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 2014 Issue 1

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20 June 2014
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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. The Outlook puts forward a consistent set of projections for output, employment, prices, fiscal and current account balances. Coverage is provided for all OECD member countries as well as for selected non-member countries. This issue includes a general assessment, chapters summarising developments and providing projections for each individual country, a special chapter on growth prospects and fiscal requirements over the long term and a statistical annex which includes data on housing, debt, and many other variables.

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  • Editorial: Achieving a resilient recovery

    The recovery from the Great Recession has been slow and arduous, and has at times threatened to derail altogether. The major advanced economies are finally gaining momentum. Private-sector confidence is rebuilding. After years of weakness, investment and trade have started to rebound. While unemployment remains unacceptably high, the labour market situation is improving in most countries and has stopped deteriorating virtually throughout the advanced economies.

  • General assessment of the macroeconomic situation

    Global growth and trade are projected to strengthen at a moderate pace through 2014 and 2015.

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  • Expand / Collapse Hide / Show all Abstracts Developments in Individual OECD Countries

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    • United States

      Economic activity is projected to pick up in 2014 once the effects of severe winter weather dissipate. Given ample corporate cash flow and an improved demand outlook, business investment should accelerate significantly. Sizable gains in asset prices have boosted household wealth, which, combined with steady progress on the labour market, should provide support to private consumption and residential investment.

    • Japan

      Although an export slowdown has moderated the expansion, improving labour market conditions and stronger business confidence will partially offset the impact of the fiscal tightening scheduled in 2014 and 2015, notably due to the consumption tax hikes. An upturn in exports, as world trade picks up, will also support the expansion, with annual growth projected at around 1¼ per cent, helping to push inflation up.

    • Euro Area

      Economic activity is projected to continue to recover as confidence improves further, financial market fragmentation declines and fiscal consolidation eases. Still, the pace will remain moderate, with still-high debt and tight credit conditions bearing on economic activity, especially in the vulnerable countries. Weak private sector balance sheets are likely to continue to affect confidence and growth for some time. High unemployment and large margins of excess capacity will recede slowly with inflation remaining very low.

    • Germany

      Economic growth is expected to strengthen as world trade picks up and real wage gains boost consumption growth. Improving confidence in the euro area recovery, low interest rates and pent-up replacement needs are projected to raise investment. The unemployment rate is expected to fall slightly. Consumer price inflation may rise to 2¼ per cent in end-2015 as economic slack is absorbed. The current account surplus will remain close to historic highs.

    • France

      After uneven growth in 2013, real GDP is projected to rise by around 1½ per cent in 2015, helped by strengthening world trade, improving prospects in the euro area and a slower pace of fiscal consolidation. The unemployment rate is expected to fall marginally and stay just below 10% of the labour force.

    • Italy

      The slow recovery from recession will continue during 2014 and growth will rise somewhat further in 2015. Gains in confidence will help both consumption and investment, with some additional boost from modest tax cuts which will boost household incomes. Public expenditure will remain weak. Price inflation is set to remain low.

    • United Kingdom

      The recovery has picked up to a robust pace, with a very accommodative monetary policy and an improving labour market supporting household consumption. Economic activity is expected to continue to be sustained by household spending and further boosted by a pick-up in investment. Headline inflation has fallen below the 2% inflation target, but is projected to slightly exceed it by late 2015 as economic slack is taken up.

    • Canada

      Economic growth is projected to accelerate to 2¾ per cent by 2015, along with a desirable rebalancing towards exports and business investment. Exports are set to gain momentum, supported by stronger foreign-market growth, the recent currency depreciation and continuing energy-sector expansion. Business investment should also accelerate, boosting capacity and cost competitiveness. Consumption growth is likely to strengthen, while housing investment should decline towards a more sustainable level. With economic slack fully absorbed, inflation is projected to rise to nearly 2% by late 2015.

