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2003 OECD Economic Outlook, Volume 2003 Issue 2

image of OECD Economic Outlook, Volume 2003 Issue 2

This issue of the OECD Economic Outlook analyses the major trends that will mark the next two years. It  covers the outlook to the end of 2005 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. Three analytical chapters look at fiscal policy and its influence on economic activity, fiscal relations across levels of government, and  crubing the growth in government spending and raising its  cost effectiveness.

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General Assessment of the Macroeconomic Situation

After a drawn-out period of fits and starts, a palpable recovery has finally taken hold across the OECD. The strong momentum already achieved in Asia, North America and the United Kingdom provides ample evidence of the renewed strength of the world economy. Despite lingering domestic weaknesses, Continental Europe is also on its way to join the recovery. However, the persistence of very large current account imbalances at this early stage of the recovery may complicate the outlook. The combination of large public and external deficits in the United States could be a source of exchange rate instability. Under such delicate circumstances, a sudden weakening of the dollar could stifle a fledgling European recovery. This would exacerbate the unevenness of the global upturn while not doing much to help reduce current account imbalances or tensions in the trade policy arena. All of this underscores the importance of strengthening fiscal policy frameworks...

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