For over 30 years, the mechanisms of macroeconomic governance in advanced economies were well known. The toolkit included changes to interest rates and balance sheets by central banks, while inflation targets functioned as anchors for expectations. When crises struck, as they inevitably do, monetary policy safety nets functioned as the first and possibly only line of defence. This framework worked for a while, but the world has evolved beyond that.
The current macroeconomic circumstances are characterised by structural conditions that cannot be addressed through traditional monetary policies. Public debt is high both in absolute terms and, importantly, in terms of the debt maturities countries face in a constant cycle of refinancing. Ageing demographics are leading to lower organic economic growth and tax bases in developed countries. Political tolerance for austerity, aggressive tightening, or repeated rounds of unconventional monetary stimulus has eroded. Moreover, geopolitical stress and polarisation have accentuated the strategic value of industrial strength and technological innovation.
In this context, technology is no longer a background variable influencing long-run growth. It is increasingly becoming a de facto macroeconomic stabiliser, driving how countries refinance their debt, grow and maintain political legitimacy during times of fiscal distress. Countries are increasingly trading off productivity-enhancing technologies and dual-use innovation, as well as financial infrastructure upgrades, to improve competitiveness and refinance, stabilise, and maintain confidence, without necessarily expanding the traditional role of monetary policy. Understanding this shift is essential for policymakers, investors, and analysts navigating the near- term horizon.
Download the Policy Outlook
