Remarks by Angel Gurría
Washington, USA - 19 April 2018
(As prepared for delivery)
Ministers, Central Bank Governors,
The latest OECD Interim Economic Outlook forecasts show a welcome continuation of the broad-based expansion with global GDP growth around 4% this year and next. Trade and investment have bounced back. Millions of new jobs are being created and the unemployment rate in the OECD area has fallen below its pre-crisis level. While this is good news, the expansion could easily be derailed or run out of steam. Let me focus on three risks.
First, an escalation of current trade tensions could derail the recovery. The international rules-based trading system has brought huge benefits, creating new opportunities and helping to lift millions of people out of poverty.
While there are genuine challenges and frustrations in the global trading system today, only international co-operation can bring lasting solutions. Protectionism doesn’t bring long-term solutions; it just leads to more protectionism. A good example of international collaboration is the Global Forum on Steel Excess Capacity, where countries have been making efforts to implement the necessary reforms in a coordinated and cooperative manner.
Second, calibrating monetary and fiscal policies as cycles mature in different countries at different speeds will require skill and continued international dialogue. While the tightening of US monetary policy rates since late 2015 has been smooth, high debt and high asset prices in many countries create vulnerabilities and leave little room for error. Reducing these vulnerabilities requires inter alia active and timely deployment of prudential and supervisory policies.
Third, if we want to sustain growth beyond the cyclical upswing, boost investment and productivity, create more and better paying jobs, improve opportunities and strengthen inclusion, we need comprehensive structural reforms.
Some countries have introduced bold reforms: these include the labour market in France; access to childcare services in Japan; the goods and services tax in India, and a comprehensive tax reform in Argentina.
But, overall reform progress has been disappointing. Our latest Going for Growth report shows that, while almost half of the reform recommendations were followed by action in 2011-12, the share has fallen to only a quarter now. The Report shows that most countries still have ample scope for tax reforms that can reconcile growth and inclusiveness. Many countries can also further improve business dynamism for example by reforming insolvency regimes. Finally a lot more can be done to boost investment in skills, which are crucial for the Future of Work and the growth of productivity.