Remarks by Angel Gurría,
Hangzhou, China, Saturday 3 September 2016
(As prepared for delivery)
Mr. Chairman, distinguished members of the business community, ladies and gentlemen,
I am honoured to be at the B20 Summit in Hangzhou. The OECD has long been a strong supporter of the B20 process, and we had the pleasure of hosting the B20 Joint Taskforce Meeting in May, where you finalised your 2016 policy recommendations to the G20.
Friends, our assessment of the global economy remains broadly unchanged since we last met in May, with global GDP growth forecast to remain at 3% in 2016 -- the same as last year -- with only a moderate improvement forecast for 2017.
Three vicious circles…
The world economy is trapped in three interrelated vicious circles:
- First, a “low-growth trap”, wherebylow demand, subpar investment by firms, sluggish trade growth, slowing productivity, and subdued wage growth are reinforcing each other.
- Second a low-growth / low interest rates trap, with potentially destabilizing consequences for the financial sector, starting with institutional investors.Non-conventional monetary policy is probably very close to its limits.
- Third, a worrying conjunction: at no point in the past 30 years has productivity growth been lower, and at no point over the same period has income inequality been higher. This conjunction is not a coincidence. Because of high inequalities of income and opportunities, certain people and households are not able to invest in education and skills and are stuck in precarious, low-productivity jobs.
...requiring a three-pronged policy approach
How do we break these three vicious cycles? A bold and comprehensive, three-pronged policy package is needed, many elements of which are encapsulated in this year’s B20 recommendations.
- In the short run, we need to boost growth by stimulating demand through a more active use of available fiscal space. The US, Japan, Canada, China, are heeding the call to boost public investment, with commitments set out in the G20 Hangzhou Action Plan. These are the right actions at the right time.
- Looking ahead, however, the G20 must also revive the momentum of comprehensive structural reforms. G20 members MUST deliver on their Brisbane commitment. Our joint assessment with the IMF however shows that considerable additional reform efforts will be needed to achieve the Brisbane 2% additional growth target by 2018. G20 Leaders need to walk the talk! One critical aspect of the structural reform agenda recognised by B20 recommendations is action to get trade and investment going again. Your recommendations resonate well with those of the OECD to G20 Trade Ministers: rolling back the flow of protectionist measures that are still pilling up despite G20 longstanding commitment to the standstill; reducing the thickness of borders through effective trade facilitation; and promoting services reforms.
- But these measures will not be enough, absent policies to foster a more inclusive growth model. After Brexit, the lack of progress of TTIP constitutes another telling illustration that globalisation is under fire. We need a new growth narrative and a package of domestic policies that ensures that the benefits of open markets are widely shared - including modernised and growth-friendly social protection systems and the implementation of skills development and training programmes to help workers adjust to changes induced by open markets. B20 recommendations on reducing skills mismatches are very welcome in this context.
Let me conclude by stressing that it is the very combination of these various policy levers that will facilitate the achievement of another long-term objective: unleashing the potential of the digital economy and of the new industrial revolution. We need to boost public investment in innovation and digital infrastructure; upgrade our citizens’ digital skills; and we need structural reforms to foster competition, entrepreneurship, and game-changing innovation by new firms. Such measures are reflected in the G20 blueprint for innovative growth, one of the key deliverables of the Chinese Presidency, which the OECD has actively contributed to design.