OECD’s recent analysis of the economic outlook in OECD and key emerging economies, as well as policy recommendations to spur growth, boost confidence and soften the impact of the jobs crisis. By Pier Carlo Padoan, Deputy Secretary-General and Chief Economist.

1. International parliamentary
seminar. The global outlook
5 February, 2014
Pier Carlo Padoan
Deputy Secretary-General and
Chief Economist, OECD

2. Growth prospects strongest in emerging
economies, weakest in euro area.
Projected change in real GDP in 2014-15
Annual average, per cent
8
8
7
BRIICS
7
6
Euro area countries
6
5
Other OECD member countries
5
1
4
4
3
3
2
2
1
1
0
0
-1 CHN IND MEX KOR ZAF USA POL AUS SWE CAN SVK BRA IRL HUN DNK FIN FRA ITA ESP NLD
IDN CHL TUR
ISR
EST
NZL NOR
ISL
RUS CHE GBR LUX AUT DEU CZE
BEL
JPN
PRT GRC SVN
-1
1. BRIICS countries comprise Brazil, China, India, Indonesia, Russia and South Africa.
Source: OECD Economic Outlook database 94.
2

3. The current recovery is still weak by past
standards…
OECD-wide real GDP, relative to pre-recession peak
Per cent
20
15
1970s; Peak at 1974Q3
1990s; Peak at 1990Q4
1980s; Peak at 1981Q3
2000s; Peak at 2008Q1
20
15
10
10
5
5
0
0
-5
-5
Note: The point labelled “t” on the horizontal axis corresponds to the pre-recession peak quarter for each cycle.
Source: OECD National Accounts database.
3

4. Drivers of growth?
 Trade slower than in the past
 Will investment pick up?
 Credit still lagging in EA
 Unemployment remains elevated
 EME slower, more vulnerable
4

5. A striking slowdown in world trade
growth…
World trade/GDP1
World trade volumes
Per cent
2007 = 100
30
30
25
25
20
20
15
15
10
120
120
100
100
10
80
80
1. Trade and GDP both in volume terms, in 2005 prices.
Source: OECD National Accounts database, CPB World Trade Monitor.
5

6. Weakness in investment…
OECD-wide fixed investment
World FDI flows
Volume, 2007 = 100
Index of USD values, 2007 = 100
105
105
120
120
100
100
100
100
95
95
80
80
90
90
60
60
85
85
40
40
80
80
20
20
75
75
0
0
Note: Fixed investment values are the weighted average of OECD member countries, where the weights are GDP
measured at 2005 PPP USD.
Source: OECD Economic Outlook 94 database, OECD Foreign Direct Investment (FDI) Statistics.
6

7. Credit lagging in the major economies…
Bank loans to non-financial private sector
2007 = 100
110
110
105
105
100
100
95
95
90
90
85
Major OECD economies
80
85
Euro area
United States
Japan
80
Note: Major OECD economies is calculated as the weighted average of the indices (2007 = 100) of nominal bank credit
to the non-financial private sector for the United States, the euro area and Japan, where the weights are GDP in 2007
measured at USD PPP.
Source: Datastream and European Central Bank.
7

8. … stubbornly high
unemployment, especially in Europe
OECD-wide unemployment
Unemployment rate
Per cent
Millions of persons
14
55
12
12
50
50
10
10
45
45
8
8
40
40
6
6
35
35
4
4
30
30
25
25
20
20
14
2
0
United States
Euro area
Japan
2
0
55
Source: OECD national accounts database, OECD Economic Outlook 94 database, and Eurostat.
8

9. Will EMEs return to strong growth?
Most EMEs are now
expected to see cyclical
upturns…
…but rapid credit growth
is a source of
vulnerability in some
9

10. Will EMEs return to strong growth?
China is still growing
strongly…
…but high public debt in
some regions is a
concern
10

11. Negative spillovers from emerging
economies could be stronger than before
A deeper slowdown in EMEs would have negative feedback effects on
advanced economies.
Some advanced economies have tight trade and financial links with
EMEs, and would be significantly affected.
First-year impact on growth of a 2% decline in domestic demand in non-OECD countries excluding China
0.0
0.0
-0.5
-0.5
-1.0
-1.0
Source: OECD Economic Outlook 94 database; and OECD calculations.
11

12. Exposure to EME could hit banks
Banks' foreign claims on emerging market economies¹
Consolidated claims on an ultimate risk basis²
40
35
30
40
Banks' foreign claims in % of GDP
Banks' foreign claims in % of financial assets
35
30
25
25
20
20
15
15
10
10
5
5
0
0
Source: OECD Economic Outlook 94 database; BIS; National sources; and OECD calculations..
12

13. Has the euro area crisis ended?
Bond yields have recently
converged somewhat…
…and bank lending rates
are edging down in most
countries
13

14. Has the euro area crisis ended?
Most deficit countries have
reduced their relative unit
labour costs since 2008
… but some of the
periphery countries are in
deflation or very close to it
14

15. EA countries have made progress on
structural reform…
Responsiveness to Going for Growth recommendations, 2011-12
Adjusted for the difficulty of undertaking reform¹
1.0
1.0
0.5
0.5
0.0
0.0
GRC
IRL
PRT
ESP
ITA
Euro
area
OECD
1.
The adjusted responsiveness rate is calculated as the share of recommendations in Going for Growth 2011
for which 'significant' action has been taken, where each recommendation is weighted by the inverse of average
responsiveness to priorities in this area in non-crisis circumstances, in order to reflect the fact that some areas of
reform are more difficult than others. The euro area and OECD rates are calculated as an unweighted average;
the OECD rate is not adjusted.
Source: OECD Going for Growth 2013.
15

16. Although adjustment must be more
symmetric
Current account balance/GDP
Per cent, 4-quarter moving average
10
10
5
5
0
0
-5
-5
-10
-10
-15
-15
-20
DEU
GRC
ITA
PRT
ESP
-20
Source: OECD National Accounts database.
16

17. Will growth in the euro area be sustained?
Investment is weak by past
standards in most countries
Export performance in the
periphery has improved, but much
of the post-crisis adjustment has
come through import compression
17