On 21 November, the Organisation for Economic Co-operation and Development (OECD) presented the latest global “OECD Economic Outlook 2019, in which OECD experts evaluated the situation in the global economy, which allows countries to plan the necessary changes in economic policy in a timely manner.
OECD experts forecast Latvian economic growth this year at the level of 2.3%, and 2.5% – in 2020 and 2.7% in 2021, while highlighting the need to increase productivity in order to ensure further economic development in the current demographic situation, in conditions of emigration and population ageing. The structural reforms implemented in Latvia should be continued, for example by investing in research and development, as well as skills development, providing professional and higher education in line with the needs of the labour market, promoting the development of the rental market and housing availability, etc. These reforms are crucial for ensuring a sustainable economic growth and competitiveness, as well as reducing of inequalities in society.
OECD experts have indicated that this year there has been the slowest growth in the global economy in the last decade, reaching 2.9% this year and next year, with a slight increase to 3% in 2021. Compared to the previous year, OECD has reduced its global economic growth forecasts by 0.5%. While growth has generally stabilised, growth rates are still low and there are concerns that this will continue in the coming years.
When presenting the latest global economic outlook, the OECD Chief Economist Laurence Boone emphasised that the main reason for the slow pace of global economic growth is economic uncertainty, mentioning Brexit as a bright example. In the risks section, she noted the tense situation in financial markets (particularly for countries with high external debt), as well as the slow pace of investment despite low interest rates. China’s influence as global growth tractive force is also declining as China’s growth is slowing down and changes in its economic development model increase (imports of capital goods into industry reduce, the importance of the services sector increases). In spite of the above, the situation in the global labour market is still evaluated positively, although the number of new jobs is declining. This in turn contributes to increased household consumption, which is stimulating growth.
In order to minimise the impacts of the identified risks, OECD urges countries to focus their policy initiatives on three main directions – developing trans-national cooperation to stop tensions in international trade; investing in sustainable infrastructure to fight climate change and promote digitisation; ensuring a more equal tax system with a view to reaching an agreement on a transparent and equitable digital economy tax system in the near future. At the same time, the need to ensure efficient management of the infrastructure project is highlighted.
The detailed OECD Economic Outlook 2019 and other materials are available http://www1.oecd.org/economic-outlook/