The OECD has urged global governments and business to drive growth by addressing current failings amid a rising number of major threats to the economic outlook.

The call came as the organisation issued its Foundations for Growth and Competitiveness (F4GC) report which urged a greater focus on enabling economic growth after over a decade of decline.

The report explained: “Revisiting the foundations for growth is now central given the decline in medium term economic prospects that have beset OECD countries, underpinned by a marked slowdown in labour productivity growth.

“The latter reflects persistently weak business investment in the aftermath of the global financial crisis as well as longer term slowdown in business dynamism and human capital accumulation. While stronger employment outcomes over the last 15 years have provided some offset, this growth could fade due to population ageing and persistent labour and skill shortages.

“In this context, there is an urgent need for countries to implement productivity-enhancing structural reforms, noting that reform momentum has been in retreat across the OECD for more than a decade. Doing so can help countries to revitalise their economies by confronting the above headwinds to growth and more fully capitalising on the opportunities offered by new technologies, such as Artificial Intelligence. The Foundations for Growth and Competitiveness (F4GC) initiative aims to provide policymakers with tools to tackle these challenges.”

On strengthening growth the report added: “To revive growth and build a strong economy, strengthening the foundations is the first step. For this, countries need to address the structural challenges involving their growth enablers.

“Investing in human capital by improving the quality and responsiveness of education, especially vocational training, expanding access at all levels of instruction, and strengthening links between universities and labour markets can increase labour productivity and improve the adaptability of the labour force to structural transformations.

“Furthermore, strengthening the quality of regulations and institutions through measures such as expanded regulatory impact assessments and more active stakeholder engagement lays the foundation for efficient regulatory frameworks, which in turn are key to providing appropriate market incentives and improving the allocation of resources across the economy.

“At the same time, increasing investment in infrastructure, especially in transport and broadband, can strengthen connectivity and knowledge and technology diffusion, in turn, raising productivity growth. Ensuring cost-effectiveness, environmental sustainability and better project appraisal are key to maximising the returns. Additionally, enhancing macroeconomic stability, including through sound fiscal management, and improving firms’ access to finance, are essential to creating a favourable environment for business activity.”

Stefano Scarpetta OECD chief economist and G20/G7 finance deputy said the economies of OECD member countries was at a pivotal moment.

“Across the OECD and beyond, the foundations of economic growth are under strain,” he said. “Over the past two decades, labour productivity growth has slowed markedly in most countries. This slowdown reflects a combination of structural bottlenecks: subdued business investment, declining firm dynamism, slowing technology diffusion and a weakening pace of human capital accumulation.

“While employment growth has been resilient, many countries are facing significant population ageing, which will affect the potential for labour to sustain growth. At the same time, rapid advances in artificial intelligence and digital technologies offer the potential of a new wave of sustained productivity gains.

“Whether new technologies translate into sustained productivity gains will depend crucially on structural policy settings.

“This first edition of Foundations for Growth and Competitiveness arrives at a pivotal moment. Structural reform momentum has slowed across many OECD countries but there is heightened need for countries to remain competitive and resilient in a global landscape characterised by unprecedented structural transformations and geopolitical and trade shocks.”

Scarpetta continued: “Sustainable prosperity rests on strong enabling conditions: high-quality human capital, sound institutions, effective governance, reliable infrastructure, affordable and secure energy supply and macroeconomic stability.

“As artificial intelligence and digitalisation reshape production and the way businesses work, workforce adaptability becomes a decisive competitive advantage. Countries that strengthen vocational education, expand access to lifelong learning and deepen links between universities and labour markets will be better placed to adapt to evolving business needs. Institutional quality and efficient regulatory processes are equally critical.

“Predictable, transparent and well designed regulatory frameworks foster trust and reduce uncertainty. Strong institutions improve the allocation of resources and underpin market incentives.

“ In an era of heightened geopolitical and economic uncertainty, macroeconomic stability and sound fiscal frameworks remain essential anchors. Yet enabling conditions alone are not sufficient.

“Markets must also function efficiently to promote economic dynamism, technological diffusion and business investment.”