not recovered since the Great Recession. Among the culprits include:
the fading impact of the information and communication technology boom, weaker labor and product market reform efforts, skills shortages and mismatches, and demographic factors such as aging populations. In addition, the lingering effects of the global crisis continue to be felt—weak corporate balance sheets, tight credit conditions in some countries, soft investment, weak demand, and policy uncertainty.
The Fund also takes aim at weakening cross-border trade flows:
The global trade slowdown is another long-term drag on productivity: trade since 2012 has barely kept pace with global GDP. This could point to lower productivity gains in the future—even without taking into account the possibility of trade restrictions.
Noticeably, the analysis is not directly aimed at the rising tide of global populism, however, and the Fund notes quite frankly:
For all its benefits, trade has had a negative impact on groups of workers and communities, particularly in Europe and the United States. These dislocations, which also reflect the impact of technological innovation, have been intensified by slower growth and the resulting backlash has undermined support for global economic integration.
Nevertheless, if productivity continues to falter, the Fund argues, the policy repercussions could be significant:
[Continued weak productivity gains] would threaten progress in raising global living standards, addressing private and public debt, and ensuring the viability of social protection systems. Declining productivity growth could also affect the ability of policymakers to respond to future economic shocks.
One avenue for igniting growth, the IMF notes, is pushing for greater gender balance in economies’ workforce. So alongside other metrics like debt management and spending, gender considerations (and inclusive growth) are now included in many of the organization’s aid programs. Thus countries seeking assistance may, as in the case of Egypt and Niger, have to embrace the “goal of increasing women’s economic participation by improving the availability of public nurseries and developing a gender strategy, respectively.”