G20: Remarks for Session 2 - Framework for Strong, Sustainable and Balanced Growth
Session II – Framework for Strong, Sustainable and Balanced Growth
Meeting of G20 Finance Ministers & Central Bank Governors
Remarks by Angel Gurría, OECD Secretary-General
10 February 2015, Istanbul, Turkey
(As prepared for delivery)
Deputy Prime Minister Babacan,
Ministers and Governors,
Ladies and Gentlemen,
We are still far from the G-20’s objective of achieving Strong, Sustainable and Balanced Growth: the world economy grew at just over 3% in 2014, below its long-run average. The fall in oil prices and some recent policy measures will help, but some large economies face a risk of persistent stagnation, a “low growth trap” in other words. At the same time, growing divergences in policy stances are increasing the risk of financial instability.
The G-20 made huge progress towards strong and sustainable growth one year ago in Sydney through its historic commitment to raise G-20 GDP by at least 2% by 2018, the so-called “2 in 5” objective.
By the time of the Brisbane summit, your national growth strategies delivered more than 800 new specific structural reform commitments. These measures were assessed by the OECD - working closely with the IMF - to deliver the 2% objective.
However, hard work is needed to implement these commitments and achieve that boost to GDP – not to mention that in light of the ongoing unfavorable trends, we may need additional efforts, at some point, to achieve the 2% target.
In this context, the OECD very much welcomes and supports the 3 “I”s agenda of the Turkish Presidency.
First, I am glad that the Turkish Presidency has put “Implementation” at the heart of its agenda. Your citizens count on you to deliver these measures that will lead to higher incomes, more jobs and less unemployment.
Delivering on these commitments is also a vital test of the G-20’s credibility. The world is watching you! In this regard, the latest issue of our Going for Growth report, that I have just released with Deputy Prime Minister Babacan, points to mixed trends:
- The pace of structural reforms has slowed in the majority of advanced countries over the last two years, after a period of significant acceleration in the aftermath of the crisis. Hopefully, this slowdown mostly results from the need to ensure that past legislated reforms are implemented. But let’s not fool ourselves: this is also a reflection of domestic reform fatigue, as reflected by recent political events;
- By contrast with advanced countries, the pace of reforms has been accelerating in major emerging-market countries, reflecting the awareness of bottlenecks and constraints to growth and the need to reduce vulnerability to fluctuations in commodity prices and capital flows.
The OECD is already working closely with G-20 members to ensure that there is a robust Accountability Assessment for the Growth Strategies. We stand ready to help countries with implementation. Working with the IMF, we will report back later in the year on progress towards the 2%.
While the G-20 must deliver what it has already promised, members’ efforts to achieve strong, sustainable and balanced growth must continue to move forward.
First, the risk of persistent stagnation in some economies and lacklustre growth globally, combined with weak labour markets and inflation, underlines the case for a stronger policy response. Monetary, fiscal and structural policies must be ambitious and work together - beyond current efforts - to put the global economy on a stronger growth path.
Let me emphasize in particular the importance of kick-starting investment – the second and fully relevant “I” of the Turkish Presidency’s agenda. But let’s not just focus on fixed investment in physical productive capacities and infrastructure, but also on investment in human capital. Around half of the growth achieved by OECD countries since WWII has been driven by progress in education. Priority should therefore be given to reforms aimed at developing skills and knowledge-based capital. Raising the quality and inclusiveness of education systems will underpin this.
This brings me to the third “I” of the Presidency’s agenda – which is absolutely pivotal to our efforts: Inclusiveness. The gap between rich and poor is at its highest level in 30 years in most OECD countries while inequalities traditionally stand at even higher levels in emerging countries. This is likely one factor behind weak demand in some countries. More profoundly, OECD recent analysis shows that inequalities are not just about income, but also about opportunities in general, such as access to education and health, with the resulting risk of creating a negative spiral of underinvestment in skills, growing inequality and, down the line, slow growth.
According to some OECD estimates, rising inequality may have knocked more than 10 percentage points off growth in Mexico, nearly 9 points in the United Kingdom, and between 6 and 7 points in the United States and Italy between 1990 and 2010.
We therefore need a “copernician” change in our approach to the growth – inequality nexus: let’s not think growth first, and inequality thereafter but let’s consider both of them, together, in their circularity. In other words, let’s think “Inclusive Growth - Old site”, right from the start, and let’s make it another touchstone of our efforts and complement the Pittsburgh tryptic of strong, sustainable and balanced growth!
The OECD is ready to provide our expertise and support to build more productive, inclusive and sustainable economies for your citizens.