Remarks by Angel Gurría
10 June 2020 - OECD, France
(as prepared for delivery)
Dear Ambassadors, Ladies and Gentlemen,
Today we launch our latest Economic Outlook. But this is no ordinary report, and no ordinary process. We would usually release the Outlook in the context of our Ministerial Council Meeting, with Ministers coming to Paris. That has had to be postponed this year. But under the leadership of Spain – the Chair of this year’s Ministerial meeting – we will be holding at noon today a virtual roundtable, with Ministers discussing the economic situation and the policy priorities for the recovery.
What is truly extraordinary, though, is the context for this Economic Outlook, and its consequences for the global economy. We are in the midst of a combined global health, economic and social crisis that is the most severe that any of us have ever witnessed.
I don’t need to remind you of the grim numbers: over 400 thousand deaths and 7 million recorded cases so far, with both numbers likely being significantly underestimated.
On the economic front, the 6% annual decline in global GDP that we foresee in 2020 is larger by far than any we have projected in the 60 years that the OECD has existed. And that is in the scenario with no second wave of infections, requiring renewed lockdowns. In the event of such a “double hit”, the fall in global GDP would be over 7½ per cent, and we would be looking at more than 40 million additional people being unemployed in OECD economies by the end of this year. Critical sectors for our economies and societies have been hard hit, tourism, air travel and SMEs, to name but a few. In addition, global trade volumes, which were already stagnating when the outbreak began, are expected to contract by about 10% this year, similar to 2009.
Throughout this crisis, I have stressed that presenting the problem as a choice between health and the economy is to pose a false dilemma. If the pandemic is not brought under control, there will be no robust economic recovery. We must not lose sight of that fact.
In that context, governments almost everywhere deserve credit for the decisive action they have taken to contain the outbreak. In a few commendable cases that meant testing, tracking and tracing from the outset. Most countries, however, were compelled to resort to lockdowns of varying degrees. This meant that health workers handled the waves of infected people, and we all owe them a huge debt of gratitude for their tireless and selfless efforts.
As a result of these strong containment efforts, the infection rate has fallen sharply in most OECD countries and many others. Containment measures are now being eased. This gives reason to hope that we have reached the trough of activity in the bulk of the global economy – even if the worst is still to come in some countries. In the words of Winston Churchill, “this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning”.
The need for skilful policy action is equally important during the next phase of the crisis. Policymakers moved decisively to cushion the blow to the economy while it was placed in its “induced coma”, but they now face the daunting challenge of quickly and completely reviving the ‘patient’.
The policies put in place now will shape our economies for decades. I would like to emphasise three points.
First, policies need to mitigate the inequalities that are being worsened by this crisis. We know that many of the worst-off and most vulnerable people are being hit hardest by the pandemic and its effects: the young, women, those in precarious or informal jobs, those without savings, those with limited digital connectivity. Some 1.2 billion children worldwide are still affected by school closures, and many of these have no access to online learning.
One particular imperative for limiting the worsening of inequality is to prevent unemployment getting stuck at high levels, setting back a whole generation of young people and undermining their long-term potential.
Second, it is essential that governments foster more resilient, inclusive and sustainable growth. The aim should not be to go back to normal – normal was what got us where we are now.
To take just one example, air pollution was killing more than 4 million people a year worldwide, even before we discovered that it also aggravates the consequences of COVID-19. Reductions in air pollution will make vulnerable segments of urban populations more resilient to health risks.
And of course the climate emergency has not gone away. Responding to this crisis and tackling climate change does not have to be an either-or. There are things governments can do to address both challenges at once. For example, they can make sector-specific financial support measures conditional on environmental improvements. And in supporting investment for the recovery, they can direct public investment and incentivise private investment to accelerate the transition to a low-carbon economy.
While the current crisis has highlighted the need for more resilience, the Outlook reminds us that simplistic reactions, such as imposing trade restrictions to shorten global value chains and lessen reliance on particular foreign suppliers, would have serious side effects. Given the ratcheting-up of bilateral trade tensions in recent years and the undermining of global rules for dispute settlement, care must be taken to enhance resilience without sacrificing the benefits of open markets.
My third and last point is that no country can address a pandemic crisis alone. All countries need to implement testing, tracing and tracking to keep the virus contained. Many will need help. In addition, countries should co-operate to develop, manufacture and distribute a vaccine or treatments to all who need them. As long as the virus is widespread somewhere, the threat will remain everywhere, and economic costs will persist as some borders remain closed. We are all in this together.
In the wake of the Great Depression and World War II, our forebears recognised that interdependence and built an international architecture that delivered the most spectacular and sustained period of global economic growth ever. I have said that we need the same breadth of vision that was shown in that period with the Marshall plan – which created the OECD – and the New Deal.
But actually, we need more than that. What is required now is larger in scale than those 20th century initiatives, and it must be at a global level, so that greater resilience, inclusiveness and sustainability can be enjoyed everywhere. There are a few glimpses of such vision, for example, with the Franco-German agreement on the EU Recovery Fund, and the recent successful Global Vaccine Summit, which will help to roll out a future COVID-19 vaccine on a global scale. But much more is needed.
The OECD is working hard to support the necessary policy response. In addition to our regular reports like today’s Economic Outlook, in March we created a Digital Hub on Tackling the Coronavirus to draw together policy advice reflecting the organisation’s wide-ranging expertise. There are now some 100 policy briefs on the Hub, and over 300,000 visitors have used it.
We are also working in a practical way to deliver multilateral solutions. For example, in the wake of the current crisis governments everywhere will be left with heavier debt burdens and the need to mobilise tax revenue in a fair and efficient manner. One part of that effort will be ensuring that multinational enterprises pay their share of tax. A key aim of our work for the G20 focuses on meeting the tax challenges arising from the digital economy. We are working hard to have a solution by the end of this year.
We are also committed to providing the data, the analysis and the policy advice to get the world through this crisis and onto a better path. A path with, in the words of our motto, better policies for better lives.
Press Release: Global economy faces a tightrope walk to recovery