India’s export performance: the goods and services nexus

By Isabelle Joumard, India Desk, OECD Economics Department

The government aims at making India an export hub, to help boost job creation. The export-to-GDP ratio has risen fast since the early 1990s and now stands broadly at par with China (Figure 1). The large share of services in total exports however stands out: while India has performed very well in exporting IT services, exports of goods have lagged behind. Exports of labour-intensive manufacturing products could grow faster and contribute to job creation. The 2019 OECD Economic Survey of India discusses policies to make India’s exports more competitive.

Performance of services exports has been stellar. India’s share of world services trade more than quadrupled from 0.5% in 1995 to 3.5% in 2018 and India has become a major exporter of business services, notably in the Information, Communication and Technology (ICT) sector. Medical and wellness tourism is also performing well, with patients seeking high-quality medical treatment at competitive prices in some Indian hospitals.

Exports of goods have displayed mixed results. India has gained market shares for some skill- and capital-intensive goods, including pharmaceuticals and refined oil. However, performance in exporting textiles, leather and agricultural products has disappointed. Looking at the labour-intensive components of the textile sector (including garment) provides an illustration: Vietnam now has a larger market share (Figure 2).

Domestic factors partly explain the relatively low performance of labour-intensive exports. Labour regulations are more stringent for industries and large firms. This creates incentives for firms to stay small, making it difficult to exploit scale economies. Electricity prices are also relatively high and transport infrastructure bottlenecks persist despite recent improvements. This hampers the competitiveness of manufacturing goods which tend to be more intensive in energy and transport than services. The length and costs to acquire land, combined with relatively high financing costs, are further weighing on firms’ competitiveness.

Barriers to trade also play a role. Import tariffs on goods declined substantially in the 1990s and 2000s. They have been raised again since 2017 and are relatively high (Figure 3). Expensive imports of intermediate products, due to import duties, can penalise Indian exporters if they do not receive the full compensation for the duties paid on inputs — this is often the case in a sector like the apparel sector where small enterprises account for the lion’s share. The complexity of India’s tariff structure further raises administrative and compliance costs. Overall, import duties run against the objective of making India an export hub.

Trade in services also faces some restrictions, with local suppliers protected from foreign competition (Nordås, 2019; OECD, 2017). Only Indian nationals are allowed to practise as lawyers or architects. Services trade restrictions, as assessed by the OECD, are also relatively high in the banking, insurance, rail and air transport, and telecommunication sectors (Figure 4). Because services are key inputs for the manufacturing sector and support participation in global value chains, stringent regulations on services are weighing on manufacturing costs and thus on export performance.

OECD simulations suggest that India would be a major beneficiary of a multilateral reduction in barriers to services trade (OECD, 2019b). Better priced services intermediates would foster a rapid expansion of production and job creation in the manufacturing sector. It would further support wages for low-skilled workers. Simulations also reveal that, even in the absence of a multilateral agreement, the economy would gain from a unilateral liberalisation of trade and investment (Joumard et al., 2020).

India could make exports a new growth engine. India’s trade prospects are relatively positive as it has specialised in sectors which will likely be in high demand in the future (e.g. ICT services, pharmaceuticals and medical devices) and in fast growing destinations (with a large share of its exports to emerging market economies). To unlock its potential to seize market shares in the labour-intensive manufacturing segment, India should modernise labour and land regulations, address infrastructure bottlenecks and open up further the services sector to trade and investment. Better and less expensive services – financial, marketing, distribution, legal, transport, etc. – will increase competitiveness in the manufacturing sector, boost job creation and meet the aspirations of women and new comers on the labour market.

References

Joumard I., M. Dek and C. Arriola (2020), “Challenges and opportunities of India’s enhanced participation in the global economy”, OECD Economics Department Working Paper No. 1597. https://doi.org/10.1787/a6facd16-en

Nordås, H.K. (2019) “Services trade restrictiveness index, methodology and application: The Indian context” in D. Chakraborty and Nag, B. (eds), India’s Trade Patterns and Export Opportunities: Reflections through Trade Indices and Modelling Techniques, New Delhi: Sage Publications

OECD (2017), Services Trade Policies and the Global Economy, OECD Publishing, Paris, https://doi.org/10.1787/9789264275232-en

OECD (2019a), OECD Economic Surveys: India 2019, OECD Publishing, Paris, https://dx.doi.org/10.1787/554c1c22-en.

OECD (2019b), Trade Policy and the Global Economy – Scenario 4: Addressing Barriers to Services Trade, OECD publishing, Paris https://issuu.com/oecd.publishing/docs/oecd-trade-scenario-4-services




Statistical Insight: men’s employment more dependent on trade than women’s

by Fabienne Fortanier, OECD Statistics and Data Directorate

Concerns are growing that globalisation may have created a few
big winners at the expense of many losers. This has stimulated efforts to
analyse how trade can be made  to Work for All, for example by focusing on the skills and occupations of affected
workers. However, there has been less attention to the gender dimension of
globalisation and global value chains, and in particular to whether they are
having differing effects on men’s and women’s work.

New analysis shows that men’s employment is more dependent on international trade than women’s. On average across the countries studied, 37% of men’s jobs, but only 27% of women’s jobs, depend on exports – either because the firms they work for export directly, or because they indirectly supply other firms that subsequently export. This compares to only 27% of women’s employment (Figure 1).

Source: OECD Statistics and Data Directorate estimates, based on full-time equivalent employment.

Focusing on manufacturing exports only (which account for around 70% of international trade), Figure 2 illustrates that in nearly all countries, the share of women in employment that is indirectly sustained by manufacturing exports is higher than the share in employment that is directly sustained. For example, in Germany, women’s share of manufacturing jobs that is directly sustained was just over 20% in 2014 but close to 35% of indirect jobs (Figure 2).

Source: OECD Statistics and Data Directorate estimates

Women’s jobs are thus both less dependent on trade overall, and
less directly involved with manufacturing exports. These trends arise partly
from differences in female labour participation across industries and partly
from the relative contributions of these industries to total trade. Overall, women
tend to work in business services and in other, mainly non-market, services, rather
than in manufacturing, where on average they only account for a quarter of the
workforce.  

