Potential growth in these countries has fallen during the last decade and the possibility of further declines down the road is high.11 While part of the explanation lies in the evolution of demographic dynamics, low investment rates and dismal productivity growth are at the heart of these trends.
In view of the complex nature of the factors behind long-term developments such as these, major efforts must be made to sustainably enhance these economies’ productive capacity. Domestic policy efforts have a central role in facing these challenges.