SHANGHAI: With little hope for the world economy picking up pace soon, governments must tackle reforms at home to kickstart growth, the Economic Cooperation and Development (OECD) said on Friday.
Promoting entrepreneurship, labor mobility and higher productivity were all on the menu of the Organization for OECD’s recommendations to policymakers.
“Global growth prospects remain clouded in the near term,” it said in its “Going for Growth” interim report, released ahead of a G20 finance ministers meeting in Shanghai.
“The case for structural reforms, combined with supporting demand policies, remains strong,” it said.
The OECD chided governments for not doing more, pointing out that cutting red tape could help stoke growth and create jobs at a time when the world economy is stuttering.
Removing barriers that stifle entrepreneurship and limit the capacity of firms to make good use of knowledge and technology is a “reform priority,” it said.
It also recommended making it easier for new entrants in services where there is pent-up demand, such as taxis, reforming health and pension benefits and helping workers to become more mobile.
“It’s up to [G20 finance] ministers to look at the situation and give the signal to governments that there’s no way out,” Alain de Serres, author of the report, told journalists in Shanghai.
Southern European countries have been more pro-active than their northern neighbors in tackling reform, the OECD said, also praising Japan, China, India and Mexico.
But others had not done enough, the report said, adding: “Governments around the world need to address deep structural weaknesses that the crisis laid bare, but which in many cases originated well before.”
Acknowledging that many government budgets are tight, the OECD said particularly cash-strapped countries may need “to prioritize on high short-term returns or on low-cost measures.”
Some measures could actually save governments money quickly, it said, including making unemployment benefits conditional on training schemes or attracting private investment into public infrastructure.
China, which holds the presidency of the G20, also stressed the importance of structural reforms.
“We might be standing at the edge of a cliff with two options: whether to fall or whether to . . . push forward the painful reform process,” Chinese Finance Minister Lou Jiwei told a news conference to launch the report.