OECD Warns of New Era of Low Growth

OECD Warns of New Era of Low Growth

‘In several emerging-market economies — notably Brazil, India and Indonesia — infrastructure investment is not sufficient to support high rates of industrialization and urbanization, hampering potential growth.’

By Agence France-Presse on 4:27 pm February 21, 2014.

Sydney. The OECD on Friday warned declining global productivity will usher in a new and extended era of low growth unless there are major structural reforms.

Its new “Going for Growth” report identifies infrastructure shortages and slowing trade activity as key problems — issues that will be in focus at the G20 meeting of finance ministers and central bank governors in Sydney this weekend.

“The widespread deceleration in productivity since the [global financial] crisis could presage the beginning of a new low–growth era,” the Organisation for Economic Cooperation and Development said.

“The global economy’s momentum remains sluggish, heightening concerns that there has been a structural downshift in growth rates compared with pre-crisis levels.

“These concerns, already prevalent among advanced OECD countries for some time, now encompass emerging–market economies and are fuelled also by high unemployment and falling labour force participation in many countries.”

The report calls for investment in skills to boost labour force participation, and a fresh approach to encourage private investment in infrastructure to help boost growth.

“One worrying development is the marked slowdown in global trade activity relative to world production,” it said. “Aside from its fundamental role as a vector of technology and knowledge diffusion, international trade boosts productivity through stronger competition pressures on domestic markets.

“And trade-related concerns are magnified by subdued investment in new plant, machinery and equipment as well as in less tangible assets such as research and development or new business processes and workforce training, which are needed to make the most of new technologies.”

The OECD said that business investment rates in most advanced economies were below what would be needed to sustain higher-trend growth rates.

“In several emerging-market economies — notably Brazil, India and Indonesia — infrastructure investment is not sufficient to support high rates of industrialization and urbanization, hampering potential growth.”

The G20 has sessions on the global economy and growth strategies, both of which have been prioritized by summit chair Australia with Treasurer Joe Hockey this week saying “infrastructure will be a key as we try to boost economic growth and create jobs”.

OECD data released Thursday showed growth in advanced economies slowed down slightly in 2013 to 1.3 percent from 1.5 percent in 2012.

The highest 12-month rate was turned in by Britain with 2.8 percent, followed by Japan and the United States with 2.7 percent.