OECD Economic Outlook

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The OECD Economic Outlook is the OECD’s twice-yearly analysis of the major economic trends and prospects for the next two years. Prepared by the OECD Economics Department, the Outlook puts forward a consistent set of projections for output, employment, government spending, prices and current balances based on a review of each member country and of the induced effect on each of them on international developments.

Coverage is provided for all OECD member countries as well as for selected non-member countries. Each issue includes a general assessment, chapters summarizing developments and providing projections for each individual country, three to five chapters on topics of current interest such as housing, and an extensive statistical annex with a wide variety of variables including general debt.
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OECD Economic Outlook, Volume 2009 Issue 1

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24 June 2009
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This June 2009 issue of OECD's twice-yearly OECD Economic Outlook provides analysis of recent economic developments and economic projections for OECD and major non-OECD countries through the end of 2010. Its comprehensive statistical annex is a useful reference tool for international economic comparisons. This issue finds that a recovery is in sight but that damage from the crisis is likely to be long-lasting.
Also available in French, German
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  • Summary of projections
  • Nearing the Bottom?
    OECD activity now looks to be approaching its nadir, following the deepest decline in post-war history. The ensuing recovery is likely to be both weak and fragile for some time. And the negative economic and social consequences of the crisis will be long-lasting. Yet, it could have been worse. Thanks to a strong economic policy effort an even darker scenario seems to have been avoided. But this is no reason for complacency; the need for determined policy action remains across a wide field of policies.
  • General Assessment of the Macroeconomic Situation
    For the first time since June 2007, the projections in this Economic Outlook have been revised up for the OECD area as a whole compared with the previous issue. The contraction of output is now moderating from the exceptional drop in the six months to March. The slowdown in the fall of activity is driven by inventory adjustment contributing positively to growth, non-OECD countries recovering, some return of business confidence and policy stimulus providing greater support. However, financial conditions remain tight in spite of some recent easing and the bottom of the recession is likely to be reached only in the second half of the current year, after which a weak recovery is projected (Table 1.1). The OECD economy will at the end of 2010 therefore be faced with an exceptional degree of slack...
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  • Expand / Collapse Hide / Show all Abstracts Developments in individual OECD countries

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    • United States
      The US economy is going through a severe and protracted recession which is projected to bottom out later this year, as fiscal and monetary support takes hold and the housing cycle bottoms out. In 2010, even after a recovery gets under way, GDP growth is likely to remain weak because of the slowdown in capital accumulation, negative wealth effects and still adverse, albeit improving, financial conditions. In this environment, a considerable degree of economic slack, especially in the labour market, is likely to persist over the projection period, bringing inflation to very low rates.
    • Japan
      The global crisis triggered a deep recession that is likely to be the most severe in Japan’s post-war history. The contraction in world trade led to a sharp plunge in exports and business investment, while falling employment and wages have reduced private consumption, leading to a projected output decline of almost 7% in 2009. Fiscal stimulus is expected to lift output growth into positive territory from the second half of 2009, although at a rate that remains below 1% through 2010.
    • Euro Area
      The euro area is in a deep recession, with external demand collapsing and domestic demand being weakened by tight financial conditions, rising unemployment and heightened uncertainty. Activity is expected to contract throughout 2009 and pick up only gradually in 2010, as the tensions in financial markets start to fade and the full effects of policy stimulus are felt. Rapid growth in unemployment and a large negative output gap will continue to dampen inflationary pressures throughout the projection period.
    • Germany
      The fall in output accelerated at the beginning of 2009 and activity is expected to continue falling throughout 2009, though at a slowing pace. The annual decline in GDP growth is projected to amount to around 6% this year. Activity will slowly pick up in the course of 2010. Unemployment is projected to rise sharply, and firms have already reduced their labour input significantly by reducing working hours.
    • France
      Real GDP is projected to fall by about 3% in 2009, with the pace of contraction gradually diminishing through the year. The recovery in 2010 is likely to be slow, with output growing below potential rates throughout the year. Still resilient private consumption and large automatic stabilisers are moderating the contraction in domestic demand, and France is less exposed to the collapse in world trade than some other countries. Both underlying and headline inflation could fall to near zero by end-2010.
    • Italy
      The recession is projected to continue into late 2009, with a slow pick-up in 2010. Falling export growth and deteriorating financial conditions have hit investment hard. After declining to quite low levels, investment should lead the recovery. Unemployment will rise significantly while inflation will decline slowly.
