The IMF has become a cheerleader for more infrastructure spending

The IMF has become a cheerleader for more infrastructure spending. The Fund's latest World Economic Outlook, due for release this week with updated forecasts, includes a chapter dealing with the beneficial impact of more spending on infrastructure. The Fund believes that now would be a good time to raise spending on infrastructure since there is a clear need, financing costs are low and opportunities to remove production bottlenecks would spur growth. The IMF has estimated that spending an additional 1% of GDP would contribute an extra a 0.4% to GDP in the first year and 0.5% in four years. The analytical work is a part of the IMF's lobbying to stimulate growth. Its judgments about the need for more investment in productive capacity have been affected by a succession of lower than expected growth outcomes to which the Fund has had to accommodate its policy recommendations. The Fund now fears that global growth potential may have been permanently eroded by a lack of investment, raising the prospect of a lengthy period of mediocre growth outcomes.