News brief Q4 2016

Europe paying a heavy price for chronic diseases  

Better public health policies and more effective health care could save hundreds of thousands of lives and billions of euros each year in Europe. The premature deaths of 550,000 working age people across EU countries from chronic diseases, including heart attacks, strokes, diabetes and cancer, cost EU economies €115 billion or 0.8% of GDP annually, according to a new joint OECD-European Commission report. While earlier diagnosis and better treatments have substantially increased the share of people surviving these diseases, many countries lag behind in terms of cancer survival rates. The burden of ill-health on social benefit expenditures is huge, with 1.7% of GDP spent on disability and paid sick leave each year on average in EU countries, more than what is spent on unemployment benefits.

See www.oecd.org/health 


Use fiscal policy against low-growth trap

“The global economy has the prospect of modestly higher growth, after five years of disappointingly weak outcomes,” OECD Secretary-General Angel Gurría said while launching the latest OECD Economic Outlook. “In light of the current context of low interest rates, policy makers have a unique window of opportunity to make more active use of fiscal levers to boost growth and reduce inequality without compromising debt levels. We urge them to do so,” Mr Gurría said. The Economic Outlook projects that well targeted public spending initiatives could catalyse private economic activity and help to get the global economy out of the low-growth trap. Growth in the US is projected at 2.3% in 2017 and 3% in 2018, for the euro area at 1.6% and 1.7%, and in Japan, at 1% and 0.8%.

See www.oecd.org/eco/outlook    


Tax policy reforms

While fiscal consolidation was the key driver of tax reforms in the aftermath of the global economic crisis, the main emphasis of recent tax reforms has shifted back to measures aimed at boosting economic growth. Austria, Belgium, Greece, Japan, the Netherlands, Norway and Spain were the countries that implemented, legislated or announced the most comprehensive tax reforms in 2015, according to Tax Policy Reforms in the OECD. The report highlights a move in some countries towards higher taxes on personal capital income, but only relatively limited moves toward reform of environmental and property taxes.

See www.oecd.org/tax  


Soundbites

We’re heading for a trade war and we’ll all lose.

Daniel Finkelstein, The Times, 30 November

It is time to change the political discourse on globalisation: trade is a good thing, but fair and sustainable development also demands public services, infrastructure, health and education systems.

Thomas Piketty, The Guardian, 16 November

Like it or not, globalisation is here to stay.

Headline, Les Echos (French daily newspaper), 28 October

For globalisation to be politically sustainable, it must be more economically equitable.

Javier Solano and Strobe Talbott, The New York Times (international edition), 20 October

Automation and globalisation are combining to generate a world with a surfeit of labour and too little work.

Ryan Avent, The Guardian, 9 October

Trade isn’t an end in itself, but a tool for better jobs, increased prosperity and reduced global poverty.

Christine Lagarde, Jim Yong Kim and Roberto Azevêdo, The Wall Street Journal, 6 October  


Economy

Real GDP growth in the OECD area picked up markedly to 0.6% in the third quarter of 2016, compared with 0.3% in the previous quarter. Growth accelerated in most G7 economies, with the exception of the UK and Germany, where growth slowed to 0.5% and 0.2%, compared with 0.7% and 0.4% in the previous quarter. In the EU and in the euro area, growth was stable at 0.4% and 0.3%.

OECD-area inflation rose to 1.2% in September 2016, compared with 0.9% in the previous month. Excluding food and energy, annual inflation was stable at 1.8% in September, for the third consecutive month.

The unemployment rate in the OECD area, at 6.3% in September, has been stable since May 2016. Across the OECD area, 39.5 million people were unemployed, 9.5 million less than at the peak recorded in January 2013, but still 6.8 million more than in April 2008, when the crisis started affecting the labour market. The unemployment rate in the euro area was at 10% in September, with the largest falls observed in France, Ireland and Belgium, but increased in the US by 0.1 percentage point to 5%, while falling by 0.1 percentage point in Korea to 4%, and remaining at 7% in Canada.

