The Past and Future of RegionalPotential Growth : Hopes, Fears, and Realities

Potential growth slowed in most emerging market and developing economy (EMDE) regions in thepast decade. The steepest slowdown occurred in the Middle East and North Africa (MNA), followed by East Asia and thePacific (EAP), although potential growth in EAP remained one of the two highest among EMDE regions, the other being SouthAsia (SAR), where potential growth remained broadly unchanged. Projections of the fundamental drivers of growthsuggest that, without reforms, potential growth in EMDEs will continue to weaken over the remainder of this decade.The slowdown will be most pronounced in EAP and Europe and Central Asia because of slowing labor force growth and weakinvestment, and least pronounced in Sub-Saharan Africa where the multiple adverse shocks over the past decade are assumedto dissipate going forward. Potential growth in Latin America and the Caribbean, MNA, and SAR is expected to bebroadly steady as slowing population growth is offset by strengthening productivity. The projected declines inpotential growth are not inevitable. Many EMDEs could lift potential growth by implementing reforms, with policypriorities varying across regions.