OECD for urgent policies to boost global economy

22 Feb '16

4 min read

The Interim Economic Outlook calls for a stronger policy response, changing the policy mix to confront the current weak growth more effectively. It points out that sole reliance on monetary policy has proven insufficient to boost demand and produce satisfactory growth, while fiscal policy is contractionary in several major economies and structural reform momentum has slowed.

The OECD says monetary policies should remain highly accommodative in advanced economies, until inflation has shown clear signs of moving durably towards official targets. In emerging market economies, monetary support should be provided where possible, taking into account inflation developments and capital market responses.

The Outlook suggests that a stronger fiscal policy response, combined with renewed structural reforms, is needed to support growth and provide a more favourable environment for productivity-enhancing innovation and change, particularly in Europe.

“With governments in many countries currently able to borrow for long periods at very low interest rates, there is room for fiscal expansion to strengthen demand in a manner consistent with fiscal sustainability,” Mann said. “The focus should be on policies with strong short-run benefits and that also contribute to long-term growth. A commitment to raising public investment would boost demand and help support future growth,” she said. (SH)

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