IMF: companies in EU expand, lag behind American counterparts
Date
9/12/2024 4:14:49 AM
(MENAFN) According to a report released by the International Monetary Fund (IMF) on Wednesday, companies in the European Union (EU) lag behind their American counterparts in terms of growth and innovation. The IMF's findings highlight a significant productivity gap between firms in the US and Europe, with the disparity being particularly pronounced in the technology sector. The report notes that while market valuations of US-listed companies have more than tripled since 2005, those of European companies have increased by only 60 percent during the same period. Productivity in US tech companies has surged nearly 40 percent since 2005, whereas European tech firms have seen minimal improvements in this regard.
The report attributes this gap to much higher levels of innovation efforts in the United States, where research and development (R&D) spending as a share of sales is more than double that of Europe. In contrast, Europe faces broader issues with business dynamism beyond its large corporations. The continent has a lower number of startups, and those that do emerge often struggle to grow rapidly or achieve significant scale compared to their American counterparts. The IMF highlights that the fastest-growing startups in the US employ six times more people than similar startups in Europe, based on their share of total employment.
To address these disparities, the IMF recommends deepening the European single market to alleviate growth constraints for Europe's most productive firms. Removing remaining trade barriers within the EU and advancing the capital markets union could provide stronger incentives for firms to invest in research and development, thereby fostering greater innovation and competitiveness. The report also points out that average income per person in the EU is approximately one-third less than in the US, largely due to lower productivity levels.
The IMF emphasizes that a robust and dynamic business sector is essential for closing the productivity and income per capita gap between Europe and the United States. Strengthening the EU's business environment and supporting entrepreneurial growth are seen as key steps towards improving economic performance and reducing the productivity disparities highlighted in the report.
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