    • Australia

      Output is projected to increase by 2½ per cent in 2014 and by nearly 3% in 2015, with a general pick‑up in demand offsetting declining investment in the resource sector. Some economic slack will remain and the unemployment rate will not begin to edge down until the second half of 2015. As a result, there will be little inflation pressure, although rapid growth in house prices and mortgage lending requires continued close attention.

    • Austria

      The recovery is gaining momentum, driven by export-market growth, improving confidence and generally favourable financing conditions. Private consumption will be subdued in the near term-term but will pick up thanks to strengthening employment growth and real income gains.

    • Belgium

      Economic growth is projected to benefit from accelerating exports, but also to become more broad-based as domestic demand picks up, in spite of on-going fiscal consolidation and a modest improvement in residential investment. Job creation is expected to slowly gather pace, leading to a slight fall in unemployment in 2015. Inflation will remain low, due to limited imported price pressures, still sizeable economic slack and recent wage restraint.

    • Chile

      Chile’s economic growth moderated in 2013 and is projected to remain weak during the first half of 2014. GDP growth is projected to pick up gradually by the end of the year and into 2015, led by investment and by exports, which will benefit from the depreciation of the exchange rate.

    • Czech Republic

      An export-led recovery began in 2013 and is expected to gather pace in 2014 as world trade strengthens, reversing the two-year decline in private investment. Stronger consumer confidence and higher real income growth should raise private consumption growth. However, only in 2015 will the pace of GDP growth start to reduce economic slack and the unemployment rate.

    • Denmark

      Economic growth remains subdued, but is expected to gradually pick up as export demand rises, monetary and fiscal policies remain supportive, and confidence returns.

    • Estonia

      After a slowdown in 2013, economic growth is projected to pick up gradually. While wage growth and low interest rates support private consumption, exports will be held back by weak economic growth in some of Estonia’s trading partners, including Finland and Russia.

    • Finland

      The economy has continued to shrink, as declining employment, modest wage increases, tax hikes and subdued confidence have pulled down consumption and investment. Economic growth will resume as the international environment improves, boosting exports, improving confidence and reviving investment.

    • Greece

      Output growth will turn positive in the course of 2014, gaining additional strength in the following year as expanding global markets and improved competitiveness boost exports and investment. The unemployment rate will edge down slowly. Substantial excess capacity and adjustment pressures will keep prices and wages falling, although the pace of decline will moderate. The current account is set to remain in surplus.

    • Hungary

      The moderate recovery is projected to continue, based on robust export growth and a gradual acceleration of private investment. The latter will nonetheless continue to be hampered by an uncertain business environment related to controversial domestic policies and tight credit conditions, which have been alleviated only partly by the central bank’s Funding for Growth Scheme and by its low policy rate. Cyclical slack and wage moderation will keep core inflation broadly in line with the 3% target, with headline inflation temporarily lower. Unemployment should broadly stabilise over the projection horizon, and the current account surplus is set to widen further.

    • Iceland

      Economic growth was considerably more robust than expected in 2013, reflecting strong exports and buoyant tourist spending. Significant employment gains and policy decisions to reduce household debt will stimulate private consumption and further fuel the recovery in 2014. As a result, unused production capacity will disappear in the course of 2015.

    • Ireland

      The recovery is projected to strengthen over 2014-15. Investment has turned around, including in the housing market, and is expected to grow solidly, although from a low base. Exports, aided by stronger trading partner growth, are projected to pick up. Steady employment growth will help bring the unemployment rate down further. Spare capacity will help keep wage and price inflation subdued.

    • Israel

      The growth slowdown in late 2013, attributable in part to an appreciating exchange rate and budget tightening, is expected to be only temporary. The economy will be buoyed by a gradually improving external environment, the benefit of which should be amplified by expanding gas production and persistently low interest rates. With growth picking up to 3½ per cent in 2015, unemployment should remain at a low level.

    • Korea

      The economy experienced an investment-led upturn that is likely to continue thanks to stronger export growth in line with the recovery in world trade. Still, high household debt will continue to constrain private consumption. Output is projected to grow around 4% in 2014-15, helping to lift inflation into the target range of 2.5% to 3.5%.

