OECD Economic Outlook.

231 Pages·1999·2.329 MB·English

by  OECD

JUNE 1999 ISSN 0474-5574
u
OECD ECONOMIC OUTLOOK
The OECD Economic Outlook analyses the major trends in the OECD area that
O
will mark the next two years. It provides in-depth coverage of the economic
E OECD
policy measures each Member country should adopt for the years to come. C
Recent measures and forthcoming developments in selected non-OECD D
economies in East Asia; Central and Eastern Europe, particularly Russia; and
E
South America are also evaluated in detail. C
O
In addition to the themes featured in every semi-annual edition, this issue 65 N ECONOMIC
also addresses these important questions: O
M
• What are the policies that work to improve labour-market conditions?
I
C
• How can climate change be dealt with most effectively? O OUTLOOK
U
• What are the lessons of the recent episodes of capital flow instability?
T
L
• What are the factors behind the widening of current account imbalances? O
O
• Is protectionism creeping back? What are the trends in market openness? K
J
In June 1998, the OECD launched a new online service to provide early U
access to the main projections and analyses of its Economic Outlook. With N
E
a special password, all subscribers can have access to the core of the

1
Outlook via Internet more than one month before the book is published:
9
www.oecd.org/publications/outlk_65. It includes a general assessment 9
9
of the current macroeconomic situation, developments and projections
for each Member country and certain non-member economies, and
projections for key economic variables. 65
O
E
1999 Subscription (2 issues) C
FF 395 US$70 DM 120 £42 ¥ 8 900 9:HSTCQE=V[V[[Z:
D JUNE 1999
(12 1999 65 1 P) FF 237 --
ISBN 92-64-16166-X 99
(cid:211) OECD, 1999.
(cid:211) Software: 1987-1996, Acrobat is a trademark of ADOBE.
All rights reserved. OECD grants you the right to use one copy of this Program for your personal use only. Unauthorised reproduction,
lending, hiring, transmission or distribution of any data or software is prohibited. You must treat the Program and associated materials and
any elements thereof like any other copyrighted material.
All requests should be made to:
Head of Publications Service,
OECD Publications Service,
2, rue André-Pascal, 75775 Paris
Cedex 16, France.
OECD
ECONOMIC
OUTLOOK
65
JUNE1999
ORGANISATIONFOR ECONOMIC CO-OPERATIONANDDEVELOPMENT
TheOrganisationforEconomicCo-operationandDevelopment(OECD)
was set up under a Convention, signed in Paris on 14 December 1960, which provides that the OECD shall
promotepoliciesdesigned:
– toachievethehighestsustainableeconomicgrowthandemploymentandarisingstandardoflivinginMember
countries while maintaining financial stability, and thus to contribute to the development of the world
economy;
– to contribute to sound economic expansion in Member as well as non-member countries in the process of
economicdevelopment;and
– to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with
internationalobligations.
The original Member countries of the OECD are: Austria, Belgium, Canada, Denmark, France, Germany,
Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland,
Turkey, the United Kingdom and the United States. The following countries became Members subsequently
throughaccessionatthedatesindicatedhereafter:Japan(28April1964),Finland(28January1969),Australia
(7 June 1971), New Zealand (29 May 1973), Mexico (18 May 1994), the CzechRepublic (21 December1995),
Hungary (7 May 1996), Poland (22 November 1996) and Korea (12 December 1996). The Commission of the
EuropeanCommunitiestakespartintheworkoftheOECD(Article13oftheOECDConvention).
TheFrenchversionoftheOECDEconomicOutlookisentitledPerspectives
économiquesdel’OCDE.
TheOECDEconomicOutlookispublishedontheresponsibilityoftheSecretary-
GeneraloftheOECD.Theassessmentgivenofcountries’prospectsdonot
necessarilycorrespondtothoseofthenationalauthoritiesconcerned.TheOECD
Secretariatisthesourceofstatisticalmaterialcontainedintablesandfigures,
exceptwhereothersourcesareexplicitlycited.
PhotoCredit:
BoldHeadedPictures/Pix
©OECD1999
Permissiontoreproduceaportionofthisworkfornon-commercialpurposesorclassroomuseshouldbeobtainedthroughthe
Centre français d'exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France,
Tel.[phone],Fax[phone],foreverycountryexcepttheUnitedStates.IntheUnitedStatespermission
should beobtained through the Copyright Clearance Center, Customer Service, [phone], 222Rosewood Drive,
Danvers,MA01923USA,orCCCOnline:http://www.copyright.com/.Allotherapplicationsforpermissiontoreproduceor
translateallorpartofthisbookshouldbemadetoOECDPublications,2,rueAndré-Pascal,75775ParisCedex16,France.
