The social and economic disruption wrought by Covid-19 offers governments the opportunity to reset policy and push their countries on a more sustainable and inclusive path, according to the Organisation for Economic Co-operation and Development.
The global policy forum, which works with 100 countries around the world, said the crisis allows leaders to address the underlying challenges their countries face, such as income equality and economic regional divides, to deliver a vibrant economic recovery and promote higher quality growth.
“The pandemic is a painful reminder that the nature of our past growth was often unsustainable and left many people behind," said OECD secretary-general Angel Gurría.
“The recovery is an opportunity to set our policies right, to achieve growth that is stronger, equitable, sustainable and more resilient. And for this to happen, governments have to act now.”
The global economy is expected to grow 6 per cent this year, compared with a previous forecast of 5.5 per cent, according to the latest World Economic Outlook, released earlier this month.
The International Monetary Fund raised its global economic forecast for a second time this year following quicker Covid-19 vaccination campaigns and the fiscal and monetary support provided by governments and central banks.
But the Washington-based lender warned policymakers about wider income gaps and an uneven recovery, with income inequality set to grow sharply post-pandemic as young workers and those with lower skill sets have been more heavily affected by the crisis.
The OECD’s Going for Growth report, published on Wednesday, offers policymakers country-specific advice on how to address those challenges and put in place a fundamental reset.
The report follows the second meeting of G20 finance ministers and central bank governors under the Italian Presidency earlier this month.
The UK, for example, saw its economic output plunge nearly 10 per cent last year, causing unemployment to rise to 5 per cent in the three months ended January, with young, low-income workers and women particularly affected by job losses.
Vulnerable social groups in Britain have been particularly affected by the pandemic and poverty is set to increase as jobs are lost and the self-employed see incomes dwindle, accentuating regional differences, the OECD said.
“The Covid-19 crisis has emphasised the need to retrain and upskill the population, secure access to affordable housing by reducing bottlenecks to supply and to revive investment,” it said in the report.
As well as country-specific analysis, the organisation provided a framework of policy reform for all its members covering three dimensions.
Policymakers must first build resilience and sustainability through structural policies that can boost an economy's first line of defence – in key sectors such as healthcare, social care and critical infrastructure – during shocks such as Covid-19.
They should also look to improve public governance and strengthen incentives for firms to factor long-term sustainability into their decision-making.
Secondly, policymakers should boost productivity growth through structural action that increases job dynamism and supports companies as they become more innovative and greener.
The third recommendation is for policies that ensure people are not left behind as economies transition post-Covid, to ensure that the reallocation of jobs is socially productive and builds resilience.
“This requires investments in skills, training and a big push for accessing quality jobs – particularly among vulnerable groups – as well as broad-based social safety nets, and better learning and support to access jobs,” the OECD said.
The report also highlights the crucial importance of countries acting together on challenges that span borders such as the Covid-19 crisis, as well as climate change, international trade and the taxation of multinational enterprises.
Last month the Bank of England's Sarah Breeden said central banks must focus on climate change as she backed a new study calling on global financial regulators to adopt "clear" green strategies to support the economic transition to net-zero.
Ms Breeden, executive director of UK deposit takers supervision at the BoE and executive sponsor for climate change, said the sooner central banks start the process “the smoother the path to net zero", with fewer economic costs and financial risks incurred along the way.
Meanwhile, IMF chief Kristalina Georgieva said earlier this year that sustainability can help to fuel the global recovery from the pandemic, as long as policymakers revitalise global co-operation and "wrestle" with climate change together.
