OECD’s 2013 Going for Growth: Reforming for a Strong and Balanced Recovery


OECD’s 2013 Going for Growth: Reforming for a Strong and Balanced Recovery

Remarks by Angel Gurría, OECD Secretary-General

Moscow, 15th February 2013

(As prepared for delivery)



Ladies and Gentlemen,

It is a great pleasure to present the 2013 edition of Going for Growth 2013 here in Moscow.

Going for Growth is the OECD’s flagship report on structural policies. It is where we identify and review progress on key priorities to achieve strong and sustained growth in each OECD country, but also in partner countries Brazil, China, India, Indonesia, South Africa and, of course, Russia which we hope to welcome as a new OECD member in the near future. In this context, let me congratulate Russia for joining the Nuclear Energy Agency of the OECD, one more step in the direction of membership.

Going for Growth covers nearly all G20 countries and indeed, the analysis has been used extensively in OECD and IMF contributions to the Mutual Assessment Process of the G20 since the 2009 Pittsburgh Summit.

This new issue of Going for Growth comes at a time when the likelihood of worst-case economic scenarios has receded but the road to a strong and balanced recovery is still fraught with many challenges. Growth prospects remain fragile and downside risks still prevail. Global current account imbalances -- which contributed to the crisis -- have narrowed, but it is still not clear how much of this adjustment will be sustained as we go forward.

With fiscal and monetary policies showing diminishing returns in most countries, structural reforms are more than ever a priority for the G20. Structural reforms can boost long-term growth and welfare but also take some pressure off macroeconomic policies and underpin the rise in confidence.


The crisis has continued to act as a catalyst for reforms

The good news is that many countries have stepped-up reform efforts in recent years. The pick-up in the overall pace of reforms, already noted in last year’s Going for Growth, has been confirmed. Perhaps not surprisingly, reforms have continued to be particularly intense among euro area countries under financial assistance programmes or acute market pressures – Greece, Ireland, Italy, Portugal and Spain.

Each of these countries has put in place broad policy packages that include changes in politically-sensitive areas such as labour laws, wage bargaining and welfare systems. They are also implementing significant fiscal consolidation programmes.

This has contributed to shore-up confidence and bring market relief in these countries and beyond, thus making fiscal consolidation less onerous. Another encouraging sign that earlier reforms are beginning to pay off is the significant improvement observed in competitiveness and export performance, at least for some of these countries. Both Portugal and Spain have recaptured export markets at a pace of over 2 per cent a year since 2009, bringing their export performance back to the level of the early 2000s. Restoring fiscal sustainability and enhancing competitiveness are necessary conditions for reducing current account deficits, creating fiscal space for the future and returning to healthy growth.

Yet, achieving stronger and more balanced growth requires that action be taken in both external deficit and external surplus countries. Here, I must say that a far more moderate pace of reforms has been observed in other euro area countries, especially those with a current account surplus (e.g. Germany). The same goes for countries enjoying particularly high living standards (e.g. Norway, Switzerland). More vigorous reforms in these countries would facilitate rebalancing by supporting global demand.  


New priorities reflect concerns about the job market legacy of the crisis

But the case for reform goes well beyond the need for durably reducing global imbalances. All domestic and G20 countries face acute domestic challenges, starting with the job market legacy of the crisis. Only in the OECD area, more than 15 million persons have been unemployed for more than a year and nearly 8 million young people are neither in employment nor in education or training. In some countries, the risk of seeing a sizeable share of youth losing attachment to the labour market is all too real, with dire social and economic consequences.

The new policy priorities identified in this report do reflect the need to cushion the impact of job losses in the short term, but also to facilitate the return to work before unemployment becomes entrenched. One of the most notable changes compared with last year’s issue of Going for Growth is a marked increase in the priority given to the policies dealing with social benefits and labour market activation.

This is particularly the case for European countries, where unemployment remains well above its pre-crisis level and where such measures need to be part of a comprehensive set of reforms to lift various barriers to jobs creation, to hiring and to labour mobility. Important steps in this direction have been taken all across Southern Europe, but also in France more recently, through changes in tax and welfare policies, wage bargaining and job protection regulation. But more needs to be done, including measures to lower the barriers to entry of new competitors in various services where the potential for rapid employment gains is probably largest.

In many emerging economies, pervasive informality represents a drag on potential growth, with large economic and social costs. While informal employment is reasonably small in Russia, it concerns between one-third and one-half of total employment in Brazil and Mexico, and well above that in India and Indonesia. Improving incentives to create and take-up jobs in the formal sector is clearly a common priority. Doing so requires extending the coverage of social protection, easing hiring and firing regulation, and providing adequate resources for primary and secondary education.

All of these measures are easier to implement in a context of strong growth. Emerging economies do have strong growth potential. But in most cases, fulfilling this potential requires the economy to be modernized. Russia is a good example.


Russia needs to modernize its economy

In spite of its rich natural and human resources, the potential of the Russian economy remains largely untapped. It has a low productivity, low per capita income, and low access to and use of ICT. It faces a critical structural challenge to reduce its dependence on oil revenues. To diversify the economy and raise productivity growth, it is crucial to increase competition, including by lowering barriers to foreign investment and reducing the role of the state in the economy. And to successfully do so, Russia needs to improve on three critical points: the efficiency of the public administration; the rule of law, closely associated with the business climate and the fight against corruption.

Also, the modernization of the economy will not happen without tackling the huge social challenges. Right now, Russia suffers from exceptionally high income and regional inequalities and from health outcomes well below those of OECD countries. In a nutshell, Russia needs to invest urgently in the quality of its human capital.

A more open, competent and accountable public administration is a prerequisite to design and implement the necessary reforms to achieve a sustainable and inclusive growth. As mentioned in the report, the government has taken steps to address these challenges. It has notably introduced a National Anti-Corruption Action Plan that includes greater protection of whistleblowers, and members of legislative bodies now have to report their income and assets. We strongly encourage Russia to continue to pursue efforts in that direction. Russia has also upgraded its fight against foreign bribery by signing on to the Anti-bribery Convention of the OECD, as part of its accession process.


Growth must not come at the expense of social and environmental objectives

The policy priorities for OECD and partner countries reported in this issue of Going for Growth have been identified primarily with a view to boosting growth, as measured by GDP per capita. This has been the hallmark of Going for Growth since its launch in 2005. However, growth is a means to an end, and that end is better lives for all citizens.

There may be concerns that by focusing solely on growth, the recommendations in this report may lead to environmental damage or exacerbate the greater inequality observed before the crisis. Such concerns have been examined in past issues of Going for Growth. The 2013 issue goes one step further and explores the side effects of our policy advice to achieve growth, on income inequality and the environment.

The report finds that many of the suggested reforms to boost growth also help to achieve other important policy objectives. Policies that foster greater equity in access to education is a case in point. They are good both for growth and equity. In some cases, however, growth policies are likely to clash with income distribution or environmental objectives. To give just one example, shifting the tax burden from labour to consumption is good for growth, but less so for equity. These policy trade-offs need to be borne in mind when designing growth policy packages so that their unintended consequences can be identified, measured and managed.


Ladies and gentlemen,

The implementation of reforms can be more easily achieved when such reforms are broadly supported by citizens. And reforms are more likely to garner popular support if they are seen as equitable and respectful of the environment, well sequenced, well “packaged” and crucially, well communicated. This is the approach which this 2013 edition of our Going for Growth is advocating.

Finally, let me thank Minister Siluanov for his hospitality and reiterate that we stand ready to continue to work with the Russian government and its’ G20 Presidency in pursuit of Strong, Sustainable and Balanced growth.


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