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2003 OECD Economic Outlook, Volume 2003 Issue 1

image of OECD Economic Outlook, Volume 2003 Issue 1

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 addition to the themes featured regularly, this issue contains five analytical chapters addressing the following questions: the telecommunications sector,  sources of divergence in growth trends among the major economies, recent patterns and developments in foreign direct investment,  and whether further trade and regulatory policy reforms would affect foreign direct investment flows and economic integration among OECD countries.

English French, German

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Spain

Growth slowed to 2 per cent in 2002, due to weaker private consumption and investment and sluggish foreign demand, but growth has remained higher than the euro area average. Inflation has declined rather little and the differential with the euro area persists. Activity should strengthen from the second half of this year, halting the rise in unemployment, with GDP likely to grow above potential in 2004.

In early 2003 a personal income tax cut was implemented, while the new Fiscal Stability Law entered into force, which obliges all levels of administration to aim at a balanced budget. The fiscal stance is, nevertheless, broadly neutral, which seems appropriate in view of the relatively small negative output gap. The inflation differential should be tackled by structural reforms rather than by tightening fiscal policy, most importantly by changes to the wage bargaining system to reduce nominal wage rigidities and by further enhancing competition in certain sectors.

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