Remarks by Angel Gurría,
OECD, Paris, 7 June 2017
(As prepared for delivery)
Ministers, Ambassadors, Ladies and Gentlemen,
Welcome to the launch of the OECD Economic Outlook. Before handing over to our Chief Economist Catherine Mann, who will elaborate on the report, I would like to highlight a few of the main messages. These messages dovetail with the key issues before us in this Ministerial Council Meeting.
The headline numbers for global growth in the Outlook provide a basis for cautious hope that a cyclical upswing is underway. Global growth is projected to accelerate modestly from 3% last year to 3.5% this year and 3.6% in 2018. There have, of course, been false dawns before, but we see more solid signs of improvement this time. In particular, trade and investment, two essential engines of global growth, have shown encouraging signs of picking up of late.
But this cautious hope comes with several caveats. First, the upswing we envisage is not that impressive. Global growth of 3.6% in 2018 would still be slower than pre-crisis averages, and the projected improvement is largely due to major commodity-producing economies like Brazil and Russia coming out of recession. Indeed, growth in the OECD region will continue in the range of 2%, similar to the past few years.
Moreover, there are downside risks to the projections. Rapid credit growth in some emerging economies is one concern. In particular, the current pattern and pace of Chinese growth is uncertain, and it is not clear whether the necessary transition to more consumption- and services-driven growth in China can be achieved without a slowdown.
There are also risks among the advanced economies, with some asset valuations looking dangerously high.
But apart from doubts about the strength and improvement in the global economy, the more important point is that the world economy needs more than an uptick in GDP growth.
The bigger problems relate to trend productivity growth and an uneven distribution of the gains from that sluggish growth. The result, in many countries, has been a long period of near-stagnation in real incomes for many while income and wealth has continued to concentrate. As we will discuss further during this MCM, we see this combination as key to the political backlash against globalisation. There is a risk that this backlash results in at least a partial retreat from openness, which would be very damaging to well-being across the world.
And there is little sign that these problems are dissipating. Despite the ongoing decline in unemployment rates across the OECD region, which is very welcome, real wage growth for most workers is still anaemic and many are still struggling to find good full-time jobs. Also, a trend towards increased regional inequality has meant that some local labour markets are depressed, even if the national picture is improving.
The costs of these trends go beyond losses in income for some individuals. Quality jobs provide not only good wages but also self-esteem and a sense of purpose and identity. The failure of our economies to generate enough of such quality jobs over the last decade has contributed to the widespread sense that globalisation is rigged to favour the few. Thus, we need to refashion the way that globalisation and technological change work, in order to favour the many.
The Economic Outlook, and especially the chapter on trade, discusses some of the policy actions that are needed. Other reports prepared for this Meeting, or released just before or after it, discuss additional issues and remedies. These include the Inclusive Growth report, the Key Issues Paper, the Business and Finance Outlook, the Next Production Revolution, Investing in Climate, Investing in Growth and the upcoming New Jobs Strategy. Together, these OECD reports make clear that only an integrated policy approach oriented towards inclusive growth, and supported by more and better international standards, will yield a globalisation that is widely shared.
Let me now give the floor to our Chief Economist, Catherine Mann, to share a bit more of the detail from the Outlook.