The energy price shock due to Russia’s war in Ukraine has disrupted the recovery, with growth projected at a modest 0.4 per cent this year and 1 per cent in 2024, it said.
The terms of trade shock, amid historically tight labour markets, has also pushed inflation to record levels, and bringing down inflation is a prerequisite for lasting stability and growth, IMF noted in a review of the country’s economy.
Productivity growth has been sluggish, reflecting a slower pace of innovation and technological diffusion, it said.
A stable, long-term strategy to promote business investment—including a permanent set of tax incentives that could potentially apply to investments other than plant and machinery—would strengthen investor confidence, it suggested.
Public infrastructure investment, notably in transport, health, networks and the green transition, could crowd-in private investment, it noted.
Liberalising the planning system would reduce barriers to investment in new industries and facilitate the mobility of both firms and workers. The authorities could also consider unlocking pension and insurance savings for investment in higher-return projects, while being mindful of any implications for financial stability, IMF said.
Upskilling and knowledge development, and higher investment in the education and training of young adults, can strengthen human capital and raise labour productivity, it added.
ALCHEMPro News Desk (DS)
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