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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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Luxembourg

Economic activity has been growing near its trend rate during the past two years (about 4%). This has been helped by rising exports of financial services, reflecting improved confidence in financial markets. With growth broadening to other sectors, including business services, employment gains have been substantial. Nominal wages, underlying inflation and headline inflation are all growing faster than in neighbouring countries. The budget deficit increased to 1.9% of GDP in 2005. The authorities are determined to restore budget balance by the end of the legislature (in 2009). The focus should be on the reduction of the rapid growth of public expenditure, including social benefits. Fiscal consolidation would be helped by measures to moderate the levels of income replacement benefits, which would also strengthen residents’ work incentives.

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