However, while men account for the lion’s share of the work involved in manufacturing exports, that work generates a substantial number of upstream jobs held by women. As Figure 3 shows, for each unit of labour input in direct manufacturing exports, an additional 0.5 unit of female labour input is generated in the companies that supply exporters, as well as an additional 0.9 unit of male labour inputs. Put differently, each job in manufacturing exports generates on average 1.4 additional jobs upstream, a third of which are jobs held by women.

Source: OECD Statistics and Data Directorate estimates

The nature of the upstream participation also differs significantly between men and women. While the bulk of upstream jobs are in the services sector, this is particularly true for women’s jobs. Taking again Germany as an example, Figure 4 shows that less than 20% of women’s upstream jobs are in industrial and goods sectors (Agriculture, Utilities, Construction, Manufacturing and Mining), compared to 45% for men.

Source: OECD Statistics and Data Directorate estimates.

The detailed data compiled for this analysis on the
export-dependency of men’s and women’s jobs provide an indication of the extent
to which reducing gender wage gaps will depend on encouraging more women to
seek employment in higher-paying sectors of the value chain. 

How the indicators were
constructed

The estimates of female employment in global value chains were
produced by combining the TiVA ICIO (2008-2014) with data on labour input by
industry, measured in hours worked as reported in the National Accounts, broken
down by gender. The gender breakdown was derived from Labour Force Surveys,
which is the only sufficiently detailed source to support this analysis, using
a combination of total employees (male/female) broken down by industry,
corrected for average weekly working hours to adjust for the fact that in many
countries, women work fewer hours on average. For details on the calculations, as
well as on the estimations made in case of missing data, see the accompanying
background note.

Further reading




Making trade and digitalisation work for all

by Laurence Boone, OECD Chief Economist

IncgrowthblogLB12-11-2018For some, the financial crisis was an eye-opener exposing the inequalities in life chances between those with the right skills and those without, between those born and educated in the right places and those who were not.  But for many others the growing gap in well-being has been a reality for decades.

Widening inequalities threaten economic growth, undermine trust in government and democracy, and fuel discontent with the multilateral rules-based system of market economies.

Governments can and should seek to reverse the trend towards growing inequality and ensure that  economic growth benefits everyone. Making trade and digitalisation work for all is not about idealism: it is about improving people’s standard of living, boosting opportunities for inter-generational mobility and ensuring a brighter future for all.

The OECD has developed a whole-of-government approach, built around analysis of policies and strategies to ensure that the fruits of economic growth are better shared across society. We identify comprehensive policy packages that optimise gains in GDP and households incomes, including among the less well off.

There are no one-size-fits-all reform packages, but key principles can guide policy-making for inclusive growth by targeting three broad areas for action: firms, skills and workers.

  • Firms: to promote business dynamism and the diffusion of knowledge by, for instance, lowering barriers to market entry or improving the efficiency of the corporate tax system.
  • Skills: by fostering higher quality education and greater innovation and through better-adapted R&D policies so that innovation fosters productivity gains across all types of activities.
  • Workers: with policies that ensure workers benefit from a fast-evolving labour market, including those who are most vulnerable to the changing demand for skills and automation, or who have less bargaining power.

The principles build on extensive OECD empirical research into the effects of pro-growth structural policy reforms on household disposable incomes. This research highlights the trade-offs between productivity gains and inequality when they appear, as well as possible synergies between efficiency and equity.

The policies needed to raise equality of opportunity are clear. It is striking that a child whose parents did not graduate from secondary school has only a 15% chance of doing so himself or herself, compared to a 65% chance for more well-off children.  Equality of opportunities can foster social mobility: an equal access to education, finance, jobs, health, transport and other public services helps compensate for the environment in which people were born. Good quality education is primordial throughout life – especially early childhood education, but also training at work, which too often benefits those already well educated.

Other reforms have more ambiguous effects on efficiency and equity. Policies which reduce labour costs by lowering unemployment benefits increase employment, but also make the vulnerable more fragile when there is an economic downturn. Meeting the twin objectives of raising employment while mitigating the negative consequences on poor households requires well-targeted active labour market policies to enhance the employability of low-skilled workers, the long-term unemployed and discouraged job seekers.

Some policies have more ambiguous effects: raising the minimum wage reduces inequality, just as stronger unions may strengthen workers’ bargaining position.  When firms have the option of investing in automation technology,  striking the right balance between bargaining power and the economic environment is  crucial to preserving employment with appropriate wage gains.

Spurring productivity, by easing barriers to firm entry and competition in product markets, supports GDP growth gains without exacerbating inequality, but only to the extent that the associated job gains are fairly equally shared across households. This requires the distributional effects of higher employment – which tends to benefit the less affluent households disproportionately – to more than offset those of higher labour productivity, which tends to benefit  the wealthiest households.

Inclusive growth also requires devoting careful attention to transition. Opening markets to trade or progress in technology inevitably leads to the decline of certain companies and obsolescence of particular skills. Accompanying measures – building on an active partnership between employers and governments, often at the regional level – can help workers and strengthen trust in the protective capacity of governments. Safety net packages and trampoline policies for keeping workers in the labour markets are all relevant. For example, in Sweden, job security councils, founded by employers, assist workers whose employment is put at risk when firms restructure. The programmes have enabled  85% of displaced workers to find a new job within a year, a higher rate than any other OECD country. Conversely, the US Trade Adjustment Assistance and the EU Globalisation Adjustment Fund, which lack such partnerships, have barely benefitted those affected by the displacement of economic activities.

It is important to acknowledge that transitional policy responses have limits. This is especially the case for persistent shocks concentrated in specific regions, sectors or skills. When distributional effects are persistent, direct fiscal policy measures may be needed to restore equity and opportunity. These may include well-designed wealth and inheritance taxation, paying particular attention to the progressivity of the tax system, and better targeting social benefits towards those who need those most. Separately at the global level, the international  programme to tackle Base Erosion and Profit Shifting (BEPS) and increase information transparency of the tax system will help strengthen the level-playing field and ensure a fair share of firms’ revenues is allocated to where value added is produced. This will help stabilise government revenues and ensure redistribution  benefits to those who need it most, but perhaps more importantly may help increase trust in multilateral cooperation.

Sustained growth is a pre-condition for improving living standards and job creation, but sustainability depends on an effective and perceived broad sharing of the growth dividends. The OECD has been promoting an inclusive growth framework based on three pillars: equal opportunities, business dynamism and inclusive labour markets, efficient and responsive governments. Implementation needs to start today.