The OECD-area employment rate increased to 66.9% in the second quarter of 2016, thus continuing the recovery since early 2011, although at a slower pace than in the three previous quarters. In the euro area, the employment rate rose by 0.2 percentage points to 65.3%, the eleventh consecutive quarter of growth.   


Country roundup

Sweden should promote quality practical training to help young people into work, according to a new OECD report. www.oecd.org/sweden/  

Hungary has become the 30th member of the OECD Development Assistance Committee (DAC), the leading international forum for bilateral providers of development co-operation. www.oecd.org/hungary/

Finland could do more to help vulnerable laid-off workers, through access to more intensive employment services before and after dismissal. www.oecd.org/finland/

Asia-Pacific countries should strengthen their health systems and sharply increase spending to deliver effective universal coverage in order to meet the changing needs of their fast ageing populations. www.oecd.org/dev/asia-pacific/

Malaysia’s economy has proven resilient, but more can be done to boost innovation, raise productivity and inclusive growth, according to two new reports from the OECD. www.oecd.org/countries/malaysia/

Lifting many of the regulations stifling business competition in Greece would benefit both consumers, through lower prices, and firms, via higher turnover. www.oecd.org/greece/

Empowering the 40% of young Latin Americans not in formal jobs, education or training could spark new growth engines, says latest Latin American Economic Outlook. www.oecd.org/dev/americas/  

Slovenia has implemented important and difficult labour market and pension reforms in response to the global financial crisis, but more is needed. www.oecd.org/slovenia/   

Panama signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, making it the 105th jurisdiction to do so, the aim being to boost transparency and combat cross-border tax evasion. www.oecd.org/countries/panama/

Middle Eastern and North African (MENA) countries need structural reforms to spur trade, investment, jobs and trust, the 2016 MENA-OECD Ministerial Meeting agreed. www.oecd.org/mena/

Latvia has successfully consolidated its hospital sector and strengthened primary care since the financial crisis, and barriers to high quality care must now be removed, says a new OECD report. www.oecd.org/latvia/


Darren Walker

On 22 November the president of the Ford Foundation Darren Walker visited the OECD, where he talked about inclusive growth and justice.  


Other stories

The post-crisis recovery in entrepreneurial activity remains mixed across countries, but new OECD data provides tentative signs of a turning point, with trends in enterprise creation rates pointing upwards in most economies. A revival in entrepreneurial activity could help improve economic growth and provide an important longer-term boost to productivity, given the positive link between start-up rates and productivity growth. See www.oecd.org/industry/  

Young people who leave school at 16 with low skills are facing increasing challenges in finding a job, and their chances may not improve even if the economy picks up, according to a new OECD report. Governments must ensure that young people obtain at least an upper-secondary qualification or gain vocational skills. See also page 58. See www.oecd.org/social/

The share of the public holding anti-immigration views has grown, driven by concerns that borders are insecure, immigrants stretch local services and some do not want to integrate. The 2016 International Migration Outlook stresses that systematic and co-ordinated action is needed to vigorously address anti-immigration backlash. See www.oecd.org/migration/  


Plus ça change...

Economic comment periodically expresses the fear that innovation may breed lasting unemployment. The fear has yet to be borne out, even though blacksmiths and grooms have had to give way to bus drivers and garage hands. What has mattered, to date, has been the speed with which new skills were learned and the degree of compassion (not protectionism) that society has accorded to those too old to learn. Countries which have willingly embraced new technology and high investment have found that a good recipe for rising living standards and low unemployment.  

“What threatens jobs?”, in Issue No 115, March 1982

©OECD Observer No 308 Q4 2016




Economic data

GDP growth: +0.7% Q2 2017 year-on-year
Consumer price inflation: 2.3% Sept 2017 annual
Trade: +1.4% exp, +1.7% imp, Q2 2017
Unemployment: 5.7% Sept 2017
Last update: 14 Nov 2017

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