National industrial policies can be effective, but they carry risks, IMF says

By Andrea Shalal

WASHINGTON (Reuters) -More countries are seeking to reshape their economies using public support for specific firms and sectors, but subsidies and other industrial policies can be costly and may not be effective unless carefully utilized, the IMF said on Friday.

The International Monetary Fund, in a chapter of its forthcoming World Economic Outlook, said industrial policies can help countries bring production onshore and catch up with other global players in a targeted sector, but they can also drive up consumer prices and lead to a misallocation of resources.

The chapter, which examined industrial policies in the European Union, China, Brazil and South Korea, concluded that well-designed and targeted support could help sectors, but subsidies needed to be carefully craf