IMF: doubling investment in R&D would increase GDP by 2%

He International Monetary Fund (IMF) He stated this Wednesday that increasing public spending on research and increasing tax incentives to encourage innovation by 0.5 percentage points of gross domestic product could increase GDP by up to 2% in the case of an average advanced economy.

This percentage means doubling the current average level of the economies of the Organization for Economic Cooperation and Development (OECD)points out the institution, which points out that in the long term it could help to achieve a lower public debt/GDP ratio.

This Wednesday, the Fund released a chapter of its Fiscal Monitor titled “Broadening borders: fiscal policies for innovation and technology diffusion,” which examines the role of fiscal policies in promoting innovation.

The report also focuses on how to design policies to boost productivity growth and thereby accelerate the green and digital transitions, at a time when governments have limited fiscal space and medium-term growth prospects are weak.

In recent years, many countries have carried out plans to promote innovation such as the United States Chips Law or the Green Deal Industrial Plan in Europe, given security concerns and the need to reactivate growth and decarbonize their economies. points out IMF.

But industrial policies are “prone to political errors and have high fiscal costs.”

In a call with reporters, Era Dabla-Norris, deputy director of the IMF’s fiscal affairs department, said these policies should not be seen “as a magic cure for slow growth” since history shows that “there are many caveats” and “mistakes” about “high fiscal costs.”

”Using industrial policy to promote innovation can generate gains if social benefits or externalities can be well identified and measured and subsidies are given to sectors that generate greater knowledge spillovers to other sectors,” Dabla-Norris added.

For example, although the returns may be particularly high in the case of investing in green technologies to reduce carbon emissions, “misallocation of resources” is “a real risk” since “most policies depend on large measure of costly subsidies and the potential gains from a strict restriction could quickly turn into considerable losses.”

Among the advice given by the Fund is not to discriminate against foreign companiessince “it can be counterproductive” given the possibility of “costly retaliation,” said Dabla-Norris.

The IMF will publish the full Fiscal Monitor next week as part of the spring meetings of the IMF and the world Bankwhich will be held between April 15 and 19 in Washington, where the headquarters of these institutions are located.

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