Trascript of the Video Message by Angel Gurría
18 September 2020 - Seoul, Korea
(As prepared for delivery)
It is my pleasure to address the 21st World Knowledge Forum on the theme of COVID-19 and the New Economic Normal.
The world is in the grip of the worst health, social and economic crisis of our lifetime. The 6% contraction in global GDP that we project for 2020 in our most recent Economic Outlook is the largest in the 60 years of the OECD’s existence. And in the case of a second wave of infections, global GDP could decline by more than 7.5%. In just a few months, the pandemic has wiped out the progress in labour markets made over the past decade to recover from the Global Financial Crisis.
Let me congratulate Korea for its swift and efficient reaction to contain the spread of COVID-19, using digital tools such as location and symptom tracking. Korea kept the virus at bay without a total lockdown, thereby limiting the economic damage. Still, we expect nearly all OECD countries to experience sharply negative growth this year, followed by a gradual recovery in 2021. And while the global economy walks on a tightrope, this crisis is disproportionately affecting the most vulnerable in our societies.
As shown in our latest Employment Outlook, self-employed, temporary and part-time workers – for example – account for up to 40% of employment in the most affected sectors. The young are once again at risk of becoming the biggest casualties of the crisis: youth unemployment in the OECD jumped from 11.3% in February, to 16.7% in June.
This is despite the extraordinary and swift measures taken by most governments to respond to the pandemic. Trillions of dollars have already been directed towards supporting individuals, households and companies across the OECD through income support and expanded paid sick leave. Moreover, about 60 million workers across the OECD have been included in the initial requests for support by companies through job retention schemes. Although there is a high burden on public debt, we should be careful not to withdraw emergency measures too quickly.
As we address these challenges, we need to start thinking and planning what will be the ‘new economic normal’. We cannot aspire to go back to what we had before the crisis. This time we need to ‘build back better’.
Looking ahead, countries must adapt existing measures to encourage a robust, inclusive and sustainable recovery.
Job retention schemes need to be targeted at jobs that are viable in the longer term, while public and private employment services must be scaled up to assist jobseekers in finding new work. Moreover, as highlighted in our recent policy brief on Youth and COVID-19: Response, Recovery and Resilience , we must act swiftly to help young people maintain links with the labour market. In this respect, early outreach is vital to maintain contact with young people who have lost their jobs or left school without finding employment, and to ensure no jobless young person goes without support.
There is also an urgent need to ensure that financial markets are well-functioning and resilient in order to support a strong economic recovery. This means ensuring that capital is efficiently allocated to the most productive firms and uses in the economy.
In addition, corporate defaults can be expected to rise above levels experienced in the Global Financial Crisis. It is therefore imperative that governments put risk capital to use for businesses in need of temporary support to contribute to employment and the wider economic recovery. For example, with appropriate programme design, equity investments could reduce the probability of default without undue burden on governments. They can also foster investments that generate long-term value, such as in R&D and intangible assets.
The COVID-19 crisis has also amplified calls for resilience and preparedness to deal with future shocks. It remains paramount to address our systemic vulnerabilities, strengthen our agility, and improve our anticipation.
Consider our interconnected infrastructure systems for instance. Water, energy, transport, telecommunications, when those services are disrupted by a flood, a cyber-attack, or an accident, cascading failures can lead to large knock-on impacts. The OECD, through its Policy Toolkit on Governance for Critical Infrastructure Resilience, is supporting countries better understand complex interdependencies and vulnerabilities across infrastructure systems to prioritise resilience efforts.
And above all, we need the strength that comes from multilateralism. Stronger international co-operation will help us end the COVID-19 crisis, speed up the recovery, and prevent future crises from taking hold. This is precisely where concerted action comes in, such as, the sharing of knowledge and of medical and financial resources; and the reduction of harmful bans to trade, especially in healthcare products.
Last but not least, in the midst of the current crisis, the world has not escaped from worsening climate change and severe biodiversity losses. Without significant changes to our economic systems, the social and economic impacts of these crises will be long-lasting and will unquestionably eclipse those of COVID-19. We must therefore absolutely ensure that the recovery goes hand-in-hand with our green efforts.
Ladies and Gentlemen,
We need a new normal, we need systems that are more resilient to future shocks, we need more inclusive and sustainable economic systems. For that, we need to change our theories, our policies, our frameworks and standards.
We urgently need to change course, and we can only do it if we act together. Because each country has a hand on the steering wheel. This is why multilateral co-operation is the only way out and the only way forward.
Together we learn, together we can, together we will! Count on the OECD! Thank you.