PARIS – The Organization for Economic Cooperation and Development on Thursday painted a bleak picture of slow growth and large current account imbalances in the global economy and urged the world’s three major economic centers to adopt fiscal and monetary policies to put growth back on course and create more jobs.
After two days of closed-door discussions here, the economic ministers from the 30 OECD member countries lamented the sharp slowdown in the U.S. economy, gave little prospect of a quick turnaround in the flagging Japanese economy and predicted that growth in Europe will slow this year.
The ministers, however, said they see a brighter side in the economic landscape after a year in which the growth rate in the OECD member countries has slowed by half, from 4 percent a year ago to around 2 percent this year.
“The foundations are in place for a return to stronger growth and inflation is expected to remain low,” they said in a final communique.
After issuing a general call for macroeconomic policies that would enhance productivity and create jobs over the long term, the OECD ministers gave specific policy advice to Japan, the United States and Europe, which together account for the bulk of the global economy.
On Japan, the communique said: “Vigorous implementation of this strong intent is essential and regulatory reform should be quickened.”
According to Japanese officials attending the two-day ministerial conference, ministers from the OECD member states expressed high hopes for the economic policies that Prime Minister Junichiro Koizumi has outlined since he assumed office three weeks ago. “Many countries now believe the reform program drawn up by the (Koizumi) government is for real,” Economy, Trade and Industry Minister Takeo Hiranuma told reporters.
Economic and Fiscal Policy Minister Heizo Takenaka, who attended the conference along with Hiranuma and other senior deputy ministers, however, said the Japanese delegation got more than a pat on the back.
“There were plenty of tough orders to fill,” Takenaka said.
Takenaka did not elaborate, but the language used in the communique issued by the OECD ministers at the end of the conference made Koizumi’s task clear.
While welcoming Tokyo’s “strong intent” to tackle Japan’s massive bad debt problem and shake up the securities and real-estate markets, the OECD emphasized that only results count.
Hiranuma admitted that “strong concern” over the state of the Japanese economy was voiced during the conference: “I feel that many countries now see our reform efforts from the perspective of a global economic issue.”
Outlining the economic malaise afflicting Japan, the OECD ministers said prospects in Japan for a “self-sustained recovery in the short term are uncertain” and that prices continue to decline.
While acknowledging that the expansive fiscal policy that has been adopted by successive Japanese governments has been geared to aid recovery, the OECD warned about the weight of public debt on Japan’s economy.
“A credible medium-term fiscal consolidation program and structural reforms must be developed without delay,” the communique said.
On the U.S. economy, the OECD urged Washington to pursue monetary policies that jack up the slowing economy while calling attention to the need for “fiscal soundness” in the administration of President George W. Bush.
The OECD said that while the economic growth in Europe will slow this year, the economic fundamentals remain good and a further decline in unemployment can be expected.
The OECD’s “economic perspectives” are expected to become the basis of policy debate when the leaders of the world’s major industrial nations meet in Genoa, Italy, in July for their annual summit.
Japan was represented in the conference by Hiranuma, Takenaka, Senior Vice Foreign Minister Shigeo Uetake and Senior Vice Environment Minister Hisashi Kazama.
Gist of ministers’ communique
The following is the gist of a communique issued Thursday after a two-day meeting of the OECD economic ministers.
* Growth in the OECD area is projected to decline to around 2 percent in 2001, half the rate achieved last year. However, the foundations are in place for a return to stronger growth, and inflation is expected to remain low.
* The U.S. economy has experienced a significant slowdown, but long-term fundamentals remain strong.
* In Japan, prospects for a self-sustained recovery in the short term are uncertain. A credible medium-term strategy for fiscal consolidation and structural reforms must be developed without delay.
* The OECD welcomes Japan’s strong intent to resolve balance sheet problems in the financial and corporate sectors, and to enhance structural reform in the securities and real-estate markets.
* While recognizing differences over the Kyoto Protocol, OECD governments are determined to work together to address climate change.
* The OECD is committed to the launch of a new global round of multilateral trade negotiations at the WTO ministerial conference in Qatar in November.
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