    • United Kingdom
      The economy is in a severe recession, with output projected to decline by 4.3% in 2009 and recover only mildly in 2010. The financial crisis has severely impaired the supply of credit and house prices have fallen sharply, thus restraining business and household spending. The depreciation of sterling is mitigating the downturn, but cannot overcome falling foreign demand. The unemployment rate is projected to rise towards 10% in 2010, with inflation well below the 2% target for an extended period.
    • Canada
      The sharp contraction that began in the last quarter of 2008 intensified in the first quarter of 2009, led by collapsing exports, fixed investment and stockbuilding. The pace of contraction appears to be slowing, but recessionary conditions are expected to linger through the third quarter, with only a slow recovery thereafter. Unemployment is projected to keep rising until early 2010 and inflation pressures to stay muted.
    • Australia
      The international crisis has not spared Australia, even if its impact will be less severe there than the OECD average. Weaker foreign demand and its repercussions on the domestic economy are expected to pull down GDP by ½ per cent in 2009, followed by growth of only 1¼ per cent in 2010. In this difficult climate, unemployment could rise to almost 8% by late 2010, while inflation should decelerate.
    • Austria
      Owing to the global crisis, Austria has entered the most severe recession in decades. GDP is set to contract in 2009, resulting in an increase in unemployment and low inflation. Activity is expected to pick up gradually in the course of 2010.
    • Belgium
      The economy is expected to continue to contract in the remainder of 2009, before a relatively slow recovery emerges in 2010 on the back of fiscal stimulus, easier monetary conditions, and a recovery in world trade. Despite rising unemployment, core inflation may persist, owing to automatic wage indexation.
    • Czech Republic
      Real GDP is contracting, largely reflecting a specialisation in export-dependent manufacturing. Falling investment and recession in major export markets are contributing to a sharp downturn this year, followed by a weak recovery in 2010, driven by the gradual pick-up of private consumption and export demand. Inflation is set to fall sharply, reflecting both the global recession and slower growth of administered prices.
    • Denmark
      The Danish economy is currently experiencing its worst recession in over four decades. The downturn, which started with the unwinding of the property boom, has now been compounded by the trade and financial effects of the global economic crisis.
    • Finland
      Economic conditions in Finland deteriorated abruptly through the winter. Falling exports explain the major part of the decline in GDP although destocking, household consumption and dwelling investment also contributed. Growth will drop sharply in 2009 and recover only slowly in 2010 as world trade picks up. The unemployment rate has begun to climb sharply, and is expected to rise through the projection period. Inflation has remained above the euro area average on the back of the high wages negotiated through 2007.
    • Greece
      Growth weakened in 2008 under the weight of the global economic crisis, despite a sound financial sector and sustained domestic demand. Activity is expected to contract in 2009 on the back of weakening exports, and to recover only slowly in 2010 as the external environment improves. Unemployment is set to reach double digits by 2010 and inflation will be low but persistently above the euro area average.
    • Hungary
      Real GDP growth fell sharply in the fourth quarter of 2008 as the recession in the euro area curbed exports, adding to already weak domestic demand which reflected fiscal restraint and tight credit conditions. The economy will be in deep recession in 2009 before slowly picking up in 2010. Unemployment is likely to reach double-digit figures during the projection period. After slowing at the beginning of 2009, consumer price inflation is projected to rise during the year due to value-added tax and excise tax increases and the recent currency depreciation.
    • Iceland
      Domestic demand collapsed following the failure of Iceland’s three main banks in October 2008, plunging the economy into a very deep recession. The economy is projected to shrink until early-2010, when it should be buoyed up somewhat by investment in large energy-related projects. The unemployment rate is likely to soar to 10% next year. Inflation should fall to very low levels and the current account should improve to near balance in 2010.
    • Ireland
      The economy is experiencing a severe contraction as large domestic imbalances correct, compounded by the global downturn and financial crisis. With the recession already well entrenched and further contraction expected, the peak-to-trough fall in GDP is set to reach 14%. Activity will recover in 2010 but at a slow pace.
    • Korea
      Output growth was positive in the first quarter of 2009, following the severe contraction in late 2008. Nevertheless, the unemployment rate has risen significantly, inflation has decelerated and the current account surplus has increased sharply. Output growth is projected to pick up further in line with the recovery in world trade, reaching a rate of 4½ per cent by late 2010.