References:




The global impact of weaker demand growth in China

by Nigel Pain and Elena Rusticelli, 

Greater international integration has modified the transmission channels and the impact that external shocks have on domestic economies via increased trade openness and exposure to global financial developments. One important change, discussed in the special chapter of the latest OECD Economic Outlook, is that growth prospects in OECD economies have become more sensitive to macroeconomic shocks in non-OECD countries. This reflects the rising share of the emerging market economies (EMEs) in global trade and finance. EMEs now account for one-fifth of world trade, up from around one-tenth two decades ago.

Changes in trade patterns and also in the intensity of trade (trade openness) have implications for the strength of the spillovers from any shocks in the EMEs. One particular example – the size of spillovers from a negative demand shock in China – is discussed below, using simulations on the global macroeconomic model NiGEM. The scenario considered is a 2-percentage point decline in Chinese domestic demand growth that persists for two years.

The trade-related spillovers from this shock are considered using versions of the model with different sets of trade patterns and different levels of trade openness (the share of trade in GDP).

  • In a first scenario, the shock is simulated at a single point in time with two different sets of bilateral trade linkages in the model – the linkages that existed in 1995 and those that existed in 2016. The share of China in total global trade rose by close to 8 percentage points between these years.
  • In a second scenario, the shock is simulated using a single set of bilateral trade linkages – those for 2016 – but with the shock occurring at two different starting periods with very different levels of trade openness. On average across economies, trade openness is 11 percentage points higher in the second starting point for the shock than in the first. This change is broadly comparable to the rise in trade openness in the decade or so prior to the financial crisis.

The adverse effects of the China shock on GDP growth in other countries increase as China becomes more integrated into global markets and as each country becomes more open to trade (figure below). In the scenarios considered, negative spillovers increase by more when trade openness is changed than from the stronger role of China in global trade, thus indicating that the general rise in cross-border trade over recent history contributes more extensively to changing transmission of shocks than the increase in the weight of single countries. GDP growth in most major OECD economies is reduced modestly, by 0.1-0.2 percentage points per annum, with a stronger impact in Japan. Negative output spillovers are larger in open economies more exposed to China via tighter GVC linkages, such as East Asia or commodity exporters.

GDP growth in China declines by between 1¼-1½ per cent per annum, depending on the particular scenario considered, with import demand falling sharply. In the scenario with the higher level of trade openness, world trade growth declines by 1 percentage point per annum relative to baseline. At the same time, the slowdown in China puts downward pressure on export prices and import prices decline in all trade partners, partially helping to correct negative growth spillovers. Such effects become more important as the share of trade with China increases, and as economies become more open to trade.

The negative output spillovers would be larger still if monetary policy did not react, or was unable to react, to offset the adverse demand shock. Central Banks, targeting the deviation of inflation and nominal GDP from their target levels, cut policy interest rates, which by the second year of the shock decline by 25-50 basis points on average in the OECD countries (depending on the scenario considered) and by more in the economies most heavily exposed to China.

Heightened financial market uncertainty and weaker commodity prices could intensify the adverse impact of a demand shock in China over and above the direct trade-related impact considered here (OECD, 2015).

EOchina2018blogJuly

References:

OECD (2015), OECD Economic Outlook, Volume 2015 Issue 2, OECD Publishing, Paris.

OECD (2018), OECD Economic Outlook, Volume 2018 Issue 1, OECD Publishing, Paris.




Brexit and Dutch Exports: Fewer glasshouses, more glass towers as agri-food shrinks and finance gains.

by Donal Smith, OECD Trade Directorate and Economics Department

netherlands economic survey 2018The Netherlands is likely to be one of the European countries that is going to be significantly affected by the United Kingdom’s planned departure from the European Union (Brexit). As an open economy with strong trade and investment links to the United Kingdom, the Netherlands is exposed to increases in barriers to trade between the United Kingdom and EU (Vandenbussche et al., 2017). New OECD simulations show the potential extent of this impact, as well as the different sectors of the Dutch economy likely to be affected.

The sector-level impacts will depend on differing UK trade exposures, tariff rates and non-tariff measures (NTMs) applied to different products; varying degrees of global value chain integration of the sectors; and differences in sectors trade diversification opportunities. On trade exposure for example, the agri-food sector has a comparatively high UK exposure. This sector accounts for 23% of the total exports of the Netherlands to the UK while the UK market makes up 12% of total Dutch agri-food exports (OECD 2018).[1]

An illustrative worst-case Brexit scenario – assuming the UK leaves the EU without any trade agreement – is simulated using the OECD METRO model (OECD, 2015).[2] The key advantage of this analysis is that it accounts for changes in both tariff and non-tariff barriers. The scenario assumes that trade relations between the EU and UK default to the World Trade Organisation’s (WTO) Most-Favoured Nation (MFN) rules, that is, the most basic trade relationship. Relative to current arrangements, this corresponds to an increase in tariffs on Dutch trade with the United Kingdom of between 0 and 12  per cent.

 

mourublog1nether2018

Simulation results show that Dutch exports to the UK would fall by 17%in the medium-term. The Dutch agri-food sector is estimated to experience a 22% fall in its UK exports (Figure 1). This is driven by a substantial 35% decline in exports in the meat products sector. Smaller materials manufacturing sectors such as wood and leather products and textiles would see a 20% fall in their UK exports. The 2% fall in production in agri-food contributes to a 7% decline in the value of agricultural land. Four of the five sectors that record the largest declines in employment following production falls are in the agri-food sectors.

Of all the non-agri-food sectors, electronic equipment would see the largest decline in total exports at 3% and the largest decline in production at 2.4% in the scenario. Access to supply chains for intermediate imports from the UK for Dutch sectors is also curtailed; intermediate imports from the UK would fall by over 40% in the finance and insurance sector in the scenario.

There are a few sectors which have export gains under this scenario. These include motor vehicles, finance and insurance and transport equipment, these sectors show increases in exports to the rest of the EU as well as the United States. The gas sector expands slightly, but this translates into relatively larger gains of gross exports of 6% (to EU) and 10% (to US).

[1] OECD METRO model data.

[2] This shock implies a scenario could be the result of a disorderly conclusion to negotiations and can be considered something close to a worst case outcome and does not consider the impact via investment.

References

OECD (2018), OECD Economic Surveys: Netherlands 2018, OECD Publishing, Paris.

