On 21 May, 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 and in 2020 at the level of 2.7%, 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. Therefore, Latvia should continue the already launched structural reforms that are so crucial for ensuring sustainable economic growth and competitiveness, as well as reducing of inequalities.
OECD experts have pointed out that since the end of 2018, most countries have seen a slowdown in economic growth rates, forecasting GDP growth of 3.2% this year and 3.4% in 2020. OECD has specifically pointed to a slowdown of growth rates in the euro area, where GDP increase will reach only 1.2% this year, according to OECD forecasts. OECD acknowledges that, in the ten years since the global crisis, countries have unfortunately failed to deliver an increase in welfare to an extent able to considerably reduce growing inequalities.
When presenting the latest global economic outlook, the OECD Secretary-General Angel Gurria emphasised that sustainable growth of OECD countries is at risk, because the current uncertainty in external markets has an impact on growth rates, even though unemployment and inflation rates remain low. Therefore, countries are encouraged to urgently address the tense situation in international trade and to continue implementing structural reforms, boost productivity by investing in the development of skills of workers, the development and improvement of digital and transport infrastructure, as well as the development of the regulatory framework for competition policy in line with the needs of the digital economy.
In its analysis of the global economic development, the OECD pointed to a number of global risks, with particular attention being paid to the tense situation in international trade, which could have a negative impact on national economic growth, investment, welfare of the population, jobs, private consumption. In addition, OECD points to risks like the slowdown in China’s economic growth, a decline in global trade and investment (in particular in Europe and Asia), which has led to a decline in consumer and business optimism, as well as the protected uncertainty in Europe in relation to Brexit.
In order to mitigate the impact of the identified risks, OECD urges countries to focus their policy initiatives on three main strands – developing trans-national cooperation to stop tensions in international trade; investing in digital and transport infrastructure; and investing in employee skills. Central banks are urged to keep low long-term interest rates to provide support for economic growth, while countries with low external public debt are urged to take advantage of the favourable situation with low interest rates to make additional investments. OECD has pointed out that reforms are currently necessary in all countries to improve living standards, increase investments and productivity in the medium term, and to ensure inclusive growth in order to reduce growing inequalities. In this context, OECD particularly emphasises the potential benefits of digitalisation, which highlights the need for countries to ensure the development of the skills of the population and employees, access of businesses to finance for research, development and innovation, and adaptation of the regulatory framework for competition policy to the digital transformation of the economy.
The detailed OECD Economic Outlook 2019 and other materials are available at http://www.oecd.org/economy/economic-outlook/