Browse by: "2023"

Spillovers from Russia’s war of aggression against Ukraine have derailed the Czech Republic’s post-pandemic recovery and further disrupted the impressive catch-up with OECD average incomes seen in the previous two decades. Inflation is high and a tight macroeconomic policy stance is needed to restore price stability. Fiscal pressures have risen. Reforming pensions and taxes could help maintain fiscal sustainability. The Czech labour market remains strong. The unemployment rate is low, and the employment rate and job security are high. However, severe labour and skills shortages are a major obstacle to growth. Bringing more mothers to work and increasing labour participation of older workers can help in this regard. More equitable provision of education and skills, effective lifelong learning and attracting and retaining skilled foreign labour would ease skills shortages and spur growth. The Czech economy remains highly energy intensive, still relies heavily on coal and records high greenhouse gas emissions. Major investments are needed to alter the energy mix and to improve energy efficiency. More ambitious environmental policies and an improved investment climate could help make growth more sustainable.

SPECIAL FEATURE: TOWARDS NET ZERO

Croatia has navigated well the COVID-19 crisis and the price shocks following Russia’s war of aggression on Ukraine. It has achieved robust output growth, rising employment and improving well-being, although inflation has surged. Integration into the euro- and Schengen areas at the start of 2023 are testament to progress, and are providing a further fillip to the economy. Ensuring that fiscal policy is counter-cyclical and that lending supports productive investments can help contain inflationary pressures and sustain growth. Croatia’s ongoing and ambitious reforms and investments must continue for incomes to converge with OECD levels while also preparing for climate change. Reducing regulatory burdens, more responsive judicial processes, addressing corruption risks and improving the performance of state-owned enterprises can foster a more dynamic business environment with stronger growth by higher productivity firms. A big push to strengthen adults’ skills would ensure that employers can fill high-skilled positions and support rising incomes. Better engaging younger adults in work, encouraging older adults to work until the full retirement age, and attracting needed skills through immigration would reduce poverty risks, raise productivity and help Croatia adapt to an ageing population.

SPECIAL FEATURES: IMPROVING THE BUSINESS ENVIRONMENT; A BETTER PERFORMING LABOUR MARKET

Costa Rica recovered well from the pandemic-induced recession. Sustained and resilient export performance continues to support growth, while consumption is hindered by high inflation and unemployment. The fiscal situation improved but remains challenging, requiring sustained efforts to contain spending and boost public sector efficiency for several years. Maintaining and reinforcing the commitment to foreign direct investment and trade, which has been key to diversify the export basket, and improving the conditions for domestic companies to thrive are key challenges to boost living standards and formal job creation. This would require reducing the regulatory burden, improving the tax mix, fostering competition in key markets and continuing decarbonisation and environment protection efforts. Supporting higher female labour participation and upgrading social protection will help to adapt to ongoing demographic changes and improve the equality of opportunities. Education and training are a high priority for Costa Rica that devotes to them one of the highest spending shares among OECD countries. However, educational outcomes remain poor and firms struggle to fill their vacancies, particularly in technical and scientific positions. Improving efficiency and quality of public spending in education is needed to better support growth and equity.

SPECIAL FEATURES: EDUCATION AND TRAINING; SKILLS

Global price pressures beset Canada’s economy just as unemployment was nearing record lows amid a strong recovery from the pandemic. Policymakers face the challenge of reining in inflation without causing a recession. Strong revenues have reduced fiscal deficits even as the federal government has extended living-cost relief and announced measures to make housing and childcare more affordable. But multi-year spending commitments will make it hard to sustain budget improvements without improved tax and spending efficiency. Moreover, for Canada to escape years of weak investment and tepid productivity growth, reforms to improve the business climate are overdue. The challenge is to lift living standards with minimal environmental impact. Canada aims to eliminate its net greenhouse gas emissions by 2050. Achieving this in a resource-intensive economy requires strong incentives to phase out fossil-fuel use and encourage energy saving. To spur decarbonisation, the federal climate strategy deploys a mix of emissions pricing, green technology support and regulations. The focus should turn now to improving mitigation tools so that they work better together while addressing remaining barriers to low-cost abatement. Canada’s federal and sub-national governments must align efforts on delivering efficient and fair measures to reduce emissions and prepare communities for climate change.

