Growth is picking up in the OECD area – at different speeds across regions – and at a faster pace than expected in the previous Economic Outlook. Strong growth in emerging-market economies is contributing significantly. However, risks to the global recovery could be higher now, given the speed and magnitude of capital inflows in emerging-market economies and instability in sovereign debt markets.

The global recovery has become increasingly widespread over the past year, despite progressing at variable speeds across countries and regions. Global output growth is expected to be around 4¾ per cent this year and in 2011, above the growth rate experienced in the decade prior to the onset of the crisis (Table 1.1). In the non-OECD economies, especially in Asia, the recovery is likely to remain buoyant, with the strong macroeconomic policy response to the financial crisis being rolled back only gradually, and a limited direct exposure to the crisis itself and to the associated lingering effects. Sustaining and broadening the recovery is proving somewhat more challenging in many OECD economies, despite the favourable backdrop from strong external demand, the progressive, if fragile, normalisation of financial conditions and the effects of strong, albeit diminishing, macroeconomic policy stimulus. Headwinds stem from the legacies of the crisis, such as weak private and public balance sheets, high unemployment and the increasingly urgent need for fiscal consolidation. The annual rate of output growth in the OECD area is expected to be around 2¾ per cent over the year to the fourth quarter...

While the worst potential outcomes from the economic crisis have been avoided, in large part due to prompt and massive world-wide policy stimulus, many countries will have to face up to severe macroeconomic imbalances during the recovery period and beyond. These include large output gaps, high unemployment, wide fiscal deficits and the need to exit from exceptionally loose monetary policy. In addition, while global current-account imbalances receded in the immediate aftermath of the crisis there are concerns that they will reappear with the recovery. These imbalances are not independent and addressing some of them could aggravate others, including those in other countries, and could also endanger the recovery.1 This paper considers what combination of policies is likely to be most successful in delivering balanced global growth by means of examining a number of alternative stylised scenarios to 2025. Given the nature of the exercise, none of these scenarios should be considered as a forecast.

The recession that struck nearly all OECD economies during 2008 and 2009 was very deep by historical standards (Figure 5.1).1 It had profound but very differentiated impacts on OECD labour markets. Most prominently, unemployment rose sharply in a number of countries but in others it has increased surprisingly little. This diverse range of individual country experiences is shaping the policy challenge that individual countries are facing in getting people back to work. Based on historical experience, the challenge is strong. Unemployment ultimately returned to pre-recession levels in only about two-thirds of past OECD recession...

The recent economic crisis has stretched policy frameworks in many OECD countries to breaking point. As economies begin to recover lessons are being drawn on how policies can better prevent the development of new large imbalances and asset price misalignments that were at the origin of the crisis. In addition, policies will have to be set so as to enhance the ability of economies to withstand large adverse shocks.

This annex contains data on some main economic series which are intended to provide a background to the recent economic developments in the OECD area described in the main body of this report. Data for 2010 to 2011 are OECD estimates and projections. The data on some of the tables have been adjusted to internationally agreed concepts and definitions in order to make them more comparable as between countries, as well as consistent with historical data shown in other OECD publications. They are using weights that change each period, with the weights depending on the quantity considered. For details on aggregation see the OECD Economic Outlook Sources and Methods.