    • Luxembourg
      The international crisis hit the economy towards the end of 2008. Initially, the financial sector was affected, but the collapse in world trade also hurt the export-dependent manufacturing sector, and GDP is set to contract during 2009. Subsequently, a mild recovery will emerge on the back of fiscal stimulus, easier monetary conditions and a pick-up in world trade.
    • Mexico
      Mexico entered recession in late 2008, and growth had turned highly negative by the first quarter of 2009, as both exports and domestic demand contracted in the wake of the crisis. The outbreak of influenza and continued troubles for auto manufacturers are likely to have contributed further to the downturn. Growth is set to set to pick up during the second half of 2009 and accelerate further through 2010, reaching quarterly growth rates of above 4% in annualised terms. Inflation has remained relatively high, despite the sharp drop in demand, largely due to sticky administered prices. This persistence in inflation has limited the scope for monetary easing.
    • Netherlands
      The economy underwent a strong contraction at the end of 2008 and in early 2009 as exports and private investment collapsed. However, unemployment has only recently started to increase, from a low level. Overall, the economy will shrink notably in 2009, before slowly recovering in 2010 along with the pick-up in world trade.
    • New Zealand
      The global crisis hit New Zealand just as it was undergoing a difficult domestic adjustment. The multiple blows of housing market correction, collapsing world trade, rising risk spreads, tighter credit conditions and unsustainably high private-sector debt suggest a recession of atypical length. However, major policy stimulus should contribute to modest positive growth next year.
    • Norway
      Norway has been hit hard by the global economic downturn, even if the decline in output is projected to be less sharp than in other countries. The export sector is severely affected, and domestic demand, mainly investment, is contracting rapidly. Despite this, rising labour costs and higher import prices following depreciation of the krone have kept inflation relatively high. The authorities reacted promptly to problems in financial markets with a number of measures to restore the normal functioning of credit markets and stimulate output.
    • Poland
      Growth slowed in the second half of 2008 but was still positive in early 2009. Given the global downturn, activity is projected to contract in 2009, though the recession should be relatively shallow, notably due to relatively modest trade dependence, historically low interest rates, moderate indebtedness of the private sector, income tax cuts and the implementation of many infrastructure projects related to transfers of EU funds and the 2012 football championships. Price pressures have built up recently, notably due to a large fall in the exchange rate but, as economic slack increases, they should recede steadily.
    • Portugal
      Portugal is in the midst of a deep recession as the collapse of external demand and tight financial conditions have affected all parts of the economy, particularly exports and investment. Activity is expected to contract throughout 2009, before recovering very slowly in 2010 as the global economy and financial conditions gradually improve. The unemployment rate is set to reach double digits. Sharply lower commodity prices and the large negative output gap will leave inflation at very low levels.
    • Slovak Republic
      After several years of exceptionally high growth, GDP is expected to contract this year. Exports will be the main drag on activity, followed by private investment. Growth is projected to recover slowly during the course of 2010 due to a brighter outlook for world trade. With rising unemployment, wage growth is expected to slow considerably. Consumer price inflation is also expected to continue to ease, though it will stay above the euro area level.
    • Spain
      Output is projected to fall by 4¼ per cent in 2009, with the rate of decline slowing as the year progresses, and by 1 per cent in 2010. The unemployment rate will reach about 20% in 2010, and inflation will fall to near zero. The government deficit is projected to reach 9½ per cent of GDP in 2010.
    • Sweden
      The Swedish economy is facing a deeper contraction than during the domestic banking crisis of the early 1990s. Output is projected to fall sharply in 2009 before recovering gradually in 2010, with the unemployment rate exceeding 11%.
    • Switzerland
      The sharp downturn of economic activity is expected to continue throughout 2009, reflecting the fall in world trade. A slow recovery in the course of 2010 will be led by gradually improving exports, notably to East Asia. Unemployment is projected to exceed 5% in 2010 and prices may decline towards the end of 2010.
    • Turkey
      The economy contracted beginning in early 2008 as falling domestic demand compounded the effects of the international downturn. GDP is expected to decline by nearly 6% in 2009, before recovering in 2010. The large output gap will push inflation back down to the target range.
    • Brazil
      Following a further deceleration in the first quarter, activity now appears to be rebounding. Industrial production is expanding, in part due to previous destocking, especially in the sectors that have benefitted from government support, including the motor industry. Retail sales have been particularly resilient. Domestic demand is poised to gather strength in the second half of 2009 on the heels of ongoing policy easing.
