Launch of the 2020 OECD Economic Survey of Germany

 

Remarks by Angel Gurría,

Secretary-General, OECD

Paris, France, 8 December 2020

State Secretary, esteemed guests,

It is my pleasure to present the 2020 Economic Survey of Germany. I would like to thank the German Government for the excellent co-operation during the preparation of this Survey.
As elsewhere, COVID-19 has delivered a severe economic shock. Germany managed the first wave of the pandemic with relatively little disruption, helped by the country’s ample health sector capacity as well as early testing, tracing and isolation of cases.

Rapid measures to build health capacity, bolster liquidity, expand short-time work and support small businesses have protected lives, jobs and firms.
Germany also took a leadership role in establishing the EU Recovery and Resilience Facility, which is a welcome tool to support Europe’s recovery.

In its own recovery package, the German Government focussed on the energy transition and digital transformation through EUR 50 billion in investment to meet long-term challenges. The OECD has long encouraged more public investment in Germany, so it is good to see progress.

The economy is not out of the woods, even with the distribution of vaccines now in sight. As in the rest of Europe, the number of cases has recently surged, and this second wave and the measures taken to contain it have set back the recovery. We estimate that GDP will have contracted by about 5½ per cent in 2020, and momentum into 2021 is weak. In this crucial phase Germany should continue to do what it has done well so far, with generous fiscal support, determined efforts on test-trace-isolate, and stricter containment measures where needed.

Looking ahead, our Survey points to some key policy challenges and sets out recommendations to tackle them.

The COVID-19 crisis increased the importance of policy reforms that support labour market inclusion. Youth, women and low-wage workers, concentrated as they are in heavily-hit sectors, are more exposed to the risk of job loss. Withdrawal rates of social assistance, child supplement and housing benefits should be reduced, with increases in income support and incentives for labour market participation.

Germany’s female labour force participation rate is high, but a large share of women, particularly mothers, work part time. This contributes to the still large gender wage gap and the low share of women in managerial positions. Steps to increase the availability of childcare in recent years are welcome, but shortages remain.

Extending female quotas, encouraging longer parental leave by fathers and strengthening rights to flexible working arrangements are tangible steps that would improve outcomes for women.

There has been much recent progress on the very important area of climate change policy, including the significant step of pricing carbon emissions from transport and heating of buildings.

Yet great challenges remain to meet sectoral emissions reduction targets, especially in transport. More consistent pricing will need to be coupled with investment to provide low-emissions alternatives.

This Survey has a special focus on digital transformation, where accelerating progress is key. The urgency of going digital has only increased as the COVID-19 crisis boosted demand for teleworking, remote learning and telemedicine.

Germany is a world leader in technology and engineering, but lags on digital transformation. Advances are needed to unleash the benefits from increased business dynamism and creation of value from data. Let me highlight four that we consider crucial.

First, administrative processes should be streamlined and competition enhanced to achieve ambitious goals for broadband connectivity and speeds.

Second, the government should play an active role in improving conditions for business investment, including through scaling up venture capital support. This would help expand firms’ adoption of advanced ICT tools such as cloud computing and big data analysis, boosting innovation and productivity.

Third, progress towards digital government and a data-driven public sector needs to be accelerated.

Fourth, a successful digital transformation requires skills development. Returns to foundational literacy and numeracy skills, which help people adapt to new technology, are high. In schools, computational thinking should be introduced earlier and training for teachers increased, to ensure effective use of digital technologies.

State Secretary,

The German Government’s strong action in response to the pandemic has helped it to weather the crisis well so far. In addition, the government has rightly seen the recovery as an opportunity to invest, to deliver future benefits through digital transformation, the energy transition and increased labour market inclusion.

This should continue. You can count on the OECD, every step of the way, to help you design, develop and deliver better policies for better lives in Germany.

Thank you.

 

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