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2005 OECD Economic Outlook, Volume 2005 Issue 1

image of OECD Economic Outlook, Volume 2005 Issue 1

Presents OECD's assessment of the economic outlook to the end of 2006 for the OECD area and China, Brazil, and the Russian Federation.  It finds that Japan and the US have rebounded but that Europe is lacking in sustained momentum, and it carefully examines why. This issue of the OECD Economic Outlook also includes several medium-term scenarios projecting to 2010. The special chapter covers measuring and assessing underlying inflation.

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Germany

Growth remains weak and heavily dependent on foreign demand, but both non-residential investment and -- somewhat later -- household consumption are projected to pick up in the course of 2005, leading to GDP growth of 1¾ per cent in 2006, sufficient to allow the output gap to begin to narrow. The general government deficit is projected to be 3½ per cent this year and to remain above 3% in 2006.

For economic performance to be raised in a durable way, reforms have to be continued and deepened within a coherent framework. Fiscal consolidation needs to be linked to more fundamental reform, requiring, inter alia, untangling responsibilities across different levels of government and continued reform of the social security system. Subsidies and tax expenditures should be reduced so as to create room for further cuts in statutory income tax rates.

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