OECD (2015), “METRO v1 Model Documentation”, TAD/TC/WP(2014)24/FINAL.

Vandenbussche, Hylke and Connell Garcia, William and Simons, Wouter, Global Value Chains, Trade Shocks and Jobs: An Application to Brexit (September 2017). Available at SSRN: https://ssrn.com/abstract=3052259 or http://dx.doi.org/10.2139/ssrn.3052259




Insertion de la Tunisie dans les chaines de valeur mondiales et rôle des entreprises offshore

Isabelle Joumard, responsable du bureau Tunisie, Département d’Économie de l’OCDE

L’ouverture de la Tunisie aux échanges internationaux a fortement progressé depuis le milieu des années 90, témoignant des avantages comparatifs du pays. Les exportations ont sensiblement augmenté, tirées par le secteur manufacturier, avec une transformation en faveur de secteurs plus intensifs en technologie et en compétences.  De plus, l’analyse des échanges commerciaux sur la base de la valeur ajoutée remet en cause la perception selon laquelle les activités à faible teneur en valeur ajoutée dominent. Cette analyse montre aussi que le degré d’intégration de la Tunisie dans les chaines de valeur mondiales est similaire à celui de pays de l’OCDE, le Portugal notamment, et supérieur à celui de nombreux pays émergents. La montée en gamme et la diversification des exportations augurent de plus d’un potentiel de croissance de l’économie tunisienne élevé.

tunisieblog2018chainsvaleurs11

Cette bonne performance à l’exportation est pour l’essentiel le fait d’entreprises entièrement exportatrices (dites offshores). Le secteur offshore dégage un excédent commercial croissant. La contribution des entreprises du secteur à la création d’emplois formels a aussi augmenté – en 2016, les entreprises du secteur offshore contribuaient à hauteur de 34% des emplois formel du secteur privé – alors que le travail informel reste un problème majeur (environ 50% des jeunes). Néanmoins, ces entreprises sont pour l’essentiel localisées proches des ports, contribuant à la concentration géographique de l’activité économique. En outre, l’effet d’entrainement sur le reste de l’économie est faible : les entreprises offshore s’approvisionnent peu sur le marché local et servent rarement la demande locale. La complexité des procédures douanières, fiscales et administratives est perçue par les entreprises comme une barrière aux échanges avec les entreprises du régime onshore. De leur côté, les entreprises du secteur onshore sont pénalisées par des difficultés lors du passage en douane de leurs produits et des services logistiques peu performants.

tunisieblog2018chainsvaleurs1

La levée des contraintes à l’exportation rencontrées par les entreprises du secteur onshore et le décloisonnement entre régimes offshore et onshore permettraient à la Tunisie de se hisser dans les chaines de valeur mondiales et d’en tirer plus d’avantages, notamment en termes de progrès technologique, de création d’emplois et de richesse.

Références :

Joumard I., S. Dhaoui et H. Morgavi (2018), « Insertion de la Tunisie dans les chaines de valeur mondiales et rôle des entreprises offshore », Document de travail du Département d’Économie N°1478.

OCDE (2018), Étude économique de l’OCDE sur la Tunisie.

 

 




Stronger Growth but Risks loom large

By Álvaro S. Pereira, OECD Chief Economist ad interim, Economics Department

After a lengthy period of weak growth, the world economy is finally growing around 4%, the historical average of the past few decades.

This is good news. And this news is even better knowing that, in part, the stronger growth of the world economy is supported by a welcome rebound in investment and in world trade. The recovery in investment is particularly worth emphasising, since the fate of the current expansion will be highly dependent on how investment will perform.

Although long anticipated, the pick-up in investment remains weaker than in past expansions. The same is true for global trade, which is expected to grow at a respectable, albeit not spectacular, rate, unless it is derailed by trade tensions.

However, contrary to previous periods, 4% world growth is not due to rising productivity gains or sweeping structural change. This time around the stronger economy is largely due to monetary and fiscal policy support.

EO1.JPG

For many years, monetary policy was the only game in town. During the international financial crisis, central banks cut interest rates aggressively, injected funds into the economy and purchased assets at a record pace in an attempt to boost the economy.

In contrast, in most countries, fiscal policy remained prudent or even became contractionary. Still, historically low interest rates provided an opportunity for governments to use their available fiscal space to help foster growth, as the OECD argued forcefully in 2016. Many OECD governments are now following this advice. At first, the resources enabled by lower interest payments were used by governments to avoid cutting expenditures or raising taxes. With the improving economic situation, many governments have started to undertake additional fiscal easing.

Now that monetary policy is finally starting to return to normal, governments are stepping in to provide fiscal policy support. We can say that fiscal policy is the new game in town: three quarters of OECD countries are now undertaking fiscal easing. The fiscal stimulus in some countries is very significant, while it is less ambitious in other countries. Still, this fiscal easing will have important repercussions for the world economy. In the short run, it will add to growth. However, countries that have been experiencing longer expansions might find that this fiscal stimulus (where it is large) will also add to inflationary pressures in the medium term. Only time will tell if these short-run gains might be offset by some medium-term pain. What matters is that, in making these choices, governments are fully aware of the medium-term impact of their policies, and do not focus only on the short-term benefits from fiscal stimulus.

EO2

The strong growth we are witnessing is also associated with robust job creation in many economies. In fact, it is particularly satisfying to see that in the OECD area, unemployment is set to reach its lowest level since 1980, even though it remains high in some countries. Thanks to this robust job creation and the related intensifying labour shortages, we are now projecting a rise in real wages in many countries. This increase is still somewhat modest. However, there are clear signs that wages are finally on the way up. This is an important development, since the global crisis had a severe impact on household incomes, particularly for the unskilled and low-income workers.

EO3.JPG

In spite of all this good news, risks loom large for the global outlook. What are these risks? First and foremost, an escalation of trade tensions should be avoided. It is worth remembering that, in part, the rise in trade restrictions is nothing new. After all, more than 1200 new trade restrictions have been implemented by G20 countries since the outset of the global financial crisis in 2007. Still, as outlined in Chapter 2, since the world economy is much more integrated and linked today than in the past, a further escalation of trade tensions might significantly affect the economic expansion and disrupt vital global value chains.

