Global productivity forecast to rise 1.2% in '23: The Conference Board

The boost in global productivity seen during 2020 was primarily due to the pandemic-induced shutdown of service-sector activities, which tend to have lower productivity levels. This sector closure drove up productivity across the economy. However, this effect quickly reversed as these less productive, labour-intensive service sectors reopened in 2021 and 2022, resulting in a robust GDP rebound of 6.3 per cent in 2021 and 3.2 per cent in 2022. However, most of this expansion was driven by a surge in labour inputs (hours worked), not improved productivity.

In 2023, global GDP growth is projected to be a modest 2.3 per cent, resulting from a slight rebound in GDP per hour worked to 1.2 per cent and a 1.1 per cent increase in total hours worked. These numbers reflect not just the mechanical effects of reopening but also the impact of new economic shocks such as supply chain disruptions, inflation and interest rate hikes, and geopolitical events like the Ukraine war, as per The Conference Board’s brief.

The brief suggests that labour productivity growth might improve to just below 2 per cent per year over the next decade, buoyed by breakthroughs in technology and businesses' focus on accelerating digital transformation. However, the speed and efficacy of adopting these new technologies remain key variables dictating their impact on productivity, leading to considerable uncertainty about future productivity prospects.

The growth of labour productivity in mature economies has been notably weak, with the US expected to see productivity decline substantially for the second year in a row. GDP per hour worked in the US is projected to fall by 0.7 per cent in 2023 after a decline of 1.1 per cent the previous year. This downturn is mainly attributed to the booming labour demand in the US and France, leading to a concentration of weakness in these regions.

Contrarily, emerging economies, particularly in Asia, are expected to see a pickup in labour productivity in 2023. Over the past decade, countries like India and China have been major contributors to global labour productivity growth, with average growth rates of 6.3 per cent and 7.6 per cent respectively between 2011-2019. In 2023, India is expected to return to strong productivity growth with a projected increase of 3.3 per cent, while China, emerging from zero COVID lockdowns, is expected to register a productivity growth of 4.8 per cent. However, other developing economies like Brazil, Mexico, and South Africa are grappling with stagnant productivity growth rates, aligning closer to mature economies rather than growth leaders like China or India.

ALCHEMPro News Desk (DP)