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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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Italy

The economy stalled in the first half of 2003, but has since recovered somewhat. Growth should gradually gather strength during 2004, largely in response to more robust world trade growth. Employment has held up well, thanks to structural reforms. Persistently high inflation is harming competitiveness, but a continuing large output gap and decelerating unit labour costs should support disinflation during 2004. The public sector deficit-to-GDP ratio is increasing in 2003 and could rise further in 2004 because of the weak economy and the likelihood of higher than programmed public capital spending. In the absence of corrective measures, the 3 per cent threshold could be exceeded in 2005. A significant decline in the high debt ratio will require additional structural measures, notably a faster implementation of the recent pension proposals. More rapid progress in product market reforms is also required to bring inflation closer to the euro area average and spur investment dynamism...

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