Permanent Representation of the Republic of Slovenia to the OECD /Newsroom /
21.05.2019  

The OECD Economic Outlook 2019: A fragile global economy needs urgent cooperative action

On 21 May, the OECD published its yearly publication The Economic Outlook.

The main messages of the Outlook are the following. The outlook remains weak and there are many downside risks that cast a dark shadow over the global economy and people’s well-being. First, the mediocre growth outlook is conditional on no escalation of trade tensions, Second, while services have remained buoyant, providing a buffer, it is unlikely that they decouple for long from manufacturing. Third, China remains a source of concern, Finally, private sector debt is growing fast in major economies.

Against this backdrop, the OECD urges governments to use all the policy tools at their disposal. Primarily, it is imperative to reignite multilateral trade discussions. Then where demand is weak, in the euro area for example, governments should take advantage of the low-interest rate environment to complement structural efforts with fiscal stimulus where public debt is relatively low. Policy priorities include investing in infrastructure, especially digital, transport and green energy, and enhancing people’s skills,

The special chapter of this Economic Outlook analyses the changes arising from digitalisation and the package of policies required to help digitalisation translate into stronger and more inclusive growth. Digital technologies change the way firms produce goods and services, innovate, and interact with other firms, workers, consumers, and governments. These technologies offer a vast potential to enhance firm productivity and ultimately living standards, but the gains have been disappointing so far. Governments and companies need to implement a range of policies to promote an efficient and inclusive digital transformation.

In Slovenia, economic growth is projected to slow to around 3½ per cent this year and just over 3% in 2020. Private consumption will be supported by continued income gains from real wage and employment growth, while private investments will be underpinned by the business sector’s need to expand capacity and favourable financing conditions. The maturing of the recovery is reflected in increasing labour shortages and tightening capacity constraints, leading demand to be increasingly satisfied through higher imports.

The fiscal stance is expansionary in 2019 and neutral the following year. As monetary conditions remain extremely accommodative, a tighter of the fiscal stance is needed to contain inflationary pressures and secure fiscal sustainability. Measures, such as restricting pathways to early retirement and accelerating the privatisation process, would contribute to mobilising under-utilised labour resources and free up workers to faster growing industries.

The OECD Economic Outlook 2019 is available at http://www.oecd.org/economy/economic-outlook/.