Browse by: "2017"
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Economic growth has picked up since Abenomics was launched in 2013, and so has job creation. However, Japan faces serious demographic headwinds, as its population is projected to decline by a quarter over 2015-50, with the share over age 65 rising from 26% to almost 40%. Firms already face labour shortages. Population ageing also puts upward pressure on government spending. Gross government debt, which has risen to 219% of GDP, the highest ever recorded in the OECD area, continues to rise. Labour productivity is about a quarter below the top half of OECD countries despite Japan's high levels of human capital, R&D and business investment. Slowing productivity growth has been accompanied by increased income inequality and relative poverty. Gender gaps in employment and wages are relatively large. This Economic Survey of Japan assesses the country’s recent macroeconomic performance and prospects, and offers recommendations to boost productivity and foster more inclusive growth. In particular, the expanding gap between leading and lagging firms should be narrowed by promoting business sector dynamism and entrepreneurship. Breaking down labour market dualism is a priority to bring about inclusive growth and raise productivity. Faster productivity and output growth, accompanied by measures to limit public spending growth and gradually increase government revenue, would help ensure fiscal sustainability.
SPECIAL FEATURES: PRODUCTIVITY FOR INCLUSIVE GROWTH; FISCAL SUSTAINABILITY
Latvia’s economy has grown robustly in recent years on the back of a strong track record in implementing structural reforms, despite a challenging international environment. Rising wages have supported household consumption. After a severe setback in 2008-09, catch-up with higher income OECD countries may have resumed. Government finances are solid and financial market confidence in Latvia is strong. Private sector indebtedness is now lower than in many OECD economies. Export performance, including diversification of products and destinations, is improving, but Latvia’s participation in global value chains is modest. Latvia’s exports still rely heavily on low value-added, natural resource intensive products, reflecting in part skills shortages and weak innovation. Unemployment remains high, although it has fallen. Many young Latvians emigrate. Informal economic activity is still widespread.
High long-term unemployment, weak social safety nets and high labour taxes for workers on low pay contribute to widespread poverty. Many low-income households are inadequately housed. High out-of-pocket payments limit access of low-income households to health services. Improving access to housing, health care, education and training would improve economic opportunities for low-income households and requires additional government spending.
SPECIAL FEATURES : MOVING UP THE GLOBAL VALUE CHAIN; ECONOMIC AND SOCIAL INFRASTRUCTURE
Luxembourg’s economic performance is robust thanks to its dynamic services sector, sound fiscal policies and openness to global talent. The pace of job creation is strong and benefits not only residents but also cross-border workers and immigrants. The large financial sector is well supervised, but to reduce reliance on the financial industry the government should further develop its long-term strategy focusing on new digital technologies and renewable energy.
Supplying the skills needed in these new sectors will require further improvements in the education system, with a focus on lifelong learning. Better alignment of skills with labour market needs would entail reorienting labour market policies from supporting job creating towards funding training programmes to facilitate the reallocation of labour. Luxembourg benefits from immigrants who play a successful role in the economy. Integration challenges remain, though, especially regarding people from non-EU countries, who suffer from high unemployment. As language proficiency is a key precondition for successful integration, public supply of language courses should be stepped up further. Education reforms seek to make schools more equitable, also for the children of immigrants, and equality between men and women is being promoted by easing access to childcare and making taxation more gender neutral.
SPECIAL FEATURES: BOOSTING SKILLS; IMPROVING THE INTEGRATION OF IMMIGRANTS
Ambitious structural reforms and sound macroeconomic policies have ensured the resilience of the highly-open Mexican economy in the face of challenging global conditions. Mexico’s productivity growth has recently picked up in sectors that benefitted from structural reforms – energy, financial, and telecoms. Trade openness, foreign direct investment, integration into global value chains and innovation incentives have boosted exports, notably of autos. Yet other sectors lag behind, suffering from overly stringent local regulations, weak legal institutions, rooted informality, corruption and insufficient financial development. Moreover, growth has not been inclusive enough to achieve better living conditions for all Mexican families, many of whom live in poverty, and whose children’s opportunities to do better than their parents could be improved. Past policies have already begun to correct these trends, but more needs to be done. The 2017 Survey makes key policy recommendations that could help to boost productivity and make growth more inclusive.