    • Luxembourg

      Economic growth will continue to pick up in 2014 as the euro area gradually recovers, the mutual fund industry attracts more inflows and the pace of fiscal consolidation lessens. In 2015, the new EU VAT regime for e-commerce will bear on competitiveness, and higher domestic VAT rates slow demand. The backward-looking wage indexation could transmit the effects of the VAT rise into wages, reducing competitiveness.

    • Mexico

      Even though the economy has faced difficulties from fitful external demand and an underperforming construction sector, a marked rebound in GDP growth is projected in 2014 and 2015. As external demand strengthens with the US recovery and the effects of fiscal stimulus start to take effect, investor confidence should return. Monetary policy has been accommodative, while the exchange rate has remained stable. Inflation expectations are well anchored, although inflation jumped briefly at the beginning of the year following tax rate hikes.

    • Netherlands

      The economy is recovering after a double-dip recession, but growth is projected to be modest as households reduce their indebtedness, unemployment keeps rising and fiscal consolidation continues. Investment is expected to pick up gradually on the back of strengthening export growth.

    • New Zealand

      Economic growth continues to be strong, boosted by post-earthquake rebuilding, recovery from a drought and enormous terms of trade gains. Economic slack is being taken up, but so far inflation pressures have remained muted, thanks to renewed currency strength and moderate wage increases. But with growth projected to stay robust, such pressures are beginning to become manifest.

    • Norway

      Economic growth is projected to recover in 2014-15, after a slowdown last year which left some slack in the economy. The impetus from the petroleum sector will be weaker than in recent years, but non-oil exports will pick up as the global economy improves. Household consumption will also gain strength on the back of growth in disposable income. The remaining slack will gradually diminish.

    • Poland

      Real GDP growth is projected to gain momentum, driven by buoyant exports and a gradual strengthening in domestic demand. Headline inflation is likely to remain moderate in the coming few quarters before gently rising as economic slack is reduced.

    • Portugal

      As global conditions improve and domestic demand recovers, economic growth is projected to resume gradually. In light of recent positive surprises on GDP, employment and exports, the recovery may materialise more rapidly than expected, although developments remain fragile. The unemployment rate is expected to continue to slowly decline throughout the forecasting horizon. As economic slack is and will remain sizeable, inflation is set to remain very low, with a risk of deflation, which would make debt reduction more difficult.

    • Slovak Republic

      Economic growth is projected to pick up in 2014 and 2015 as export markets strengthen and the pace of fiscal consolidation slows down. Private consumption will contribute positively to GDP growth for the first time in five years with the recovery of the labour market and stronger real wages. Investment will progressively pick up thanks to a more favourable environment in the euro area, and will further expand the export-oriented manufacturing base. The completion of the highway network will further broaden the regional base for export-oriented activities.

    • Slovenia

      Output is projected to start growing again in 2014 as stronger foreign demand boosts exports. Sustained weaknesses in the banking sector and needed debt reduction in the corporate sector will weigh on investment, while continued fiscal consolidation will be a further drag on demand. With a gradual recovery in domestic demand and continued pick-up in exports, activity should gather pace in 2015. Large slack and high unemployment will keep inflation low.

    • Spain

      Spain’s moderate recovery is projected to strengthen gradually in 2014-15. Economic growth will be led mainly by exports, although private consumption will also strengthen, aided by an improving labour market and stronger confidence. Business investment is projected to benefit from the better economic outlook and higher exports. Higher activity will result in positive employment growth, but ample spare capacity will keep inflation low. This will enable further competitiveness gains, although there is a risk of deflation, which would make debt reduction more difficult.

    • Sweden

      Growth is gaining momentum, driven by a strong pick-up in private investment and consumption. Although unemployment will remain high throughout 2014, it is projected to fall markedly in 2015, which should help push up inflation from current low levels towards the 2% inflation target.

