Foundations for Growth and Competitiveness 2026

Executive Summary

Revisiting the foundations for growth is now central given the decline in medium term economic prospects that have beset OECD countries, underpinned by a marked slowdown in labour productivity growth. The latter reflects persistently weak business investment in the aftermath of the global financial crisis as well as longer term slowdown in business dynamism and human capital accumulation. While stronger employment outcomes over the last 15 years have provided some offset, this growth could fade due to population ageing and persistent labour and skill shortages. In this context, there is an urgent need for countries to implement productivity-enhancing structural reforms, noting that reform momentum has been in retreat across the OECD for more than a decade. Doing so can help countries to revitalise their economies by confronting the above headwinds to growth and more fully capitalising on the opportunities offered by new technologies, such as Artificial Intelligence.

The Foundations for Growth and Competitiveness (F4GC) initiative aims to provide policymakers with tools to tackle these challenges. This 2026 edition identifies structural reform priorities that can be organised into three key policy areas (see below): enabling factors, including human capital, governance, infrastructure and macroeconomic policy; market incentives and allocative efficiency, spanning taxation, product and labour market regulation, trade and FDI; and targeted and sectoral measures including innovation and energy security support.

The Foundations for Growth and Competitiveness Framework

Reform priorities are identified through a newly developed policy prioritisation model, built upon a new database aggregating most of the OECD statistical production on structural policy settings. Each of the indicators in this database is subsequently paired with relevant performance outcomes, informed by the current state of knowledge on how improved policy settings can lift the structural drivers of growth. For any given country, a reform priority candidate emerges when both the performance outcome and the associated policy measure fall below the OECD average, with larger gaps receiving higher priority. This quantitative(cross-country) potential priority selection is then complemented by the qualitative expertise of the relevant country desk, to identify the top five structural priorities for the 48 countries covered, including all 38 OECD member countries.

While each country’s situation is unique, more than one-third of structural challenges identified concern product market regulations (PMR) and insolvency and education, skills and human capital (see below), which is significant given the slowdown in business and human capital accumulation. Another one-third of the recommendations encompass labour mobility and participation, governance and institutional quality and tax system efficiency. Structural challenges with physical infrastructure, innovation and openness to trade and FDI follow, jointly making up for more than one-fifth of the total. Finally, challenges related to digital infrastructure, energy and environmental policies, housing and macroeconomic policy and financial markets make up under one-tenth of the total.

Reviving growth requires addressing a wide range of structural challenges

Source: OECD calculations based on F4GC country notes.

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Strengthening the underlying enablers of growth

To revive growth and build a strong economy, strengthening the foundations is the first step. For this, countries need to address the structural challenges involving their growth enablers. Investing in human capital by improving the quality and responsiveness of education, especially vocational training, expanding access at all levels of instruction, and strengthening links between universities and labour markets can increase labour productivity and improve the adaptability of the labour force to structural transformations.

Furthermore, strengthening the quality of regulations and institutions through measures such as expanded regulatory impact assessments and more active stakeholder engagement lays the foundation for efficient regulatory frameworks, which in turn are key to providing appropriate market incentives and improving the allocation of resources across the economy. At the same time, increasing investment in infrastructure, especially in transport and broadband, can strengthen connectivity and knowledge and technology diffusion, in turn, raising productivity growth. Ensuring cost-effectiveness, environmental sustainability and better project appraisal are key to maximising the returns. Additionally, enhancing macroeconomic stability, including through sound fiscal management, and improving firms’ access to finance, are essential to creating a favourable environment for business activity.

Enhancing market incentives and allocative efficiency

Once these key enablers are in place, the second natural step is to provide firms and households with market incentives that encourage economic activity and channel resources to their most productive uses.

The regulatory environment can foster firm creation, investment and innovation, provided that key enabling factors such as adequate skills and infrastructure are in place. Strengthening competition in product markets, including by reducing government ownership in business, and maintaining international rules-based open trade and FDI, provides incentives for firms to invest and innovate. Reducing administrative burdens, easing barriers to entry – especially in sectors with large spillovers to the rest of the economy (e.g. network industries, professional services and retail trade) – and simplifying insolvency regimes can promote the entry and exit of firms, boosting business dynamism and allocative efficiency.

Furthermore, reducing barriers to labour mobility and participation can promote a more efficient use of the workforce. Strengthening work incentives – through well-designed tax-benefit systems and activation policies – alongside expanded access to affordable childcare and housing policies that promote mobility, can support a better labour utilisation and allocation of skills. Finally, tax reforms that streamline tax expenditures and broaden the tax base, shift the burden from labour and corporate income towards immovable property and consumption and digitalise tax collection, can further boost growth by reducing distortions.

Guiding and supporting economic activity

With the enabling conditions for growth established and policies providing adequate market incentives set, governments can then strategically steer economic activity toward priority areas. Targeted reforms that promote innovation, green investments and energy security help address market failures, accelerate technological transitions, and align growth with long-term societal objectives, while strengthening competitiveness and economic resilience.

Public support for R&D remains essential to overcome underinvestment, and stronger business–university collaboration and better coordination across innovation policies can amplify impact, particularly when combined with education reforms.

Energy market reforms are increasingly central to the security of energy supply and to advancing the clean energy transition. To this end, countries can benefit from removing barriers to entry, strengthening regulation, and incentivising investment in renewables and energy efficiency.

Gathering support for structural reforms requires deepening their coherency and the understanding of their impact

A successful structural reform agenda hinges on its coherence and mastering any potential political economy barriers to reform. With this in mind, F4GC places a strong emphasis on understanding the scope for exploiting policy complementarities as well as generating new evidence on the timeframe over which the growth gains of structural reforms materialise, given that reforms can entail political costs.

While the most prevalent policy priorities relate to PMRs and insolvency regimes and human capital and skills, reforms in these areas have the potential to unleash policy complementarities by enhancing the effectiveness of policies in other domains (especially targeted policies). For instance, the returns to innovation subsidies will be amplified by the availability of high-quality human capital as well as PMRs and insolvency regimes that enhance economic dynamism, which is central to the innovation process.

Furthermore, leveraging the newly constructed database, this first edition also provides new empirical evidence on the short-term economic impact of structural reforms, which can be uncertain and uneven. The short-term effects shape the reactions of voters and interest groups, influencing whether reforms are politically feasible, sustained, or reversed. Knowing these effects allows policymakers to anticipate resistance, design compensatory measures, build coalitions, and overall construct a better reform strategy that can increase the chances of reforms being successfully adopted and implemented.

This new empirical evidence aims at complementing previous OECD work, which documented primarily long-term effects. But building on these long-term insights, this edition also highlights how structural reforms can also support fiscal sustainability amid high public debt and rising spending pressures. By broadening the tax base, boosting economic dynamism or improving government efficiency, structural reforms can lower debt-to-GDP ratios without relying solely on austerity, thereby reinforcing debt sustainability and strengthening both resilience and growth. Recognising these effects more prominently can also enhance the political acceptability of reforms, by demonstrating tangible fiscal and economic gains to stakeholders.