Economic Policy Reforms: Going for Growth
Determined and systemic action to implement a comprehensive reform agenda across a wide range of policy areas offers governments the best chance to boost weak demand, restore healthy economic growth, create jobs and ensure that the gains are broadly shared across society, according to the OECD’s latest Going for Growth report.
OECD’s latest Going for Growth report: http://www.oecd.org/economy/goingforgrowth.htm.
Netherlands Country Notes: http://www.oecd.org/economy/growth/going-for-growth-netherlands-2015.pdf
The report assesses and compares reform progress across countries since 2013 and identifies new priorities to revive growth and make it more inclusive. The OECD shows that the pace of policy reforms has slowed in most advanced economies, after a significant acceleration during the global economic crisis. Emerging economies, on the other hand, are quickening the pace of reform. "An ambitious reform agenda can help boost jobs, productivity and support demand, which is crucial to preventing the development of a vicious circle whereby weak demand and growing inequalities undermine potential growth and confidence, possibly leading to persistent stagnation,”
OECD Secretary-General Angel Gurría said during a launch event in Istanbul. “We understand the difficulties many governments face in pushing for reforms, in a context of weak demand, limited budgetary leeway and high unemployment. But we still see structural reforms – combined with effective fiscal and monetary policy – as part of an essential trilogy to boost growth".
Going for Growth 2015 assesses the effect of pro-growth structural reforms on income inequality. It notes that both advanced and emerging economies are encouraged to make growth more inclusive, by removing obstacles to employment and labour market participation of under-represented groups such as women, youth, low-skilled and older workers. The pursuit of comprehensive reform strategies can be one of the keys to addressing rising inequalities and the lingering social consequences of the crisis,” Mr Gurría said. “Implementing reforms that raise the job opportunities and earnings potential of low-skilled workers, help young people get a step on the job ladder and improve the labour market opportunities of women will unlock growth potential in our economies and ensure that it is shared by all.”
Presenting Going for Growth 2015 with Turkish Deputy Prime Minister Ali Babaçan ahead of the 9-10 February meeting of G20 finance ministers, Mr. Gurría said the report’s pro-growth recommendations for freeing up trade and investment, investing in people’s skills and stimulating innovation would boost growth while supporting demand in OECD and G20 countries alike. Improving product and labour market regulations and tackling barriers to cross-border trade and investment are key to achieving this. (Read the speech: http://www.oecd.org/economy/oecd-s-2015-going-for-growth-breaking-the-vicious-circle.htm)
The Going for Growth analysis forms the basis of the OECD’s wider contribution to the G20 Framework for Strong, Sustainable and Balanced Growth and to G20 National Growth Strategies. Recommendations in the report were instrumental in the development of these national growth strategies endorsed by G20 leaders at their Summit in Brisbane in November 2014. The strategies aim to raise the countries’ combined gross domestic product (GDP) by 2% over the coming five years. They can also help provide clearer guidance about the direction and sustainability of policy decisions, which is important to boost confidence.
“Through experience emanating from the Great Recession, structural reforms are critical to restore growth where fiscal and monetary policies are at their limits for most of the countries,” Mr Babaçan said. “We should understand that accommodative macroeconomic policies cannot solely safeguard growth permanently. Therefore, accelerating structural reforms should be our priority and indeed, the growth strategies of the G20 are crucial towards this end. I am sure that the Going for Growth Report of OECD will be helpful for many countries to set out their reform agenda to achieve strong, sustainable and balanced growth.”
Going for Growth 2015 highlights key trends in reform activity as well as areas where more needs to be done:
● Reform activity has remained high, albeit declining, in Greece, Ireland, Portugal and Spain, and has increased in Japan. Reform activity has remained weak, and has even been declining, in most Nordic countries and most euro area core countries.
● The pace of reform has been accelerating in most major emerging countries, in particular China and Mexico, reflecting awareness of bottlenecks and constraints to growth and the need to reduce vulnerability to fluctuations in commodity prices and capital flows.
● Labour productivity remains the main driver of long-term growth. Across the OECD, countries are giving priority to education and active labour market policies, consistent with the importance of knowledge-based capital and complementary skilled labour as sources of growth, and mindful of the persistence of unemployment.
The report also examines the environmental pressures related to economic growth and discusses the role of structural reforms and environmental policies. Evidence on the importance of adequate design of environmental policies as well as their impact on productivity growth is highlighted.