Another important risk going forward is related to the rise in oil prices. Oil prices have risen by close to 50% over the past year. Persistently higher oil prices will push up inflationary pressures and will aggravate external imbalances in many countries.

In the past few years, very low interest rates have encouraged borrowing by households and corporations in some countries and led to overvaluation of assets (e.g. houses, equities) in many others. In this context, rising interest rates might be challenging for highly indebted countries, families and corporations. Of course, this rise in interest rates has been widely anticipated and should thus not cause any major disruptions. Nevertheless, if inflation rises more than expected and central banks are forced to raise rates at a faster pace, it is likely that market sentiment could shift abruptly, leading to a sudden correction in asset prices.

A swifter rise in interest rates in advanced economies might also continue to lead to significant currency depreciation and volatility in some emerging market economies (EMEs) that are highly reliant on external financing and facing internal or external imbalances. Geopolitical tensions might also contribute to sudden market corrections or a further rise in oil prices. Brexit and policy uncertainty in Italy could add pressures to the expansion in the euro area.

What does this all mean for policy? Since private and public debt remain high in some countries, improving productivity, decreasing debt levels and building fiscal buffers is key to strengthen the resilience of economies. As monetary and fiscal policies will not be able to sustain the expansion forever and might even contribute to financial risks, it is absolutely essential that structural reforms become a priority. In the past couple of years, few countries have undertaken substantial structural reforms. Most of the countries that reformed are large EMEs, such as Argentina, Brazil and India. In the advanced economies, important labour reforms were introduced in France and a sweeping tax reform was implemented in the United States. However, as the 2018 OECD Going for Growth points out, these important exceptions do not counter the rule that reform efforts have been lagging.

Why is this important? Because the only way to sustain the current expansion and to make growth work for all is to undertake productivity-enhancing reforms. As many OECD Education Policy Reviews and OECD National Skills Strategies show, it is crucial to redesign curricula to develop the cognitive, social and emotional skills that enable success at work, and to improve teaching quality and the resources necessary to deliver those skills effectively. In many countries, investment in quality early childhood education and vocational education and apprenticeships are of particular importance. Skills-enhancing labour-market reforms are also crucial. Reforms to boost competition, improve insolvency regimes, reduce barriers to entry in services and cut red tape are also key for making our economies more dynamic, more inclusive and more entrepreneurial. Investment in digital infrastructure will also be essential in this digital age. In addition, there are significant opportunities to reduce trade costs in both goods and, in particular, services, boosting growth and jobs across the world.

In spite of stronger growth, there is no time for complacency. Structural reforms are vital to sustain the current expansion and to mitigate risks. Therefore, at this juncture of the world economy, it is truly crucial to give reforms a chance. After monetary and fiscal policies have done their jobs, it is time for reforms to sustain the expansion, to improve well-being, and to make growth work for all.

References

Economic Outlook, May 2018.

 

 




La croissance s’affermit, mais des risques assombrissent fortement l’horizon

Álvaro S. Pereira, Chef économiste de l’OCDE par intérim, Département des affaires économiques

Après une longue période de croissance atone, l’activité économique mondiale croît enfin au rythme d’environ 4 %, qui correspond à la moyenne historique des dernières décennies.

C’est une bonne nouvelle, et qui apparaît encore meilleure lorsque l’on sait que ce rebond de la croissance de l’économie mondiale est, pour partie, le résultat d’un redémarrage opportun de l’investissement et des échanges mondiaux. La reprise de l’investissement mérite tout particulièrement d’être soulignée, sachant que l’avenir de l’expansion actuelle dépendra fortement de l’évolution de l’investissement.

Bien qu’anticipé depuis longtemps, le redressement de l’investissement demeure plus timide que lors des phases d’expansion passées. Il en va de même pour les échanges mondiaux, dont on attend qu’ils progressent à un rythme respectable, sans toutefois être spectaculaire, à moins que des tensions commerciales ne viennent les mettre en péril.

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Cependant, contrairement à ce qui avait pu être observé précédemment, cette croissance mondiale de 4 % ne repose pas sur un accroissement des gains de productivité ou sur une évolution structurelle profonde. Cette fois, l’intensification de l’activité économique est dans une large mesure imputable au soutien procuré par les politiques monétaire et budgétaire.

Pendant de nombreuses années, la politique monétaire a été le seul levier utilisé. Durant la crise financière internationale, les banques centrales ont procédé à des réductions draconiennes des taux d’intérêt, elles ont injecté des fonds dans l’économie et acquis des actifs à un rythme sans précédent dans l’espoir de donner un coup de fouet à l’activité économique.

Dans la plupart des pays, en revanche, la politique budgétaire est restée guidée par la prudence, voire est devenue restrictive. Au demeurant, le niveau historiquement bas des taux d’intérêt offrait aux pouvoirs publics l’occasion d’employer la marge de manœuvre budgétaire dont ils disposaient pour contribuer à relancer la croissance, selon la position défendue avec force par l’OCDE en 2016. Un grand nombre de pays de l’OCDE suivent désormais ce conseil. Dans un premier temps, les États ont utilisé les ressources dégagées par la diminution des versements d’intérêts pour éviter d’avoir à comprimer les dépenses ou à augmenter les impôts. La situation économique s’améliorant, nombre d’entre eux se sont désormais engagés sur la voie d’un nouvel assouplissement budgétaire.

Maintenant que la politique monétaire commence enfin à revenir à la normale, les pouvoirs publics s’emploient à soutenir l’activité par la politique budgétaire. On peut dire que la politique budgétaire est le levier qui a désormais la faveur des pouvoirs publics : les trois quarts des pays de l’OCDE s’engagent à présent sur la voie d’un assouplissement budgétaire. La relance budgétaire est très ample dans certains pays, et moins ambitieuse dans d’autres. Pourtant, cet assouplissement budgétaire aura des répercussions importantes sur l’économie mondiale. À court terme, il renforcera la croissance. Cependant, les pays ayant connu de plus longues périodes d’expansion s’apercevront peut-être que cette relance budgétaire (lorsqu’on lui donne de l’ampleur) accentue également les tensions inflationnistes à moyen terme. Seul le temps nous dira si les gains à court terme seront contrebalancés par des effets douloureux à moyen terme. Ce qui compte, c’est que les responsables de l’action gouvernementale, au moment de choisir telle ou telle option, soient pleinement conscients de l’impact à moyen terme de leurs politiques, et ne se bornent pas à considérer uniquement les avantages à court terme de la relance budgétaire.

