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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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Mexico

Following a slowdown in the first half of 2005 due to weaker foreign demand, growth is expected to pick up after mid year, underpinned by the strengthening of export markets and increased public investment, fuelled by high oil revenues. Headline and core inflation rates have come down to the central bank's target and are expected to continue a gradual decline. Employment is growing at a relatively strong pace.

The central bank eased its stance in the second half of 2005. On the fiscal front, the deficit target of 0.2% of GDP in 2005 will be easily met, thanks to higher-than-projected oil revenues. The draft budget for 2006 targets only a moderate consolidation, as lower oil revenues are assumed. A revenue-enhancing tax reform is needed to address spending needs while reducing the vulnerability of public finances to oil price volatility.

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