What is the economic outlook for
OECD countries?
An interim assessment
Paris, 8th September 2011
11h00 Paris time
Pier Carlo Padoan
Chief Economist and Deputy Secretary-General
1
Growth slowdown across major OECD
and non-OECD economies
OECD majors GDP growth World GDP growth
Quarterly GDP growth, Contributions to quarterly GDP growth,
annualised, in per cent annualised, in per cent
15 15 8 8
United States
Growth slowdown
Japan
10 10 6 6
Euro area
5 5 4 4
0 0 2 2
-5 -5 0 0
-10 -10 -2 -2
-15 -15 -4 -4
Non-OECD
-20 -20 -6 -6
OECD
-25 -25 -8 -8
2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
Source: OECD Quarterly National Accounts database; and national sources.
2
World trade is flat
CPB indicator of world trade
Index: 2000 = 100
180 180
170 170
160 160
150 150
World trade
140 140
130 130
120 120
110 110
100 100
90 90
80 80
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Dutch Central Planning Bureau.
3
Unemployment remains stubbornly high
Unemployment rate
In percent of labour force
12 12
10 10
8 8
Labour markets
6 6
4 4
United States
2 2
Japan
Euro area
0 0
2006 2007 2008 2009 2010 2011
Source: OECD Main Economic Indicators; and Eurostat.
4
Five causes of slowdown
• Japan disaster global impact greater than
expected
• Commodity prices more damaging
Causes of slowdown
• Fiscal consolidation may have been faster
than anticipated
• Faster private sector balance sheet
adjustment
• Policy uncertainties
5
Confidence has weakened
Business confidence Consumer confidence
2 2 2 2
1 1 1 1
0 0 0 0
Confidence
-1 -1 -1 -1
-2 -2 -2 -2
United States United States
-3 -3 -3 -3
Japan Japan
Euro Area Euro area
-4 -4 -4 -4
2005 2006 2007 2008 2009 2010 2011 05 06 07 08 09 10 11
Note: Manufacturing PMI. Normalised and Note: Normalised and presented in units of standard
presented in units of standard deviation. deviation. Source: OECD Main Economic Indicators;
Source: Markit. Japanese Cabinet Office.
6
Higher risk perceptions reflected in yields
Euro-area sovereign bond yields Corporate bond yields
In per cent In per cent
20 20 12 12
Financial market confidence
Germany
18 Greece 18
Ireland
10 10
16 Italy 16
Portugal
14 Spain 14
8 8
12 12
10 10 6 6
8 8
4 4
6 6
4 4 US high yield
2 US BBB 2
2 2 Euro area high yield
Euro area BBB
0 0 0 0
Jan-10 Jul-10 Jan-11 Jul-11 Nov-10 Feb-11 May-11 Aug-11
Source: Datastream; and OECD Main Economic Indicators.
7
The outlook
Annualised quarter-on-quarter GDP growth, in per cent
2011 Q1 2011 Q2 2011 Q3 2011 Q4
United States 0.4 1.0 1.1 0.4
Japan -3.6 -1.3 4.1 0.0
Germany 5.5 0.5 2.6 -1.4
Interim Assessment
France 3.6 0.0 0.9 0.4
Italy 0.6 1.0 -0.1 0.1
United Kingdom 1.9 0.7 0.4 0.3
Canada 3.6 -0.4 1.0 1.9
G7 0.8 0.4 1.6 0.2
G7 excluding Japan 1.6 0.7 1.1 0.2
Euro 31 3.7 0.5 1.4 -0.4
1. Weighted average of Germany, France and Italy.
Source: OECD, Quarterly National Accounts database; and OECD Indicator Model forecasts.
8
Recent weakness is expected to continue for the
next two quarters in most major OECD economies
Annualised quarter-on-quarter real GDP growth, in per cent
United States Euro 3 (Germany, France Italy)
6 6
* - EO89 projections1
5 5
Interim Assessment
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 -2
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2009 2010 2011 2009 2010 2011
1. Refers to OECD Economic Outlook No. 89 projections (published in May 2011).
Source: OECD, Quarterly National Accounts database; OECD Economic Outlook 89 database;
and OECD Indicator Model forecasts.
9
Impact of Japan disaster is fading
Car production
12-month percent change, number of units produced
0 0
-10 -10
-20 -20
Japan disaster
-30 -30
-40 -40
-50 -50
-60 -60
Japan
-70 -70
Rest of the World
-80 -80
Jan-Feb Mar Apr May Jun Jul
Note: 2011
Source: Toyota Motor Corporation and Honda Motor Co. Ltd monthly reports.
10
Commodity prices remain high
Index: Jan 2000 = 100; US$ per barrel (Brent)
350 160
Agricultural raw materials
Food 140
300
Metals and minerals
Oil $US (right scale) 120
Commodity prices
250
100
200
80
150
60
100
40
50
20
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: OECD Main Economic Indicators; and Datastream.
11
Equity prices have tumbled
Index: August 2008 = 100
120 120
100 100
80 80
Equity prices
60 60
40 40
United States Japan
20 China France 20
Germany United Kingdom
0 0
2008 2009 2010 2011
Note: United States: Wilshire 5000; France: CAC-40; Germany: DAX Index; Japan: Nikkei 225;
United Kingdom: FTSE 100; China: Shanghai Composite Index.
Source: Datastream.
12
Policy imperative is to restore confidence:
medium term
Medium-term policy imperatives
• Fiscal consolidation
• Structural policies
• Banking recapitalisation
• Euro-area architecture
13
Policy imperative is to restore confidence:
short term
• Monetary policy
Short-term policy imperatives
• Fiscal policy
• Exchange rate adjustment
14
Room for monetary policy response in
some economies
Central bank policy rates
percentage points
18 18
United States Euro area
16 Japan India 16
China Brazil
14 14
Monetary policy
12 12
10 10
8 8
6 6
4 4
2 2
0 0
2008 2009 2010 2011
Source: Federal Reserve; Bank of Japan; European Central Bank; Bank of England; Reserve Bank of India; and
Central Bank of Brazil.
15
Fiscal consolidation required is large
in many countries
Improvement in underlying primary balances
percentage points of GDP
12 12
Additional consolidation required after 2012
10
Projected 2010-12 consolidation 10
8
Fiscal policy
4
2
2
0
-2 0
DEU ITA CAN FRA GBR JPN USA
Note: Consolidation through 2011 and 2012 as projected in Economic Outlook 89; consolidation after 2012
assumed to be an additional ½ percentage points of GDP each year.
Source: OECD Economic Outlook 89 database; and OECD calculations.
16
What is the economic outlook for
OECD countries?
An interim assessment
Paris, 8th September 2011
11h00 Paris time
Pier Carlo Padoan
Chief Economist and Deputy Secretary-General
17