SPECIAL FEATURES: INCLUSIVE GROWTH; PRODUCTIVITY
New Zealand is enjoying strong economic growth, driven by booming tourism, high net immigration, solid construction activity and supportive monetary policy. The fiscal position is sound, with low public debt and a balanced budget. The major economic vulnerability emanates from high levels of household debt associated with rapid increases in house prices, which have reached high levels relative to fundamentals. Barriers to expanding housing supply are being reduced, and macro-prudential measures have been taken to contain financial stability risks, but further measures may be needed. While the short-term economic outlook is strong, there are longer-term challenges from low productivity growth, a changing labour market and some growing environmental pressures. Addressing these challenges would secure sustainable improvements in well-being for all New Zealanders.
SPECIAL FEATURES: IMPROVING PRODUCTIVITY; THE CHANGING LABOUR MARKET
Norway has high levels of GDP per capita and inclusiveness, helped by business dynamism, sound petroleum-wealth management and comprehensive welfare and public services. Retaining these successful outcomes will require the business sector to diversify and successfully exploit opportunities from globalisation and technological change, while continuing to contribute to inclusiveness. This is the theme of Chapter 1 of this Survey. In general the policy environment is business-friendly and adjustment from a “4%” to a “3%” fiscal rule has demonstrated continued good macroeconomic management. However, the house-price correction currently underway poses challenges. Also there is scope to strengthen Norway’s business environment, including through attention to competition and business insolvency, reduced state-stakes and encouragement of new “disruptive” businesses.
Norway’s economy would benefit from improving value for money in public spending. This would create room for lowering taxes, including those that most strongly impact businesses. There is a tendency for high-cost options in policies and inertia in reform. Chapter 2 of this Survey focuses on transport infrastructure investment. Such investment can widen economic opportunities for business and increase welfare for households. However, realising these returns requires that transport-infrastructure investment is well chosen and implemented efficiently.
SPECIAL FEATURES: BUSINESS ENVIRONMENT; TRANSPORT INFRASTRUTURE
Portugal’s economy has gone through a gradual recovery from a deep recession. A wide-ranging structural reform agenda has supported the recovery and the ongoing reduction of imbalances built up in the past. Raising investment will underpin the ongoing rebalancing of the economy and a stronger export sector. Incentives for new capital investments could be strengthened by improvements in judicial efficiency, administrative reform, product market regulation reforms or lower labour costs. Removing non-performing loans from bank balance sheets would enhance banks’ ability to provide new credit to firms. Addressing bottlenecks in insolvency procedures and opening up new sources of financing would also boost private sector investment. Overcoming a legacy of a low skilled labour force is key for higher living standards. Despite remarkable progress, the education system could do more to raise skill levels and reduce the link between learning outcomes and socio-economic backgrounds. The high share of early school drop-outs and frequent use grade repetition could be reduced by shifting resources towards primary education and students at risk and improving teacher training and exposure to best practices. Unifying the current fragmented Vocational Education and Training (VET) system into one dual VET system, and strengthening monitoring and evaluation could raise its effectiveness to meet the labour market needs and ability to contribute to a more skilled society. Efforts need to continue to raise the skills levels of the low-qualified adult population.
SPECIAL FEATURES: RAISING INVESTMENT; RAISING SKILLS
Slovakia’s economy continues to perform extremely well both in terms of macroeconomic outcomes and public finances. Employment is rising, prices have been stable, and the external account is near balance. Poverty and income inequality are low, and the country’s environmental footprint has improved markedly. However, population ageing, projected to be one of the steepest in the OECD on the basis of the expected change in the old-age dependency ratio, will pose policy and social challenges in the decades ahead. They will be compounded by the persistent emigration of young, particularly educated people, as well as the weak integration of the numerous Roma. Other concerns are the work disincentives faced by women and high long-term unemployment. Widely different labour market outcomes between Bratislava and the eastern part of the country also contribute to large regional per capita GDP gaps and a dual functioning of the economy. The authorities have continued their reform process over the last few years to address these issues, which require improving public-sector efficiency. Making growth more inclusive for the Roma, women and the chronically unemployed will require further reforms in education, health care and the labour market, along with better infrastructure.
