PARIS (Reuters) – Economic growth is expected to fall by almost half in developed countries and large emerging economies over the coming decades, requiring higher taxes to prevent debt from exploding, the EU said on Thursday. OECD in an update of its long-term economic projections.
While accelerating the transition to cleaner energy could further strain economic activity, effective carbon pricing schemes could generate windfall revenues for some governments, the Organization for Economic Co-operation and Development said ( OECD).
The trend growth of the 38 member countries of the OECD and the G20 should gradually slow down, from 3% before the COVID-19 pandemic to 1.7% by 2060. The cause: the reduction in the workforce work in many countries, due to the aging of the population, and lower productivity in emerging countries.
For OECD member countries, the trend growth rate is expected to fall from 1.8% to 1.3% in 2060. Emerging G20 economies are expected to experience a larger slowdown, from 4.5% to 2%. by 2060.
Slower growth will be accompanied by pressure on public finances, which in the case of OECD countries would mean that taxes would have to be increased on average by more than six percentage points by 2060 to maintain the debt at its current level.
Governments unwilling or unable to raise taxes will have to find other ways to ease the pressure, for example by reforming the health and pension systems.
In a scenario where countries accelerate the energy transition to limit the rise in global temperatures to 1.5 degrees Celsius, global growth would be 0.2 percentage points lower than expected between 2025 and 2030.
This decline would reach nearly 0.6 percentage points by 2045-2050, with a less significant shock in OECD countries than in large emerging economies, more dependent on fossil fuels.
However, the widespread use of tradable emissions permits, carbon and fuel taxes to increase carbon prices could generate additional public revenues of around 3.75% of economic output in the OECD countries during the period 2026-2030.
(Report by Leigh Thomas; by Gaëlle Sheehan, edited by Blandine Hénault)
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