Remarks by Angel Gurría, OECD Secretary-General
Paris, 25 May 2011
(As prepared for delivery)
Prime Ministers, Ministers, Ambassadors, Ladies and gentlemen,
It is my pleasure to welcome you to the opening event of this 50th Anniversary Ministerial Meeting on Better Policies for Better Lives, the launch of the OECD Economic Outlook.
I would like to extend a particular welcome to all leaders, Ministers and senior representatives from around 50 countries that have gathered in Paris for this Ministerial, including from our partners Brazil, China, India, Indonesia, the Russian Federation, which is continuing its accession process, and South Africa.
The global recovery is continuing. It remains two-speed though, with the world economy projected to grow by 4¼ to 4¾ % and the emerging market economies by close to 7%.
The OECD economy is projected to grow in the range of 2¼ to 2¾ % this year and next. With private consumption and investment acting as its engines, growth is becoming self-sustained, that is, less driven by temporary government aid or external demand.
That said, a key message of this Economic Outlook is that there is no room for complacency.
The crisis is not over yet, it has just changed its skin. Downside risks predominate. There could be positive surprises, such as momentum in private demand possibly feeding onto itself as confidence recovers. But the sovereign debt crisis in Europe, the possibility of further increases in oil and other commodity prices, an unsettled fiscal situation in the United States and Japan, a possible slowdown in China turning out sharper than expected, overheating in emerging economies, and renewed fragility in housing markets, all cast their shadow.
There are even bigger concerns for the medium and longer term. Unemployment-, including long term -remains too high and could become entrenched as many people stay on the dole far too long. Countries may be trapped in a situation of low growth and high public debt. The fiscal consolidation needs are extraordinarily challenging. And the two-speed growth of the world economy could prompt sharp increases in capital flows to the emerging market economies, where they could exacerbate financial vulnerabilities.
The room for macroeconomic policies to address these complex challenges is largely exhausted; therefore, we have to “go structural”. I have been saying this since the G20 in Pittsburgh. Labour market policies have a key role to prevent unemployment –from becoming entrenched. Such policies include more effective job placement services with training to match skills and jobs; rebalancing employment protection towards temporary workers; and temporary reduction in labour taxation through well targeted marginal job subsidies. But we also need to reach out for new sources of growth, and this is where Innovation plays a key role, not only in the restricted sense of promoting R&D, but in a broader one including the context in which innovation happens, and the role of intangibles and organisational changes. Going green in our structural policies is also another way to foster higher rates of growth while taking care of the environment. In this OECD Ministerial we will be presenting our Green Growth Strategy, to provide policy options and tools for countries to build on.
There are synergies among structural reforms to boost growth and jobs, as they also generate higher fiscal revenue and thus fiscal consolidation. Pro-competition reforms in product markets may also unleash opportunities for investment and reduce current account balances in surplus countries, ultimately contributing to global rebalancing while supporting growth. Reforms of the social security systems, particularly in emerging countries, could lead to reduced current account imbalances as well.
But going structural is not enough: we also have to go social. Financial crises raise poverty rates and adversely affect highly-indebted households. Fiscal consolidation is unavoidable, but if poorly designed it may further increase income inequality and poverty. Upward food and energy price shocks have significant adverse effects on the poorest members of society, reflecting higher risk of job losses and adverse purchasing power effects.
Conserving or establishing a well developed welfare system can play an important role in mitigating such adverse redistribution effects, although this should be carefully balanced with growth and jobs objectives. Strong labour unions can play an important support function as well, but we have to ensure prime-age groups are not over-protected to the detriment of youths. At the OECD we have evidence showing that inequality increased even before the crisis. You can imagine the further impact of the economic crash in an already stewed income distribution.
Ministers, Ladies and gentlemen, the 50th Anniversary edition of the Economic Outlook discusses very important issues. It even dares to cover not only the next 18 months, but also the next 15 years, up to 2026, and suggests how we can overcome the rather mediocre performance our economies will show, if left to themselves and if not enhanced by enlightened public policies.
I am now happy to hand the floor to our Deputy Secretary-General and Chief Economist Pier Carlo Padoan who will guide you through the outlook and policy challenges in more detail.