As reminded by the news these days the most exposed

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As reminded by the news these days, the most exposed people to the coronavirus are the most vulnerable ones, the elderly and the sick. Similarly, the economic impact of the virus can only be greater when affecting an already weakened economy: it will take only a few tenths of a percentage point to lead a subdued rate of economic growth into recession, compared to a healthy and robust economic system. The revised OECD best-case scenario sets GDP growth at 2.4% in 2020. Traditionally, the International Monetary Fund defines a global growth rate below 2.5% as recession. This definition might be controversial, and should be updated keeping into account inflation and population growth levels, but it is indeed telling of the dire situation we are currently experiencing. In addition, as bad as it looks, such projection is based on the assumption that the coronavirus will remain contained at current diffusion levels and not spread to more economies than the few ones currently hit a scenario that seems to be challenged in the news by the hour. A crisis of supply, exposing a more structural issue of demand The engines of growth have stalled because household income has been compressed for too long. The OECD (2020) hints to a stagnating industrial production in late 2019, and feeble consumer spending despite rises in employment levels. Indeed, recent employment gains have not been matched with good job quality, as for example documented for the United States, where the average market income for the bottom 50% of working-age adults has fallen by 6.2% since 1980 (Hawell and Kalleberg, 2019). Between 1999 and 2017, real wages at the world level have just grown by 2.2%, down to 1.4% if China is not taken into account (ILO, 2018). Therefore, labour productivity rose faster than real wages over the entire period, particularly in high-income countries (Figure 1). This resulted in a cut of the labour income share in world GDP of 2.5%, from 53.8% in 2004 to 51.3% in 2017.
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Figure 1 - Trends in average real wages and labour productivity in high-income countries, 1999 2017 Source: ILO (2018), Global Wage Report 2018/19 database and ILO calculations. Policies to restore growth The OECD calls for a number of solutions to weak economic performance, close to mainstream supply-side economic policy: strengthening and liberalising market competition, investing in workers skills, streamlining tax and transfer policies, improving quality of infrastructure, supporting innovation and shifting taxation towards property, consumption and environmental taxation (OECD, 2019). The latest Interim Assessment reiterates many of these, while stressing the relevance of fiscal intervention in countries most affected by the coronavirus. The call for maintaining an accommodative monetary policy The OECD re-states that it is essential to maintain supportive monetary policies to ensure long-term low interest rates (OECD, 2020). In fact, long-term interest rates are already falling, since investors tend to privilege long-term government bonds given short-term risks associated with the coronavirus. While monetary policy is predicted to remain
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