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 2010 Issue 1

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26 May 2010
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The OECD Economic Outlook analyses the current economic situation and examines the economic policies required to foster a sustained recovery in member countries. This issue covers the outlook to end-2011 for both OECD countries and selected non-OECD economies. 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 three special chapters. The first covers prospects for growth & imbalances beyond the short-term, the second covers return to work after the crisis, and the third examines counter cyclical economic policy.


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  • Summary of projections
  • A Strengthening Recovery, but also New Risks
    Growth is picking up in the OECD area – at different speeds across regions – and at a faster pace than expected in the previous Economic Outlook. Strong growth in emerging-market economies is contributing significantly. However, risks to the global recovery could be higher now, given the speed and magnitude of capital inflows in emerging-market economies and instability in sovereign debt markets.
  • General Assessment of the Macroeconomic Situation
    The global recovery has become increasingly widespread over the past year, despite progressing at variable speeds across countries and regions. Global output growth is expected to be around 4¾ per cent this year and in 2011, above the growth rate experienced in the decade prior to the onset of the crisis (Table 1.1). In the non-OECD economies, especially in Asia, the recovery is likely to remain buoyant, with the strong macroeconomic policy response to the financial crisis being rolled back only gradually, and a limited direct exposure to the crisis itself and to the associated lingering effects. Sustaining and broadening the recovery is proving somewhat more challenging in many OECD economies, despite the favourable backdrop from strong external demand, the progressive, if fragile, normalisation of financial conditions and the effects of strong, albeit diminishing, macroeconomic policy stimulus. Headwinds stem from the legacies of the crisis, such as weak private and public balance sheets, high unemployment and the increasingly urgent need for fiscal consolidation. The annual rate of output growth in the OECD area is expected to be around 2¾ per cent over the year to the fourth quarter...
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  • Expand / Collapse Hide / Show all Abstracts Developments in individual OECD countries

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    • United States
      The economy continues the recovery that began in mid-2009, although net job creation has been positive only since the beginning of 2010. Corporate profits have turned up, particularly in the financial sector, but bank lending conditions have not fully normalised. The speed of the recovery is projected to remain moderate through 2011 as households continue to rebuild net worth and the unemployment rate declines slowly.
    • Japan
      The recovery from the global crisis remains on track, thanks to a strong rebound in exports and fiscal stimulus that has supported household income in the face of falling employment and wages. Output growth is projected to reach 3% in 2010 on a year-average basis, but to slow somewhat in the second half of the year and average 2% in 2011. Nevertheless, the unemployment rate is likely to stay above 4½ per cent through 2011 and deflation will persist, as production remains below capacity.
    • Euro area
      A gradual recovery is underway driven by economic policy stimulus, a rebound in world trade and improving financial conditions, although there has recently been significant financial market volatility. Difficulties in restoring competitiveness and sound public finances in some peripheral countries may complicate recovery. Persistently high unemployment in much of the euro area, and financial develeraging by indebted households and businesses will weigh on domestic demand. Substantial economic slack is likely to keep inflation low.
    • Germany
      The underlying growth momentum is intact, although negative one-offs affected the economy around the turn of the year. Growth is expected to pick up strongly from the second quarter onwards as the improvement in world trade continues and firms gradually raise their investment expenditures. The labour market continues to be exceptionally robust given the magnitude of the output contraction. Nevertheless, labour hoarding has left some enterprises with excess employment and some increase in layoffs and in unemployment is expected.
    • France
      The recovery is underway. Real GDP growth is projected to increase somewhat, averaging about 2% through both 2010 and 2011, led by business investment, exports and an end to destocking. The unemployment rate should peak soon before declining slowly in 2011, while price pressures will remain subdued with underlying inflation around 1% per year.
    • Italy
      The recession in Italy, which had one of the largest peak-to-trough falls in output in the OECD area, ended in mid-2009. Although growth picked up to a 2% annual rate in the first quarter, the recovery is projected to proceed at a moderate pace for 2010 as a whole, strengthening a little in 2011. Government policy has helped to limit unemployment, which will nevertheless continue to rise slowly into 2011. Excess capacity will exert continuing downward pressure on inflation after a short-term increase due to resurgent energy prices.
