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What ails investment?

March 29, 2017

Abstract: The slow recovery in global output growth (as forecast by the IMF in January 2017) can be attributed to sluggish investment growth. Investment, which was a prime driver of global GDP in pre-financial crisis period, slowed down steadily since 2010 and forecasts indicate a continuing downward trend. This slowdown in global investment can be attributed to a set of factors, which include inter alia slowing output growth, stressed financial systems and growing “share economy” (of which, companies such as Uber and Airbnb are a part). Given the nature of factors impeding investment, conventional instruments like interest rates and tax incentives are unlikely to work. Meanwhile, governments should at least use the policy levers that would accelerate growth in investment, when recovery begins.

Keywords: IMF; global investment; recovery, GDP growth; financial system; interest rates; tax incentives

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