The US economy has significantly outperformed its OECD peers over the last several years, largely on account of an improvement in labour productivity in the services sector. Meanwhile, manufacturing productivity has remained stagnant. Employment and investment rates, while having rebounded somewhat during the post-pandemic period, remain low by OECD standards.

Growth-enhancing reforms include those that encourage parents, especially secondary earners, to remain in the labour force, and reduce red tape to spur investment in housing and infrastructure. Reviving manufacturing productivity growth is also key, particularly by addressing critical labour shortages. The substantial increase in the restrictiveness of US trade policies will lower growth in the absence of a resolution of ongoing trade tensions.

Against this difficult background, Argentina has recently embarked on an ambitious reform process, which has started to pay off. Continuous efforts will be necessary to phase out distortionary taxes that hinder investment and to improve the efficiency of public works. Enhancing the flexibility of labour market regulations and lowering non-wage labour costs would help tackle labour market informality. Continuing to reduce barriers to domestic and international competition would foster productivity growth.

The United States economy has continued to expand at a solid pace and price pressures have eased somewhat. However, a sustained fiscal deficit has contributed to raising public debt as a share of GDP to its highest level since World War II, with a further substantial increase in prospect over coming decades as the population ages. To put the public finances on a more sustainable path, a multi-year fiscal adjustment should be enacted that achieves savings on pensions and healthcare and raises taxation, including on capital incomes. A more medium-term oriented and less complicated federal budgeting process would support this. At the same time, economic growth would benefit from productivity enhancing reforms that promote competition, including through maintaining international trade openness and reinforcing relevant skills in the workforce. Efforts to reduce greenhouse gas emissions have accelerated, but further policy measures will be needed to achieve emission reduction targets. Policy options include a package of broad-based carbon pricing, taxes and sectoral policies. As the climate transition further progresses, additional measures will be needed to support displaced workers from fossil fuel industries and for climate adaptation.

SPECIAL FEATURE: MANAGING FISCAL PRESSURES IN THE UNITED STATES

Further reading

• Debt Dilemma: Addressing America’s mounting fiscal pressures
• Press release | Communiqué de presse