As a result of a deep and persistent deficiency in aggregate demand, the US economy has been operating far below its potential output level. Real GDP fell by 8 relative to its noninflationary potential in 2008 2009, and has remained about 8 below its previous growth path ever since.

This new round of central bank activism reflects persistent concerns about economic growth. Despite a once unthinkable amount of monetary stimulus, global output remains well below potential, with the potential itself at risk of being suppressed.

China s Untapped Growth Potential

Since Abenomics was launched, the deflation gap (the difference between actual and potential output) has dropped from roughly three percentage points to below 1.5. This implies that, while the first two arrows are helping to improve Japan s actual growth path, the third arrow has yet to do much for potential growth.

So India s medium term growth potential lies well below that of China in recent decades. A significant boost in infrastructure spending and policy reforms can make a difference, but it cannot close the gap.

The aim of the concept of potential as opposed to actual GDP is to take into account that, like an engine, an economy often operates below or above potential. In a demand driven recession, actual output falls below potential, which results in a rise in unemployment.

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Farther to the west, US economic performance is weakening, with first quarter growth a miserly 1.9 well below potential. And job creation faltered in April and May, so the US may reach stall speed by year end.

The US is adjusting structurally and generating real (inflation adjusted) GDP growth (though well below its potential annual rate of 3 3.5 ). The tradable sector is expanding and is not dependent on leverage to generate aggregate demand.

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SHANGHAI China s economic slowdown, from a nearly 10 annual output gain in 2007 to below 8 today, has fueled widespread speculation about the economy s growth potential. While it is impossible to predict China s future growth trajectory, understanding the economy s underlying trends is the best way to derive a meaningful estimate.

Yet America s actual economic growth in 2014 will remain well below potential. Moreover, the US economy s performance remains overly dependent on the Federal Reserve s experimental monetary policies, courageously adopted in the absence of adequate measures by other economic policymakers.

Earlier this year, the Congressional Budget Office warned that the potential US growth rate has declined as a result of years of subpar investment rates, the aging of the population, and smaller productivity gains. Every year of below capacity growth means lower growth capacity in the future, owing to lost investment, erosion of worker skills and experience, and diminished risk taking.

While there is a tendency to overrate the impact of the oil windfall on current growth, analyses based on long term trends suggest that the economies of the ESCWA member countries have performed well below their potential since the early 1980s.

Continued progress in these areas will increase the region's resilience and growth potential.

The US seems to be settling into annual real (inflation adjusted) growth rates of around 2 , though whether this is at or below the economy s potential remains a source of heated debate. Meanwhile, China seems to be headed for the 6 7 growth rate that the government pinpointed last year as the economy s new normal.

We recognize the potential of South South cooperation in promoting economic growth and development.

Ethiopia s development potential is closely tied to seasonal rains, so high rainfall variation, together with lack of infrastructure, has undermined growth and perpetuated poverty. A single drought can cut growth potential by 10 over an extended period.

After all, economic growth, while unnecessarily held below potential by Congress (and vulnerable to decline if Congress is not careful), has again outpaced that of Europe. The budget deficit has fallen markedly, while companies and households, too, have continued to strengthen their balance sheets.

So here, too, the logic points to a vicious circle Slower growth leads to artificial remedies and further erosion of long term growth potential.

Indeed, most established parties are so busy playing defense that they have little inclination to engage in the type of forward looking strategic thinking that is needed to re energize exhausted growth models, anchor financial stability, and ensure that technological innovation enables broad based prosperity. As a result, Western economies are running chronically below their potential and risk undermining their future potential.

Under the circumstance that is lack of more sustainable investment growth to boost economic growth potential, current fiscal policy driven growth will be unsustainable, Economist Barclays indicated in a research report.

But such a sharp decline in potential growth typically implies a powerful brake, in the form of an external shock or major internal adjustments. Under normal circumstances, an economy s potential growth rate adjusts naturally and gradually, as structural change progresses.

But the first half growth rate looks set to come in closer to 1.5 at best, even below 2011 s dismal 1.7 . And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices, and a resurgence of US manufacturing will boost growth in the second half of the year and fuel above potential growth by 2013.

On balance, then, the multispeed growth patterns of the past decade are likely to continue. Even as the developed economies experience an extended period of below trend growth, the emerging economies will remain an important growth engine.

However, the growth response in many developing countries was anaemic average annual per capita growth rose marginally above that of the 1980s, but remained well below that of the 1970s.

The importance of the link between economic growth and the reduction of acute poverty must be emphasized (see figure below).

In order to realize their fullest potential, developing countries need a sustained period of social and economic growth.

Average annual growth, at only 2.4 , is well below what is needed and possible for a country with such enormous human and natural endowments, a prime location on the United States doorstep, and considerable catch up potential. Moreover, Mexico s growth record is far inferior to that of some other countries that started with a lot less and yet leap frogged it (and other Latin American economies).

In the emerging world, India and Brazil are just two examples of economies where inadequate investment has kept growth below potential (though that may be changing in India). The notable exception is China, which has maintained high (and occasionally perhaps excessive) levels of public investment throughout the post crisis period.

Preliminary work is under way, in collaboration with academic institutions, on a number of these potential new verification technologies, some of which are discussed below.

To that end, Malawi had developed the Malawi Economic Growth Strategy, which outlined areas of high growth potential, including agro processing, the cotton and textile industry, mining and tourism.

New information and communications technologies were game changers that boosted the potential growth rate of the US economy in the 1990 s. McKinsey s research suggests that shale energy and big data technologies will be game changers with similar benefits for the economy s potential growth over the next several years.

Targets for local private sector fund raising in potential high growth country offices have been set and will be monitored.

When the first and second arrows lift actual growth above potential growth, monetary expansion will no longer be able to produce substantial GDP or employment gains. That is when the third arrow, which aims to boost Japan s potential growth through structural change (including increased private investment, technological innovation, improved trade links, and reformed corporate tax policy), will become far more important.

The extent of potential losses for the cases reported below under (c) and (d) had yet to be determined by UNHCR, since those cases were still pending.

1.124 240,000 children below three years of age will have been monitored for growth and development, screened for anaemia and anaemic children treated.

However, that growth was fragile, because it came from peripheral sectors of the economy rather than from the basic sectors with high growth and job creation potential such as agriculture or mining.

Current conditions are keeping economic performance well below potential. This could be addressed promptly while eliminating inefficiencies and re orienting institutions that were co opted by the old system to serve the few rather than the many would increase potential output significantly.

Build South South trade in goods and services at the bilateral, regional and interregional levels in sectors with high growth potential.

Innovative strategies are needed to combine the benefits of existing technologies along with the potential growth enabled from new emerging technologies.

Japan, by contrast, hesitated to expand its money supply substantially, leaving the yen's exchange rate against the US dollar to appreciate to 76 (from less than 100 before the Lehman crisis), and causing GDP growth to decline further. In 2009, Japan's economy was performing at 8 below potential, even though its financial system was sound.

Their exposure to potential economic shocks, which threaten to push them below the general poverty line, is very high (World Bank, report No. 25343, p. 46, vol. II).

China s rebalancing is apparent, first and foremost, in the export sector. Export growth has slowed from its 2001 2008 average of 29 annually to below 10 , making foreign demand a far less critical engine of growth.

Rising interest rates, high inflation, and severe policy gridlock amid a spate of government corruption scandals have impeded both foreign and domestic investment in India, thus slowing economic growth to a level that is below its potential. An unpredictable regulatory environment, inadequate infrastructure, and a sluggish, monsoon dependent agricultural sector are adding to the economy s problems.