FOREWORD
ThiseditionoftheOECDEconomicOutlookanalysestheprospectiveeconomic
developments in OECD countries over1999 and2000 and provides recommenda-
tionsontheeconomicpoliciesneededtoensuresustainedeconomicgrowth.Inaddi-
tion, this volume reports the OECD Medium-Term Reference Scenario, which
extends the short-term projections to2004. The detailed country notes provide an
assessmentoftheeconomicsituationandtheoutlookforeachMembercountryand
certainnon-membereconomies.Thepolicyassessmentspresentedinthisedition65
are based on projections that were finalised on 4May1999 and published in a
preliminaryeditionoftheOECDEconomicOutlookinmid-May.
In addition to these issues, a number of other themes are dealt with in more
depthinfivespecialchapters:
– LabourMarketPerformance and the OECD Jobs Strategy.This chapter dis-
cusseslabour-marketperformanceintheOECDcountriesoverthe1990sand
relatesittoprogressmadeinimplementingtheOECDJobsStrategy.Itsug-
geststhatacomprehensiveprogrammeofreforms,alongthelinesoftheJobs
Strategy, can significantly improve labour-market conditions. But policy
makersmuststaythecourseinimplementingreforms:ittakestimefortheir
effectstomaterialiseinthelabourmarkets.
– Policy challenges arising from climate change. Most OECD countries have
signed the Kyoto Protocolcommittingthemselvesto specificemissionstar-
getsof“greenhousegases” fortheperiod2008-12.Thischapterlooksatthe
policies required to meet these commitments, the associated costs, and the
role of international trading of emissions allowances in minimising these
costs. It also looks further ahead, addressing the question of encouraging
developingcountriestoagreetorestraintheiremissionsgrowth.Evenifthese
policiessucceed, some climate change islikely;the chapter discusses some
oftheissuesinvolvedinadaptingtoit.
– Therecentexperiencewithcapitalflowstoemergingmarketeconomies.This
chapteranalysesthefactorsbehindtherecentepisodesofcapital-flowvolatil-
ity,focusingonkeydifferencesincapitalmarketsinstitutionsandsupervision
betweenemergingandmatureOECDcountries.Theanalysisconfirmsthata
sound financial system and macroeconomic stability are prerequisites for a
successfulintegrationwithglobalcapitalmarkets.Italsoconsiderstheextent
towhich currency pegscan be usedasa stabilisation toolandsuggeststhat
whiletheimpositionofcapitalcontrolsasanemergencymeasuremayyield
some short-term benefits, improved crisis management in a multilateral
settingwouldbemoreappropriate.
– Causes of the recent widening of OECD current-account balances. This
chapteranalysesthe mainfactorsunderlyingtherecentwideningincurrent-
accountimbalances.ItshowsthatimportcontractionintheAsiancrisiscoun-
tries has had a major impact on OECD exports, especially from Japan. In
addition,increasedcurrent-accountimbalancesofbothJapanandtheUnited
Statescanbelargelyexplainedbydifferencesinrelativedemandpatternsand
corresponding saving-investment imbalances, and such imbalances may
persistoverthemediumterm.
O E C D
iv- OECDEconomicOutlook
– Trends in market openness. This chapter reviews trends in market openness
indicators and barriers to international trade and investment. Protectionist
trade policies, especially on industrial goods, have gradually been scaled
back over the past 40years. Againstthis background, market openness has
increased significantly, although changes have been uneven across sectors
and countries.Forinstance, barriersto trade in agricultureremain pervasive
inmostOECDcountries.Inveryrecentyearsthereareconcernsthatrecourse
tosometradepolicyinstruments,suchasanti-dumpinginitiationsandtechni-
calbarrierstotradearebeingmisused.Thischapteralsodiscussestheroleof
domesticpoliciesinrestrictingmarketaccess.
