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2005 OECD Economic Outlook, Volume 2005 Issue 2

image of OECD Economic Outlook, Volume 2005 Issue 2
Twice a year, the OECD Economic Outlook analyses the major trends and examines the economic policies required to foster high and sustainable growth in member countries. Developments in major non-OECD economies are also evaluated. The present issue covers the outlook to end-2007. Together with a wide range of cross-country statistics, the Outlook provides a unique tool to keep abreast of world economic developments.  In addition to the themes featured regularly, this issue contains an analytical chapter addressing the recent run-up in house prices.

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France

The recovery that appears to have gained hold in the second half of the year should continue into 2006. Domestic demand is expected to pick up slightly and exports should recover. Modest employment gains will permit only a small drop in unemployment. Inflation is likely to fall back somewhat as the “second-round” effects of higher energy prices appear to be small. The general government deficit is likely to remain above 3% of GDP.

While the shortfall on the target for reducing the budget deficit may be largely due to low growth, firm measures to reduce it significantly over the next few years remain necessary. Moves to simplify parts of the tax system are welcome; introducing more tax breaks for certain activities unfortunately offsets this, adding to the system’s complexity. Social unrest calls for policies to improve prospects for the excluded. Fundamental labour market reforms, including liberalising regulations that restrict job opportunities for the low-skilled, should be a key component.

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