    • United Kingdom
      The recovery is gaining traction, supported by improving financial conditions, rebounding exports and a temporary surge in stockbuilding. High inflation and lingering effects from the credit crunch, together with necessary fiscal tightening, will nevertheless keep growth subdued in 2010. The recovery will gain momentum in 2011 when household consumption and business investment start to grow more robustly. The unemployment rate is set to peak in mid-2010 and fall slowly thereafter. Inflation is high, but is projected to fall below the 2% target, once the temporary effects of the increase in the VAT rate wane, due to significant economic slack.
    • Canada
      The economy is rebounding vigorously from the recession trough, helped by a recovering trade sector and policy measures. The pace of recovery is projected to moderate going forward as policy stimulus is withdrawn, inventory rebuilding runs its course and households deleverage. Unemployment should keep declining and inflation pressures stay muted, given remaining economic slack. The high rate of household indebtedness is a source of risk to the outlook.
    • Australia
      After weathering the crisis well in 2009, the Australian economy is projected to experience strong growth in 2010 and 2011, above its trend rate. Activity might expand by as much as 3¼ per cent and 3½ per cent in these two years, driven by booming exports and domestic demand. The unemployment rate is expected to fall below 5% by the end of 2011, in a context of moderate inflation.
    • Austria
      The recovery is expected to gather momentum in 2010 and 2011 as foreign demand firms and policies remain broadly supportive. Even so, unemployment and economic slack will persist throughout this period, which will keep inflation subdued.
    • Belgium
      The recovery started in mid-2009, supported by fiscal and monetary easing and a rebound in world trade growth. A gradual pick-up in activity is expected. However, unemployment will continue to increase until early 2011, pushing up the already high level of structural unemployment.
    • Chile
      The earthquake and tsunami that hit Chile in late February interrupted the strong recovery that had started in the second half of 2009. Production in the most affected areas has been severely damaged. However, reflecting reconstruction efforts, economic growth is expected to rebound strongly in the second half of 2010, decelerating somewhat later on as the reconstruction boom gradually tapers off and policy tightens.
    • Czech Republic
      Real GDP has been growing since the second half of last year, mainly due to a recovery in export markets. Domestic demand remains subdued as a result of high unemployment and fiscal tightening. A gradual recovery is projected for 2010 and 2011, with GDP growth of 2% and 3% respectively. Inflation is expected to rise gradually to about 2% by 2011, which is within the new official target.
    • Denmark
      The Danish economy has started to recover from the recession, but the upturn is expected to be muted. Policy stimulus will continue to support growth in 2010, and the recovery is projected to broaden in 2011.
    • Finland
      While Finland was hit hard by the collapse in world trade, growth resumed during the second half of 2009, albeit at a slow pace. With foreign demand recovering further in 2010 and confidence picking up, growth is projected to accelerate gradually. Unemployment is expected to keep increasing until the end of 2010, then recede slowly.
    • Greece
      The Greek economy is in a protracted recession in the wake of the global crisis and as needed fiscal austerity takes hold. The rate of decline in real GDP is projected to diminish over the projection period, reflecting improvements in external demand. Economic slack and rising unemployment will keep inflation very low.
    • Hungary
      A weak recovery should take place during 2010 as solid growth in external demand more than offsets soft domestic demand. The recovery should gather pace in 2011 as the headwinds from ongoing weakness in the labour market and tight credit conditions ease. Inflation should decline significantly until the end of 2011 as the base effects from last year’s indirect tax increases disappear and large negative unemployment and output gaps are expected to persist for some time.
    • Iceland
      Considerable progress has been made during the recession in reducing economic imbalances. This provides a strong foundation for the economic recovery, which is projected to get underway in the second half of 2010 despite major fiscal consolidation. The recovery is projected to be led by domestic demand, which should be boosted in 2011 by planned investment in large energy-related projects.
    • Ireland
      After a severe recession in 2009, the economy appears to be close to a turning point. The recovery will nevertheless be externally driven, as unwinding the imbalances created during the economic boom will continue to restrain consumption and investment for some time. This suggests that a broadlybased revival will take some time to emerge. By contrast, the contribution of exports to growth will be increased by the improvement of external competitiveness.
    • Korea
      Korea has achieved one of the strongest recoveries among OECD countries, led by exports and expansionary fiscal policy. While the fiscal stimulus has been reversed, buoyant exports are projected to help boost output growth to 5¾ per cent in 2010, leading to a marked decline in unemployment.
