PwC Economists Call on Businesses to Help Increase Productivity Rates in G7 Countries

The recent increase in economic activity in the advanced economies of the G7 countries is attracting the attention of policymakers. However, is the optimism justified? More importantly, can the growth be sustained? In the latest edition of Global Economy Watch, PwC economists turn their attention to advanced economies and call on businesses to help increase productivity rates.

Economists say that specific data indicates a slight acceleration of economic growth in G7 countries to 1.7% compared to the last quarter of 2016. The average growth rate post-crisis is 1.8%. Furthermore, what fuels optimism is the widespread recovery across G7 countries, as evidenced by the smallest difference in growth rates among countries in the last 20 years.

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PwC economists have identified three reasons for this turnaround:

• First, the continuous favorable monetary policy in G7 countries, particularly in the Eurozone, despite the gradual rise of U.S. rates following recent historical lows.
• Second, governments are beginning to spend more, and some are implementing infrastructure plans.
• Third, the increase in demand from large (E7) emerging markets, partially driven by fiscal stimulus in China, as well as a turnaround in economic activity in Brazil. This is confirmed by the latest trade data showing that imports from emerging markets continue to grow compared to last year.

Will this continue in the future? Most subjective data based on surveys indicate that the momentum has carried into the first quarter of this year. This cannot be confirmed until concrete GDP data is released at the end of this month, with the U.S. and the UK being the first to do so on April 28. However, policymakers must focus on the key factor that determines long-term living standards: productivity.

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“Our analysis shows that the growth of productivity in G7 countries post-crisis is two-thirds slower than its average long-term rate,” says Barret Kupelian, senior economist at PwC.

It is common for governments to take on the responsibility of promoting reforms across the economy. For example, they can help kickstart large public investment projects or invest more in schools.

“However, we believe that businesses also play an important role, especially from an individual perspective,” adds Barret Kupelian. “Management techniques that represent best practices can, for example, impact national productivity rates if implemented in numerous companies.