Opening remarks by Angel Gurría
21 May 2019 - OECD, Paris
(As prepared for delivery)
Ladies and gentlemen,
I am pleased to be here with our Chief Economist Laurence Boone to launch our latest Economic Outlook.
It is certainly possible to see the glass half full: unemployment and inflation are low, and global GDP growth – while lower than in the last couple of years – is projected to be 3.2% in 2019 before edging up to 3.4% in 2020.
Although, we discuss a number of downside risks to the Outlook, the biggest threat is the escalation of trade-restrictive measures.
This is happening as we speak. Growing trade tensions drive uncertainty, thus business investment is hit and global growth is stifled. This in turn will undermine people’s well-being: jobs will be disrupted and consumers’ purchasing power will be hurt. And this unfolding danger could easily have knock-on effects. Prolonged uncertainty about existing or even further trade restrictions, could heighten volatility in financial markets, in a context where more than 50% of the non-financial corporations’ debt being issued is only one level above the limit of investment grade and could easily migrate below investment grade in the face of a systemic shock. Given that we are talking about hundreds of billions of dollars that could suffer this fate, the systemic threat is clear. Also, a prolonged and protracted US-China conflict over trade could exert further drag on the Chinese economy. Already, import growth was negative in the last quarter of 2018 and flat in the first quarter of 2019.
The world economy is in a dangerous place. Unless there is a de-escalation of trade tensions, the outcome could be much worse than in our central scenario. Global trade growth has already fallen markedly, from 5.5% in 2017 to projected rates of 2.1% in 2019 and 3.1% in 2020. It should be growing at double the rate of GDP. The effect on investment is easy to understand. We invest to produce, ultimately to sell. If you don’t know if you have access to markets or at which tariff, you simply don’t invest.
We must reinforce transparent, predictable and rules-based trade. Waves of trade liberalisation have benefitted people around the world, with something like a billion people lifted out of poverty; new industries and new markets created across the globe. So there is urgent work to do at the multilateral table to ensure that trade can continue to underpin global and inclusive growth.
Another concern is that the quality of growth leaves much to be desired.
Productivity growth has remained low in the OECD, despite the upside potential of the digital revolution. GDP growth in OECD economies has been largely driven by rising employment, much of it low-paid and low-quality jobs, hindering aggregate demand and productivity.
Moreover, people in those low-quality jobs are generally not getting enough training to reap the benefits of the digital transformation, raising the prospect of widening disparities in income and well-being in the future.
So all is not well. But let me assure you that we are not only drawing attention to how empty the glass is – we are also making recommendations on how to fill it.
Across a range of key economic policy areas, we are coming forward with solutions. We are leading international efforts to agree on how to tax corporate profits in increasingly digitalised economies; tomorrow we are adopting new principles on the use of artificial intelligence; we have come forward with policy frameworks for inclusive growth and sustainable development; the list goes on. The ‘I Am the Future of Work’ initiative covers all angles of the challenge of creating more and better jobs. And today’s Economic Outlook is part of that across-the-house effort, with recommendations on how countries can achieve stronger, more inclusive and more sustainable growth and how they can better exploit the potential of digitalisation.
Ladies and Gentlemen:
Let’s be neither optimistic nor pessimistic. Let’s be “activistic”! There is so much work to do, and together, as Laurence will tell you, we have a better chance to succeed. Thank you.