A new study of the World Bank has said the productivity growth in developing countries that is responsible for lifting millions of people out of poverty will need substantial support from policymakers if it is to withstand the severe challenges posed by the Covid-19 pandemic's economic shock.
According to the report titled "Global Productivity: Trends, Drivers, and Policies," productivity growth has been declining globally and in emerging market and developing economies since the 2007-2009 financial crisis, in what is the steepest, longest and broadest productivity deceleration of recent decades.
The study warns that the Covid-19 pandemic could depress labour productivity even further for years to come unless urgent policy action is taken.
World Bank Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu, said, "Productivity levels in emerging markets and developing economies remain less than 20 percent of the average in advanced economies, and only two percent in low income countries."
"A possible silver lining may be that changes in behavior from the pandemic will accelerate the adoption of new technologies, greater efficiencies among businesses and the pace of scientific innovation. However, it is vital to ensure that these gains are widely distributed and that technology-driven labor market disruptions are well managed," she added.
The report collects data from 35 advanced economies and 129 emerging market and developing economies.
"It finds factors that have spurred productivity growth – such as working age population growth, educational attainment, and growth of global value chains – have faded or gone into reverse since the 2007-09 global financial crisis," said a press release from the World Bank.
According to the report, the collapse of global trade and disruptions in global supply chains during the current pandemic, if prolonged, could be particularly damaging to prospects for productivity growth among emerging market and developing economies.
"While emerging market and developing economies have historically lagged advanced economies in productivity levels, falling poverty rates in recent decades had been an encouraging sign that some of these economies had made productivity and income gains," said the World Bank press release.