IgnazioVisco
HeadofEconomicsDepartment
TABLE OF CONTENTS
Editorial ix
I. General assessmentofthemacroeconomicsituation ...... 1
TheglobalsituationandtheoutlookfortheOECDarea ...................... 1
Policyconsiderationsinanuncertainglobalenvironment .................... 9
Istheimpactofthecrisisinemergingmarkets
onOECDcountrieswaning? ............................................................. 10
TheUnitedStates:howsolidistheexpansion? ................................ 15
Japan:structuralreformneedstobesteppedup ................................ 21
Europe:copingwithcyclicaldivergence ........................................... 27
Appendix:TheOECDmedium-termreferencescenario ...................... 32
II. Developmentsin individual OECDcountries .................... 39
UnitedStates ....... 39 Belgium .............. 75 Mexico ............... 101
Japan ................... 43 CzechRepublic .. 78 Netherlands ........104
Germany ............. 49 Denmark ............. 81 NewZealand ......106
France ................. 53 Finland................ 84 Norway ............... 108
Italy ..................... 57 Greece................. 86 Poland.................110
UnitedKingdom . 61 Hungary .............. 89 Portugal ..............113
Canada ................ 65 Iceland ................ 91 Spain...................116
Ireland................. 93 Sweden ............... 119
Australia ............. 70 Korea .................. 96 Switzerland.........122
Austria ................ 73 Luxembourg ....... 99 Turkey ................125
III. Developmentsin SelectedNon-Member Economies ....... 129
DynamicAsiaandChina ....................................................................... 129
RussianFederationandCentralandEasternEurope ............................ 134
SouthAmerica ....................................................................................... 137
IV. Labourmarketperformance
andthe OECDjobs strategy ..................................................... 141
V. Policy challenges arising fromclimatechange .................. 163
VI. Therecentexperience withcapital flows
toemergingmarketeconomies ................................................ 177
VII. Causes ofthe recentwidening
of OECDcurrentaccount imbalances .................................. 197
VIII.Trends in market openness ........................................................ 207
Annex ............................................................................................................. 223
Countryclassification............................................................................. 224
Weightingschemeforaggregatemeasures............................................. 224
AnnexTables ......................................................................................... 225
O E C D
vi- OECDEconomicOutlook
Boxes
I.1. Policyandotherassumptionsunderlyingtheprojections ..................... 3
I.2. Shiftingstatisticalground:
overhaulofthenationalaccountsinEUcountries ................................ 6
I.3. TheregionaleconomicimpactoftheKosovocrisis.............................. 12
I.4. DevaluationoftheChinesecurrency:impactonOECDcountries ....... 14
I.5. WhatishappeningintheUSeconomy:measurementissues................ 18
I.6. SpirallinggeneralgovernmentdebtinJapan......................................... 22
III.1. China’sstructuralreforms:progressandproblems ............................... 133
IV.1. TheOECDJobsStrategy ....................................................................... 142
IV.2. Keystructuralpolicyreformsinthe1990s............................................ 153
VIII.1. Amillenniumtraderound? .................................................................... 211
Tables
I.1. Outputgrowthprojections ..................................................................... 1
I.2. Oilandnon-oilcommodityprices ......................................................... 2
I.3. Generalgovernmentfinancialbalances ................................................. 4
I.4. Worldtradesummary ............................................................................ 5
I.5. Inflationandunemployment .................................................................. 8
I.6. Currentaccountbalances ....................................................................... 9
I.7. ExternalassetsofbanksintheBISareavis-à-visindividualcountries. 11
I.8. Shareofselectedemergingmarkets
intotalexportsofmatureeconomies,1997 ........................................... 12
