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2006 OECD Economic Outlook, Volume 2006 Issue 1

image of OECD Economic Outlook, Volume 2006 Issue 1
OECD's twice-yearly assessment of the major economic trends and policies in member countries and selected non-members. This issue covers the outlook to the end of 2007.  Together with a wide range of cross-country statistics, the Outlook provides a unique tool to keep abreast of world economic developments. This issue also contains a special chapter on Future Budget Pressures Arising from Spending on Health and Long-Term Care.

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Euro Area

Activity is gathering pace, especially in export-oriented manufacturing industries, and business surveys suggest that activity will be robust in the first half of 2006. However, the recovery has yet to feed through to household consumption. This may well occur soon, underpinned by employment growth and a moderate pick-up in wages. Overall, growth should average about 2¼ per cent through 2006-07. Were it not for Germany’s value-added-tax increase, inflation would be below 2% next year. With persistent oil price pressures and as evidence builds up that the recovery is firming, the need for monetary tightening should become clear. Its actual pace should be conditional, however, on unambiguous signs that economic slack is shrinking. Governments need to make greater efforts towards fiscal consolidation throughout the current economic upswing. Further reforms to enhance the Single market, including for services, would improve the euro area’s economic performance and its resilience to shocks.

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