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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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Iceland

A new economic expansion has begun, driven by domestic demand, and growth is projected to exceed 5 per cent per annum by 2005 as work on the major aluminium-related investment projects gathers momentum. Inflation is likely to move to the top of the official target range. The challenge for policymakers will be to restrain domestic demand and avoid overheating at the peak of construction activity in the middle of the decade, through timely monetary and fiscal tightening. Government plans to cut taxes from 2005 should be reconsidered if the intended slowdown in public spending growth is not achieved. In any case, official interest rates will need to be raised substantially, probably in the not-too-distant future...

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