1. OECD INTERIM GLOBAL
ECONOMIC ASSESSMENT
Tailwinds driving a modest acceleration...
but storm clouds on the horizon?
http://www.oecd.org/economy/economicoutlook.htm
Paris, 18th March 2015
11h00 Paris time
Catherine L. Mann
OECD Chief Economist

2. Key messages
Positive surprises support somewhat better growth prospects
• Stronger incoming data
• Lower oil prices
• Easing by ECB and other central banks
Inconsistent real and financial signals point to risks
• Abnormally low inflation and interest rates
• Rapid moves in exchange rates and asset prices
• Still lagging real investment and employment
Policy implications: Balanced policy packages needed
• Implement stable medium-term fiscal path
• Reinvigorate structural policies appropriate to each economy
• Reduce over-reliance on monetary policy
2

3. Growth prospects have improved slightly
compared to a few months ago
GDP growth1
Volume, per cent
1. Economies representing over 70% of global GDP measured at 2013 PPP exchange rates .
Source: November 2014 OECD Economic Outlook database; OECD National Accounts database; and OECD calculations.
3
0
1
2
3
4
5
0
1
2
3
4
5
November 2014 Outlook forecasts
March Interim Outlook forecasts

4. The oil price drop is positive for global growth
Brent crude price
USD per barrel
4
Impact of fall in oil price between 2014 and
2015 on trade balance1
Billions of US dollars
1. Assumed average oil price (Brent) of $57 per barrel in 2015.
Source: Datastream; ICIC Pricing; OECD November 2014 Economic Outlook database; and OECD calculations
-600
-400
-200
0
200
400
600
-600
-400
-200
0
200
400
600
40
50
60
70
80
90
100
110
120
40
50
60
70
80
90
100
110
120
$85 per barrel = November
2014 Outlook assumption

5. Many central banks have eased monetary policy
5
Note: size of bubbles indicates relative GDP (at PPP). Russia, which raised policy rates sharply in
December before cutting twice since, is not included as an easer over this period.
Timeline of easing decisions since December 2014
Central banks of countries
accounting for about 48%
of global GDP have eased
over the past 3 months
Egypt
India
Switzerland
Peru Turkey Canada
Euro area
Australia
Israel
China
SerbiaKorea
Pakistan Singapore
RomaniaDenmarkSwedenIndonesia
January 2015 →
← February 2015
March 2015 →
India
Norway
Switzerland
← December 2014
Iceland
Poland
Denmark
Denmark
Denmark
China
Thailand
Romania
Turkey
Morocco
Uzbekistan
Botswana

6. The ECB’s action is working through
financial markets
Yield curves
Instantaneous forward rates
Source: ECB; Bank of England; Datastream .
Nominal effective exchange rate
Index, Jan 2014 = 100
6
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1 2 3 4 5 6 7 8 9 10
Years
March 2014
November
2014
March 2015
84
86
88
90
92
94
96
98
100
102
84
86
88
90
92
94
96
98
100
102
Announcement of
expansion of the
asset purchase
Depreciation

7. Interim Outlook – small upward revisions,
still only moderate growth
1. GDP at market prices adjusted for working days. In the case of Germany, this differs from the “headline”
measure, which does not include the working day adjustment. The unadjusted number for Germany would
be higher by 0.2 percentage points in 2015 and by 0.1 percentage point in 2016.
2. Economies representing over 70% of global GDP measured at 2013 PPP exchange rates. 7
Real GDP1
Percentage change
2014
Column2 Column3
March 2015
Interim
Projections
difference
from
November
Outlook
March 2015
Interim
Projections2
difference2
from
November
Outlook
United States 2.4 3.1 0.0 3.0 0.0
Euro area 0.9 1.4 0.3 2.0 0.3
Japan 0.0 1.0 0.2 1.4 0.4
Germany 1.6 1.7 0.6 2.2 0.4
France 0.4 1.1 0.3 1.7 0.2
Italy -0.4 0.6 0.4 1.3 0.3
United Kingdom 2.6 2.6 -0.1 2.5 0.0
Canada 2.5 2.2 -0.4 2.1 -0.3
China 7.4 7.0 -0.1 6.9 0.0
India 7.3 7.7 1.3 8.0 1.4
Brazil 0.0 -0.5 -2.0 1.2 -0.8
Aggregate2
3.7 4.0 0.1 4.3 0.2
2015 2016

