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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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Germany

Based on strong export growth, output is projected to improve. While weak consumption and construction investment are still weighing on activity, equipment investment has strengthened. As the upswing broadens, GDP is projected to grow slightly above potential, 1¾ per cent (working day adjusted) in both 2006 and 2007. The general government deficit is likely to total 3.9% of GDP in 2005, and remain high in 2006, but then fall to 2.6% in 2007, largely on account of an increase in the value added tax rate.

For economic performance to be raised in a durable way, the new government has to go further in reforming labour and product markets within a coherent framework. Fiscal consolidation needs to be linked to more fundamental spending reform, requiring, inter alia, the untangling of responsibilities across different levels of government, more determined reductions in both subsidies and tax expenditures and continued reform of the social security system.

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