PRODUCTIVITY & COMPETITIVENESS

Emerging Markets Are Leading the Global Productivity Slowdown

There is no rebound in sight for global productivity. The latest release of annual productivity growth rates from
The Conference Board reveals that growth in global output per worker slowed in 2015 primarily because of a
drop in output growth in emerging markets and developing economies.
Trend growth of labor productivity (output per person). Major regions 1971 2015.

Notes: Labor productivity is defined as output per person. Trend growth rates are obtained using HP filter,
assuming a =100. *Based on TCB data series. Source: The Conference Board Total Economy Database,
May 2016.
The Conference Board Asia Insights Jun 23 2016.

The 2016 Productivity Brief report illustrates that productivity growth continues to trend down in all regions of the
world. Globally, productivity growth was 1.2 percent in 2015, compared to 1.9 percent in 2014. In China*, labor
productivity growth dropped to 3.3 percent in 2015 from 5.2 percent in 2014. And resource-rich economies in
Latin America, Africa and Russia are experiencing declining productivity on the back of falling oil prices. However,
other major Asian economies, including India, are holding up relatively well.
Productivity growth is a powerful indicator of economic efficiency, and a key measure when analyzing recovery
and sustained growth among countries. Productivity growth frees up resources for investment in future sources of
economic growth, including innovation and technological change, creating a positive cycle of higher productivity,
more output growth, and increasing living standards.
The Productivity Brief report indicates that:
The global productivity slowdown is driven primarily by emerging markets, as weaker output growth,
especially in economies highly dependent on lower-priced natural resources and commodities, has not been
accompanied by reduced employment growth. Productivity growth among emerging markets and developing
economies was 1.7 percent in 2015, down from 3.0 percent in 2014, but is projected to improve to 2.2 percent in
2016.
The slowdown in Chinas economy is almost entirely reflected in weaker productivity growth, as
employment growth is already sluggish in a highly over-invested economy. However, modest productivity gains
are possible in 2016, as companies slow additional hiring. The Conference Board reports China productivity
growth as 3.3 percent in 2015 compared to 5.2 percent in 2014, but with a forecast increase to 3.6 percent in
2016.
Productivity growth in India and other emerging Asian economies declined moderately to 5.2 percent in
2015 from 5.3 percent in 2014 for India, and to 2.8 percent from 3.9 percent for the same period in other emerging
Asia economies. However, the long-term trend in Indias productivity growth is in decline, whereas other emerging
Asian economies are still catching up. Average productivity growth during 2011 - 2015 was higher compared to
2006 - 2010 in most emerging Asia economies, with notable gains in Indonesia, Pakistan, the Philippines and
Vietnam, and moderate increases in Bangladesh, Cambodia, Malaysia, Sri Lanka and Thailand. An exception is
Myanmar, which has seen a significant decline.
Any improvements in productivity growth will come primarily from resource-rich economies, such as
Brazil, Russia, the Middle East and sub-Saharan Africa if prices of natural resources and commodities continue
to hold at current levels.
In summary, productivity growth has been trending down globally over the past decade. Several factors are in
play. Mature economies are still struggling to recover from the impact of the financial crisis and recession,
possibly a precursor to long-term stagnation. In emerging markets productivity growth trends are exhausted, and
further stymied by regulatory and policy measures that inhibit growth, as illustrated in our report Prioritizing
Productivity. And finally, developments in technology and innovation have translated poorly into new economic
growth. As highlighted in our report Navigating the Digital Economy, the slowing of the pace at which innovations
spread throughout the economy may be a key factor in driving growth. Business cannot be complacent.
Asia Insights is a regular delivery of research, analysis and opinion on business issues and trends for members
of The Conference Board in Asia. We welcome your questions or a discussion with you and your colleagues on
what the information presented here may mean more specifically for your business. Contact us at
service.ap@conference-board.org

The Conference Board Asia Insights Jun 23 2016.

Related knowledge resources from The Conference Board include:

Productivity Brief 2016
Prioritizing Productivity Report
Navigating the Digital Economy
The Economy & Business Environment Practice
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The Conference Board Asia Insights Jun 23 2016.