Group of Twenty economies have weathered another year of shocks, from energy price increases and persistent policy uncertainty to heightened protectionism. But this resilience should not obscure a deeper challenge: medium-term growth prospects remain weak. We forecast annual growth for the group—which accounts for about 85 percent of global output—of just 3 percent in 2031, near the lowest since the global financial crisis.
In part, dimmer prospects reflect the impact of poorly designed structural policies and regulations and inadequate institutional frameworks—what we refer to as impediments to growth in this year’s G20 Report on Strong, Sustainable, Balanced, and Inclusive Growth.
While structural policies and regulations are important tools for addressing market failures and other inefficiencies that may reduce welfare and growth, they can also create difficult tradeoffs, particularly if excessive or incorrectly targeted. Weak institutional frameworks, such as in public financial management, can also impede growth by reducing the efficiency and scale of public and private investment.
A new survey of IMF G20 country teams, conducted for this year’s report, highlights the prevalence of policy-related impediments to growth in three areas: business regulations and labor markets, intrajurisdictional barriers, and investment barriers.
Around half of the G20’s advanced economies and three quarters of emerging markets face constraints from excessive labor-market, product-market, or consumer protection regulations, our survey shows. Yet some economies have too little regulation in these areas.
