As the top finance ministers and central bankers meet in Shanghai, the Organization for Economic Cooperation and Development (OECD) has put pressure on the G-20 to create an urgent policy in response to stuttering global growth, in addition to the call from the International Monetary Fund (IMF).
Emphasizing the instability of the world economy and markets, Angel Gurria (the OECD secretary general) said in Shanghai that the growth was still muted 8 years from the global financial crisis.
”The problem is structural reforms are decelerating just at the time when they should be accelerating,” he said. “We are in the eighth year (after the global financial) crisis and we have not reached the 4 percent cruising speed that we had before the crisis… the speed, the appetite, the courage for reforms has waned; we should pick it up and do exactly the opposite.”
According to Gurria, central bankers have done the best that they can and it should now be on the governments hands to stimulate the private sector to invest again.
The comments of Gurria came as the G-20 representatives (the group of leading developed and emerging economies around the world) meet in the capital of China on Friday to evaluate the world economy and two days after the IMF has called for “multilateral actions to boost growth and contain risk,” especially through fiscal stimulation.
The IMF noted that the G-20 had promised in 2014 to improve global growth by an additional 2% by 2018. Based on the measurements they have implemented so far, they had only added 0.8%.
The OECD Report
The OECD, on the other hand, monitors reforms that were being implemented by the G-20 to help them keep track of the promise they made 2 years ago. On Friday, the organization released a report regarding the reforms on economic policy.
The report said: “Even though progress is made in tackling some of the main challenges, the slowdown in the pace of reforms observed in 2013-14 has continued in 2015, even after taking into account measures that are in the pipeline but that have yet to be fully implemented.”
The pace of the reform policies was generally faster in countries in Southern Europe, including Italy and Spain, than European countries in the Northern part, according the OECD. Meanwhile, outside Europe, the reform leaders are China, India, Japan, and Mexico.
Having implemented negative interest rates on their central banks last month to which commentators said has little effect, the Finance Minister of Japan Taro Aso pledged for a group response to calm the current crisis faced by the global market today. This is to address the growing fear that the economic slowdown in China may spread worldwide.
However, US Treasury Secretary Jack Lew played down the chances of this group “crisis response”, telling Bloomberg TV on Wednesday that it isn’t expected because the current economic environment isn’t considered as a crisis situation.
There has been a decrease in productivity in most countries, with slowdown going for about 15 years (in advanced economies at least).