OECD Coordination

Under the title "The Future We Want: Better Policies for the Next Generation and a Sustainable Transition", the annual OECD Ministerial Council Meeting was held in Paris on June 9-10. In light of the Russian aggression against Ukraine and its massive impact on the global economy, ministers discussed solutions for a proper policy mix to address the new and old challenges: successful, post-pandemic economic recovery; climate crisis and the consequences of war for the global economy, especially for the most vulnerable.

Among the most substantive content of the meeting were:

• political commitment to support the reconstruction of Ukraine (based on a speech by President Zelensky during the opening ceremony);
• exchange of views on the economic and social consequences of Russian aggression at a time when the world is still dealing with the aftermath of the pandemic. In this context, the OECD Economic Outlook paints a picture of slowing growth and a prolonged period of more stubborn inflation;
• success of the OECD work and concrete implementation of the reform of international taxation (allocation of taxing rights and introduction of a minimum tax rate);
• strengthening the interaction between trade and environment: trade liberalization and environmental goals should be pursued together, for example through environmental chapters in free trade agreements, through duty-free environmental goods or by ending environmentally harmful subsidies;
• forcing open global markets as a prerequisite for economic recovery and green (energy) transformation;
• establishing a new partnership with Africa with special attention to energy challenges;
• the green transition: creating a new multilateral OECD platform for a coherent approach to reducing global emissions (Inclusive Forum on Carbon Mitigation Approaches), through stocktaking, information exchange and sharing of best practices with broad participation beyond the OECD.

In addition, the MCM adopted eight new multilateral standards covering a wide range of areas, such as sustainable investment (quality in the sense of investment sustainability), blockchain or SMEs. He also adopted the traditional Ministerial Council Statement and,  with the adoption of the roadmaps (strategy papers), the starting signal for concrete accession negotiations for five accession candidates (Brazil, Bulgaria, Croatia, Peru and Romania) was given. Discussions on the roadmap with Argentina are still ongoing.

The OECD Economic Outlook was presented ahead of MCM 2022.

Key messages from the June 8, 2022 press conference: Russia's invasion of Ukraine immediately slowed the recovery of the pandemic-weakened economy. This has put the global economy on a path of lower growth and higher inflation.

According to the projections of the OECD's June 2022 Economic Outlook, global growth will decline dramatically to 3 percent in 2022 and fall to 2.8 percent in 2023. This is significantly weaker than predicted in the December 2021 Economic Outlook.

Europe is suffering the most from the economic and social effects of the war. Many European countries are directly affected by their energy imports and the influx of refugees.

High inflation is cutting into private household budgets. Socially vulnerable people are particularly affected. In the world's poorest economies, the risk of a severe food crisis is still acute due to supply shortages and high prices.

Further increases in food and energy prices as well as persistent supply bottlenecks are major contributors to consumer price inflation reaching a higher level and remaining high for longer than previously assumed. In some advanced economies, inflation is now expected to reach levels not seen since the 1970s. Cost pressures are expected to ease in the course of 2023 as the effect of rising interest rates begins to be felt. However, core inflation in many major economies is expected to remain at or above the central banks' target range.

"Higher commodity prices are hitting countries around the world, adding to inflationary pressures, squeezing real incomes and spending, and thus slowing the recovery," OECD Secretary General Mathias Cormann said at the launch of the Economic Outlook. "This slowdown is directly attributable to Russia's unprovoked and unjustifiable war of aggression, which is hurting real incomes, growth and employment prospects worldwide."

The outlook is fraught with uncertainty and, more importantly, significant downside risks. It is not known how long Russia's war against Ukraine will last and how far it will escalate, he said.

Many low-income and emerging economies face even greater challenges. In addition to rising food and energy prices, they also face lower demand growth in their export markets and possible capital outflows as a result of rising interest rates in advanced economies.

In addition, the pandemic is not over either. More aggressive or contagious variants could spread, and China's zero-covid strategy could lead to further supply chain disruptions.

"The outlook is sobering, and Russia's aggression against Ukraine is already costing the world dearly," said Chief Economist Laurence Boone. "Exactly how costly - and how the burden is shared - depends heavily on the choices made by policymakers and citizens. We cannot accept famine at any price."

More international cooperation is essential to avoid a food crisis. To help countries affected by supply disruptions, it is important to counter export restrictions that raise prices on world markets. Increased efforts are also needed to transport raw materials from Ukraine, as well as targeted direct aid. Governments must act urgently to protect low-income households from the costs of war. However, the best solution to cushion the effect of higher prices is temporary, targeted, means-tested fiscal measures. 

In most economies with healthy growth and employment performance, accommodative monetary policy is no longer justified given the level of inflation. The more widespread and entrenched inflation is, the more rapid the change in policy must be. In many emerging economies, further interest rate increases are probably necessary to anchor inflation expectations and prevent destabilizing capital outflows.

The war has once again demonstrated the importance of energy security. A faster energy transition would not only reduce CO2 emissions but also improve security of supply. Regulatory and fiscal measures can create incentives for switching to alternative energy sources. However, the large-scale expansion of renewables also requires copper, rare earths and other raw materials that only a few countries have. Open global trade is therefore essential for both the energy transition and energy security.

With the September 2021 OECD Economic Outlook Interim Report, the OECD presents its latest global economic forecast with a focus on the G20 countries.

