Page 18 - Policy Economic Report -August 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

The potential gains from such reforms are substantial, although they generally materialize gradually. The
IMF's broader analysis of structural reforms indicates that closing part of the gap with more efficient
regulatory and institutional systems could generate meaningful increases in productivity and economic
growth. In Europe, for example, the IMF estimates that reforms addressing labour markets, product-
market regulation and governance could raise average annual GDP growth during 2030–40 by around 0.5
percentage point in advanced economies and 0.7 percentage point in Central, Eastern and Southeastern
European economies.

An important consideration is that the design and sequencing of reforms matter. Product-market and
governance reforms can often be introduced without intensifying cyclical weaknesses and may therefore
be prioritized during periods of economic uncertainty. Labour-market reforms require greater attention
to timing because their short-term effects can vary depending on the measures adopted and prevailing
economic conditions. The IMF also stresses the importance of complementary policies and institutional
capacity to ensure that reforms are implemented effectively rather than remaining limited to legislative
changes.

For developing economies, strengthening institutional capacity can be particularly important.
Improvements in governance, regulatory clarity and the business environment can help attract
investment, support entrepreneurship and increase participation in global value chains. Effective
institutions can also improve the efficiency of public spending and revenue collection, creating fiscal
benefits alongside the direct gains from higher productivity. In this context, structural reform is not simply
a regulatory exercise but an important component of strengthening an economy's long-term productive
capacity.

The IMF's assessment therefore highlights that well-designed regulation should focus on improving
market functioning rather than simply reducing regulation. A more efficient regulatory environment can
encourage competition, investment and innovation while continuing to protect legitimate social and
economic objectives. For economies seeking to raise potential growth amid demographic pressures,
technological change and heightened global uncertainty, strengthening labour markets, product markets
and institutions can provide an important foundation for sustained and inclusive economic expansion.

3. Financial market reforms could lift Europe's growth - IMF

Europe's fragmented financial markets continue to constrain the ability of businesses—particularly young
and innovative firms—to obtain financing and scale across borders. Despite having substantial household
and institutional savings, Europe has not been able to channel these resources efficiently towards high-
risk, high-return investment opportunities. Differences in banking regulations, deposit-insurance
arrangements and insolvency frameworks continue to impede cross-border lending, while restrictions
affecting pension funds and insurers limit the availability of long-term risk capital and venture capital.

The IMF's analysis finds that even a moderate reduction in barriers to cross-border banking could raise
European Union GDP by around 2 per cent over the long term. Better integration would allow savings to

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