IMF: Diagnosing the slowdown in global growth

The International Monetary Fund (IMF) experts recently spoke about the key secular trends that have significantly impacted global economic growth since the turn of the millennium. These trends, as highlighted by the experts, have major implications for the current decade for economies and investors globally. The discussion covered various aspects such as labor force dynamics, investment trends, and the implications for global economic growth in the medium term. Let's delve into the key themes and points discussed by the IMF experts in the CNBC Africa interview. Labor force dynamics have been a crucial factor in shaping global economic growth. The decline in the growth of the working-age population, particularly in advanced economies, has been attributed to demographic factors such as lower fertility rates and aging populations. This has led to a reduction in the share of the working-age population actively participating in the labor force. However, the experts noted that advanced economies have successfully countered this trend by increasing labor force participation rates among women, highlighting the importance of inclusive labor market policies. Another significant trend discussed was the decline in business investment, especially in OECD countries, post the global financial crisis. The experts pointed out that aggregate business investment had fallen below trend levels, with macroeconomic conditions playing a crucial role in influencing capital formation. They emphasized that policy actions aimed at improving allocative efficiency, removing barriers to competition, and facilitating job transitions could help address the growth gap in investment. Looking ahead, the IMF experts projected a decline in global economic growth to 2.8 percent by 2030, based on current macroeconomic trends. They highlighted the slowdown in total factor productivity (TFP) growth and the stagnation in labor force expansion as key factors driving this trend. The experts also warned that this lower growth trajectory could pose challenges for poorer countries trying to narrow the income gap with richer economies, potentially impacting debt sustainability and hindering the green transition. Despite the gloomy outlook, the experts emphasized that policy interventions could help mitigate the slowdown in economic growth. Structural reforms aimed at improving allocative efficiency, labor market reforms to incentivize participation, and addressing discriminatory barriers were identified as key policy measures to boost economic dynamism. The experts suggested that with determined policy actions and a favorable external environment, there is a possibility to reverse the trend of slowing economic growth and foster a more robust global economy. In conclusion, the IMF experts stressed the importance of proactive policy interventions to navigate the challenges posed by the current economic trends and unlock growth potential in the medium term. By implementing targeted reforms and addressing structural bottlenecks, countries can aim to achieve sustainable and inclusive economic growth in the coming years.