The Greater Relevance of an Inclusive-Growth Agenda in a - PowerPoint PPT Presentation

The Greater Relevance of an Inclusive-Growth Agenda in a Downside-Risk Scenario Jointly Prepared by ILO and UNCTAD G20 Framework Group Seoul, September 17-18, 2015 Session 6 (Revised on January 7, 2016)

OUTLINE � Downside risk scenario: triggers and expected outcomes Simulations assume: slowdown of growth in China; continuing fall of commodity and energy prices; G20 policies continue to lean towards ‘adjustment’ � Elements of an inclusive growth recovery Simulations assume: fiscal expansion, progressive taxation, more equitable functional income distribution. Outcomes reflect growth and employment gains (Simulations with United Nations Global Policy Model)

Downside risk scenario : assumptions Dollar price indexes Baseline (blue), Downside risk scenario (red) Units: base 2005 = 1 Growth slowdown in China Primary commodities Oil 15 10 2.0 2.0 5 1.8 1.8 0 1.6 1.6 -5 1.4 1.4 -10 1.2 1.2 -15 1.0 1.0 10 12 14 16 18 20 10 11 12 13 14 15 16 17 18 19 20 10 11 12 13 14 15 16 17 18 19 20 • G20 policy responses are assumed in line with recent past, leaning towards continuing fiscal austerity and structural reforms

Downside risk scenario: growth outcomes Growth rate of GDP baseline (blue), Downside risk scenario (red) Units: % per year America Developed Ecs Europe Asia Developed Ecs 10 10 10 8 8 8 6 6 6 4 4 4 2 2 2 0 0 0 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20 America Emerging Ecs Other Emerging Ecs Asia Emerging Ecs 10 10 10 8 8 8 6 6 6 4 4 4 2 2 2 0 0 0 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20

Inclusive-growth agenda: policy triggers Fiscal Expansion + Tax Reform (from indirect to direct taxation) Government income and expenditure as % of GDP Downside risk scenario (green,blue), Inclusive growth recovery (black,red) Units: % America Developed Ecs Europe Asia Developed Ecs 24 24 24 22 22 22 20 20 20 18 18 18 16 16 16 14 14 14 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20 America Emerging Ecs Other Emerging Ecs Asia Emerging Ecs 24 24 24 22 22 22 20 20 20 18 18 18 16 16 16 14 14 14 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20

Inclusive-growth: regaining wage shares Income from employment as % of GDP Downside risk scenario (blue), Inclusive growth recovery (red) Units: % America Developed Ecs Europe Asia Developed Ecs 60 60 60 58 58 58 56 56 56 54 54 54 52 52 52 50 50 50 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20 America Emerging Ecs Other Emerging Ecs Asia Emerging Ecs 60 60 60 58 58 58 56 56 56 54 54 54 52 52 52 50 50 50 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20

Outcomes of the inclusive-growth agenda: improved fiscal balances Government sector net lending as % of GDP Downside risk scenario (blue), Inclusive growth recovery (red) Units: % America Developed Ecs Europe Asia Developed Ecs 15 15 15 10 10 10 5 5 5 0 0 0 -5 -5 -5 -10 -10 -10 -15 -15 -15 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20 America Emerging Ecs Other Emerging Ecs Asia Emerging Ecs 15 15 15 10 10 10 5 5 5 0 0 0 -5 -5 -5 -10 -10 -10 -15 -15 -15 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20

Outcomes of the inclusive-growth agenda: “2+ percent target above the baseline” Growth rate of GDP Downside risk scenario (blue), Inclusive growth recovery (red) Units: % per year America Developed Ecs Europe Asia Developed Ecs 8 8 8 6 6 6 4 4 4 2 2 2 0 0 0 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20 America Emerging Ecs Other Emerging Ecs Asia Emerging Ecs 8 8 8 6 6 6 4 4 4 2 2 2 0 0 0 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20

Outcomes of the inclusive-growth agenda: employment gains, the ultimate test of inclusiveness Employment Downside risk scenario (blue), Inclusive growth recovery (red) Units: millions America Developed Ecs Europe Asia Developed Ecs 184 228 74.5 180 227 74.0 176 226 73.5 172 225 73.0 168 224 72.5 164 223 72.0 160 222 71.5 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20 America Emerging Ecs Other Emerging Ecs Asia Emerging Ecs 190 124 1,920 185 1,880 122 180 1,840 120 175 1,800 170 118 1,760 165 116 1,720 160 155 114 1,680 10 12 14 16 18 20 10 12 14 16 18 20 10 12 14 16 18 20

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