OECD urges policymakers to hit reset to deliver strong recovery after Covid
▶ Crisis emphasises need to retrain people, revive investment and secure access to cheap housing, report says
The social and economic disruption wrought by Covid-19 offers governments the opportunity to reset policy and push their countries on a more sustainable and inclusive path, according to the Organisation for Economic Co-operation and Development.
The global policy forum, which works with 100 countries around the world, said the crisis allows leaders to address the underlying challenges their countries face, such as income inequality and economic regional divides, to deliver a vibrant economic recovery and promote higher quality growth.
“The pandemic is a painful reminder that the nature of our past growth was often unsustainable and left many people behind,” said OECD secretary general Angel Gurria.
“The recovery is an opportunity to set our policies right, to achieve growth that is stronger, equitable, sustainable and more resilient. And for this to happen, governments have to act now.”
The global economy is expected to grow by 6 per cent this year, compared with a previous forecast of 5.5 per cent, according to the latest World Economic Outlook, released earlier this month.
The International Monetary Fund raised its global economic forecast for a second time this year following quicker Covid-19 vaccination campaigns and the fiscal and monetary support provided by governments and central banks.
However, the Washington-based lender warned policymakers about wider income gaps and an uneven recovery, with income inequality set to grow sharply after Covid-19 as young workers and those with lower skills have been more heavily affected by the crisis.
The OECD’s Going for Growth
report that was published yesterday offers policymakers country-specific advice on how to address those challenges and put in place a fundamental reset.
The report comes after the second meeting of G20 finance ministers and central bank governors under the Italian Presidency earlier this month.
The economic output of the UK, for example, fell by about 10 per cent last year, causing unemployment to rise to 5 per cent in the three months ended January, with young, low-income workers and women particularly affected by job losses.
Vulnerable social groups in Britain have been particularly affected by the pandemic and poverty is set to increase as jobs are lost and the incomes of the self-employed dwindle, accentuating regional differences, the OECD said.
“The Covid-19 crisis has emphasised the need to retrain and upskill the population, secure access to affordable housing by reducing bottlenecks to supply and to revive investment,” it said in the report.
As well as country-specific analysis, the organisation provided a framework of policy reform for all its members covering three dimensions.
Policymakers must first build resilience and sustainability through structural policies that can boost an economy’s first line of defence – in key sectors such as health care, social care and critical infrastructure – during shocks such as Covid-19.
They should also look to improve public governance
and strengthen incentives for companies to factor long-term sustainability into their decision-making.
Secondly, policymakers should boost productivity growth through structural action that increases job dynamism and supports companies as they become more innovative and greener.
The third recommendation is for policies that ensure people are not left behind as economies transition after Covid-19, to ensure that the reallocation of jobs is socially productive and builds resilience.
“This requires investments in skills, training and a big push for accessing quality jobs – particularly among vulnerable groups – as well as broad-based social safety nets, and better learning and support to access jobs,” said the OECD.
The report also highlights the crucial importance of countries acting together on challenges that span borders such
as the Covid-19 crisis, as well as climate change, international trade and the taxation of multinational enterprises.
Last month, the Bank of England’s Sarah Breeden said central banks must focus on climate change as she backed a new study calling on global financial regulators to adopt “clear” green strategies to support the economic transition to net-zero.
Ms Breeden, executive director of UK deposit takers supervision at the BoE and executive sponsor for climate change, said the sooner central banks start the process “the smoother the path to net zero”, with fewer economic costs and financial risks incurred along the way.
Meanwhile, IMF chief Kristalina Georgieva said earlier this year that sustainability can help to fuel the global recovery from the pandemic, as long as policymakers revitalise global co-operation and “wrestle” with climate change together.
Governments were called on to boost productivity through action that increases job dynamism and supports companies