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)

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

OUTLINE

(Simulations with United Nations Global Policy Model)

• G20 policy responses are assumed in line with recent

past, leaning towards continuing fiscal austerity and structural reforms

Downside risk scenario : assumptions

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• 10
• 5

5 10 15 10 12 14 16 18 20 Growth slowdown in China

1.0 1.2 1.4 1.6 1.8 2.0 10 11 12 13 14 15 16 17 18 19 20

Primary commodities

1.0 1.2 1.4 1.6 1.8 2.0 10 11 12 13 14 15 16 17 18 19 20

Oil Dollar price indexes Baseline (blue), Downside risk scenario (red) Units: base 2005 = 1

Downside risk scenario: growth outcomes

2 4 6 8 10 10 12 14 16 18 20 America Developed Ecs 2 4 6 8 10 10 12 14 16 18 20 Europe 2 4 6 8 10 10 12 14 16 18 20 Asia Developed Ecs 2 4 6 8 10 10 12 14 16 18 20 America Emerging Ecs 2 4 6 8 10 10 12 14 16 18 20 Other Emerging Ecs 2 4 6 8 10 10 12 14 16 18 20 Asia Emerging Ecs

Growth rate of GDP baseline (blue), Downside risk scenario (red) Units: % per year

Fiscal Expansion + Tax Reform (from indirect to direct taxation)

Inclusive-growth agenda: policy triggers

14 16 18 20 22 24 10 12 14 16 18 20 America Developed Ecs 14 16 18 20 22 24 10 12 14 16 18 20 Europe 14 16 18 20 22 24 10 12 14 16 18 20 Asia Developed Ecs 14 16 18 20 22 24 10 12 14 16 18 20 America Emerging Ecs 14 16 18 20 22 24 10 12 14 16 18 20 Other Emerging Ecs 14 16 18 20 22 24 10 12 14 16 18 20 Asia Emerging Ecs

Government income and expenditure as % of GDP Downside risk scenario (green,blue), Inclusive growth recovery (black,red) Units: %

Inclusive-growth: regaining wage shares

50 52 54 56 58 60 10 12 14 16 18 20 America Developed Ecs 50 52 54 56 58 60 10 12 14 16 18 20 Europe 50 52 54 56 58 60 10 12 14 16 18 20 Asia Developed Ecs 50 52 54 56 58 60 10 12 14 16 18 20 America Emerging Ecs 50 52 54 56 58 60 10 12 14 16 18 20 Other Emerging Ecs 50 52 54 56 58 60 10 12 14 16 18 20 Asia Emerging Ecs

Income from employment as % of GDP Downside risk scenario (blue), Inclusive growth recovery (red) Units: %

Outcomes of the inclusive-growth agenda: improved fiscal balances

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• 10
• 5

5 10 15 10 12 14 16 18 20 America Developed Ecs

• 15
• 10
• 5

5 10 15 10 12 14 16 18 20 Europe

• 15
• 10
• 5

5 10 15 10 12 14 16 18 20 Asia Developed Ecs

• 15
• 10
• 5

5 10 15 10 12 14 16 18 20 America Emerging Ecs

• 15
• 10
• 5

5 10 15 10 12 14 16 18 20 Other Emerging Ecs

• 15
• 10
• 5

5 10 15 10 12 14 16 18 20 Asia Emerging Ecs

Government sector net lending as % of GDP Downside risk scenario (blue), Inclusive growth recovery (red) Units: %

Outcomes of the inclusive-growth agenda:

“2+ percent target above the baseline”

2 4 6 8 10 12 14 16 18 20 America Developed Ecs 2 4 6 8 10 12 14 16 18 20 Europe 2 4 6 8 10 12 14 16 18 20 Asia Developed Ecs 2 4 6 8 10 12 14 16 18 20 America Emerging Ecs 2 4 6 8 10 12 14 16 18 20 Other Emerging Ecs 2 4 6 8 10 12 14 16 18 20 Asia Emerging Ecs

Growth rate of GDP Downside risk scenario (blue), Inclusive growth recovery (red) Units: % per year

Outcomes of the inclusive-growth agenda:

employment gains, the ultimate test of inclusiveness

160 164 168 172 176 180 184 10 12 14 16 18 20 America Developed Ecs 222 223 224 225 226 227 228 10 12 14 16 18 20 Europe 71.5 72.0 72.5 73.0 73.5 74.0 74.5 10 12 14 16 18 20 Asia Developed Ecs 155 160 165 170 175 180 185 190 10 12 14 16 18 20 America Emerging Ecs 114 116 118 120 122 124 10 12 14 16 18 20 Other Emerging Ecs 1,680 1,720 1,760 1,800 1,840 1,880 1,920 10 12 14 16 18 20 Asia Emerging Ecs

Employment Downside risk scenario (blue), Inclusive growth recovery (red) Units: millions

Thank You!