SPECIAL FEATURE : CANADA’S TRANSITION TO NET-ZERO EMISSIONS

Bulgaria’s convergence towards more advanced economies has continued but at a slower pace. Soaring energy and food prices have pushed up inflation to its highest levels in decades. However, support packages and strong momentum in wages and pensions have stabilised purchasing power. With the currency board arrangement, the onus to decrease short-term inflationary pressures is on fiscal policy. Fiscal discipline has resulted in low public debt, but growing spending pressures related to ageing, infrastructure and skills will need to be financed by greater tax collection efficiency and higher environmental taxes. The fight against corruption, which imposes high transaction costs, needs to continue by implementing more effective measures. Bulgaria’s climate transition strategy is under development. Environmental taxes, including excise taxes on fuels and carbon taxes on sectors outside of the emissions trading system need to increase to curb energy intensity and reduce emissions. The shrinking number of workers due to smaller young cohorts entering the labour market and outward migration are undermining Bulgaria’s growth prospects and the sustainability of its social institutions. Bulgaria needs to provide more support for families, including quality childcare country-wide, and make staying in the country more attractive by raising productivity, fostering the creation of good-quality formal jobs and reinforcing the social safety net.

SPECIAL FEATURE: BETTER JOBS AND INCOMES

The Australian economy rebounded robustly in the wake of the pandemic. However, inflation has risen and fiscal pressures are on the horizon due to population ageing and climate change. Monetary policy should remain restrictive until underlying inflation is clearly on track to meet the central bank target, while fiscal buffers need to be rebuilt through reducing tax exemptions and improving public spending efficiency in areas such as health. In the medium-term, achieving inclusive and sustainable economic growth requires an ongoing focus on key social objectives such as reducing gender inequality and achieving the climate transition. Gender inequalities have steadily declined but remain visible in the labour market. Further reforms to tax, childcare, education, social benefits and parental leave can improve labour market opportunities for women, promote more equal sharing of unpaid work between genders and help more vulnerable women, notably single mothers. The climate transition is also underway, but further policy measures are needed to meet emissions goals, support the reallocation of workers and adapt to climate change. Given the abundance of renewable energy resources and a large wealth of critical minerals, Australia can secure the energy transition while remaining a key player in international energy markets.

SPECIAL FEATURES: FULLY REALISING THE ECONOMIC POTENTIAL OF WOMEN; ACHIEVING THE TRANSITION TO NET ZERO.

The global economy continues to confront the challenges of persistent inflation and subdued growth prospects. GDP growth has been stronger than expected so far in 2023, but is now moderating as the impact of tighter financial conditions, weak trade growth and lower business and consumer confidence is increasingly felt. The slowdown is projected to be mild, with continued disinflation, but a growing divergence across economies is expected to persist in the near term. The Outlook underlines a range of risks, including the potential for disruptions to commodity markets and trade from heightened geopolitical tensions, uncertainty about the persistence of inflation, and the extent to which excess household savings will be run down. Key policy priorities are to ensure that inflation returns durably to target, address mounting fiscal pressures, revive global trade and improve the prospects for sustainable and inclusive growth in the medium term.

This issue includes an assessment of the global economic situation, and a chapter summarising developments and providing projections for each individual country. Coverage is provided for all OECD members as well as for selected partner economies.

Global economic developments have begun to improve, helped by lower energy prices, improving business and consumer sentiment, and the reopening of China. However, the OECD Economic Outlook highlights that the upturn is fragile and the recovery is set to remain weak by past standards, with the effects of tighter monetary policy increasingly being felt. The Outlook underlines a range of risks, including the possibility that inflation could prove more persistent than projected and that the impact of higher interest rates on financial markets and economic activity could be stronger than expected. Well-calibrated policy measures are required to unwind the impact of the recent sequence of negative shocks to the global economy, restore economic stability, and strengthen prospects for strong, inclusive and sustainable improvements in living standards.

This issue includes an assessment of the global economic situation, a chapter on promoting gender equality to strengthen economic growth and resilience and a chapter summarising developments and providing projections for each individual country. Coverage is provided for all OECD members as well as for selected partner economies.

The near-term global outlook is shaped by the increasingly visible impact of monetary policy tightening by most major central banks and stresses in the Chinese economy. Global growth is projected to slow, remaining below trend in 2023-24, while inflation moderates but remains above target. Key downside risks include the possibility of a sharper-than-expected slowdown in China and a continued rise in oil prices.

The Interim Report says that monetary policy should remain focused on bringing inflation back to target, while increased efforts by governments are needed to rebuild fiscal space and respond to future challenges, including the climate transition. Structural policy efforts need to be reinvigorated to strengthen growth prospects, with a key priority being to revive global trade. The Interim Report is an update on the assessment in the June 2023 issue of the OECD Economic Outlook (Number 113).

Short-term economic prospects have improved, helped by lower commodity prices and the reopening of China, with global growth set to pick up moderately and inflation declining gradually. However, downside risks predominate.

The Interim Report highlights that the recovery remains fragile, with key risks stemming from uncertainty about the war in Ukraine and energy market developments, and significant financial vulnerabilities. Well-designed policy measures are required to reduce inflation pressures, ensure better-targeting of fiscal policy support, and revive sustainable growth. The Interim Report is an update on the assessment in the November 2022 issue of the OECD Economic Outlook (Number 112).