WASHINGTON: It is absolutely critical for European countries to boost growth and productivity to catch up with the United States, a senior IMF official told AFP, calling on policymakers to make “smarter” spending choices.
The International Monetary Fund estimates that global public debt levels will rise to 100 percent of economic output by 2029, with much of that increase driven by the world’s largest economies.
In its recent Fiscal Monitor report on global tax-and-spend policies, the IMF called on countries to spend their money more wisely by reallocating existing spending into areas like research and development which boost economic growth, and by spending money more efficiently as well.
“For advanced economies in particular, it’s really hard to find room for maneuver because there’s very little discretionary spending,” Era Dabla-Norris, the deputy director of the IMF’s Fiscal Affairs department, said in an interview at the Fund’s headquarters in Washington.
Europe has lagged far behind the United States when it comes to economic growth, making it “absolutely critical” for policymakers there to tweak how they spend in order to boost growth and productivity, she added.
The IMF calculated that if advanced economies — including Europe — took spending on administrative overheads, which equals just one percent of GDP, and channeled it into spending that boosted private investment, and research and development, that could raise output by 1.5 percent over the next five to 10 years.
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