The Organisation for Economic Co-operation and Development (OECD) has issued a call for governments worldwide to implement fiscal stimulus measures in order to bolster flagging global economic growth. In its latest economic outlook, the OECD argues that monetary policy alone is insufficient to revive growth and that coordinated fiscal action is now necessary.
Infrastructure Investment Key
The OECD specifically recommends increased investment in infrastructure projects. It believes that such investments would not only provide a short-term boost to demand but also enhance long-term productivity. The organization emphasizes the importance of choosing high-quality projects that offer the greatest economic benefits.
Concerns Over Slowing Growth
The call for fiscal stimulus reflects growing concerns about the state of the global economy. Growth has been slowing in many countries, and inflation remains stubbornly low. The OECD warns that without further action, the global economy could remain stuck in a low-growth trap.
Coordination is Crucial
The OECD stresses the importance of international coordination in implementing fiscal stimulus. It argues that coordinated action would be more effective than individual countries acting alone. This is because coordinated stimulus would generate positive spillover effects, boosting demand in all participating countries.
Potential Risks
While advocating for fiscal stimulus, the OECD acknowledges that there are potential risks. One concern is that increased government spending could lead to higher debt levels. However, the OECD argues that the benefits of stimulus outweigh the risks, especially in a low-interest-rate environment.
Key Recommendations:
- Increase public investment in infrastructure.
- Focus on high-quality projects with long-term benefits.
- Coordinate fiscal action internationally.
- Monitor debt levels carefully.