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La forte croissance que nous observons va également de pair avec une création d’emplois vigoureuse dans de nombreuses économies. De fait, il est particulièrement satisfaisant de constater que dans la zone OCDE, le chômage devrait atteindre son plus bas niveau depuis 1980, même s’il reste élevé dans certains pays. Compte tenu de la vitalité de la création d’emplois et de l’accentuation des pénuries de main‑d’œuvre qui en résulte, nous prévoyons désormais une progression des salaires réels dans de nombreux pays. Cette hausse est encore assez timide, mais on perçoit des signes indiquant clairement que les salaires sont enfin sur une pente ascendante. Il s’agit d’une évolution importante, sachant que la crise mondiale avait eu de graves effets sur les revenus des ménages, en particulier pour les travailleurs peu qualifiés et à faible revenu.

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Malgré toutes ces bonnes nouvelles, des risques assombrissent fortement les perspectives mondiales. Quels sont-ils ? D’abord et avant tout, une escalade des tensions commerciales, qui doit être évitée. N’oublions pas que, pour une part, un recours accru à des restrictions commerciales n’a rien de nouveau. La preuve en est que plus de 1 200 restrictions nouvelles ont été instituées par des pays du G20 depuis que la crise financière mondiale a éclaté en 2007. Au demeurant, comme indiqué dans le chapitre 2, parce que l’économie mondiale est beaucoup plus intégrée et interconnectée aujourd’hui que par le passé, une nouvelle escalade des tensions commerciales pourrait porter gravement atteinte à l’expansion de l’activité économique et déclencher des perturbations dans des chaînes de valeur mondiales essentielles.

Un autre risque important est lié à l’envolée des cours du pétrole. Ceux-ci ont augmenté de près de 50 % au cours de l’année écoulée. La persistance de cette tendance intensifiera les tensions inflationnistes et accentuera les déséquilibres extérieurs dans nombre de pays.

Ces dernières années, le niveau très bas des taux d’intérêt a encouragé les ménages et les entreprises à recourir à l’emprunt dans certains pays et a abouti à une surévaluation des actifs (notamment des logements et des actions) dans beaucoup d’autres. Dans ce contexte, un relèvement des taux d’intérêt pourrait mettre en difficulté les pays, les familles et les entreprises lourdement endettés. Certes, cette augmentation des taux d’intérêt a été largement anticipée et ne devrait donc pas induire de perturbations majeures. Néanmoins, si l’inflation augmente davantage que prévu et si les banques centrales sont contraintes de relever plus rapidement les taux d’intérêt, les perceptions sur les marchés pourraient s’inverser brusquement et conduire à un ajustement brutal des prix des actifs.

Une remontée plus rapide des taux d’intérêt dans les économies avancées pourrait également entraîner encore d’importants phénomènes de volatilité et de dépréciations des monnaies dans certaines économies de marché émergentes qui sont très tributaires des financements extérieurs et sont confrontées à des déséquilibres internes et externes. Les tensions géopolitiques pourraient également favoriser de brusques corrections du marché ou un nouvel essor des cours du pétrole. Le Brexit et l’incertitude autour de l’action gouvernementale qui sera menée en Italie ne font qu’ajouter aux pressions qui pèsent sur l’expansion dans la zone euro.

Que faut-il en déduire pour l’action publique ? Parce que la dette publique et la dette privée demeurent élevées dans certains pays, il est primordial de rehausser la productivité, de faire baisser les niveaux d’endettement et de constituer des marges de manœuvre budgétaires pour renforcer la résilience des économies. Étant donné que les politiques monétaire et budgétaire ne permettront pas d’alimenter indéfiniment l’expansion et pourraient même contribuer à accroître les risques financiers, il est absolument essentiel que la priorité soit donnée aux réformes structurelles. Ces dernières années, rares sont les pays qui ont engagé des réformes structurelles d’envergure. La plupart de ceux qui ont mené des réformes sont de grandes économies de marché émergentes, comme l’Argentine, le Brésil et l’Inde. Du côté des économies avancées, une importante réforme du travail a été adoptée en France et une réforme fiscale de grande ampleur est entrée en vigueur aux États-Unis. Cependant, comme souligné dans l’édition 2018 d’Objectif croissance, ces exceptions notables n’empêchent pas que les réformes ont pris du retard.

Pourquoi est-ce important ? Parce que le seul moyen d’entretenir l’expansion actuelle et de faire en sorte que la croissance bénéficie à tous consiste à entreprendre des réformes destinées à améliorer la productivité. Comme le montre l’OCDE dans de nombreux Examens des politiques nationales d’éducation et Stratégies nationales sur les compétences, il est primordial de repenser les cursus pour développer les compétences cognitives, sociales et émotionnelles indispensables à la réussite dans le monde du travail, et d’améliorer la qualité de l’enseignement ainsi que les ressources nécessaires pour favoriser une acquisition efficace de ces compétences. Dans beaucoup de pays, l’investissement dans une éducation de qualité pour les jeunes enfants ainsi que dans l’enseignement professionnel et l’apprentissage revêt une importance particulière. Il est en outre capital d’entreprendre des réformes du marché du travail propres à améliorer les compétences. Des réformes axées sur l’intensification de la concurrence, l’amélioration des régimes de faillite, l’abaissement des obstacles à l’entrée dans les secteurs de services et la simplification des procédures administratives sont aussi des ingrédients essentiels pour que nos économies deviennent plus dynamiques, plus inclusives et plus propices à l’entrepreneuriat. Les investissements dans les infrastructures numériques seront aussi fondamentaux à l’ère du numérique. Par ailleurs, il existe de vastes possibilités de réduction des coûts commerciaux sur les marchés de biens mais aussi et surtout de services, laissant entrevoir des perspectives de croissance et de création d’emplois dans le monde entier.

Malgré le regain de croissance, l’heure n’est pas à l’excès de confiance. Les réformes structurelles sont la clé de la poursuite de l’expansion actuelle et de l’atténuation des risques. C’est pourquoi, à ce point de bascule pour l’économie mondiale, il est véritablement capital de donner une chance aux réformes. Les politiques monétaire et budgétaire ayant rempli leur office, le moment est venu de faire en sorte que les réformes prennent le relais et qu’elles concourent à soutenir l’expansion, à améliorer le bien-être et à produire une croissance bénéfique pour tous.