SPECIAL FEATURES: ENHANCING SKILLS; IMPROVING THE HEALTH-CARE SYSTEM
The economy is experiencing a strong recovery after a prolonged period of low growth following the international financial and domestic banking crises. The current economic prosperity reflects a combination of recent structural reforms, business restructuring, supportive monetary conditions and improved export markets. A downside is that unemployment consists increasingly of low-skilled and older workers who are unable to fill emerging labour shortages. In addition, long-run growth prospects are hindered by a rapidly ageing population and low productivity growth, partly linked to product market issues. The 2017 Survey makes key policy recommendations to secure fiscal sustainability through pension and health care reform. In addition, the Survey recommends measures to enhance economic growth by boosting investment incentives in human and physical capital. Such investments will improve the skills and adaptability of the Slovenian workforce and promote competitive firms, fostering faster productivity growth and higher living standards for all Slovenians by ensuring more inclusive growth.
SPECIAL FEATURES: ENHANCING SKILLS; COMPETITION POLICY AND REGULATION
Over the last two decades, South Africa has accomplished enormous social progress by bringing to millions of citizens access to key public services. Nevertheless, growth has trended down markedly recently due to constraints on the supply side. Low growth has led to the stagnation of GDP per capita, and persistent high unemployment and inequalities.
The economy faces many structural challenges while high inflation limits room for monetary policy support and high public debt constrains public spending. South Africa needs structural reforms that would boost the potential of the economy, in particular, broadening competition, limiting the size and grip of state-owned enterprises on the economy, and improving the quality of the education system.
Greater regional integration could provide new opportunities for growth by expanding market size. South African firms are well placed to benefit from deeper integration. However, lowering tariffs and non-tariffs barriers on trade, developing regional infrastructure and harmonising regulations are needed to foster regional integration.
More entrepreneurs and thriving small businesses would contribute to inclusive growth and job creation. Barriers to entrepreneurship include bureaucratic procedures and licensing, which are also an ongoing burden on small firms. An education system that better equippes students with basic and entrepreneurial skills would grow the pipeline of entrepreneurs. A better evidence base is crucial for more effective financial and non-financial support programmes to boost start-up rates and small firms’ growth.
SPECIAL FEATURES: DEEPENING REGIONAL INTEGRATION; BOOSTING ENTREPRENEURSHIP
Spain is enjoying a robust recovery from a deep recession and a wide range of structural reforms has contributed to sustainable rises in living standards. Highly accommodative euro-area monetary policy, low oil prices and, more recently, expansionary fiscal policy have all supported domestic demand. Exports have been a particular bright spot, as Spain has resisted the slowdown in global export growth. However, raising well-being and GDP per capita, particularly via productivity increases, and making growth more inclusive remains a challenge. Spain has long suffered from very low productivity growth, which has restrained increases in living standards. Misallocation of capital towards low productivity firms and underinvestment in innovation have dragged down productivity, although more recently capital allocation has been improving. Policies to foster a better allocation of capital and higher productivity include reducing regulatory barriers in product markets that are holding back competition, encouraging higher investment in R&D and innovation and ensuring that capital goes to a wider set of innovative firms. Reducing entry barriers and improving framework conditions would also help to foster green investment. The unemployment rate is gradually falling down thanks to stronger growth, but it remains very high, particularly among the young and long-term unemployed. The high share of long-term unemployed risks loss of skills, disaffection and alienation. Poverty has also risen, mainly due to lack of quality jobs that provide enough hours of paid work to support decent incomes. Part of the answer is continued strong economic growth, but strengthening training and job placement and better minimum income support are crucial.