    • China
      The Chinese economy is now rebounding strongly from the slowdown in the autumn of 2008, thanks to sizeable monetary and fiscal stimuli. Real GDP growth is projected at 7¾ per cent this year and 9¼ per cent in 2010, with some rebalancing towards domestic demand. However, with growth still below potential, downward pressures on prices are expected to linger.
    • India
      There has been a pause in India’s long economic upswing, with GDP growth having fallen well below potential by late 2008. The government introduced some new stimulatory fiscal measures at the beginning of 2009, following a sizeable increase in public outlays in 2008. In 2009, falling exports are projected to result in some slowdown in domestic demand. With the gradual recovery of the global economy and easier financial conditions, growth is projected to gradually regain momentum.
    • Russian Federation
      Russia is suffering a severe recession, but the rebound in commodity prices and the expected effects of policy stimulus point to some recovery through 2009 and into 2010. If oil prices remain around recent levels the current account will remain in surplus and net private capital outflows will ease, allowing the exchange rate and foreign exchange reserves to consolidate their recent recovery. Inflation is expected to decline this year and next.
    • Chile
      Economic activity is projected to contract in 2009. The world economic crisis has hit Chile mainly through a deterioration in its terms of trade, as copper prices have fallen sharply, and through tighter financial conditions. The investment boom, led by mining and energy, has suddenly come to a halt and plummeting consumer and business confidence have led to sharp adjustments in private consumption and inventories. Inflation is declining rapidly and will undershoot the central bank’s target band at the end of the year. After several years of surpluses, the current account has turned negative.
    • Estonia
      Real GDP is set to fall by around 14% this year and by a further 1% in 2010. Although a weak recovery will begin next year, the resumption of growth could be threatened if recovery in major export markets is delayed and will depend largely on success in shifting resources from serving domestic demand, which has collapsed, to expanding export activities.
    • Indonesia
      GDP growth slowed in the first quarter of 2009 to 4.4% on year-on-year basis from 5.2% in the previous quarter. A weakening in investment was only partly offset by rising consumption and especially government spending. Imports contracted faster than exports, delivering positive, although small, trade and external current account surpluses. Inflation is retreating rapidly following a large fall in regulated fuel prices. Activity is projected to gather further steam from mid-year.
    • Israel
      Recession is now underway, due largely to high exposure to international trade, but it is being tempered by the relatively mild difficulties in domestic financial markets and the absence of a house-price bubble. Growth will only turn modestly positive at the end of this year.
    • Slovenia
      Slovenia is experiencing the worst crisis since independence, as GDP is expected to contract by about 6% in 2009. A weak rebound should occur in 2010 as exports pick up. Inflation will continue to moderate on the back of a rising output gap and higher unemployment.
    • South Africa
      The global crisis has pushed South Africa into recession. Growth will likely be negative in 2009 before recovering in 2010, when policy stimulus, global recovery and the staging of the soccer World Cup will boost activity. The output gap will help keep inflation moving downward, returning to the target range in 2010. Current account deficits will shrink somewhat on account of lower domestic demand, but will remain sizeable, unless capital inflows weaken again, forcing even greater import compression.
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  • Beyond the Crisis
    The economic crisis will cast a long shadow. The projections described in Chapters 1 and 2 imply that by the end of 2010, even though a recovery is under way, most OECD countries will still face severe macroeconomic imbalances including large output gaps, high unemployment, very low inflation or even deflation and wide fiscal deficits. This chapter considers how such macroeconomic imbalances might begin to be resolved over the medium term, as well as the main associated risks and uncertainties.
  • Special chapters in recent issues of OECD Economic Outlook
  • Statistical Annex
    This annex contains data on some main economic series which are intended to provide a background to the recent economic developments in the OECD area described in the main body of this report. Data for 2008 to 2010 are OECD estimates and projections. The data on some of the tables have been adjusted to internationally agreed concepts and definitions in order to make them more comparable as between countries, as well as consistent with historical data shown in other OECD publications. Regional totals and sub-totals are based on those countries in the table for which data are shown. Aggregate measures contained in the Annex, except the series for the euro area (see below), are computed on the basis of 2005 GDP weights expressed in 2005 purchasing power parities (see following page for weights). Aggregate measures for external trade and payments statistics, on the other hand, are based on current year exchange rates for values and base-year exchange rates for volumes.
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