OECD Economic Outlook

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1

What is the economic outlook for

OECD countries?

Paris, 28 November 2011

11h Paris time

Pier Carlo PadoanDeputy Secretary-General and Chief Economist



2

The outlook

T

h e o u t l o o k

2010 2011 2012 2013

United States 3.0 1.7 2.0 2.5

Euro area 1.8 1.6 0.2 1.4

Japan 4.1 -0.3 2.0 1.6

Total OECD 3.1 1.9 1.6 2.3

Source:OECD Economic Outlook 90 database.

Brazil 7.5 3.4 3.2 3.9

China 10.4 9.3 8.5 9.5

India 9.9 7.7 7.2 8.2

Indonesia 6.1 6.3 6.1 6.5

Russian Federation 4.0 4.0 4.1 4.1

South Africa 2.8 3.2 3.6 4.7

Real GDP growth, in per cent



3

Confidence is weakening

C

o n f i d e n c e

Business confidence Consumer confidence

25

30

35

40

45

50

55

60

65

25

30

35

40

45

50

55

60

65

2008 2009 2010 2011

United States

Japan

Euro area

Note: Manufacturing sector. Values greater than 50

signify an improvement in economic activity.

Source: Markit Economics Limited.

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

-3

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

2008 2009 2010 2011

United States

Japan

Euro area

Note: Values below zero signify levels of consumer

confidence below the period average.

Source: OECD Main Economic Indicators.



4

Equity markets extremely volatile

E q u i t y p r i c e s

Share price indices, January 2010 = 100

Note: Wilshire 5000, FTSE Eurotop 100, FTSE 100, Nikkei 225, Shanghai Composite. Last observation: 23-11-2011.

Source: Datastream

70

80

90

100

110

120

130

70

80

90

100

110

120

130

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11

United States Euro area

United Kingdom Japan

China



5

Financial conditions tightening

F i n a n

c i a l c o n d i t i o n s

OECD Financial Conditions Index

Note: A unit increase (decline) in the index implies an easing (tightening) in financial conditions sufficient to

produce an average increase (reduction) in the level of GDP of ½ to 1% after four to six quarters.

Source:Datastream; OECD Economic Outlook 90 database; and OECD calculations.

-6

-4

-2

0

2

4

6

-6

-4

-2

0

2

4

6

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

United States

Euro area

Japan



6

Euro-area sovereign spreads widening

S o v e r e i g n s p r e a

d s

10-year government bond yield spreads ver sus Ger man bunds, percentage points

Note: Last observation: 24-11-2011.

Source: Datastream.

0

5

10

15

20

25

30

35

0

5

10

15

20

25

30

35

J a n - 1

0

M a r -

M a y

J u l - 1 0

S e p -

N o v -

J a n - 1 1

M a r -

M a y

J u l - 1 1

S e p -

N o v -

Italy

Greece

Ireland

Portugal

Spain

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

J a n - 1

0

M a r - 1 0

M a y - 1

0

J u l - 1 0

S e p - 1

0

N o v - 1

0

J a n - 1 1

M a r - 1 1

M a y - 1 1

J u l - 1 1

S e p - 1 1

N o v - 1 1

France

Austria

Belgium

Netherlands



7

Divergent euro area labour costs

E u r o a

r e a r e b a l a n

c i n g

Unit labour costs, 2000 = 1

Source: OECD Economic Outlook 90 Database.

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Germany

France

Ireland

Portugal

Spain

Greece

Italy



8

World trade has stagnated

W

o r l d t r a d e

CPB world trade index

Note: Index 2000 = 100.

Source: CPB.

80

90

100

110

120

130

140

150

160

170

80

90

100

110

120

130

140

150

160

170

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011



10

-8

-6

-4

-2

0

2

4

6

8

2007 2008 2009 2010 2011 2012 2013

Growth to be sustained by non-OECD

W

o r l d g r o w t h

Contribution to annualised quarterly world real GDP growth, percentage points

Note: Calculated using moving nominal GDP weights, based on national GDP at purchasing power parities.

