Chart of the Week: Slowing Productivity: Why It Matters and What To Do

IMF Blog, April 3, 2017

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The global financial crisis of 2008-2009 preceded and amplified a sharp slowdown in output per worker and total factor productivity across most advanced economies and many emerging and developing countries.
Even before the global financial crisis, productivity growth showed signs of slowing in many advanced economies; the crisis produced a further, abrupt deceleration.
Unlike normal economic slowdowns, deep recessions leave long-lasting scars on total factor productivity; the global financial crisis was no different.

High-debt firms entering the crisis were often forced into fire sales of assets and deep cuts in investment, including in innovation, with lasting effects on their own and aggregate productivity.
Subdued productivity can:
- threaten progress in raising global living standards if it persists (the source warns that another decade of weak productivity growth could seriously threaten progress in raising global living standards),
- make it more difficult to sustain existing private and public debt levels in some countries, potentially jeopardizing financial stability.

Boost demand and investment in advanced economies where these remain weak.
Help firms restructure debt and strengthen bank balance sheets.
Give clear signals about future economic policy, particularly fiscal, regulatory, and trade policies.
Implement structural reforms to address headwinds constraining productivity growth, including:
- aging,
- the global trade slowdown,
- slowing improvements in educational attainment.

The piece directs readers to a new IMF paper on slowing productivity and policy responses.
It also notes a speech by the IMF Managing Director Christine Lagarde on "Reinvigorating Productivity Growth."

Source: Chart of the Week: Slowing Productivity: Why It Matters and What To Do — The Editors, April 3, 2017