The global economy is growing significantly faster than expected a year ago. However, the recovery remains unstable. The OECD points out that the economic recovery varies greatly from country to country or from sector to sector. Production gaps persist, particularly in emerging and developing countries with low vaccination rates. This results in risks - for both advanced and emerging economies. The extraordinary support measures taken by governments and central banks following the outbreak of the Corona pandemic prevented the worst from happening. Given the progress in vaccination and the gradual economic recovery, the OECD projects strong global economic growth of 5.7 percent in 2021 and 4.5 percent in 2022.

After more than a year of working together to protect health and economies, the need for collective action remains. Whether it is defeating COVID-19, rebuilding post-crisis economies and societies, addressing the climate crisis, or managing the disruptive impacts of critical and emerging technologies, no single challenge facing citizens today can be effectively addressed by one nation alone. Finding solutions to these global challenges requires cooperation and coordination. It requires trust built on shared values. Moreover, solutions must be green and inclusive to serve as intergenerational responses.

For 60 years, the OECD has served as an effective platform for like-minded, market-oriented democracies to collaborate and find solutions to the most pressing economic challenges. To honour the organization's 60th anniversary and draw attention to its critical work, the 2021 OECD Council Meeting at Ministerial Level, chaired by the United States with Korea and Luxembourg as Vice-Chairs, gathers leaders and ministers under the theme "Shared Values: Building a Green and Inclusive Future."

Under the committed leadership of the United States, this second part of the Ministerial Council Meeting took place on October 5 and 6. In his keynote address, U.S. Secretary of State Anthony BLINKEN highlighted four priorities for the global future and for the OECD: (i) overcoming the COVID-19 pandemic, (ii) climate action, (iii) addressing inequality, and (iv) benefits and risks of technology.

Further Information:

• 2021 Ministerial Council Statement

Chaired by the US and co-chaired by Luxembourg and South Korea, the Ministers as well as the representatives of the EU, BIAC and TUAC, thanked OECD General-Secretary Gurria for his commitment to the increased relevance of the OECD as a think and do tank, for important policy recommendations, especially during the pandemic, for the enlargement of the OECD with more members and increased global influence, also through intensified cooperation with the G20. Costa Rica was welcomed as the new 38th member.

Member States' inputs on lessons learned from the crisis and priorities for the future were very consistent: rapid political action and the start of successful vaccination efforts lead to optimistic economic outlook, but uneven by country and marked by uncertainties, depending on further vaccination successes globally - with multiple calls for international solidarity to help developing countries with vaccination. Economic support would have to continue, but probably slowly scaled back and more focused. The importance of multilateral cooperation and open markets was again stressed. Challenges were raised by all countries to be addressed simultaneously in a focused manner: climate change, loss of biodiversity, inequalities, need for structural reforms and digital transformation. Common values, such as market economy, open trade, human rights and international cooperation, rule-based and fact-based policy decision-making should continue to form the basis for policies and measures in the future. Finally, a number of documents and recommendations were adopted, including an action plan for youth, the environment, international mobility and travel, and the protection of children in the digital environment.

On the second day, the handover ceremony to the new General-Secretary Mathias Cormann and his opening statement outlining his priorities for inclusive and green reconstruction based on the shared values of OECD members followed.

The OECD Council, consisting of the ambassadors of the 37 member countries, appointed the Australian Mathias Cormann as the organization's sixth Secretary-General on March 15, 2021. His five-year term began on June 1, 2021. Member countries made the decision after a seven-month selection process launched in August 2020.

Mathias Cormann took office on June 1, 2021, one day after the end of the third term of Angel Gurria, who led the organization as Secretary-General for 15 years. Mathias Cormann is the first OECD Secretary-General from the Asia-Pacific region.

Further information:

• OECD Secretary-General: Mathias Corman
• Mathias Corman - curriculum vitae

On October 28/29, 2020 this year's (virtual) OECD Ministerial Council Meeting was held under the title "The Path to Recovery: Strong, Resilient, Green and Inclusive".

Spanish Prime Minister Pedro Sánchez: Main topics of the meeting are recovery and transformation. The pandemic has triggered the biggest global crisis. More than 1.1 million people lost their lives. 42 Million have been infected. 2020 will see the worst recession since World War II, with global GDP expected to fall by 4.5 percent. Even though countries around the world responded with unprecedented measures, the crisis is not over. Action must be taken jointly to contain the pandemic and ensure a strong, robust, green and inclusive recovery. 

The participants agreed that the COVID-19 crisis had intensified existing global problems such as inequalities and the digital divide. The elimination of these and challenges such as climate change, biodiversity loss and especially the protection of particularly vulnerable groups were priorities in the context of recovery. The transformative potential of digitalization should be exploited. Free, fair and stable trade, investments and open markets are central elements for the economic recovery. In order to achieve more resilient global supply chains, diversification and removing existing barriers in supply chains must be focused on. Protectionism is not an option. The accelerated implementation of the OECD Guidelines for Multinational Enterprises for Responsible Business Conduct could further strengthen the resilience of supply chains. In unison, all representatives expressed a clear commitment to the need for more international cooperation in addressing this global crisis and for a global level playing field. The OECD was asked to accompany the recovery phase with its analytical and data-based potential in an advisory capacity, as it also has the necessary tools to collect and analyse data on measures taken and their effects and thus contribute to improving the necessary transparency. Furthermore, the OECD and its important role as an international platform for global cooperation was also reaffirmed with G20, G7 or the Asia-Pacific Economic Cooperation.

Further Information:

• Key Issue Paper of the MCM 2020
• 2020 Ministerial Council Statement
• Summarized Opening and Leader's Session