Références

Perspectives économiques, mai 2018.




Un Mayor crecimiento, aunque se advierten importantes riesgos

Álvaro S. Pereira, Economista Jefe interino, Departamento de Economía de la OCDE

Después de un largo período de débil crecimiento, la economía mundial finalmente está creciendo alrededor del 4%, cercano al promedio histórico de las últimas décadas.

Esta es una buena noticia, y es aún mejor sabiendo que, en parte, el mayor crecimiento de la economía mundial está respaldado por una recuperación positiva de la inversión y del comercio mundial. Cabe destacar especialmente la recuperación de la inversión, ya que el futuro de la actual expansión dependerá en gran medida del buen comportamiento de la inversión.

Aunque se esperaba desde hace mucho tiempo, el repunte de la inversión sigue siendo más débil que en expansiones anteriores. Lo mismo ocurre con el comercio mundial, que se espera crezca a un ritmo aceptable, aunque no espectacular, a menos que se vea frenado por las tensiones comerciales.

Sin embargo, a diferencia de períodos anteriores, el crecimiento mundial del 4% no se debe al aumento de la productividad ni a un cambio estructural radical. Esta vez, el fortalecimiento de la economía se debe en gran medida al apoyo de la política monetaria y fiscal.

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Durante muchos años, la política monetaria fue la única carta sobre la mesa. Durante la crisis financiera internacional, los bancos centrales recortaron de manera drástica los tipos de interés, inyectaron fondos en la economía y compraron activos a un ritmo récord en un intento por impulsar la economía.

En cambio, en la mayoría de los países, la política fiscal siguió siendo prudente o incluso se contrajo. No obstante, los tipos de interés históricamente bajos brindaron a los gobiernos la oportunidad de utilizar el espacio fiscal disponible para ayudar a fomentar el crecimiento, como firmemente argumentó la OCDE en 2016. Muchos gobiernos de la OCDE siguen ahora esta recomendación. En un principio, los recursos habilitados por la reducción de los pagos de intereses fueron utilizados por los gobiernos para evitar recortar gastos o aumentar los impuestos. Con la mejora de la situación económica, muchos gobiernos han comenzado a emprender una relajación fiscal adicional.

Ahora que la política monetaria está finalmente empezando a volver a la normalidad, los gobiernos están interviniendo para proporcionar apoyo con la política fiscal. Podemos decir que la política fiscal es la nueva carta que se añade a la partida: tres cuartas partes de los países de la OCDE están llevando a cabo una relajación fiscal. El estímulo fiscal en algunos países es muy significativo, mientras que en otros es menos ambicioso. No obstante, esta relajación fiscal  tendrá  importantes repercusiones para la economía mundial. A corto plazo, contribuirá al crecimiento. Sin embargo, los países que han experimentado expansiones más prolongadas podrían encontrarse con que este estímulo fiscal (en los casos en que es importante) también se sumará a las presiones inflacionarias a medio plazo. Sólo el tiempo dirá si las ganancias de corto plazo podrían verse compensadas por impactos  negativos  de medio plazo. Lo que importa es que, al tomar estas decisiones, los gobiernos sean plenamente conscientes del impacto a medio plazo de sus políticas, y no se centren únicamente en los beneficios de corto plazo de los estímulos fiscales.

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El fuerte crecimiento que estamos presenciando también está asociado a una fuerte creación de empleo en muchas economías. De hecho, es especialmente satisfactorio comprobar que en los países de la OCDE el desempleo va a alcanzar su nivel más bajo desde 1980, aunque en algunos países sigue siendo elevado. Gracias a esta sólida creación de empleo y a la consiguiente intensificación de la escasez de mano de obra, ahora se prevé un aumento de los salarios reales en muchos países, a pesar de que este aumento es todavía modesto. Sin embargo, hay señales claras de que los salarios están finalmente aumentando. Se trata de un acontecimiento importante, ya que la crisis mundial tuvo un grave impacto en los ingresos de los hogares, en particular de los trabajadores no cualificados y de bajos ingresos.

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A pesar de todas estas buenas noticias, se advierten importantes riesgos en el panorama mundial. ¿Cuáles son estos riesgos? Ante todo, debe evitarse un aumento de las tensiones comerciales. Es importante recordar que, en parte, el aumento de las restricciones comerciales no es nada nuevo. Después de todo, los países del G20 han implementado más de 1.200 nuevas restricciones al comercio desde el inicio de la crisis financiera mundial en 2007. No obstante, como se señala en el Capítulo 2, dado que la economía mundial está mucho más integrada e interconectada hoy que en el pasado, una mayor escalada de las tensiones comerciales podría afectar significativamente la expansión económica y perturbar las vitales cadenas de valor mundiales.

Mirando hacia el futuro, otro riesgo importante está relacionado con el aumento de los precios del petróleo que han aumentado cerca del 50% en el último año. Esta persistente subida incrementará las presiones inflacionarias y agravará los desequilibrios externos en muchos países.

En los últimos años, los extremadamente bajos tipos de interés han alentado el endeudamiento de los hogares y las empresas en algunos países, y han dado lugar a la sobrevaloración de activos (por ejemplo, viviendas, acciones) en muchos otros. En este contexto, los crecientes los tipos de interés podrían ser un reto para los fuertemente endeudados países, familias y empresas. Además, esta subida de los tipos de interés se ha anticipado ampliamente y, por lo tanto, no debería causar ninguna perturbación importante. Sin embargo, si la inflación aumenta más de lo previsto y los bancos centrales se ven obligados a subir los tipos de interés a un ritmo más rápido, es probable que la confianza del mercado cambie bruscamente, dando lugar a una repentina corrección de los precios de los activos.

Una subida más rápida de los tipos de interés en las economías avanzadas también podría seguir provocando una depreciación significativa de la moneda y volatilidad en algunas economías emergentes (EMEs) ya que dependen en gran medida de la financiación externa y se enfrentan a desequilibrios internos o externos. Las tensiones geopolíticas también podrían contribuir a correcciones repentinas del mercado o a una nueva subida de los precios del petróleo. Brexit y la incertidumbre política en Italia podrían añadir presiones a la expansión en la zona del euro.