    • Luxembourg
      The economy has experienced a severe recession but recovery is underway, led by strong exports of financial services. Activity will continue to pick up and domestic demand will recover as confidence returns and employment growth increases.
    • Mexico
      The vigorous recovery in activity which started in the third quarter of 2009 is projected to continue in 2010 and 2011. After rebounding strongly, export growth is projected to gradually normalise. The inventory cycle should reach its end, while final domestic demand is expected to recover with a lag as the labour market further improves.
    • Netherlands
      The economy is recovering on the back of stronger world trade growth, fiscal stimulus and supportive euro-area monetary conditions. Domestic demand is expected to slowly gain pace, but will significantly contribute to growth only in 2011. Employment will bottom out, but expand only in 2011.
    • New Zealand
      The recovery gained momentum at end-2009, driven by domestic policy stimulus and rebounding external demand and commodity prices. The eventual bounceback of domestic demand may be weaker than in past recoveries, however, because of the overhang of private-sector indebtedness, sticky unemployment and lingering uncertainty that may hold back investment.
    • Norway
      Norway’s economic recovery began somewhat earlier than in most OECD countries and growth is projected to continue, but at a more modest pace than before the recession. Consumer spending and, somewhat later, investment growth is projected to pick up in 2010, while public spending will slow from its recent fast pace. By 2011, mainland GDP will be growing sufficiently fast to eliminate excess capacity in much of the economy.
    • Poland
      After recording the OECD’s best growth performance in 2009, the economy has started to accelerate on the back of strength in exports, public consumption and stockbuilding. Real GDP growth is projected to rise strongly, mainly driven by infrastructure investments, linked to transfers of EU funds and the 2012 football championship, and private consumption.
    • Portugal
      Growth is expected to resume in 2010 but to remain sluggish throughout most of the projection period, reflecting necessary fiscal consolidation and de leveraging. As a consequence, unemployment is set to rise further in 2010, and inflation will remain low. External demand will support exports, but a worsening net investment income balance may prevent any significant narrowing of the current account deficit.
    • Slovak Republic
      An export-led recovery is pulling the economy out of the recession, but weakness in private consumption is a drag on growth. Nevertheless, GDP is expected to grow by over 3½ per cent in 2010 and close to 4% in 2011. Unemployment is envisaged to peak in 2010 at around 14% before falling somewhat in 2011.
    • Spain
      Output is projected to stabilise in 2010 and to edge up by 1% in 2011. The unemployment rate is projected to decline in 2011. Headline inflation will rise temporarily, reflecting higher oil prices and the increase in value added tax rates, but is set to fall to close to zero in 2011.
    • Sweden
      The Swedish economy experienced a severe recession in 2008-09. Although activity is regaining momentum, economic slack is now substantial and unemployment will remain high for some time.
    • Switzerland
      Growth is set to pick up gradually, reaching 1.8% in 2010 and 2.2% in 2011, driven initially by strong external demand and subsequently by domestic demand, notably private investment and consumption. Unemployment is projected to decline slowly in 2011 while inflation is projected to be less than 1%.
    • Turkey
      The economy has rebounded sharply since the second quarter of 2009 thanks to good export performance. GDP is projected to expand by 6.8% in 2010 and 4.5% in 2011. However, job creation will not be strong enough to absorb the rapidly growing labour force and unemployment will rise further.
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  • Expand / Collapse Hide / Show all Abstracts Developments in Selected Non-member Economies

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    • Brazil
      The Brazilian economy has been expanding at a brisk pace since mid-2009 on the back of booming domestic demand boosted by massive policy stimulus. As a result imports have surged. Domestic demand could slow somewhat in coming quarters given a tighter monetary stance. Subsequently, infrastructure investment will help lift growth anew. Inflation is projected to exceed the mid-point of the inflation target range this year and next.
    • China
      China’s vigorous expansion continued in early 2010. GDP growth is projected to exceed 11% this year before slowing to just under 10% in 2011, as the impact of the stimulus package diminishes. With the terms of trade deteriorating and domestic demand remaining strong, the current account surplus may continue to fall sharply in 2010, to around 2¾ per cent of GDP, and rebound only slightly in 2011. With food prices easing, inflationary pressures are likely to remain subdued.