SPECIAL FEATURES: IMPROVING JOB QUALITY; INNOVATIVE BUSINESS INVESTMENT
Sweden’s economy has fared well in recent years thanks to strong macroeconomic, fiscal and financial fundamentals, as well as a competitive and diversified business sector. Output has been lifted by an expanding labour force, investment and lately a pick-up in productivity. Unemployment is receding, although it remains high for vulnerable groups, notably the foreign-born. While income inequality is relatively low, it has risen more rapidly than in any other OECD country since the 1990s. Capital gains boosted top incomes, while benefits increased more slowly than wages. High labour market entry thresholds, spatial segregation, and bottlenecks in migrant settlement reduce opportunities and social mobility. Sweden is one of the world’s most gender-equal countries, even though foreign-born women are lagging behind. Women have a high employment rate, outperform men in education and are well represented in government and parliament. However, gender wage differences persist: women are under-represented on private company boards, in senior management positions, in many well-paid and influential professions and among entrepreneurs. This Economic Survey of Sweden assesses the country’s recent macroeconomic performance and prospects, and offers recommendations to foster more inclusive growth. In particular, reforms to housing, wage subsidies and migrant settlement and integration would raise the incomes and opportunities of the disadvantaged. So would a more systematic approach to benefits uprating. Better shared parental leaves would raise gender equality further. Fostering women entrepreneurship and promoting entry of women in senior management is also crucial.
Special Features: Income inequality; Gender inequality
Switzerland continues to provide its citizens with a high standard of living. The economy has shown considerable resilience, most recently to the exchange rate appreciation in 2015. Nevertheless, growth has been too slow to absorb spare capacity or raise income per capita meaningfully. Unconventional monetary policies have helped return inflation to positive territory, but pose other risks. Fiscal policy is sound, and the federal fiscal rule has helped lower public indebtedness but it implies that spending priorities must be funded from other areas. Labour productivity growth has been falling since the late-1990s to be one-third of the OECD average rate in the past decade. Swiss R&D and innovation are top-ranked but need to be more widespread. Frontier firms’ labour productivity has diverged from the rest. The Swiss education and training system is well regarded and has contributed to high employment rates. However, it is being increasingly challenged by the ever-growing demand for high-skilled workers along with the changing nature of work. Maintaining and raising living standards will require policies to restore productivity growth and ensure that the skills training and lifelong learning system is nimble.
SPECIAL FEATURES: BOOSTING PRODUCTIVITY; MEETING SKILLS NEEDS
After a good performance until 2016, growth slowed in the first half of 2017. The unemployment rate has fallen to below 4.5%, but real wages are in a downward trend. Planned Brexit has raised uncertainty and dented business investment. Negotiating the closest possible EU-UK economic relationship would limit the cost of exit. The authorities should allow automatic stabilisers to work and identify in advance productivity-enhancing fiscal initiatives on investment, to be implemented rapidly were growth to weaken significantly in the run-up to Brexit, while safeguarding fiscal sustainability. Comprehensive policy packages should boost the productivity of lagging regions and cities, which requires local transport investments to foster connectivity, spending on research and development to raise innovation, housing investments to ease the matching of skills to jobs, and greater educational attainment and training tailored to business needs. Enhancing teachers’ training and other incentives, in particular in disadvantaged schools, would address teacher shortages and improve skills. Low-skilled workers participate less in lifelong learning and introducing targeted re-training programmes would boost competencies more broadly. Tax and regulatory reforms of non-standard forms of employment would offset workers’ weaker bargaining power and ensure better job quality.
SPECIAL FEATURES: REGIONAL PRODUCTIVITY; PRODUCTIVITY OF LOW-SKILLED WORKERS
This first OECD Investment Policy Review of Lao PDR uses the OECD Policy Framework for Investment to assess the investment climate in Lao PDR and discusses the challenges and opportunities faced by the Government of Lao PDR in its reform efforts. It includes chapters on trends in foreign investment and trade, the legal framework for investment, regulatory restrictions on foreign investment, corporate governance, investment promotion and facilitation, promoting and enabling responsible business conduct, infrastructure connectivity and the investment framework for green growth.
