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2002 OECD Economic Outlook, Volume 2002 Issue 2

image of OECD Economic Outlook, Volume 2002 Issue 2

Twice a year, the OECD Economic Outlook analyses the major trends that will mark the next two years. The present issue covers the outlook to the end of 2004 and examines the economic policies required to foster high and sustainable growth in member countries. Developments in selected major non-OECD economies are also evaluated in detail.

In addition to the themes featured regularly, this issue contains four analytical chapters addressing the following important questions: the deterioration in budgetary positions in most OECD countries, raising the labour force participation of older workers,  the benefits that OECD countries could achieve from undertaking reforms to promote product market competition, and inflation rates in some of the larger, slow-growing economies have not declined sufficiently to offset higher rates elsewhere in the euro area.

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Hungary

GDP is likely to expand by more than 3 per cent in 2002 led by strong domestic demand. Although competitiveness has weakened and the net contribution from trade has become strongly negative, the growth impulse will carry over to 2003, when international recovery will add further stimulus.

Ongoing fiscal loosening is putting pressure on monetary policy. Fiscal policy needs to be tightened substantially, both to forestall overheating and to allow monetary policy to be more supportive of competitiveness so as to avoid undue deterioration of the foreign balance and a negative impact on foreign direct investment inflows. Labour market reforms should support employment adjustments in the government sector and encourage business sector demand for low-skilled labour, in order to provide a boost to Hungary’s low employment rate.

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