Publications & Documents

This paper describes an algorithm, 'DoomBot', which selects parsimonious models to predict downturns over different quarterly horizons covering the ensuing two years for 20 OECD countries. The models are country- and horizon-specific and are automatically updated as the estimation sample period is extended, so facilitating out-of-sample evaluation of the algorithm. A limited combination of explanatory variables is chosen from a much larger pool of potential variables that include those that have been most useful in predicting downturns in previous OECD work. The most frequently selected variables are financial variables, especially those relating to credit and house prices, but also include equity prices and various measures of interest rates (such as the slope of the yield curve). Business cycle variables -- survey measure of capacity utilisation, industrial production, GDP and unemployment -- are also selected, but more frequently at very short horizons. The variables selected do not just relate to the domestic economy of the country being considered, but also international aggregates, consistent with findings from previous OECD work. The in-sample fit of the models is very good on standard performance metrics, although the out-of-sample performance is less impressive. The models do, however, provide a clear out-of-sample early warning of the Global Financial Crisis (GFC), especially when considered collectively, although they do generate ‘false alarms’ just ahead of the crisis. The models are less good at predicting the euro area crisis out-of-sample, but it is clear from the evolution of the choice of variables that the algorithm learns from this episode, for example through the more frequent selection of a variable measuring euro area sovereign bond spreads. The latest out-of-sample predictions made in mid-2023, suggest the probability of a downturn is at its greatest and most widespread since the GFC, with the largest contributions to such risks coming from house prices, interest rate developments (as measured by the slope of the yield curve and the rapidity of the change in short rates) and oil prices. On the other hand, warning signals from business cycle variables and equity prices, which are often good downturn predictors at short horizons, are conspicuously absent.

The Turkish economy grew strongly over the past two decades and created many jobs. However, given its young and growing workforce, Türkiye needs to ramp up efforts to achieve high-quality formal job creation. A sizeable share of the workforce, mostly female workers, does not actively participate in the labour market. While informality has decreased significantly, it is still widespread and entrenches productivity differences across firms. Rigid labour market rules, particularly the high severance pay but also minimum wages, impede formal job creation. More flexible labour markets should be part of a comprehensive reform programme that shifts job loss protection to a broader-based unemployment insurance scheme, supported by well-designed activation policies. While educational attainment has risen impressively, a growing number of vacancies, significant skill mismatches and a low level of adult skills highlight the need to address the quality of education and to improve on the matching of talent to jobs.

The Government of Australia has made improving gender equality one of its core priorities, recognising the potential social and economic benefits that it can bring. This OECD Review assists Australia in embedding gender considerations in policy and budget decisions. It draws upon best practices across OECD countries and sets out a series of actions to enable the federal government to strengthen gender impact assessments and gender budgeting. This will help target government policy and resources towards better and fairer social and economic outcomes.

Thailand has achieved remarkable economic progress over the past decades. A strong and timely policy response helped to cushion the economic and social impact of the pandemic, and of high energy and food prices. While bold fiscal support prevented the economy from falling into a recession, public debt has risen and fiscal consolidation should now continue at a gradual pace. Rising social demands, population ageing and the green transition will likely add to public spending pressures and call for raising additional tax revenues. Boosting productivity and mastering the transition towards more sustainable and inclusive growth will require stepping up delayed structural reforms. Competition remains limited across several sectors, likely related to market entry barriers and high regulatory burdens. More than half of workers lack formal employment and social security does not cover most of them. Social pensions provide a minimum income floor for elderly people, and raising them could allow significant inroads in the fight against poverty and inequality. Meeting climate pledges will require bold and well-organised reforms. Renewable power generation has advanced, but the overall share of renewable energy sources remains lower than in peer countries. SPECIAL FEATURES: BOOSTING PRODUCTIVITY; INCLUSIVE RECOVERY; GREEN GROWTH

Sweden is among OECD best performers in reducing greenhouse gas emissions, much thanks to a comprehensive policy framework and relatively efficient policies. There is nonetheless room to further improve consistency of targets and policies, notably for transport, agriculture and carbon removals. Sweden’s long record as a climate frontrunner is also threatened by policy changes moving the 2030 reduction target out of reach unless compensated by new ambitious measures. A green industrial revolution is gaining momentum in Sweden’s north, fuelled by an abundant supply of clean electricity. Considerable investments in electricity generation, storage and transmission are needed, but long planning and permitting procedures slow many key projects down. The green revolution depends on people and skills to run industry and complementary public services. This is a challenge for northern regions and municipalities already facing labour shortages.

Banks and other financial institutions have a central role to play in supporting the net zero transition of the business sector and its millions of SMEs. They are working to integrate climate considerations in various aspects of their operations, including strategy, management and financial products. This calls for the development of new internal capacities and access to SME sustainability data and assessments which are currently difficult to obtain. This policy paper presents the findings of a 2023 survey of public development banks and private financial institutions, conducted by the by the OECD Platform on Financing SMEs for Sustainability. It provides insights on financial institutions' current approaches and plans for the integration of climate considerations in their SME operations. It also provides information on the offer of finance and non-financial support for SMEs’ net zero investments and on related SME climate-related data requirements.