8. A welcome fall in unemployment, but low
employment rates suggest that slack remains
Employment and unemployment rates
G7 countries, per cent
Source: OECD National Accounts database; OECD Main Economic Indicators database; and OECD calculations .
8
Real wage and labour productivity
G7 countries, average growth rates, per cent
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2000Q2-2009Q4 2010Q1-2014Q4
Real wage growth Labour productivity growth
55
56
57
58
59
60
4
5
6
7
8
9
Unemployment rate (left scale)
Employment rate (right scale)

9. United States – continued cyclical recovery,
despite weather
9
Cyclical recovery continues, though
one-offs (e.g. severe winter weather)
may mask underlying strength
Absent brinksmanship, fiscal policy is
expected to remain neutral
Federal Reserve likely to delay first
interest rate increase due to low
inflation and dollar appreciation
Domestic demand growing faster than
output – the United States is adding to
demand in the rest of the world
Estimated effect of lower energy prices on
share of energy in household spending
Nominal effective exchange rate
Trade weighted, broad currency index 2010 = 100
0
1
2
3
4
5
6
0
1
2
3
4
5
6
2014 2015
Households save approx.
$90/month on energy
90
95
100
105
110
115
90
95
100
105
110
115
Source: Bureau of Economic Analysis; and OECD calculations.
Source: US Federal Reserve.

10. Retail trade
3-month moving average volume index, 2010=100
Euro area – tailwinds offer escape from
stagnation
PMI
New Orders/Incoming New Business
Source: ECB; Eurostat; Markit; Datastream .
10
Mortgage rates
Per cent
Share prices
Euro Stoxx 50 index, Jan 2011=100
96
97
98
99
100
101
96
97
98
99
100
101
40
45
50
55
60
40
45
50
55
60
Values above 50
indicate expansion
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Average Difference between max. and min.
60
70
80
90
100
110
120
130
140
60
70
80
90
100
110
120
130
140

11. Euro area – fiscal policy needs to complement
monetary and structural policies
Stable, medium-term fiscal path needed to support demand
Ad hoc extensions of deadlines (12
since 2009) create uncertainty, and
reduce fiscal multipliers, thus
undermining objective of the extension
Complexity of rules may lead to poor
policy decisions, and ‘gamesmanship’’
11
Change in underlying primary balance
% of potential GDP
-5
-4
-3
-2
-1
0
1
2
3
4
5
-5
-4
-3
-2
-1
0
1
2
3
4
5
Euro area
2007-2009 2009-2011
2011-2013 2013-2015
Source: OECD November 2014 Economic
Outlook database.

12. The Juncker Plan could spur demand and supply,
as well as promote structural improvements
12
The Juncker Plan helps complete
the Single Market, especially in
network industries
Reducing regulatory differences
by one fifth could increase cross-
border FDI in the EU by up to 25%
and trade intensity by up to 15%
Spillovers from collective action
enhance the growth impact of
investment
Electricity prices for industrial users
Index EU average = 100; 2012 or latest available
20
40
60
80
100
120
140
160
20
40
60
80
100
120
140
160 Germany United Kingdom
France Spain
Greece Portugal
Public investment
Volume index, 2009 = 100
40
60
80
100
120
140
160
180
40
60
80
100
120
140
Sources: IEA; OECD National Accounts database.

13. Japan – getting growth and inflation
back on track, and staying there
13
Low oil prices and the latest
monetary and fiscal stimulus
provide a welcome impetus for
near-term growth
Implementation of structural
policies (the “third arrow”) is critical
to raise productivity and growth
The scale of the challenge of
reducing the public debt burden
remains exceptionally large
Labour productivity growth
Per cent
Public debts and deficits
Per cent of GDP
-6
-4
-2
0
2
4
6
8
-6
-4
-2
0
2
4
6
8
Source: OECD National Accounts database.
0
60
120
180
240
0
5
10
15
20
Overall budget deficit (left scale)
Government gross liabilities (right scale)

14. China – growth slowing gradually to the
official target of around 7%
14
Lower oil prices and policy stimulus
are counterbalancing factors weighing
on growth, notably weakness in the
real estate and financial sectors
Slowing domestic demand creates
tension between meeting growth
targets and rebalancing the economy
Service sector liberalisation would
unleash a new growth drive
Gap between floor space started
and sold
Millions of square meters
Real total domestic expenditure
Year-on-year percentage change, 3-quarter moving average
60
65
70
75
80
85
90
95
100
105
Real property price
Index 2010=100
0
10
20
30
40
50
60
70
80
Source: CEIC; OECD November 2014 Economic Outlook
database.
4
5
6
7
8
9
10
11
4
5
6
7
8
9
10
11