Source: O

ECD EconomicO

utlook 90 database.

OECD

Non-OECD



11

Unemployment will remain high

U n

e m p l o y m e n

t

Unemployment rates, percentage of labour force

Source: OECD Economic Outlook 90 database.

0

2

4

6

8

10

12

0

2

4

6

8

10

12

2006 2007 2008 2009 2010 2011 2012 2013

United States

Euro area

Japan



12

Policy rates becoming accommodative

M o

n e t a r y p o l i c y

Policy interest rates, in percent

0

2

4

6

8

10

12

14

16

0

2

4

6

8

10

12

14

16

J a n - 0

8

M a r - 0 8

M a y - 0

8

J u l - 0 8

S e p - 0

8

N o v - 0

8

J a n - 0

9

M a r - 0 9

M a y - 0

9

J u l - 0 9

S e p - 0

9

N o v - 0

9

J a n - 1

0

M a r - 1 0

M a y - 1

0

J u l - 1 0

S e p - 1

0

N o v - 1

0

J a n - 1 1

M a r - 1 1

M a y - 1 1

J u l - 1 1

S e p - 1 1

N o v - 1 1

United States Euro area

Japan Brazil

China India

Source: Datastream; Central Bank of Brazil; Reserve Bank of India; and CEIC.



13

Fiscal consolidation is ongoing

F

i s c a l p o l i c y

Change in underlying primary balance 2011 to 2013, percent of GDP

-1

0

1

2

3

4

5

6

-1

0

1

2

3

4

5

6

PRT GRC ITA HUN IRL POL ESP FRA GBR BEL USA NLD AUT DEU EST DNK JPN CHE

Note: Percentage of potential GDP. Total consolidation is the projected difference in the underlying primary balance;

revenue side is the projected increase in the underlying receipts excluding interest earned on financial assets; and

spending side is the projected decline in the underlying primary spending excluding interest payments on debt.

Source: OECD Economic Outlook 90 database; and OECD calculations.

Spending side

Revenue side



14

The downside scenario

D o w

n s i d e s c e n a

r i o

Intensification of euro-area crisis and excessive US fiscal consolidation

Source: OECD calculations.

-4

-2

0

2

4

6

8

10

-4

-2

0

2

4

6

8

10

2012 2013 2012 2013 2012 2013 2012 2013

United States Euro area Japan China

Baseline

Downside

scenario



15

The upside scenario

U p

s i d e s c e n a r i o

Euro-area debt crisis successf ully def used

Source: OECD calculations.

0

2

4

6

8

10

12

0

2

4

6

8

10

12

2012 2013 2012 2013 2012 2013 2012 2013

United States Euro area Japan China

Baseline

Upside

scenario



16

Prerequisites for achieving the upside

U p s i d

e p r e r e q u i s

i t e s

The euro area:

The 26 October package:

Stabilisation by ensuring an adequately resourced European

Financial Stability Fund (EFSF).

Voluntary Greek sovereign debt haircut.

Shoring up the banking sector through recapitalisation.

Be ready to provide liquidity to the banking sector if needed.

Overhaul of euro-area governance, combined with

substantive str uctural refor ms.

These measures need to be followed up at the next ECOFINCouncil on 9 December.

The United States:

Efforts need to be redoubled to reach an agreement on a credible

fiscal progra

mme.

Stop contagion



17

The OECD Strategic Response

S t r a

t e g i c r e s p o n

s e

Identifies country-specific policy measures that could beimplemented in the event of a relapse:

Fiscal support backed by improved fiscal frameworks where

public finances and confidence allows.

Monetary policy easing where possible.

Str uctural refor ms to strengthen growth, lower unemployment

and bolster confidence.



18

What is the economic outlook for

OECD countries?

Paris, 28 November 2011

11h Paris time

Pier Carlo PadoanDeputy Secretary-General and Chief Economist

OECD Economic Outlook

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