The economic crisis offers governments the opportunity to combine emergency action with important structural reforms, says the Organisation for Economic Co-Operation and Development (OECD). Such reforms are needed to improve long-term growth and resilience, the OECD argues.
Speaking at a press conference, Angel Gurría, the secretary-general, said: “If the opportunity is seized to make lasting reforms that will improve long-term economic performance, we may look back at this period as one where we repositioned our economies to achieve stronger, cleaner and fairer growth.”
Klaus Schmidt-Hebbel, the chief economist, said the debacle in financial markets did not call into question the beneficial effects of recommended reforms of product and labour markets.
Going for Growth, the economic policy reforms programme of the International Monetary Fund (IMF), identifies key reforms to raise living standards in each OECD country. It says such policies can both boost short-term demand to soften the impact of the recession and raise economic growth over the long term.
The IMF’s recommended policies include infrastructure projects, boosting spending on training programmes, cutting taxes on labour income and reforming anti-competitive regulations in product markets.
The IMF said that because crises can unmask policy weaknesses, important reforms are often initiated at such times. But the report also warns, “When politicians are under pressure to act quickly, they risk implementing policies that are ultimately bad for growth.”
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