OECD Economic Outlook, Volume 2003 Issue 1
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OECD Economic Outlook, Volume 2003 Issue 1

Twice a year, the OECD Economic Outlook analyses the major trends that will mark the next two years. The present issue covers the outlook to the end of 2004 and examines the economic policies required to foster high and sustainable growth in member countries. Developments in selected major non-OECD economies are also evaluated.

In addition to the themes featured regularly, this issue contains five analytical chapters addressing the following questions: the telecommunications sector,  sources of divergence in growth trends among the major economies, recent patterns and developments in foreign direct investment,  and whether further trade and regulatory policy reforms would affect foreign direct investment flows and economic integration among OECD countries.

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Economic activity has weakened, but should begin to strengthen from the second half of 2003 as the international economy recovers, de-stocking slows and business investment begins to pick up. Real GDP growth may reach 2 per cent in 2004, which would nonetheless leave a substantial negative output gap. Given the sub-par growth outlook, employment growth is set to remain weak, increasing the unemployment rate to 5 per cent in 2004. With lower domestic cost pressures, inflation is projected to fall to 1½ per cent in 2004.

Improving competitiveness and enhancing employment prospects will depend on the resumption of wage moderation. It is important to remove the incentives to leave the labour force prematurely via benefit programmes. The government should take measures to adjust public spending to lower trend growth and return the budget to balance. The objective of paying-off debt by 2030, thereby prefunding the additional budget costs associated with population ageing, should be restored.

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