In an IMFBlog post, International Monetary Fund staff published analysis showing that industrial policy has expanded sharply in recent years, with governments increasingly using targeted interventions in response to crises and shifting their objectives toward supply chain resilience, national security, and geopolitical concerns. Drawing on the New Industrial Policy Observatory, the authors conclude that industrial policy can improve competitiveness in some cases, but the benefits are usually modest, short-lived, and highly dependent on policy design. The database covers more than 52,000 interventions across 75 countries since 2009 and shows that the number introduced last year was 2.5 times the pre-pandemic average. It also records at least 305 industrial policy measures linked to the war in the Middle East in its first two months. Product-level gains are concentrated in sectors that were already competitive. Firm-level subsidies lift capital spending, but productivity and output effects fade or can reverse after a few years, while export incentives have little effect on firm performance. Stronger results appear when measures target sectors with large market distortions, support the green transition, or focus on upstream supply chain components, with effects in some distorted sectors as much as four times larger. The authors add that institutional and regulatory improvements can raise output in inefficient industries by as much as 10 percent in the medium term, about five times the boost seen after industrial policies, and warn that uncoordinated subsidies can trigger costly cross-border spillovers and subsidy races.
International Monetary Fund2026-05-28
International Monetary Fund research finds industrial policy rose to 2.5 times the pre pandemic average but gains are mostly temporary
International Monetary Fund staff report that industrial policy interventions have expanded sharply, with governments increasingly targeting supply chain resilience, national security, and geopolitical objectives. Using the New Industrial Policy Observatory database of over 52,000 measures in 75 countries, they find that firm- and product-level gains are typically modest and short-lived, with stronger effects when policies address large market distortions, support the green transition, or target upstream supply chains. The authors note that institutional and regulatory reforms can deliver larger medium-term output gains than subsidies and warn that uncoordinated support measures risk costly cross-border spillovers and subsidy races.