Remarks by Angel Gurría
13 June 2020 - OECD, France
(As prepared for delivery)
Prime Minister Conte, Ministers, Ladies and Gentleman,
Sono onorato di essere qui per questa sessione inaugurale della Consultazione Nazionale. La conversazione di oggi si svolge in un contesto estremamente complicato.
The COVID-19 pandemic has triggered the most severe recession in nearly a century and is causing enormous damage to people’s health, jobs and well-being.
Our latest Economic Outlook, released last Wednesday, paints a very bleak picture. The 6% annual decline in global GDP that we project for 2020 is far bigger than any other decline we have seen in the 60 years of the OECD’s existence.
And this is the “upbeat” scenario without a second wave of infections. In the case of a “double hit” scenario, global GDP could decline by more than 7.5%, with 40 million additional people being unemployed in the OECD by December 2020.
Key sectors for our economies and societies have been hit hard: tourism, hospitality and transport industries have suffered the most. In addition, this year global trade volumes are expected to decline by 9.5% in the single-hit scenario and by 11.5 % in the double-hit.
The challenges that COVID-19 has created are immense. The policies we put in place now will shape our economies for decades to come. Accommodative monetary policies and sustained public spending will be necessary as long as economic activity and inflation are depressed, and unemployment is high. Public support must be well targeted, fair and transparent.
First, we need to bring the pandemic under control. Throughout this crisis, I have stressed that presenting the problem as a choice between health and the economy is to pose a false dilemma. At the same time, it is by now clear that we will need to live with the virus. We will be lucky if we have a vaccine within 1 year or 18 months, not to mention the challenge of manufacturing it at large scale.
Second, policies need to mitigate the inequalities that are being worsened by this crisis. Our analysis shows that the pandemic is exposing the poor quality of many jobs and the lack of access to social protection for many. We have documented that the crisis disproportionately affects the young, those in precarious or informal jobs, those with limited digital connectivity, and women, who make up almost 70% of the health workforce and the overwhelming majority of long-term care workers. Governments should continue to provide well-calibrated safety nets that allow transitions of capital and workers towards expanding sectors and businesses.
Third, we must ensure that we do not go straight into the next crisis: the climate and environmental one. As we focus on sustainable growth, we now have an opportunity to build economic systems that value nature as the central source of human well-being and environmental health in the post-COVID-19 world. Governments must act fast to ensure a green and inclusive recovery; this is particularly important given that improving environmental sustainability also reduces vulnerability to pandemics.
Italy has been severely affected by this crisis. In our ‘’single-hit scenario’’, GDP is projected to fall by 11.3% in 2020 and to recover by 7.7% in 2021. If, however, there is another virus outbreak later this year, Italy’s GDP is projected to fall by 14% in 2020, before recovering by 5.3% in 2021. In both scenarios, the crisis will reverse the gains in employment made in recent years. While Italy’s industrial production may restart relatively quickly, tourism and many consumer-related services are projected to recover more gradually.
The Italian government deserves credit for the quick and decisive actions taken to contain the outbreak and to protect people and businesses. Italy has doubled the number of intensive care beds since the start of the health crisis. You are also supporting workers’ incomes and demand through transfers and short-time work schemes, and boosting firms’ liquidity by guaranteeing loans, deferring tax payments and offering tax credits.
Looking ahead, continued sanitary measures, together with weak confidence and lower demand for exports are likely to slow the recovery. In the context of an uncertain future that risks becoming the "new normal", the resilience of the health system will need to be improved. This implies developing reserve capacity to be mobilised quickly in case of need, investing in an effective primary care system, and enabling widespread use of technology.
We must also remember that Italy's productive fabric is characterised by the marked presence of SMEs and pronounced territorial imbalances, which risk being exacerbated by the crisis. Ensuring swift implementation of SME support measures by removing administrative obstacles is crucial. It is also important to link short-term responses to longer-term structural measures that improve the resilience and competitiveness of SMEs, by accelerating digitisation, helping them to diversify and addressing skills shortages.
