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ECONOMY

expanded and better-targeted social safety nets, re- alongside the encouragement of competition and an
forms to encourage competition and a sound regula- effective regulatory environment can be beneficial
tory environment can be pro-poor and pro-growth. both to poverty eradication and to growth. And while
inflation has declined sharply among low-income
HOW TO REKINDLE GROWTH? countries over the last 25 years, keeping it low and
How to rekindle productivity growth? The outlook for stable cannot be taken for granted.
productivity remains challenging. Therefore, efforts
are needed to stimulate private and public invest- WAY FORWARD
ment; upgrade workforce skills to boost firm produc- Low inflation is associated with more stable output
tivity; help resources find the most productive sectors; and employment, higher investment, and falling pov-
reinvigorate technology adoption and innovation; erty rates. However, rising debt levels and fiscal pres-
and promote a growth-friendly macroeconomic and sures could put some economies at risk of disruptions
institutional environment. that could send prices sharply higher.
Two other issues merit consideration in this edition Strengthening central bank independence, mak-
of the outlook: adverse consequences of price con- ing the monetary authority’s objectives clear, and
trols and inflation prospects in LICs. cementing central bank credibility are essential to
While price controls are sometimes considered keep prices anchored. If policy-makers manage to
a useful tool to smooth price fluctuations for good mitigate tensions and clarify unsettled issues in a
and services such as energy and food, they can also number of areas — they could prove the forecast
dampen investment and growth, worsen poverty out- wrong by sending growth higher than anticipated.
comes, and lead to heavier fiscal burdens. Replacing
them with expanded and targeted social safety nets LETTERS@TEHELKA.COM

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