Remarks by Angel Gurría,
Shanghai, 26 February 2016
(As prepared for delivery)
Ladies and Gentlemen,
It is a great pleasure to present the 2016 issue of Going for Growth here in Shanghai, on the occasion of the February meeting of G20 Finance Ministers and Central Bank Governors, as I have for the past four years.
Going for Growth is the OECD’s flagship report on structural policies. Its prime purpose is to help policymakers setting reform agendas for the well-being of their citizens. It is instrumental in supporting G20 countries in their efforts to fulfil their Leaders’ pledge (made in 2014, in Brisbane), of boosting their combined gross domestic product (GDP) by an additional 2% by 2018.
This year’s report comes out at a time when near-term global growth prospects are again clouded – as highlighted by the updated OECD economic outlook released last week. Emerging-market economies are losing steam, world trade is slowing down and heightened uncertainties related to financial fragilities are holding back investment in both emerging and advanced economies. Such weak investment, combined with inadequate skills and with challenges in the way innovation drives and diffuses throughout our economies, have resulted in slow productivity gains.
Getting back to healthy and inclusive growth calls for an urgent and comprehensive policy response, drawing on monetary, fiscal and structural policies, all deployed in concert to ensure that the potential gains in jobs and productivity from structural reforms can materialise through sufficient demand. Seven years into the crisis, and in response to the very weak recovery, we have conveyed a number of bold, but at the same time realistic and consistent, policy messages, including on collectively raising public investment, in our latest economic outlook.
With respect to structural reforms specifically, this 2016 Going for Growth report underscores the importance of achieving policy coherence across a broad range of reform objectives such as product market competition, labour mobility and financial market robustness. This is critical to create an environment conducive to innovation and the smooth allocation of resources, the success of which is crucial to reverse the widespread slowdown in productivity.
The report also stresses the importance for policy makers to take an inclusive approach in the pursuit of growth so that the gains benefit all segments of society. For instance, a challenge for many governments is to shift social protection from jobs to individuals so that it better supports the process of jobs and firms turnover that underpin dynamic, growing economies. In some countries, reforms to provide better access to high-quality education for students from disadvantaged backgrounds, including migrants, combined with measures to make the tax system more efficient, more equitable and more job and investment-friendly, would help to make growth more inclusive.
Given the breadth and evolving nature of the growth and inclusiveness challenges facing both advanced and emerging economies, the slowdown in the pace of structural reform documented in this report is deeply concerning. While the pace of reforms should be accelerating to restore sustainable and equitable growth, it appears to have steadily declined since 2011-12.
In addition, some countries with ambitious reform programmes, face significant political challenges and the risk of losing momentum. Also, progress has been made on the G20 action plan to raise reform efforts, and achieve the so-called additional 2% in GDP by 2018, but much remains to be fully implemented.
Given the weak demand environment, it is important that structural reform packages meant to promote long-term jobs and productivity growth focus also on achieving some short-run demand gains. In order to kick-start the process, this report reviews the issues and evidence on the impact of reforms introduced in a difficult economic conjuncture. The lessons drawn offer valuable insights on the type of reforms most likely to succeed in such circumstances as well as on specific measures to increase the short-term payoff even in a context of weak demand. For example, reform strategies that put more weight on infrastructure spending, on facilitating the entry of new firms in services, or on reducing barriers to labour mobility are most likely to boost activity in the short term. This also has to do with the political economy of the reform process to enhance support for such policies from the broader public.
Minister Lou Jiwei,
Ladies and Gentlemen,
In Brisbane, a bit more than a year ago, G20 Leaders made meaningful commitments in the area of structural reforms. They “talked the talk”. Now it is time, for the G20, to “walk the talk” and deliver ambitious, tangible policy action. The OECD’s 2016 Going for Growth is precisely meant to deliver better policies for better lives.