Global economic growth faces mounting pressure from short-term uncertainties, including geopolitical tensions, and longer-term structural challenges such as weak productivity, underinvestment, skills shortages, and ageing populations, according to a new report from the Organisation for Economic Co-operation and Development (OECD).
The first edition of “Foundations for Growth and Competitiveness,” launched in Paris, provides a blueprint for countries to implement reforms that enhance productivity and competitiveness.
The OECD identifies three key priorities for action:
- Enabling Factors – strengthening human capital, governance, infrastructure, and macroeconomic stability.
- Market Incentives and Allocative Efficiency – reforming taxation, labour and product markets, trade policies, and foreign investment regimes.
- Targeted Sectoral Measures – supporting innovation, energy security, and the green transition.
The OECD report warns that pro-growth reforms are most effective when they are comprehensive, addressing multiple areas simultaneously to reinforce structural drivers of growth. High-quality human capital, sound institutions, reliable infrastructure, and stable macroeconomic conditions are essential foundations for long-term economic resilience.
Digitalisation and AI are reshaping workforces and production methods worldwide. The OECD analysis suggests that artificial intelligence could lift annual labour productivity growth by 0.7–1.2 percentage points across member countries over the next decade, depending on the speed of adoption.
“Reversing three decades of a declining economic growth trajectory is essential to securing and sustaining meaningful gains in household incomes and living standards,” OECD Secretary-General Mathias Cormann said.
“The priorities are clear: improve the business environment, drive innovation, and invest in skills and employment.
Getting this right will unlock stronger growth and competitiveness, cushion the fiscal pressures of ageing populations and position countries to harness the full potential of AI and other transformative technologies.”
To capture these gains, countries must tackle skills shortages through revamped academic and vocational curricula, expanded access to lifelong learning, and stronger links between universities and labour markets.
The report stresses the importance of efficient markets in ensuring that labour and capital flow to their most productive uses. Measures such as reducing barriers to business entry, supporting post-entry growth, and reforming restrictive regulations in product markets and insolvency regimes could boost firm dynamism and reallocate resources more effectively.
Population ageing also presents a pressing challenge. Policies to improve labour participation, particularly among women, older workers, and underrepresented groups, alongside affordable childcare, flexible housing, and broad-based tax reforms, are needed to strengthen workforce participation and productivity.
Targeted interventions in innovation, energy, and the green transition can further enhance competitiveness. Public investment in research and development, combined with strong human capital and market-friendly policies, can magnify productivity gains. Energy reforms that encourage investment in renewables and efficiency improvements are key to economic resilience in an increasingly uncertain world.
OECD Secretary-General Mathias Cormann highlighted the urgency of action, saying: “There is an urgent need to reignite the structural drivers of growth and ensure economies remain competitive and resilient in a rapidly evolving global landscape.”
The report provides a comprehensive framework for policymakers to benchmark performance across 48 countries, identify bottlenecks, and design evidence-based reform strategies tailored to national circumstances.
“This is not a call for deregulation for its own sake,” OECD Chief Economist Stefano Scarpetta said.
“The objective of regulatory reforms should be to ensure that competition, openness and mobility allow innovation and entrepreneurship to flourish. The digital transformation and AI offer new opportunities, but realising their full potential requires coherent, evidence-based and well-sequenced reforms. Countries can revitalise productivity growth, enhance competitiveness and secure rising living standards for future generations.”
Leave a Comment