RIYADH: Global economic growth is expected to average around 3.1 percent in the next five years, below the pre-pandemic level of 3.7 percent, according to an International Monetary Fund official.
Speaking at the China Development Forum in Beijing on March 23, Nigel Clarke, deputy managing director of the IMF, said that total factor productivity internationally, which measures the ability to create more outputs with the same inputs, has been growing at a slower pace since the 2008-09 global financial crisis.
The worldwide growth projections of the IMF indicate that countries in the Middle East are expected to show future financial resilience.
In January, the UN financial agency said Saudi Arabia’s economy is projected to grow by 3.3 percent in 2025 and 4.1 percent in 2026.
“Global growth is steady but underwhelming. Our five-year ahead growth forecast remains at 3.1 percent— well below the pre-pandemic average of 3.7 percent,” said Clarke.
He added: “Patterns of trade and capital flows are shifting. AI (artificial intelligence) is rapidly advancing. Trade is no longer the engine of global growth it used to be. Divergences across countries are widening. And governments worldwide are shifting their policy priorities.”
Clarke argues that countries should pursue structural reforms to boost productivity and ensure medium-term growth.
He further said that in aging societies— where the share of the working-age population is shrinking— productivity growth plays a vital role in maintaining living standards.
“It also applies to emerging markets and developing economies trying to close the gap with richer countries. To provide better jobs and a higher standard of living, they too need to ignite productivity growth,” added the deputy managing director.
He added that this productivity growth could be achieved only by innovation, technological advancements, and ample investments in research and development.
Citing IMF research, Clarke highlighted that productivity growth in advanced economies could increase by 0.2 percentage points a year with a hybrid policy that boosts public research expenditure by a third and doubles subsidies to private research.
He noted that AI could boost global gross domestic product growth between 0.1 and 0.8 percentage points per year in the medium term, depending on how it is adopted.
Clarke also underscored the necessity of better resource allocation in the future to maintain a healthy global productivity level.
“The movement of labor and capital toward more productive firms and industries has long been an important source of overall productivity growth. As workers move from farms to factories, for example, their productivity increases dramatically. So too do their income and living standards, with spillovers to the whole economy,” he said.
According to Clarke, effective measures should be taken to strengthen the private sector, as well as create an environment that could help them thrive.
“Through our policy advice, lending and capacity development, the IMF has consistently supported countries in establishing macroeconomic and financial stability as a foundation for growth,” said Clarke.
He added that a new IMF Advisory Council on Entrepreneurship and Growth has been created to help countries develop ideas on easing regulatory barriers, adapting tax systems, and incentivizing long-term savings to boost innovation.
