## Industrial Policy Is Adapting to Crises, but Remains Hard to Implement Effectively

_IMF Blog, May 28, 2026_

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**Canonical URL:** [Industrial Policy Is Adapting to Crises, but Remains Hard to Implement Effectively](https://www.imf.org/en/blogs/articles/2026/05/28/industrial-policy-is-adapting-to-crises-but-remains-hard-to-implement-effectively)

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## Bibliographic details
- Authors: Adam Jakubik, Florence Jaumotte, Samuel Pienknagura, Michele Ruta
- Published: May 28, 2026

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### Key facts and context
- Industrial policy has grown more popular in recent years, especially in response to crises.
- At least 305 industrial policy measures attributed to the war in the Middle East were announced in its first two months; examples include energy and fertilizer export bans, subsidies for green energy products, and support for exporters.
- The New Industrial Policy Observatory (NIPO) data encompass more than 52,000 interventions across 75 countries since 2009.
- The total introduced last year was 2.5 times the pre-pandemic average.
- The recent acceleration in industrial policy began with COVID-19 in 2020; unlike previous crises, many measures remained in place after the emergency passed.

### Priorities shifting
- Motivations for government intervention have changed:
  - After 2008, dominant justifications were to boost competitiveness and address climate change.
  - Since 2020, rationales increasingly emphasize supply chain resilience, national security, and geopolitical concerns.
- Governments are moving beyond aims to build stronger, more competitive industries toward reducing dependence on geopolitical rivals and protecting strategic sectors—a qualitatively different kind of industrial policy.

### What’s working? Evidence on outcomes
- Overall assessment: mixed results; success depends heavily on policy design and instrument choice.
- Product-level findings:
  - Industrial policy tends to improve competitiveness for targeted sectors, but effects are short-lived.
  - The competitiveness boost is mostly seen in sectors that were already competitive.
- Firm-level findings:
  - Firm-level subsidies are associated with sustained increases in capital investment, but productivity and output effects fade quickly and can reverse after a few years.
  - Export incentives have little bearing on firm performance, though they can reallocate resources toward more productive firms after a period of adjustment.
- Bright spots:
  - Targeting sectors with high market distortions (such as generous mark-ups and external financial dependence) can produce effects as much as four times larger.
  - Policies supporting the green transition show stronger and more durable improvements in competitiveness.
  - Interventions that target upstream components for final products appear more effective than those aimed directly at end products.

### Elusive success and comparison with broader reforms
- The evidence does not support self-reinforcing cycles of success where government support fosters competition; instead, outcomes are mainly modest, temporary gains in already-strong sectors.
- Broader, economy‑wide reforms often deliver bigger gains:
  - Institutional and regulatory improvements can raise output in inefficient industries by as much as 10 percent in the medium term.
  - This 10 percent medium-term gain is five times as large as the medium-term output boost seen after implementation of industrial policies.
  - Financial reforms especially help credit‑constrained industries.
- Structural reforms benefit all sectors, avoid the risks of anointing winners, and improve the prospects of industrial policy succeeding if it is used.

### Spillovers and international dynamics
- Industrial policy typically reallocates resources to targeted entities, which may hurt the overall economy if it comes at the expense of more productive players.
- When one country subsidizes a strategic sector, others frequently follow (as NIPO data show), risking an expensive, globally inefficient arms race of subsidies that leaves everyone worse off.
- Industrial policy measures can affect global imbalances when they impact aggregate productivity or are applied economy-wide to force savings and redirect resources toward external surpluses.
- Managing these spillovers will require more international cooperation at a time when geopolitical tensions make such cooperation increasingly difficult.

### Policy implications and recommendations
- Success depends on careful policy design, including the choice of instruments and targeting:
  - Prioritize interventions where market distortions are large or where upstream components can be strengthened.
  - Favor policies that support the green transition for more durable competitiveness gains.
- Strengthen implementing institutions and governance to improve policy effectiveness.
- Ensure robust macroeconomic policy fundamentals to complement targeted interventions.
- Consider broader structural reforms (institutional, regulatory, and financial) as often delivering larger and more inclusive gains than targeted industrial policies.
- Pursue international cooperation to manage cross-border spillovers and reduce the risk of subsidy races and retaliatory measures.

*Source: IMF blog article "Industrial Policy Is Adapting to Crises, but Remains Hard to Implement Effectively" — May 28, 2026.*

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## Content in this bundle

- **Chapter 3**
  - [Chapter 3 (Markdown version)](/-/media/files/publications/weo/2025/october/english/ch3.pdf.md){rel="alternate" type="text/markdown"}
  - [Chapter 3 (PDF)](/-/media/files/publications/weo/2025/october/english/ch3.pdf){rel="external" type="application/pdf"}

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## References

- [New Industrial Policy Observatory](https://www.imf.org/en/Publications/WP/Issues/2025/10/31/Industrial-Policy-Since-the-Great-Financial-Crisis-570816)
- [policy design](https://www.imf.org/en/publications/staff-discussion-notes/issues/2025/03/21/industrial-policies-handle-with-care-561795)
- [looking at trade patterns](https://www.imf.org/en/publications/wp/issues/2025/05/23/do-industrial-policies-increase-trade-competitiveness-567184)
- [firms in targeted sectors respond](https://www.imf.org/en/publications/wp/issues/2025/07/18/industrial-policies-and-firm-performance-a-nuanced-relationship-568626)
- [presence of market failures](https://www.imf.org/en/publications/policy-papers/issues/2024/03/11/industrial-policy-coverage-in-imf-surveillance-broad-considerations-546162)
- [NIPO data](https://www.imf.org/en/publications/wp/issues/2023/12/23/the-return-of-industrial-policy-in-data-542828)
- [global imbalances](https://www.imf.org/en/publications/wp/issues/2026/04/04/global-imbalances-industrial-policy-and-tariffs-575229)

_Source: https://www.imf.org/en/blogs/articles/2026/05/28/industrial-policy-is-adapting-to-crises-but-remains-hard-to-implement-effectively_