1

What is the economic outlook for OECD countries?

An interim assessment

Paris, 8th September 201111h00 Paris time

Pier Carlo PadoanChief Economist and Deputy Secretary-General

2

Growth slowdown across major OECD and non-OECD economies

Source: OECD Quarterly National Accounts database; and national sources.

Gro

wth

slo

wdo

wn

OECD majors GDP growthQuarterly GDP growth, annualised, in per cent

World GDP growthContributions to quarterly GDP growth,

annualised, in per cent

2006

2006

2006

2006

2007

2007

2007

2007

2008

2008

2008

2008

2009

2009

2009

2009

2010

2010

2010

2010

2011

2011

-8

-6

-4

-2

0

2

4

6

8

-8

-6

-4

-2

0

2

4

6

8

Non-OECD

OECD

2006 2007 2008 2009 2010 2011-25

-20

-15

-10

-5

0

5

10

15

-25

-20

-15

-10

-5

0

5

10

15

United StatesJapanEuro area

3

World trade is flat

Source: Dutch Central Planning Bureau.

Wor

ld tr

ade

CPB indicator of world tradeIndex: 2000 = 100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201180

90

100

110

120

130

140

150

160

170

180

80

90

100

110

120

130

140

150

160

170

180

4

Unemployment remains stubbornly high

Source: OECD Main Economic Indicators; and Eurostat.

Labo

ur m

arke

ts

Unemployment rateIn percent of labour force

2006 2007 2008 2009 2010 20110

2

4

6

8

10

12

0

2

4

6

8

10

12

United States

Japan

Euro area

5

Five causes of slowdownCa

uses

of s

low

dow

n

• Japan disaster global impact greater than expected

• Commodity prices more damaging

• Fiscal consolidation may have been faster than anticipated

• Faster private sector balance sheet adjustment

• Policy uncertainties

6

Confidence has weakened

Note: Manufacturing PMI. Normalised and presented in units of standard deviation. Source: Markit.

Confi

denc

e

Business confidence Consumer confidence

Note: Normalised and presented in units of standard deviation. Source: OECD Main Economic Indicators; Japanese Cabinet Office.

2005 2006 2007 2008 2009 2010 2011-4

-3

-2

-1

0

1

2

-4

-3

-2

-1

0

1

2

United States

Japan

Euro Area

05 06 07 08 09 10 11-4

-3

-2

-1

0

1

2

-4

-3

-2

-1

0

1

2

United States

Japan

Euro area

7

Higher risk perceptions reflected in yields

Source: Datastream; and OECD Main Economic Indicators.Fina

ncia

l mar

ket c

onfid

ence

Euro-area sovereign bond yieldsIn per cent

Corporate bond yieldsIn per cent

Nov-10 Feb-11 May-11 Aug-110

2

4

6

8

10

12

0

2

4

6

8

10

12

US high yield

US BBB

Euro area high yield

Euro area BBB

Jan-10 Jul-10 Jan-11 Jul-110

2

4

6

8

10

12

14

16

18

20

0

2

4

6

8

10

12

14

16

18

20

GermanyGreeceIrelandItalyPortugalSpain

8

The outlookAnnualised quarter-on-quarter GDP growth, in per cent

1. Weighted average of Germany, France and Italy.Source: OECD, Quarterly National Accounts database; and OECD Indicator Model forecasts.

Inte

rim A

sses

smen

t

2011 Q1 2011 Q2 2011 Q3 2011 Q4United States 0.4 1.0 1.1 0.4Japan -3.6 -1.3 4.1 0.0Germany 5.5 0.5 2.6 -1.4France 3.6 0.0 0.9 0.4Italy 0.6 1.0 -0.1 0.1United Kingdom 1.9 0.7 0.4 0.3Canada 3.6 -0.4 1.0 1.9

G7 0.8 0.4 1.6 0.2G7 excluding Japan 1.6 0.7 1.1 0.2Euro 31 3.7 0.5 1.4 -0.4

9

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42009 2010 2011

-2

-1

0

1

2

3

4

5

6

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

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.

Inte

rim A

sses

smen

t

United States

* - EO89 projections1

Euro 3 (Germany, France and Italy)

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42009 2010 2011

-2

-1

0

1

2

3

4

5

6

10

Impact of Japan disaster is fading

Note: 2011Source: Toyota Motor Corporation and Honda Motor Co. Ltd monthly reports.

Japa

n di

sast

er

Jan-Feb Mar Apr May Jun Jul-80

-70

-60

-50

-40

-30

-20

-10

0

-80

-70

-60

-50

-40

-30

-20

-10

0

Japan

Rest of the World

Car production12-month percent change, number of units produced

11

Commodity prices remain high

Source: OECD Main Economic Indicators; and Datastream.

Com

mod

ity p

rices

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

50

100

150

200

250

300

350

0

20

40

60

80

100

120

140

160

Agricultural raw materials

Food

Metals and minerals

Oil $US (right scale)

Index: Jan 2000 = 100; US$ per barrel (Brent)

12

Equity prices have tumbled

Note: United States: Wilshire 5000; France: CAC-40; Germany: DAX Index; Japan: Nikkei 225; United Kingdom: FTSE 100; China: Shanghai Composite Index.Source: Datastream.

Equi

ty p

rices

Index: August 2008 = 100

2008 2009 2010 20110

20

40

60

80

100

120

0

20

40

60

80

100

120

United States Japan

China France

Germany United Kingdom

13

Policy imperative is to restore confidence:medium term

Med

ium

-ter

m p

olic

y im

pera

tives • Fiscal consolidation

• Structural policies

• Banking recapitalisation

• Euro-area architecture

14

Shor

t-ter

m p

olic

y im

pera

tives • Monetary policy

• Fiscal policy

• Exchange rate adjustment

Policy imperative is to restore confidence:short term

15

Room for monetary policy response in some economies

Source: Federal Reserve; Bank of Japan; European Central Bank; Bank of England; Reserve Bank of India; and Central Bank of Brazil.

Mon

etar

y po

licy

Central bank policy ratespercentage points

2008 2009 2010 20110

2

4

6

8

10

12

14

16

18

0

2

4

6

8

10

12

14

16

18

United States Euro area Japan

India China Brazil

16

Fiscal consolidation required is large in many countries

Fisc

al p

olic

y

Improvement in underlying primary balances percentage points of GDP

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.

DEU ITA CAN FRA GBR JPN USA-2

0

2

4

6

8

10

12

0

2

4

6

8

10

12

Additional consolidation required after 2012

Projected 2010-12 consolidation

17

What is the economic outlook for OECD countries?

An interim assessment

Paris, 8th September 201111h00 Paris time

Pier Carlo PadoanChief Economist and Deputy Secretary-General