I.9. ManufacturingintheUSeconomy ........................................................ 19
I.10. TheopennessoftheUSeconomy.......................................................... 19
I.11. HouseholdbalancesheetsintheUnitedStates...................................... 21
I.12. Macroeconomicindicatorsintheeuroarea,1996-2000........................ 29
I.13. Medium-termreferencescenariosummary ........................................... 34
I.14. Fiscaltrendsinthemedium-termreferencescenario ............................ 36
III.1. ProjectionsforselectedAsianEconomies ............................................. 132
III.2. ProjectionsforRussiaandtheSlovakRepublic..................................... 135
III.3. PrejectionsforBrazilandArgentina...................................................... 138
IV.1. TrendunemploymentintheOECDcountries:
levelsandchangesovertheperiod1990-98 .......................................... 144
V.1. Overviewofnationalemissiontrends,Kyotoobjectives
andEUburden-sharing .......................................................................... 164
V.2. CostsofKyotoinOECDregions,2010 ................................................ 166
V.3. Realincomegainsandlosses,2010-2050,withtrading
andtransferstonon-Annex1countries ................................................. 172
VI.1. Incentivesforadequateriskassessmentinbankingsystems................. 180
VI.2. Prudentiallimitsonbanks'currencyexposure ...................................... 181
VI.3. Foreignreservesasapercentofshort-termforeigndebt...................... 189
VII.1. TradeadjustmentofthemajorOECDregionswiththeAsia-5............. 199
VII.2. Tradebaseddecompositionofchanges
incurrentaccountbalances,1996-98 .................................................... 201
VII.3. Saving-investmentbaseddecompositionofchanges
incurrentaccountbalances,1996-98 .................................................... 204
VIII.1. Production-weightedaveragetariffrates ............................................... 209
VIII.2. Pervasivenessofnon-tariffbarriers ....................................................... 213
VIII.3. Useofanti-dumpingactions .................................................................. 214
VIII.4. Importpenetrationratesformanufacturingindustries .......................... 216
VIII.5. Exposuretoforeigncompetitionformanufacturingindustries ............. 216
VIII.6. Shareofforeignaffiliatesinmanufacturingproduction........................ 218
TableofContents-vii
Figures
I.1. Financialmarketindicators ................................................................... 3
I.2. ProjectionsandoutcomesfortheUnitedStates .................................... 16
I.3. ActualandstructuralunemploymentratesintheUnitedStates............ 16
I.4. LabourproductivitygrowthintheUSbusinesssector ......................... 17
I.5. Theincreasingdiffusionofinformationprocessingequipment
intheUnitedStates................................................................................ 19
I.6. CorporateprofitsandpriceearningsratiointheUnitedStates............. 20
I.7. RiskpremiainJapan ............................................................................. 25
I.8. ProfitmarginsintheJapanesenon-financialcorporatesector .............. 26
I.9. BusinessclimateandconsumerconfidenceindicatorsinJapan ........... 26
I.10. Employmentinselectedeuroareacountries ......................................... 28
I.11. Businessclimateandconsumerconfidenceindicators
intheEuropeanUnion ........................................................................... 28
I.12. Inflationtrendsintheeuroarea ............................................................. 29
I.13. Realinterestratesintheeuroarea ......................................................... 30
I.14. GrowthofM3intheeuroarea .............................................................. 30
I.15. Projectedoutputgapsandunitlabourcosts
ineuroareacountries,1999................................................................... 31
I.16. Medium-termreferencescenario ........................................................... 35
III.1. Realeffectiveexchangeratesandsovereignbondspreads ................... 130
IV.1. StandardisedunemploymentratesinOECDregions,1972-98.............. 141
IV.2. Changeintrendunemploymentandemploymentrates,1990-98 ......... 145
IV.3. Part-timeandtemporaryemployment,1985-97 .................................... 146
IV.4. DecompositionofemploymentratesinOECDcountries,1998 ........... 148