    • Switzerland

      Economic growth is projected to pick up slowly. Export growth, subdued by the strong Swiss franc and a slow recovery in Europe, should rebound and support robust internal demand. Some slack, combined with the strong currency, is delaying the exit from deflation. Employment should keep growing throughout the projection period, driven by activity.

    • Turkey

      Economic growth lost momentum in the course of 2013, as capital market tensions pushed interest rates up. Credit and private demand decelerated. Export growth fell, notably due to rapidly declining gold sales. Political tensions have dented confidence, provoking capital outflows and forcing the central bank to raise interest rates sharply in early 2014. Growth is projected to remain subdued through mid‑2015, while the current account deficit will remain very high.

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  • Expand / Collapse Hide / Show all Abstracts Developments in Selected Non-member Economies

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    • Brazil

      The economy has lost its earlier momentum, even though inflation remains stubbornly above the central bank’s target mid-point of 4.5%. Tighter monetary policy, softer external demand and policy uncertainties due to the presidential election are likely to weigh on activity during 2014. In 2015, GDP growth is projected to rise somewhat, with persistent supply constraints, including a tight labour market, and the need for continued tight macroeconomic policies holding back domestic demand.

    • China

      GDP growth fell in early 2014 as investment slowed in response to tighter credit conditions. In particular, restrictions on mortgage lending and land development continue to curb real estate investment and sales. Measures to phase out excess industrial capacity work in the same direction. However, investment will continue to be supported by a greater emphasis on urbanisation needs and the opening up of sectors previously off limits to private investment. Overall, growth is expected to remain a bit above 7¼ per cent over the next two years. The current account surplus is set to shrink to 1¼-1½ per cent of GDP.

    • India

      Growth is expected to gather momentum. Investment should recover as projects cleared by the Cabinet Committee on Investment are implemented and political uncertainty declines after the May 2014 general elections. The rupee depreciation over the summer of 2013 and firming external demand will underpin export growth, while the rise in rural incomes and the decline in inflation will boost consumption. However, fiscal consolidation and supply bottlenecks, coupled with still high non-performing loans and corporate leverage, will weigh on the recovery.

    • Indonesia

      In contrast to the fragility in a number of other emerging market economies, consumer confidence has firmed in Indonesia. The economy has slowed, and this and stronger exports have helped to narrow the current account deficit in recent months. As a result, current account concerns have dissipated, and the currency has appreciated sharply. Inflation has started to slow, as the impact of fuel subsidy cuts has abated and food prices have eased.

    • Russian Federation

      The moderate recovery that was under way at the end of 2013 has been halted by the turbulence related to the events in Ukraine. Associated increased uncertainties and capital flight are now weighing on investor confidence. Consumption growth will weaken as real income growth slows and consumer credit becomes more expensive. The weak rouble will provide some support to the slowing economy and the budget.

    • South Africa

      Economic activity is expected to be driven by faster export growth, reflecting depreciation of the rand and a pick-up in world trade growth. Domestic demand will be held back by continued weak confidence and modest growth in real incomes, but will slowly benefit from the stronger external sector. However, growth will not become strong enough to reduce the substantial negative output gap.

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  • Growth Prospects and Fiscal Requirements Over the Long Term

    The composition of global output will continue to shift towards emerging economies as well as towards Asia; the combined GDP of China and India was 33% of that of the OECD in 2010 (on a PPP basis), but is expected to rise to 73% by 2060.

  • Statistical Annex

    This annex contains data on key economic series which provide a background to the recent economic developments in the OECD area described in the main body of this report. Data for 2014 to 2015 are OECD estimates and projections. The data in some of the tables have been adjusted to conform to internationally agreed concepts and definitions in order to make them more comparable across countries, as well as consistent with historical data shown in other OECD publications. Regional aggregates are based on weights that change each period, with the weights depending on the series considered. For details on aggregation, see OECD Economic Outlook Sources and Methods.

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