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IMF calls for advanced economies to sequence labor and product market reforms to boost economy

Xinhua, April 7, 2016 Adjust font size:

The International Monetary Fund(IMF) on Wednesday called for advanced economies to sequence their labor and product market reforms to overcome persistent weakness of growth.

Labor and product market reforms can help advanced economies overcome the lasting sluggish growth since the global financial crisis through raising potential output and employment level over the medium term, the IMF said in its biannual World Economic Outlook (WEO) report.

"Prioritizing and sequencing (labor and product market) reforms can be particularly important for optimizing their impact in the current environment of persistent slack in most advanced economies," the IMF said.

"The impact of labor market reforms varies across types of reforms and depends on economic conditions," said the report. "Reforms that entail fiscal stimulus will be the most valuable, including reducing labor tax wedges and increasing public spending on active labor market policies."

In contrast, reforms to employment protection arrangements and unemployment benefit systems are beneficial in economic good times but can have detrimental effects when the economy is weak, said the report.

"Product market reforms should also be prioritized, because they boost output regardless of overall economic conditions and because they do not weigh on public finances," said the IMF. Enditem