In its Economic Outlook last Autumn, the OECD took the view that the US slowdown was not heralding a period of worldwide economic weakness, unlike, for instance, in 2001. Rather, a “smooth” rebalancing was to be expected, with Europe taking over the baton from the United States in driving OECD growth.

Cyclical differences have continued to unwind among the major OECD regions (Table I.1). In the United States the correction in the housing market has pushed GDP growth below its potential rate. Growth in the euro area has continued at a fast clip and has been increasingly balanced between the different aggregate expenditure components. In Japan, despite some variability in recorded quarterly growth, the underlying pace of output remains above that of potential, driven mainly by exports and business investment.

This chapter provides a synthesis of the work undertaken by the Economics Department on the economic effects of globalisation, while also draws on other OECD and non-OECD research.1 It begins with an overview of the main trends that have characterised the globalisation process. The second section then describes its potential effects on employment and wages. Globalisation also has had an impact on inflation and has been accompanied by distinctive trends in international capital flows, which are discussed in the third section. The chapter concludes by examining the benefits and challenges that globalisation creates for economic policy.

Fiscal consolidation is required in most OECD countries. This is especially so in view of medium and long-term spending pressures on public finances related, inter alia, to ageing. Countries that are successful in consolidating will then face the challenge of locking in the gains achieved. Against that background, this chapter presents evidence on the factors that in the past were associated with successful consolidation and with the preservation of those gains.

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 2006 to 2008 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 2000 GDP weights expressed in 2000 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 for values and base year exchange rates for volumes.