IV.5. Follow-throughonpolicyrecommendationstoimplement
theJobsStrategy .................................................................................... 152
IV.6. Follow-throughinimplementinglabourmarketreforms
andperformances,1990-98 ................................................................... 157
IV.7. Cyclicalvariabilityandtrendunemployment,1990-98 ........................ 158
V.1. AlternativeCO concentrationpaths ..................................................... 171
2
V.2. Averagecostsofalternativescenarios,2010-50 ................................... 172
VI.1. Factorsbehindtwenty-ninebankinsolvencies ...................................... 182
VI.2. Currentaccountbalancesinselectedemergingmarketcountries ......... 184
VI.3. Nominalandrealeffectiveexchangerates ............................................ 185
VII.1. Changeincurrentaccountbalances,1996-98 ....................................... 198
VII.2. Relativeoutputgapsandtradebalances
ongoodsandservicesinthemainOECDregions,1990-98 ................. 202
VIII.1. Protectionintheagriculturesector ........................................................ 210
VIII.2. Numberofnotificationsoftechnicalbarrierstotrade........................... 212
VIII.3. Anti-dumpinginitiationsandeconomicslack ....................................... 214
VIII.4. Tradeopenness ...................................................................................... 215
VIII.5. Comparativepriceperformanceinmanufacturing ................................ 219
Conventional signs
$ USdollar . Decimalpoint
c UScent I,II Calendarhalf-years
£ Poudsterling Q1,Q4 Calendarquarters
mbd Millionsbarrelsperday Billion Thousandmillion
.. Datanotavailable Trillion Thousandbillion
0 Nilornegligible s.a.a.r. Seasonallyadjustedatannualrates
– Irrelevant n.s.a. Notseasonallyadjusted
O E C D
viii- OECDEconomicOutlook
Summary of projectionsa
Seasonally adjusted at annual rates
1998 1999 2000
1998 1999 2000
I II I II I II
Percentage changes from previous period
Real total domestic demand
United States 5.1 4.2 1.9 5.8 4.4 5.1 2.0 1.9 1.7
Japan –3.5 –1.2 –0.3 –4.3 –2.7 –0.7 –0.7 –0.1 –0.4
Germany 3.1 1.7 2.2 4.8 1.8 1.3 2.4 2.0 2.4
European Union 3.5 2.2 2.5 4.7 2.3 2.1 2.4 2.5 2.7
Total OECD 2.7 2.6 2.1 3.0 2.3 2.9 2.1 2.1 2.1
Real GDP
United States 3.9 3.6 2.0 4.0 3.8 4.2 2.0 2.0 1.9
Japan –2.8 –0.9 0.0 –3.9 –2.0 –0.8 0.0 0.0 –0.1
Germany 2.8 1.7 2.3 3.5 1.5 1.4 2.7 2.1 2.5
European Union 2.8 1.9 2.4 3.0 2.2 1.6 2.3 2.4 2.6
Total OECD 2.3 2.2 2.1 2.1 2.1 2.4 2.1 2.1 2.1
Per cent
Inflationb
United States 1.0 1.1 1.5 0.9 0.9 1.2 1.1 1.5 1.7
Japan 0.4 –0.7 –0.6 1.7 –1.7 –0.2 –0.7 –0.4 –0.7
Germany 0.9 0.9 1.3 1.5 0.5 1.0 1.0 1.4 1.4
European Union 1.8 1.7 1.7 1.8 1.6 1.8 1.7 1.7 1.7
Total OECD less high inflation 1.3 1.1 1.3 1.6 0.6 1.4 1.1 1.4 1.4
countriesc
Total OECD 3.1 2.4 2.2 3.4 2.2 2.7 2.2 2.2 2.1
Per cent of labour force
Unemployment
United States 4.5 4.2 4.4 4.5 4.5 4.2 4.2 4.4 4.5
Japan 4.1 4.9 5.3 4.0 4.3 4.8 5.1 5.2 5.4
Germany 11.2 10.7 10.0 11.5 10.9 10.7 10.6 10.2 9.8
European Union 10.5 10.1 9.8 10.7 10.3 10.2 10.1 9.9 9.7
Total OECD 7.1 7.0 7.0 7.1 7.0 7.0 7.0 7.0 7.0
Per cent of GDP
Current balances
United States –2.7 –3.4 –3.5 –2.5 –3.0 –3.3 –3.5 –3.5 –3.4
Japan 3.2 3.0 3.5 3.1 3.3 2.8 3.3 3.4 3.6
Germany –0.2 0.0 0.2 –0.2 –0.1 0.0 0.1 0.2 0.3
European Union 1.1 1.0 1.0 1.0 1.1 0.9 1.0 1.0 1.0
Total OECD –0.1 –0.5 –0.5 0.0 –0.2 –0.5 –0.5 –0.5 –0.4
Per cent
Short-term interest ratesd
United States 4.8 4.5 4.5 5.0 4.5 4.4 4.5 4.5 4.5
Japan 0.7 0.3 0.4 0.8 0.7 0.3 0.2 0.3 0.4
Euro area 3.9 2.7 2.6 4.1 3.8 2.9 2.6 2.6 2.6
Percentage changes from previous period
World tradee 4.5 3.9 5.6 2.7 2.4 3.9 5.7 5.7 5.6
a) Assumptions underlying the projections include:
– no change in actual and announced fiscal policies;
– unchanged exchange rates from 26 April 1999; in particular $1 = Y 119.15 and $1 = 0.942 euro;
– the cut-off date for other information used in the compilation of the projections was 4 May 1999.
b) GDP deflator, percentage changes from previous period.
c) High inflation countries are defined as countries which have had, on average, 10% or more inflation in terms of the GDP deflator during the 1990s on the
basis of historical data. Consequently, Greece, Hungary, Mexico, Poland and Turkey are excluded from the aggregate.
d) United States: 3-month Treasury bills; Japan: 3-month CD; Euro area: 3-month interbank rates.
e) Growth rate of the arithmetic average of world import volumes and world export volumes.