IMF chief: Slowing productivity may hit living standards

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WASHINGTON: Living standards around the world could fall unless governments invest more in research and education that can help revive weak productivity growth, International Monetary Fund managing director Christine Lagarde warned on Monday.

She said the private sector alone will not be able to generate enough innovation to lift productivity to acceptable levels.

Her remarks were accompanied by the release of an IMF study that found that the 2008-2009 financial crisis and deep recession played a bigger role in slowing productivity than previously thought, stifling global demand and investment.

"Another decade of weak productivity growth would seriously undermine the rise in global living standards," Ms Lagarde told an audience at the American Enterprise Institute, a pro-business think tank in Washington.

"Slower growth could also jeopardise the financial and social stability of some countries by making it more difficult to reduce excessive inequality and sustain private debt and public obligations."

Economists have long viewed productivity gains as essential for sustaining higher wages and living standards, but they have struggled to explain a protracted slowdown in productivity growth since the early 2000s.

Ms Lagarde said the post-crisis recession has left a "permanent scar" on output per worker and total factor productivity, a broad measure of innovation that includes both labour and capital inputs.- REUTERS