Recovery is under way in the world’s advanced economies, underpinned by supportive financial conditions and reduced drag from budgetary tightening, but activity in the major emerging markets is mixed, according to the OECD’s latest Interim Economic Assessment.

1. 11 March 2014
Recent economic
developments and
the near-term outlook
Rintaro Tamaki
Deputy Secretary-General and Acting
Chief Economist, OECD

2. 2
1. Recent
developments and
near-term outlook

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Recent PMIs for the major
economies have mostly been
strong.
Consensus forecasts for 2014
have risen in recent
months, except for Japan.
Ongoing recovery in advanced
economies…
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… with the OECD’s Composite Leading
Indicators pointing to an upswing…
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… though not in most EMEs
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Advanced economy activity is still being
supported by easy financial conditions

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Trade volumes have risen more rapidly in recent months
With the recovery of advanced
economies, world trade growth has picked
up
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Recent developments in the United States
have been affected by unusual weather
Severe winter weather
appears to have dented the
growth of output…
… and employment.
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As expected, activity appears to be surging ahead of
1 April, with a dip foreseen afterward.
The consumption tax hike will make
Japan’s near-term growth profile uneven
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Euro area unemployment is
still near its highs.
Inflation has fallen further
below target in the euro area.
Albeit improving, the euro area is still
lagging other major advanced economies
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OECD interim short-term projections
b 2013Q3 2013Q4 2014Q1 2014Q2
United States 4.1 2.4 1.7 [3.1]*
Japan 0.9 0.7 4.8 [-2.9]*
Germany 1.3 1.5 3.7 2.5
France -0.2 1.2 0.7 1.0
Italy -0.1 0.5 0.7 0.1
United Kingdom 3.4 2.9 3.3 3.3
Canada 2.7 2.9 0.5 [2.4]*
G7 2.8 2.0 2.2 2.0
Euro area 31
0.5 1.2 1.9 1.4
Source: OECD Interim Projections.
* All numbers based on OECD indicator model, except for the United States,
Japan and Canada, where the numbers for 2014 Q2 are from the November
2013 Economic Outlook, owing to one-off factors that cannot be captured by
the model.
1. Weighted average of Germany, France and Italy.
Note: Based on GDP releases and high-frequency indicators published by 10
March; seasonally and in some cases working-day adjusted.

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2. Risks
OECD Economic Outlook
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Trend growth has slowed in emerging
economies…
Economic Outlook online database

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… and tighter financial conditions may
compound that with a cyclical slowdown…
Bouts of financial market turmoil like the one
affecting many EMEs in January may depress
near-term growth in some cases.

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… and could complicate the recovery for
advanced economies
Economic Outlook online database

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The dip in momentum in the United States could
turn out to be less transitory than expected
Home sales have declined as
long-term interest rates have
risen.
Business confidence has turned
down.

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3. Policy priorities
OECD Economic Outlook

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Priorities to support demand and reduce
fiscal risks in advanced economies
• Gradually withdraw monetary accommodation, with careful
communication.
• Improve the quality of fiscal consolidation while its pace
slows.
USA
• Maintain or increase monetary stimulus.
• Ensure that the review of the banking system is credible and
followed up.
• Adhere to the programmed pace of structural fiscal
consolidation.
Euro
area
• Meet or exceed the targeted quantitative and qualitative
easing.
• Pursue steadfast fiscal consolidation.
• Strengthen structural reform efforts (the “third arrow” of
Abenomics).
Japan

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Priorities for EMEs to manage weaker
demand and greater risk aversion
• Steadily restrain credit growth.
• Improve financial and macro-prudential regulation.
• Enhance monitoring and control of local government
spending.
• Implement the wide-ranging reforms announced in
November.
China
• Provide for sufficient exchange rate flexibility.
• Address inflation pressures where necessary.
• Relax fiscal policy only where sufficient scope exists.
Other
EMEs

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Most countries have considerable scope to
step up growth-friendly structural reforms
Source: OECD calculations based on Going for Growth 2014.
Responsiveness to Going for Growth recommendations
Note: Responsiveness rates are calculated as the share of priority areas in Going for Growth in which 'significant' action has been taken.
The euro area and OECD rates are calculated as an unweighted averages. OECD countries are shaded in blue, non-OECD countries are in
yellow, and the OECD average is in red.
Responsiveness rate, 2012-2013
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
IDN
NOR
ISL
CHE
RUS
BEL
CHL
NLD
TUR
USA
LUX
KOR
SWE
POL
JPN
AUS
AUT
HUN
FRA
ITA
CZE
DEU
OECD
ISR
CAN
SVN
CHN
ZAF
DNK
FIN
BRA
IND
SVK
GBR
MEX
PRT
EST
NZL
ESP
IRL
GRC

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4. Summing up
OECD Economic Outlook

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Improved momentum in major advanced
economies
Slowing growth exacerbated by tighter
financial conditions in emerging
economies
Growing importance of structural reforms
in both advanced and emerging economies
Key messages

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Additional reading
Economic Outlook
Economic policy reforms: Going for Growth
Economic Outlook online database
Main economic indicators
Economic’s department policy notes
Economic’s department working papers
OECD forecasts during and after the financial
crisis: a post mortem