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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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United States

The economy has been soft recently. Household spending has advanced more modestly as higher energy prices have pinched real incomes. Yet business investment has stabilised and appears set to recover following the end of the war in Iraq, while rising military expenditures are providing a boost to demand. Growth is expected to rebound sharply by the autumn assuming the conflict is resolved by early summer. Household, business and foreign demand -- the latter buoyed by the drop in the dollar -- are all projected to strengthen markedly in 2004. Inflation should fall back as energy prices reverse and slack persists following several years of growth below potential.

Monetary policy has remained supportive, but interest rates will need to be raised once growth picks up. The proposed tax cuts and further increases in expenditure, not least the jump in defence purchases, will widen the federal government deficit sharply. This will have to be reversed in coming years. While the planned tax rate reductions and reforms to dividend taxation are attractive from an efficiency perspective, these proposed changes should be part of a more revenue-neutral reform package.

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