The Foundations for Growth and Competitiveness 2026 report by the OECD examines the structural factors shaping long-term economic growth and productivity across countries. It responds to a clear concern: economic growth prospects are weakening, largely due to slowing productivity, declining business dynamism, and insufficient investment.
The report provides a framework (F4GC) to identify policy priorities and guide governments in strengthening the foundations of competitiveness.
Declining Productivity and Growth Challenges
A central message of the report is that labour productivity growth has slowed significantly across OECD economies. This trend is tied to weak business investment since the global financial crisis and a broader slowdown in innovation and firm dynamism.
Although employment levels have improved in recent years, this has not fully offset structural weaknesses. Additionally, demographic pressures—such as ageing populations—are expected to further limit future growth potential.
Three Pillars of Competitiveness
The report structures its policy recommendations around three main areas:
1. Enabling Factors
According to Priorities for foundational growth conditions, sustainable growth depends on strong fundamentals such as:
- Human capital (education and skills)
- Governance and institutional quality
- Infrastructure (physical and digital)
- Macroeconomic stability
Without progress in these areas, other reforms tend to have limited impact.
2. Market Incentives and Efficiency
The report highlights the importance of well-functioning markets to allocate resources efficiently. This includes:
- Tax systems
- Labour and product market regulations
- Trade and foreign investment policies
Poorly designed incentives can trap resources in low-productivity sectors and reduce overall competitiveness.
3. Targeted and Sectoral Policies
Governments are also encouraged to support specific areas such as:
- Innovation and R&D
- Energy systems and security
- Digital transformation
These policies aim to accelerate structural change and help economies adapt to new technologies like artificial intelligence.
The Critical Role of Human Capital
Human capital emerges as one of the most important drivers of growth. The report emphasizes that improving education and skills can significantly boost productivity.
Evidence from the section on Boosting human capital shows that:
- Raising skill levels to match top-performing countries could increase productivity by around 17% on average.
- Better allocation of skills across jobs could add an additional productivity boost of about 5%.
However, skill mismatches remain a major issue, with over 10% of workers employed in roles that do not align with their qualifications.
Innovation and Digital Transformation
Innovation plays a key role in competitiveness, but results remain uneven. Many countries struggle with:
- Low adoption of digital technologies
- Weak collaboration between firms and research institutions
- Skills shortages in advanced sectors
The report suggests that better-designed innovation policies and improved digital infrastructure are necessary to unlock productivity gains.
Reference
Organisation for Economic Co-operation and Development. (2026). Foundations for Growth and Competitiveness 2026. OECD. https://www.oecd.org/en/publications/foundations-for-growth-and-competitiveness-2026_40a7532f-en.html