This country review report for Chile provides, from an international perspective, an independent analysis of major issues facing the use of school resources in Chile, current policy initiatives, and possible future approaches. The report serves three purposes: i) to provide insights and advice to Chilean education authorities; ii) to help other countries understand the Chilean approach to the use of school resources; and iii) to provide input for the comparative analysis of the OECD School Resources Review. The analysis in the report focusses on the following areas: i) the funding of school education (including planning, distribution, incentives and monitoring); ii) equity resourcing policies targeted at specific groups of students; iii) school organisation and the operation of schools; and iv) the teaching profession.
The OECD Sovereign Borrowing Outlook provides regular updates on trends and developments associated with sovereign borrowing requirements, funding strategies, market infrastructure and debt levels from the perspective of public debt managers. The Outlook makes a policy distinction between funding strategy and borrowing requirements. The central government marketable gross borrowing needs, or requirements, are calculated on the basis of budget deficits and redemptions. The funding strategy entails decisions on how borrowing needs are going to be financed using different instruments and which distribution channels are being used. This edition provides data, information and background on sovereign borrowing needs and discusses funding strategies and debt management policies for the OECD area and country groupings. In particular, it examines: gross borrowing requirements; net borrowing requirements; central government marketable debt; interactions between fiscal policy, public debt management and monetary policy; funding strategies, procedures and instruments; liquidity in secondary markets; implications of a low interest environment for government debt; and the outlook of inflation linked bonds.
After two decades of solid growth of household disposable income and living standards more generally, Canadians generally enjoy a high level of well-being. However, disparities persist – not all population groups have benefitted equally strongly from past improvements in living standards. Income inequality is close to the OECD average, but the tax and benefit system is less redistributive than those in most OECD countries. Despite high social mobility over a number of different dimensions such as health, earnings, social class or education, middle class self-identification has fallen in recent years. At the same time, productivity growth has slowed own, limiting the potential for further improvements in living standards. The slowdown in productivity growth is linked to a growing divide between high-productivity frontier firms and low-productivity laggards, as well as a weakening of business dynamism. The cross-cutting challenge presented by the persistence of multidimensional inequalities and weak productivity growth underlines the need for a reappraisal of Canada’s policy making process with the aim of fostering stronger and more inclusive growth.
India’s economy continues to grow at an impressive rate, with projected annual GDP growth of 7.5% in 2017-18. India will thus remain the fastest-growing G20 economy. Unprecedented growth in exports in services since the 1990s has made India a global leader in this sector. Inflows of foreign direct investment (FDI) grew at three times the annual world average rate in the last decade, reflecting the success of efforts to attract international investment and gradually loosen restrictions to foreign investment. India’s economic successes are being translated into increased well-being for its population. As GDP per capita has more than doubled in ten years, extreme poverty has declined substantially. Access to education has steadily improved, and life expectancy has risen. Multiple opportunities present themselves for India, and the right mix of policies is needed to take advantage of them. India has made advances in integrating in global value chains and developing a competitive advantage in fields such as information and communication technology. Now is the time to secure continued progress by boosting competition and further lowering barriers to trade and investment. Looking to the future, it will be vital to fully tap into the potential offered by India´s young population. This means investing in the large numbers of young people entering the labour market. Likewise, the rapid pace of development must be matched with the upgrades to infrastructure necessary to support it.
This report sets out several of the recent advances, and suggests the most promising approaches, to the quantification and valuation of some of the wider economic benefits that flow from transport-related development. Economic appraisal can offer decision-makers important insights into the expected socio-economic impacts of transport projects. The sophistication of modern supply chains and the growing prominence of the services sector have increased the interest of decision-makers in economic benefits beyond those traditionally captured in transport appraisal.