Recent economic
developments and the
near-term economic
outlook
Christian Kastrop
Director, Policy Studies Branch
Economic...
OECD economies are driving the
pick-up in global growth
2
1. Preliminary projections are as circulated to the Working Part...
New order data confirm the divergent trends
in advanced and emerging economies
3
1. Weighted average of new orders in manu...
Growth rates of advanced-economy investment
and world trade have improved recently
.
4
Note: Manufacturing New Export Orde...
Labour market slack is generally shrinking,
though the euro area is lagging…
5
1. The NAIRU is based on OECD estimates.
So...
… which is one factor raising the risk of
deflation in the euro area
6
1. Core countries include Austria, Belgium, Finland...
Credit has grown quickly in some EMEs,
worsening financial vulnerabilities
. 7
Source: BIS.
Credit to the private non-fina...
With below-target inflation, monetary policy
should remain accommodative,
especially in the euro area
8
Source: OECD Econo...
Most countries have made good progress on
fiscal consolidation, but further effort is needed
in many cases
9
Note: The ave...
Accelerated structural reform could
boost long-term growth
10
.
Source: OECD, PMR database; OECD STEP 95 long-term databas...
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DELSA/GOV 3rd Health meeting - Christian KASTROP

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This presentation by Christian KASTROP was made at the 3rd Joint DELSA/GOV Health Meeting, Paris 24-25 April 2014. Find out more at www.oecd.org/gov/budgeting/3rdmeetingdelsagovnetworkfiscalsustainabilityofhealthsystems2014.htm

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DELSA/GOV 3rd Health meeting - Christian KASTROP

  1. 1. Recent economic developments and the near-term economic outlook Christian Kastrop Director, Policy Studies Branch Economics Department
  2. 2. OECD economies are driving the pick-up in global growth 2 1. Preliminary projections are as circulated to the Working Party on Short-term Economic Prospects (STEP) in April 2014. 2. BRIICS countries comprise Brazil, China, India, Indonesia, Russia and South Africa. Source: OECD Economic Outlook 94 database; STEP 95 database. Real GDP growth, November 2013 Economic Outlook and preliminary estimates and projections for the May 2014 Economic Outlook 1 1 2 3 1 2 3 2012 2013 2014 2015 %% OECD April 2014 estimates and projections November 2013 Economic Outlook 4.5 5.0 5.5 6.0 4.5 5.0 5.5 6.0 2012 2013 2014 2015 %% BRIICS2 April 2014 estimates and projections November 2013 Economic Outlook
  3. 3. New order data confirm the divergent trends in advanced and emerging economies 3 1. Weighted average of new orders in manufacturing and services. Note: Above 50 suggests expansion. Source : Markit. Purchasing Managers Indices, composite new orders1 40 45 50 55 60 65 40 45 50 55 60 65 Euro area Japan United Kingdom USA 40 45 50 55 60 65 40 45 50 55 60 65 China India Brazil Russia
  4. 4. Growth rates of advanced-economy investment and world trade have improved recently . 4 Note: Manufacturing New Export Orders Index above 50 suggests expansion. Source: CPB World Trade Monitor; Markit. World Merchandise Trade Growth and Purchasing Managers Index 0 1 2 3 4 5 6 45 46 47 48 49 50 51 52 53 54 55 % index Manufacturing New Export Orders Index World Merchandise Trade Growth (6 month MA) Source: Datastream. Capital goods shipments 3-month on previous 3-month percentage change, not annualised Note: For Japan, capital goods shipments excluding transport equipment at constant price; for the United States, nondefence capital goods excluding aircraft at current price; for Germany total turnover at current prices of capital goods. All series seasonally adjusted. -20 -15 -10 -5 0 5 10 15 -20 -15 -10 -5 0 5 10 15 United States Japan Germany
  5. 5. Labour market slack is generally shrinking, though the euro area is lagging… 5 1. The NAIRU is based on OECD estimates. Source: OECD National Account database. Source : OECD STEP 95 database. % of labour force Unemployment rate Actual and structural unemployment rates, euro area % of labour force 6 7 8 9 10 11 12 13 6 7 8 9 10 11 12 13 Unemployment rate NAIRU¹ 0 2 4 6 8 10 12 14 0 2 4 6 8 10 12 14 United States Euro area United Kingdom Japan
  6. 6. … which is one factor raising the risk of deflation in the euro area 6 1. Core countries include Austria, Belgium, Finland, France, Germany and Netherlands. 2. Vulnerable countries include Greece, Ireland, Italy, Portugal, Slovenia and Spain. Source: Eurostat; OECD STEP 95 database; and OECD calculations. Goods and services import prices year-on-year percentage changes Services prices 0 0.5 1 1.5 2 2.5 Core countries¹ Vulnerable countries² -4 -2 0 2 4 6 8 10 Core countries¹ Vulnerable countries²
  7. 7. Credit has grown quickly in some EMEs, worsening financial vulnerabilities . 7 Source: BIS. Credit to the private non-financial sector Percent of GDP 0 20 40 60 80 100 120 140 160 180 CHN TUR BRA RUS IND IDN MEX 2012 2007
  8. 8. With below-target inflation, monetary policy should remain accommodative, especially in the euro area 8 Source: OECD Economic Outlook 95 database. Consumer price index Annual percentage change 0 1 2 3 United States Japan Euro area 2014 2015
  9. 9. Most countries have made good progress on fiscal consolidation, but further effort is needed in many cases 9 Note: The average measure of consolidation is the difference between the underlying primary balance in 2015 and the average underlying primary balance between 2016 and 2030, except for those countries for which the debt target is only achieved after 2030, in which case the average is calculated up until the year that debt target is achieved. Source: OECD STEP 95 long-term database. Consolidation requirements to reduce government debt to 60 per cent of GDP Change in the underlying primary balance, percentage points of GDP -2 0 2 4 6 8 10 12 14 16 18 20 NLD AUT BEL SVN DEU SVK ISR FIN CZE ITA GRC EA15 IRL ISL HUN PRT CAN OECD FRA USA ESP GBR JPN Average 2016-30 2014-15 2010-13
  10. 10. Accelerated structural reform could boost long-term growth 10 . Source: OECD, PMR database; OECD STEP 95 long-term database; and OECD Calculations. Note: The 'Faster pace' shows the effect of an increase in the speed of product market reform which roughly matches the average rate of improvement in the PMR index observed over the period 2008-13 for Greece, Italy, Poland, Portugal and Slovak Republic. The 'Faster pace of reform to best practice' shows the effect of the same increased speed of product market reform, but to a level which matches the current best quartile among OECD countries rather than the current OECD average as in the baseline and first scenario. Effect of improved product market regulation on GDP in 2030 Percentage points -5 0 5 10 15 20 25 FIN PRT HUN SVK EST CAN CZE FRA BEL ESP JPN CHL ISL NOR CHE IRL MEX SWE GRC BRA LUX ARG KOR SVN ZAF TUR SAU POL ISR IDN IND RUS CHN Faster pace to best practice Faster pace
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