The Intentional Monetary Fund has offered a solution to persistently sluggish global economic growth. In its biannual World Economic Outlook, the fund proposed structural changes to labor markets and some more heavily regulated business sectors. It said these reforms could help lift potential output over the medium term and also strengthen consumer confidence in the near term.

The IMF acknowledged these reforms could cause near-term falls in wages and price deflation. To cushion negative shocks, fiscal stimulus measures should be put in place.

Also in this report, the IMF said emerging markets are coping better with recent capital outflows due to stronger reserve buffers, less foreign currency debt and more flexible exchange rates.