BizKnowledge Watch

The OECD has just published its latest Economic Survey of Japan. According to the report Japan is poised for an economic expansion, but long-term growth prospects remain contingent on additional efforts to revitalize the economy and reduce unsustainable levels of public debt.

The survey forecasts the Japanese economy will grow by about 1.5% annually in 2013 and 2014. The report hails Prime Minister Shinzo Abe’s three-pronged strategy — bold monetary policy, flexible fiscal policy and a growth strategy — to end 15 years of deflation and relaunch economic growth.

The study points out that Japan’s gross public debt reached 220% of GDP in 2012 – the highest level ever recorded in the OECD area – while the budget deficit is hovering around 10% of GDP. With the debt ratio moving further into uncharted territory, the report underlines the urgent need to restore fiscal sustainability.

The plan should include spending cuts and tax increases large enough to bring the budget back into primary surplus by 2020 and stabilize the public debt ratio. A detailed and credible package is essential to maintain market confidence in Japan’s fiscal situation, mitigating the risk of a run-up in long-term interest rates, the OECD said.

The whole report is available for the IESE Community here.

The UN has just published the Human Development Report 2013, “The Rise of the South: Human Progress in a Diverse World.”

The report examines the profound shift in global dynamics driven by the fast-rising new powers of the developing world and its long-term implications for human development.

The study identifies more than 40 countries in the developing world that have done better than had been expected in human development terms in recent decades, with their progress accelerating markedly over the past ten years.

The Report analyzes the causes and consequences of these countries’ achievements and the challenges that they face today and in the coming decades.

China has already overtaken Japan as the world’s second biggest economy while lifting hundreds of millions of its people out of poverty. India is reshaping its future with new entrepreneurial creativity and social policy innovation. Brazil is lifting its living standards through expanding international relationships and antipoverty programs that are emulated worldwide.

But the “Rise of the South” analyzed in the Report is a much larger phenomenon: Turkey, Mexico, Thailand, South Africa, Indonesia and many other developing nations are also becoming leading actors on the world stage.

The full text of the report is available online.

The OECD has just published the report, “Going for Growth: Reforming for a strong and balanced recovery”. According to the study structural reforms offer governments a powerful tool to boost economic growth, create jobs and bring about a strong and balanced economic recovery.

This year’s report assesses and compares progress that countries have made on structural reforms since 2011 and takes a fresh look at reform priorities to revive growth sustainably and boost employment. It shows that the pace of reform has accelerated where it is most needed – in the European countries hardest hit by sovereign debt duress, including Greece, Ireland, Italy, Portugal and Spain.

The report draws attention to the more moderate pace of reform in other euro area countries, notably those with current account surpluses, like Germany or the Netherlands. The highest-income OECD countries, like Norway, Switzerland and the United States, and key emerging-market economies are also shown to have made more limited progress on key reforms.

One special feature of this year’s report is to explore the side effects of pro-growth policies on other objectives, such as reducing income inequalities and preserving the environment.

The whole report is available for the IESE Community here.

The OECD has just published its latest Economic Survey of the United Kingdom. According to the report Britain must continue to pursue pro-growth, as well as inequality reducing structural reforms in order to recover from the nation’s deepest recession in nearly a century.

The effects of the global financial crisis, turbulence from the euro area, and weak domestic demand risk are prolonging the downturn. This could reduce the country’s long-term growth potential and add to social pressures.

The report argues that monetary policy is a key tool to stimulate the economy in the short term, while the government’s fiscal plan, hard won credibility on the financial markets, and strong institutions allow it the flexibility to adapt to weaker than expected growth. It is appropriate to allow the deficit to shrink more slowly than initially planned to cushion the shock and help households through any downturn. Additional tax increases or spending cuts – beyond those already planned – should not be imposed to compensate for a temporary slowdown, the Survey says.

But medium-term fiscal consolidation continues to be essential, it adds. The government’s plan has achieved a significant reduction of the public deficit, despite difficult economic conditions, but it is still over 8% of GDP (excluding one-offs), while the government debt–to-GDP ratio is above 80%.

The Survey outlines what needs to be done to combat inequality by raising the number and quality of jobs, investing in people’s skills and strengthening the welfare system. Among the recommendations are measures to tackle skill shortages, ease the transition from education to the job market and increase incentives to move off benefits and into work.

The whole report is available for the IESE Community here.

The IMF has just published the World Economic Outlook Update, titled “Gradual Upturn in Global Growth During 2013.”

According to the report Global growth is projected to increase during 2013, as the factors underlying soft global activity are expected to subside. However, this upturn is projected to be more gradual than in the October 2012 World Economic Outlook (WEO) projections. Policy actions have lowered acute crisis risks in the euro area and the United States. But in the euro area, the return to recovery after a protracted contraction is delayed. Activity is now expected to contract by 0.2 percent on 2013 instead of expanding by 0.2 percent. While Japan has slid into recession, stimulus is expected to boost growth in the near term. At the same time, policies have supported a modest growth pickup in some emerging market economies, although others continue to struggle with weak external demand and domestic bottlenecks. If crisis risks do not materialize and financial conditions continue to improve, global growth could be stronger than projected. However, downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. Policy action must urgently address these risks.

Read the full text online.