Communication is key to economic reforms

According to an International Monetary Fund blog jointly written by Silvia Albrizio, Bertrand Gruss and Yu Shi, the global economy is stuck in a low-growth gear, largely because of aging populations, weak business investment and structural frictions that prevent capital and labor from flowing to where they can be most productive.

- MARIANNE GO

According to their IMF blog, demographic pressures are intensifying, and the green and digital transitions call for significant investment and resource reallocation across companies and industries. However, based on their observation, some countries are poised to fall further behind, making it even more urgent to update the rules that shape how economies operate. They point out that although specific policy priorities differ across countries, many economies share the need to ease market entry for new businesses, foster competition in the provision of goods and services, encourage workers to stay in the labor force, and better integrate immigrant workers.

Reforms, they argue, need broad societal support, yet public discontent has mounted since the global financial crisis.

To build trust and public support, they point out, policymakers need to improve communication, engage the public when designing reforms, and recognize that some people may need support if the reforms hurt them.

Based on their analysis of factors that shape public attitudes toward reforms, they noted that resistance often extends beyond mere economic self-interest.

Personal beliefs, perceptions, and other behavioral factors, their research showed, account for about 80 percent of support for reforms from more than 12,000 people across six representative countries.

Crucially, they said, knowledge and misperceptions about the need for reform and the effects of policies are the primary predictors of differences in policy support. This is important - and encouraging - because it offers a clear area for policymakers to act.