¿Qué significa todo esto para la política? Dado que la deuda pública y privada sigue siendo elevada en algunos países, la mejora de la productividad, la disminución de los niveles de deuda y la creación de amortiguadores fiscales son clave para fortalecer la resiliencia de las economías. Puesto que las políticas monetaria y fiscal no podrán sostener la expansión de manera permanente e incluso podrían acentuar los riesgos financieros, es absolutamente esencial que las reformas estructurales se conviertan en una prioridad. En los últimos dos años, pocos países han emprendido reformas estructurales sustanciales. La mayoría de los países que aplicaron reformas son grandes EMEs, como Argentina, Brasil e India. En las economías avanzadas, se introdujeron importantes reformas laborales en Francia, y se aplicó una amplia reforma fiscal en los Estados Unidos. Sin embargo, como señala la publicación de la OCDE Going for Growth, de 2018, éstas importantes excepciones no contradicen la regla de que los esfuerzos de reforma han sido rezagados.

¿Por qué es esto importante? Porque la única manera de mantener la expansión actual y hacer que el crecimiento funcione para todos es emprender reformas que aumenten la productividad. Como demuestran numerosos estudios de la OCDE sobre la revisión de políticas educativas (Education Policy Reviews) y las estrategias nacionales de la OCDE en materia de competencias (National Skills Strategies), es fundamental rediseñar los planes de estudio para desarrollar las competencias cognitivas, sociales y emocionales que permiten el éxito en el trabajo, y mejorar la calidad de la enseñanza y los recursos necesarios para impartir esas competencias de manera eficaz. En muchos países, la inversión en educación de calidad para la primera infancia, la formación profesional y los programas de aprendices revisten especial importancia. También son cruciales las reformas del mercado laboral que mejoren las habilidades. Las reformas para impulsar la competencia, mejorar los regímenes de insolvencia, reducir los obstáculos a la entrada en el sector de los servicios y reducir la burocracia también son fundamentales para hacer que nuestras economías sean más dinámicas, más incluyentes y más emprendedoras. La inversión en infraestructura digital también será esencial en esta era digital. Además, existen importantes oportunidades para reducir los costes del comercio de bienes y, en particular, de los servicios, impulsando el crecimiento y el empleo en todo el mundo.

A pesar de un crecimiento más fuerte, no hay tiempo para la autocomplacencia. Las reformas estructurales son vitales para mantener la expansión actual y mitigar los riesgos. Por lo tanto, en esta coyuntura de la economía mundial, es realmente crucial dar una oportunidad a las reformas. Después de que las políticas monetarias y fiscales hayan cumplido sus objetivos, es hora de que las reformas sostengan la expansión, mejoren el bienestar y hagan que el crecimiento funcione para todos.

Referencias

Perspectivas económicas OCDE, mayo 2018.




Boosting export performance in Chile

by Antoine Goujard, Chile Desk, Economics Department

Chile’s export growth has disappointed over the past two decades. In particular, exports of goods and services – in volume – have only grown at 1.1% annually over 2009-17 and at around 2.0% for non-copper products and services, compared to 4.2% in the average Latin American country (Panels A and B).

Chile’s weak export performance reveals structural weaknesses. Beyond copper and copper-related products that are highly dependent on external demand, export growth has been weak in manufacturing and services sectors. At the same time, with low investment in innovation and skills, productivity gains have stalled (Panel C). Exports remain mostly natural-resource based (Panel D) and highly concentrated across products, firms and destinations, with SMEs participating little in international trade.

To enhance inclusive growth potential decisive policy efforts are needed to improve productivity and competitiveness, and broaden the export base. The 2018 OECD Economic Survey shows that while the implementation of the 2014-18 Productivity Agenda and measures to raise the efficiency of electricity markets have been positive steps, more efforts are needed to raise productivity in four key areas:

  1. Strengthening competition. Perceived market dominance that tends to reduce efficiency and raise rents, is among the worst in the OECD. Competition is limited in key sectors, such as telecommunications, maritime services and railways. The recent strengthening of the competition framework is welcome, but systematic reviews of competitive pressures are needed. Moreover, the guidelines issued by the OECD (2016b) should be used to review existing regulations from a competition perspective according to a set schedule, and pro-competitive and streamlining measures should be implemented rapidly.
  2. Simplifying the business environment. Administrative procedures, such as licenses and permits, are burdensome, notably for smaller and younger firms complicating entry of new businesses. Streamlining unnecessary and complex regulations would allow substantial productivity gains. Improving the digital procedures for firms (Escritorio Empresa), and focusing on ex-post controls for businesses that have low associated sanitary and environmental risks, would ease firm creation and growth. On the trade side, simplifying regulations of preferential trade agreements would help SMEs to go global. Going forward, the regulatory process should build on all stakeholders and strengthened ex-ante and ex post evaluations such as the new productivity assessments (OECD, 2016a).
  3. Increasing innovation and skills. Business investment in R&D and innovation is particularly weak, while entrepreneurial and managing skills are low and unequal. Increasing public support for R&D and innovation, and strengthening its evaluation, would help develop public-private links and ease R&D financing for SMEs. Additional technical assistance and mentoring for young and smaller firms, building on the recent Centros de Desarrollo de Negocios, would also support firm growth, innovation and access to export markets.
  4. Improving logistic and digital infrastructure. Investment in intermodal connections, railways and digital networks is needed to bridge connectedness gaps (OECD, 2017b). Developing national and local infrastructure strategies, integrating the regulation of public and private ports and better accounting for environmental damages in transport taxes and road pricing would ensure money is well spent. Fully integrating the single window mechanism for exports and imports (SICEX) with the domestic logistic infrastructure and with regional partners would deliver significant synergies and gains for exports.

xports and chile 2018

Find out more:

OECD (2018), OECD Economic Surveys: Chile 2018, OECD Publishing.

OECD (2017a), OECD Economic Outlook (November 2017), OECD Publishing.

OECD (2017b), Infrastructure Governance Review: Chile – Gaps and governance standards of public infrastructure, OECD publishing.

OECD (2016a), OECD Reviews of Regulatory Reform – Regulatory Policy in Chile, Government Capacity to Ensure High –Quality Regulation, OECD Publishing.

OECD (2016b), Competition Assessment Toolkit – Volume I: Principles, OECD Publishing.

Goujard, A. (2018), “Boosting export performance in Chile”, OECD Economics Department Working Papers, forthcoming, OECD Publishing.