With the pandemic affecting SMEs the most, the IMF managing director warns that dominant companies are “even stronger while their smaller competitors are left behind.
The covid-19 pandemic has reinforced the concentration and market share of large companies, resulting in a brake on growth and innovation, according to a study published Monday by the International Monetary Fund (IMF).
“We see growing signs in many sectors that market power is clamping down in the absence of strong competitors for dominant firms,” IMF Managing Director Kristalina Georgieva said, quoted by EFE, at a conference organized by the Bruegel and Brookings ‘think tanks’.
Georgieva highlighted how the crisis triggered by the covid-19 pandemic has hit small and medium-sized enterprises particularly hard, allowing “dominant companies to emerge even stronger while their smaller competitors are left behind.”
One example is the concentration of profits among the top four ‘players’ in an industry, according to the IMF report titled “Rising corporate market power: Emerging policy issues.”
“We estimate that this concentration may now increase in advanced economies by at least as much as it increased in the 15 years to the end of 2015. Even in sectors that have benefited from the crisis, such as the digital sector, dominant ‘players’ are among the big winners,” the IMF chief commented.
One of the clearest factors is the ‘boom’ in mergers and acquisitions which, according to the study, may weaken incentives for innovation and strengthen the ability of companies to raise prices.
The IMF will present its “Global Economic Outlook” report in early April with new projections for world growth.
In January, the Fund forecast global economic growth of 5.5 percent for 2021, following a 3.5 percent contraction in 2020.
In recent months, however, Georgieva has warned of the danger of a differentiated recovery due to unequal access to vaccines, concentrated in the advanced countries, which could lead to problems of economic stability in the developing world.
