Global potential economic growth to remain at low level

WASHINGTON - The potential economic growth across major advanced and emerging market economies has declined in recent years and is unlikely to bounce back to pre-crisis level over the next five years, according to a study released by the International Monetary Fund (IMF) on Tuesday.

Unlike previous crises, the global financial crisis in 2008 has been associated not only with a reduction in the level of the global potential output, but also with a persistent reduction in its growth rate.

Potential growth gauges how fast economies can grow over time without inflationary or deflationary pressure. The study, part of the IMF's twice-yearly World Economic Outlook, could provide theoretical support for discussions on how to boost growth when the world's economic policymakers gather in Washington next week for the IMF and World Bank's spring meetings.

The study found that the potential growth in advanced economies is expected to increase from about 1.3 percent during 2008-2014 to 1.6 percent during 2015-2020, but well below the pre-crisis level of an average 2.25 percent rise during 2001-2007.

In emerging market economies, their potential growth is expected to decline from 6.5 percent during 2008-2014 to 5.2 percent during 2015-2020, due to aging populations, weaker investment, and lower productivity growth as technological gaps between these economies and advanced economies get narrower.

With China rebalancing its economy from investment-driven to consumption-led growth pattern, the country will also see its potential growth fall over the next five years.

The IMF suggested advanced economies should boost their demand, push forward structural reforms and enhance support for research and development, while the emerging economies need to increase infrastructure spending and carry out structural reforms that are aimed at improving business conditions and product markets and fostering human capital accumulation.