G20 Finance Ministers and Central Bank Governors Meeting - Session 3, Policies for Recovery, 10 July 2021

 

Remarks by Mathias Cormann,

Secretary-General, OECD

Venice, Italy, 10 July 2021

Ministers, Governors,

Vaccinations, better health management and unprecedented fiscal and monetary support have lead to a further strengthening of the OECD’s growth outlook, with our OECD Economic Outlook released on May 31st projecting a strong rebound in 2021: with global GDP expected to increase by 5.8% in 2021, the fastest in almost 50 years, and 4.4% in 2022.

But uncertainty remains high, the recovery remains uneven, and the virus remains the biggest short-term social and economic risk.

The wider circulation of the Delta variant further reinforces the need to get as many people as possible all around the world vaccinated as quickly as possible.

As we seek to optimise the strength and the quality of this recovery, we must acknowledge that not all was well before the pandemic.

Many of our economies have been struggling with slow productivity growth and declining business dynamism, persistent long-term unemployment or informality and unequal opportunities.

Two major pre-crisis trends have also accelerated: the digital transformation of our economies and the pressure to ensure environmental sustainability. Both represent challenges and opportunities.

There is no one size fits all strategy, but let me highlight three strategic priorities to make the most of those opportunities:

First, building resilience and environmental sustainability. This requires boosting the quality and efficiency of our health systems and health coverage as well as preventing environmental damages, especially climate change and biodiversity loss.

Governments are serious about this: the pandemic saw important moves on health policy coverage, while almost all OECD and many non-OECD countries have now committed to net-zero emission targets by around mid-21st century.

Net-zero is a very ambitious task – the challenge is how to turn the commitments into outcomes.

For this, climate policies must strengthen the private sector’s incentives to boost green investment and innovation. So far, these incentives have been too weak.

Additionally, a cost-effective and publicly acceptable climate strategy will have to use a mix of available policy tools: carbon pricing is one, but not the only one. Public investment, targeted subsidies, direct support for technology innovation and regulatory standards, all have a role to play.

The G20 can lead the way in tracking policies and outcomes – and the OECD stands ready to support with its just-launched International Programme for Action on Climate (IPAC). Providing evidence is crucial, and this is what the OECD is about.

The second key challenge and requirement, common to many economies, is to seize the opportunities offered by digital technology progress.

OECD work, which informed the G20 Menu of Policy Options, emphasizes the need for facilitating investments in complementary intangible assets such as innovation, data, software, design and distribution networks and adapting taxation and competition frameworks.

But more structural changes are needed to reap the benefits of digitalization. Letting markets reward the most productive, most innovative business ideas, fostering competition, rule of law and rules-based trade to ensure the conditions for more innovation and productivity growth.

The third pillar is about supporting people in these transitions.

As the recovery gains momentum, it will be essential for reallocation across sectors to become a source of opportunity. This means expanding and improving active labour market policies to help workers transition from one job to another. It also means addressing long-standing gaps in social protection, with targeted and more systematic policies that ensure both fairness and incentives to work.

Here again, the OECD work for the G20 Menu of Policy Options showed the importance of connectivity and lifelong digital skills development, across the population.

Ministers, Governors, I cannot emphasize enough how important international co-operation will be for the recovery and for securing longer-term growth. Please count on our collaboration as you navigate from crisis settings to recovery and move forward in the implementation of the G20 Action Plan.

 

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