15. India – now leading the growth pack,
but facing numerous challenges
The improvement partly reflects data revisions. The underlying acceleration is
slower, with sluggish investment and exports and emerging obstacles to
structural reforms.
15
-20
-15
-10
-5
0
5
10
15
20
25
30
-20
-15
-10
-5
0
5
10
15
20
25
30
GDP (new series) GDP (old series)
Gross fixed capital formation Exports of goods and services
GDP, exports and investment
Volume, 4-quarter moving average, year-on-year percentage change
Source: Indian Central Statistics Office; and OECD calculations.

16. Offsetting the positive – commodity economies
The fall in commodity prices goes well beyond oil, and is
hurting commodity-exporting economies like Brazil
16
Brazil: contribution to GDP
Volume , year-on-year percentage change
60
70
80
90
100
110
120
60
70
80
90
100
110
120
Agricultural raw materials
Metals and Minerals
Food and Tropical Beverages
Source: Brazilian Institute of Geography and Statistics (IBGE); Datastream.
Non-oil commodity prices
Index, 2011=100
-6
-4
-2
0
2
4
6
8
10
12
14
-6
-4
-2
0
2
4
6
8
10
12
14
Imports Exports
Consumption Investment
GDP

17. Structural reform momentum
has slowed and should be reinvigorated
17
During the last two years, most advanced countries did less in areas identified
as priorities by the OECD than in the previous period
Responsiveness rate1, Going for Growth recommendations
1. Share of recommendations in Going for Growth 2011 for which 'significant' action has been taken, with an
adjustment to reflect the fact that some areas of reform are more difficult than others.
Source: OECD Going for Growth (2015).
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2013-14 2011-12

18. Storm Clouds:
Disconnect between
modest real economy and strong financial signals
18

19. Deflation risks:
The oil price fall added disinflationary impetus
when inflation was already low
19
Number of countries with negative 12-
month headline inflation rate
Headline inflation in OECD countries
Per cent
Where inflation was already too low, the challenge of getting back to target has increased
Deflation increases the vulnerability of indebted households, firms and governments and
aggravates stagnation risks
-5
0
5
10
15
20
25
30
-5
0
5
10
15
20
25
30 25th percentile Median 75th percentile
0
5
10
15
20
25
0
5
10
15
20
25
Source: OECD Main Economic Indicators database.

20. Negative term premium:
Nominal interest rates are extraordinarily low,
and in many cases now negative
20
Medium-term bonds of several governments
are now trading at negative nominal yields
Bond yields are far below historical
norms in most countries
10-year government bond yields
Per cent
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Q4-2014 1980-2007 average
-1.5
-1.0
-0.5
0.0
0.5
1.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
Denmark
Japan
Switzerland
Sweden
Germany
France
Austria
Belgium
Netherlands
3-year government bond yields
Per cent
Source: Datastream.

21. Suppressed risk premium:
Prolonged ultra-low interest rates are building up
vulnerabilities
21
US bond and foreign exchange volatility
Index, January 2014=100
Credit default swap prices
United States high-yield corporate, basis points
40
60
80
100
120
140
160
40
60
80
100
120
140
160
2010 2011 2012 2013 2014 2015
Average, 2005-
present
MSCI World equity index
January 1990=100
0
50
100
150
200
250
300
350
0
50
100
150
200
250
300
350
Source: Datastream.
70
85
100
115
130
145
160
175
190
205
0
50
100
150
200
250
300
350
400
450
Foreign exchange market volatility (left scale)
Treasury note volatility (rightscale)

22. Summing up: Improved prospects,
but no room for complacency
22
Global economy may be at a turning point
• Falling energy prices underpin acceleration in growth
• Downward push on inflation gives room to central banks to support demand
Mutually reinforcing fiscal, monetary, structural policies are needed
• Maintain monetary stimulus as appropriate
• Implement consistent medium-term fiscal policy
• Re-invigorate and target structural reforms
Over-reliance on monetary policy is a concern
• Evidence of mis-pricing of risks and exchange rate overshooting
• Monetary policy alone has not revived real investment