Ultra-accommodative monetary policies and regulatory changes in recent years have created an environment that is not conducive for sustainable economic growth. Such extraordinary policies have led to a "search for yield", but, sadly, not a "search for growth".
Furthermore, growth in developing markets is slowing – it seems that their models of export-driven growth are breaking down.
At the Financial Times Growth Markets Summit in New York on 2 December, I participated in a panel discussion on the key structural elements required to stimulate growth. Panelists, who included Jay Ireland of GE Africa and Alejandro Werner of the International Monetary Fund, agreed that the "diagnosis" of the problem comes down to the low interest rate environment and high debt burdens.
Structural and institutional reforms are urgently needed in many emerging economies in order to bolster growth and enable long-term social progress. Stable governance, regulatory systems that encourage investment and decent infrastructure are the foundation for this. But central banks' unconventional policies are diverting policymakers' attention from structural reforms.
Standardisation of "growth-friendly" infrastructure investments would be one important step towards a healthy growth environment. A level playing field and strengthened investor rights would enable long-term investors, such as insurers, to finance infrastructure projects desperately required in many emerging economies.
If private market funds could be unlocked to secure power supplies or build railways, jobs would be created and productivity would rise. Just imagine the flourishing growth opportunities.
Location: New York, NY, United States