G20: Global co-operation and strong policy action needed for a sustainable recovery – OECD
The COVID-19 crisis has exposed major weaknesses in our economies that can only be fixed through greater global co-operation and strong, targeted policy action, according to a new OECD report presented to the Leaders of the G20 countries at their virtual Summit this past weekend.
New Horizons, a report requested by the G20 to support its Action Plan in response to the crisis, says governments need to plan now for the recovery while continuing to live with the virus. Emergency economic measures to tackle the crisis will need to be adapted, support to people and businesses become more targeted, and new policies put in place to make the objective of a stronger, sustainable and inclusive global economy, a reality.
Speaking at the Summit OECD Secretary-General Angel Gurría said that ambitious reforms were needed to ensure a vigorous recovery. He added: ‘We need to make sure health and social protection benefit all, that public and private investment is aligned with the Sustainable Development Goals, and we need to build resilience into the heart of our economic and social systems.’
The OECD identifies the need for stronger co-operation between governments in a number of fields:
• in health, from research to distributing COVID-19 vaccines,
• in trade, to ensure robust global production chains,
• in the taxation of multinationals as the economy becomes increasingly digitalised,
• in environmental sustainability, and,
• in preventing sudden outflows of capital and sovereign debt crises in emerging markets and developing countries.
The report says exceptional fiscal spending and monetary support should be maintained as long as needed to buffer the shock of the pandemic, and outlines how governments should work on three main fronts – to reallocate resources; support people; and build a sustainable and resilient economic system for the future.
The crisis is accelerating changes to the economy, which are often disruptive. Governments will need to assist workers and businesses to transition from shrinking to expanding sectors; by removing barriers to mobility, by increasing competition, and by making it easier for firms to access finance and advanced technologies or to restructure.
Improving training and building skills, particularly among the low-skilled, youths and women who are often vulnerable in the labour market, will be key. Job retention schemes will need to evolve to ensure that people, rather than their jobs, are protected, that their opportunities are widened and their income safeguarded.
Increasing public and private investment particularly in healthcare, digitalisation, lowering carbon emissions, education and skills are essential to reinforce sustainability and resilience.
The New Horizons report is part of the broad range of analysis and recommendations from the OECD and other international organisations to support the work of the G20.
Mr. Gurría welcomed the achievements of the G20 under the Saudi presidency. In particular, he pointed to the G20 reaffirming its targets to reduce the percentage of young people who are most at risk of being left behind in the labour market by 15% by 2025, and to reduce the gender gap in the labour force by 25 % over the next five years. The OECD and ILO will continue monitoring progress in these areas, as well as on the impact of the pandemic on employment and trends in migration.
Mr Gurría said the OECD is continuing to work with the G20 towards achieving a political agreement on how to tax the digital economy by mid-2021. In the Secretary-General’s Tax Report to G20 finance ministers, the OECD warns that without an agreement there would be a proliferation of unilateral measures and an increase in damaging tax and trade disputes that could cut global GDP at a time when we are reeling from the pandemic.
He added that a sustainable economic recovery from the crisis would be undermined by environmentally harmful spending – such as fossil fuel subsidies – which still outweighs more ecologically friendly investments in the recovery packages announced by governments.
Mr Gurría also welcomed G20 progress on fighting corruption and criminalising foreign bribery, including the request by Saudi Arabia to join the OECD Working Group on Bribery, with a view to adhering to the OECD Anti-bribery Convention, the international standard in this area.