Drivers of medium term growth

Josina Solomons, Kerschyl Singh and Jean-Francois Mercier

No 11036, Occasional Bulletin of Economic Notes from South African Reserve Bank

Abstract: Global long-run potential growth has been on a declining trend in recent years. Covid-19 and the measures undertaken to contain it may have exacerbated this trend. Emerging markets have not been immune to productivity slowdowns, and growth prospects seem particularly challenging over the medium to long term. Five-year ahead growth prospects in emerging market countries are forecast to decline, from roughly 7% in 2008, to 4.4% currently. Long-term drivers of EM productivity have also been declining and could drop even further over the coming decade. Over the last five years, labour productivity growth slowed in emerging market economies to 3.5%, from 4.1% during the period 2000-2009. Lower emerging market productivity could translate into weaker exchange rates and higher inflation over the medium term.

Date: 2021-10-06
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