I would also like to underline the importance of mobilising alternative financing instruments and channels, to avoid the over-indebtedness of SMEs, and of measures to improve the ability of capital markets to strengthen the balance sheets of companies with equity capital. Otherwise, serious liquidity problems today can become a long term or even medium term solvency problem.
The next phase will also have to take into consideration the heterogeneity between companies, sectors, occupations and areas. For sectors suffering large losses in demand, such as tourism, policy will need to help firms and workers to upgrade their operations and skills, and to innovate.
Beyond the short and medium term challenges, the crisis can also represent a chance to plan and pursue a multi-annual reform programme, in line with the latest recommendations from the OECD Economic Survey of Italy, and an opportunity to transform production and consumption. Notably, the priorities for Italy should be: reducing administrative complexity and improving the effectiveness of the legal system, supporting employment and investment, reducing the large tax wedge on labour income, and guaranteeing workers’ access to retraining. Streamlining and improving access to income support programmes would also prevent large increases in poverty and support demand.
In addition, accelerating the adoption of digital technologies, such as ‘smart working’ and online services, would raise competitiveness. And supporting the renewal of the ageing infrastructure and the transition to lower carbon activities would sustain the recovery and improve well-being.
When phasing out support measures, the government must make sure that it is not done too early. Ending fiscal support prematurely would risk extending the bankruptcies and lost output caused by the crisis, especially in a double-hit scenario.
If there is one thing we have learnt from this crisis, it is that no country can address a pandemic alone.
A substantial part of the policy support needed for the recovery should be organised at the EU level. In this context, the ambitious EU Recovery Plan will not only bring the necessary financial firepower to restore long-term economic growth and competitiveness, but will also strengthen Europe’s cohesion by ensuring that no person, region, or Member State is left behind.
Moreover, the G20 in 2021 will look to Italy for direction and guidance as it navigates the post-COVID-19 world. Under the Italian Presidency, G20 Leaders will have to lead by example and consolidate the collective response to the COVID-19. This will include: accelerating efforts to mitigate the impact on firms and people; restoring consumer and business confidence; preserving financial stability and reviving growth; minimising disruptions to global supply chains; providing help to all developing countries in need of assistance; and coordinating public health measures.
It will also fall upon Italy to assess the full impact of the crisis across different population groups, firms, sectors, places and their governance systems. It will be a time to gather and implement the lessons learnt from the crisis. In short, a time to develop and deliver a “build back better”. We need to seize this opportunity to deeply re-think the growth process, including “beyond GDP” and towards resilience and inclusion-centred goals.
The OECD has been actively supporting our members and partners throughout the COVID-19 crisis. As part of our response, we launched a Digital Hub on Tackling the Coronavirus, providing a single entry point to the OECD’s analysis on the economic and social impacts of COVID-19. To date, we have published almost 100 policy briefs in virtually all areas of our policy work and the Hub has received over 300,000 visitors.
In addition, we have also provided policy advice to global fora such as the G20. We have kept open lines of communication with other multilateral organisations to ensure a co-ordinated and coherent response.
And we have organised a virtual Ministerial Council Roundtable, as well as targeted COVID-19 Ministerial briefings for a number of our Member countries.
We are also working in a practical way to deliver multilateral solutions. In the wake of the current crisis, governments everywhere will need to mobilise tax revenue in a fair and efficient manner. One part of that effort will be ensuring that multinational enterprises pay their share of tax. A key aim of our work for the G20 focuses on meeting the tax challenges arising from the digital economy. We are working hard to have a solution by the end of this year. We are also working on other important policy priorities, ranging from making AI more human centric and enhancing global sharing of data, to supporting open trade, which will be a critical ingredient of the recovery.
Prime Minister Conte, Ministers, Ladies and Gentlemen:
L’OCSE è con l’Italia. We are eager to help you. The OECD is committed to providing the data, the analysis and the policy advice to get Italy and the world through this crisis and onto a path of better policies for better lives. Da sempre e in particolare in questa crisi: siamo con l’Italia. Thank you. Grazie.