    • India
      Following an uptick in growth in the first half of 2009, a sharp contraction in agricultural output caused by deficient monsoonal rainfall held back the momentum of the Indian economy. Nevertheless, the non-agricultural sector has continued to perform well and recent high-frequency indicators of activity and business sentiment suggest that this segment of the economy is growing robustly. With agricultural output expected to rebound sharply, economic growth should be strong in the near term before moderating to around trend rates.
    • Russian Federation
      Aided by the large rise in oil prices since early 2009, the economic recovery is gaining momentum. Although some components of domestic demand have yet to rebound, they are projected to do so in the course of 2010 and into 2011. Inflation has declined strongly in the last year, but is likely to move back up slightly before stabilising. The current account surplus will widen in 2010 on account of strong export prices, but will narrow again in 2011 as the recovery in private domestic demand gathers strength and as the real appreciation of the rouble over the past year boosts import growth.
    • Estonia
      The economy left a long and deep recession at the end of 2009 on the back of the recovery of external demand. After shrinking 14% in 2009, GDP will accelerate throughout 2010 and 2011, with growth rates picking up to more than 4% in 2011. Although unemployment will remain high at least until 2011, inflation has come back much earlier than expected.
    • Indonesia
      Resilient domestic consumption continues to underpin GDP growth. Investment is picking up but is still hindered by high lending rates. With robust demand for its natural resources, the resulting significant currency appreciation has not prevented exports from recovering more rapidly than imports, supporting the trade and current account surpluses. Inflationary pressures remain tame. Activity is projected to accelerate further on the back of rising investment and improving credit conditions.
    • Israel
      Recovery from Israel’s relatively mild downturn is underway, and growth should be close to potential by the end of 2011. Annual inflation is set to fall in the near term, but market expectations point to a subsequent rise to within the upper half of the Bank of Israel (BoI)’s 1-3% target band.
    • Slovenia
      Recovery began in the second half of 2009, underpinned by a rebound in exports. The pace of growth should pick up gradually through 2010 and 2011 as the forces constraining domestic demand recede. Although the unemployment rate has stabilised in recent months, further increases are likely later in 2010 as government short-time work measures are phased out. Inflation is likely to remain moderate owing to the large slack in the economy.
    • South Africa
      Growth has resumed, and will receive a temporary boost from the World Cup in mid-2010. The projected growth rate of 5% in 2011 will be above potential, but a negative output gap will remain. The current account deficit is likely to widen, as imports will grow faster than exports, but not to pre-crisis levels.
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  • Prospects for Growth and Imbalances beyond the Short Term
    While the worst potential outcomes from the economic crisis have been avoided, in large part due to prompt and massive world-wide policy stimulus, many countries will have to face up to severe macroeconomic imbalances during the recovery period and beyond. These include large output gaps, high unemployment, wide fiscal deficits and the need to exit from exceptionally loose monetary policy. In addition, while global current-account imbalances receded in the immediate aftermath of the crisis there are concerns that they will reappear with the recovery. These imbalances are not independent and addressing some of them could aggravate others, including those in other countries, and could also endanger the recovery.1 This paper considers what combination of policies is likely to be most successful in delivering balanced global growth by means of examining a number of alternative stylised scenarios to 2025. Given the nature of the exercise, none of these scenarios should be considered as a forecast.
  • Return to Work after the Crisis
    The recession that struck nearly all OECD economies during 2008 and 2009 was very deep by historical standards (Figure 5.1).1 It had profound but very differentiated impacts on OECD labour markets. Most prominently, unemployment rose sharply in a number of countries but in others it has increased surprisingly little. This diverse range of individual country experiences is shaping the policy challenge that individual countries are facing in getting people back to work. Based on historical experience, the challenge is strong. Unemployment ultimately returned to pre-recession levels in only about two-thirds of past OECD recession...
  • Counter-Cyclical Economic Policy
    The recent economic crisis has stretched policy frameworks in many OECD countries to breaking point. As economies begin to recover lessons are being drawn on how policies can better prevent the development of new large imbalances and asset price misalignments that were at the origin of the crisis. In addition, policies will have to be set so as to enhance the ability of economies to withstand large adverse shocks.
  • 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 2010 to 2011 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. They are using weights that change each period, with the weights depending on the quantity considered. For details on aggregation see the OECD Economic Outlook Sources and Methods.
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