Advanced economies have taken longer than expected to recover from the global financial crisis. More recently, the short-term outlook for global growth has brightened. Trade volumes have grown and business and market sentiment have improved. Looking further ahead, however, several factors will weigh on the world’s economy.

In the developed world, productivity gains associated with technology advances in the 1980s and 1990s have largely been exhausted and new advances in information and communications technologies have not yet translated into higher productivity across economies. Real wage growth is not expected to improve unless productivity increases, particularly in developed economies.

Ageing populations will impede the productive capacity of economies such as Japan, China and the European Union. In response to cyclical crises, major economies have little room for stimulus because of high public debt and low official interest rates. China’s economy is also slowing as it matures and this will affect global growth rates.

Despite changes to financial regulation and supervision since the global financial crisis, risks remain in the global monetary system. These include high debt in major economies and potentially destabilising increases in borrowing costs as developed economies normalise monetary policy.