OECD Economic Outlook, Volume 2005 Issue 2
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OECD Economic Outlook, Volume 2005 Issue 2

Twice a year, the OECD Economic Outlook analyses the major trends and examines the economic policies required to foster high and sustainable growth in member countries. Developments in major non-OECD economies are also evaluated. The present issue covers the outlook to end-2007. Together with a wide range of cross-country statistics, the Outlook provides a unique tool to keep abreast of world economic developments.  In addition to the themes featured regularly, this issue contains an analytical chapter addressing the recent run-up in house prices.
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Output growth of close to 4¼ per cent is expected in 2005, rising to 4½ per cent in 2006 before edging down a little in 2007. While some reduction in the contribution from the external sector is likely, domestic demand is expected to pick up. Inflation is set to fall sharply in the near term, reflecting reductions in indirect taxes but will rise again in 2007, though it will remain on track to meet medium-term targets.

Ensuring fiscal sustainability must be a priority. For 2006 the government aims for a substantial cut in the headline budget deficit but one-off factors, notably plans to take expenditure on motorway construction off budget, suggest that the underlying deficit will increase by about one percentage point of GDP. A fiscal strategy that backs realistic targets with stronger spending discipline is needed to recover credibility and avoid an increase in the risk premium.

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