This document discusses recent economic trends and the near-term economic outlook. It notes that preliminary projections show a pickup in global growth being driven by OECD economies. While new order data shows divergent trends between advanced and emerging economies, with growth rates of investment and world trade improving recently in advanced economies. It also discusses labour market slack shrinking and risks of deflation in the euro area. The document analyzes credit growth and financial vulnerabilities in some emerging markets, and argues for accommodative monetary policy, especially in the euro area. It notes progress on fiscal consolidation but further efforts are still needed. The document concludes that accelerated structural reform could boost long-term growth.

1. Recent economic
developments and the
near-term economic
outlook
Christian Kastrop
Director, Policy Studies Branch
Economics Department

2. OECD economies are driving the
pick-up in global growth
2
1. Preliminary projections are as circulated to the Working Party on Short-term Economic Prospects (STEP) in April 2014.
2. BRIICS countries comprise Brazil, China, India, Indonesia, Russia and South Africa.
Source: OECD Economic Outlook 94 database; STEP 95 database.
Real GDP growth, November 2013 Economic Outlook and preliminary estimates and
projections for the May 2014 Economic Outlook 1
1
2
3
1
2
3
2012 2013 2014 2015
%% OECD
April 2014 estimates and
projections
November 2013 Economic
Outlook
4.5
5.0
5.5
6.0
4.5
5.0
5.5
6.0
2012 2013 2014 2015
%%
BRIICS2
April 2014 estimates and projections
November 2013 Economic Outlook

3. New order data confirm the divergent trends
in advanced and emerging economies
3
1. Weighted average of new orders in manufacturing and services.
Note: Above 50 suggests expansion.
Source : Markit.
Purchasing Managers Indices, composite new orders1
40
45
50
55
60
65
40
45
50
55
60
65
Euro area Japan
United Kingdom USA
40
45
50
55
60
65
40
45
50
55
60
65
China India Brazil Russia

4. Growth rates of advanced-economy investment
and world trade have improved recently
.
4
Note: Manufacturing New Export Orders Index above 50 suggests expansion.
Source: CPB World Trade Monitor; Markit.
World Merchandise Trade Growth and
Purchasing Managers Index
0
1
2
3
4
5
6
45
46
47
48
49
50
51
52
53
54
55
% index
Manufacturing New Export Orders Index
World Merchandise Trade Growth (6 month MA)
Source: Datastream.
Capital goods shipments
3-month on previous 3-month percentage change, not annualised
Note: For Japan, capital goods shipments excluding transport equipment at
constant price; for the United States, nondefence capital goods excluding
aircraft at current price; for Germany total turnover at current prices of capital
goods. All series seasonally adjusted.
-20
-15
-10
-5
0
5
10
15
-20
-15
-10
-5
0
5
10
15
United States Japan
Germany

5. Labour market slack is generally shrinking,
though the euro area is lagging…
5
1. The NAIRU is based on OECD estimates.
Source: OECD National Account database. Source : OECD STEP 95 database.
% of labour force
Unemployment rate Actual and structural unemployment rates, euro area
% of labour force
6
7
8
9
10
11
12
13
6
7
8
9
10
11
12
13
Unemployment rate NAIRU¹
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
United States Euro area
United Kingdom Japan

6. … which is one factor raising the risk of
deflation in the euro area
6
1. Core countries include Austria, Belgium, Finland, France, Germany and Netherlands.
2. Vulnerable countries include Greece, Ireland, Italy, Portugal, Slovenia and Spain.
Source: Eurostat; OECD STEP 95 database; and OECD calculations.
Goods and services import prices
year-on-year percentage changes
Services prices
0
0.5
1
1.5
2
2.5 Core countries¹ Vulnerable countries²
-4
-2
0
2
4
6
8
10 Core countries¹ Vulnerable countries²

7. Credit has grown quickly in some EMEs,
worsening financial vulnerabilities
. 7
Source: BIS.
Credit to the private non-financial sector
Percent of GDP
0
20
40
60
80
100
120
140
160
180
CHN TUR BRA RUS IND IDN MEX
2012 2007

8. With below-target inflation, monetary policy
should remain accommodative,
especially in the euro area
8
Source: OECD Economic Outlook 95 database.
Consumer price index
Annual percentage change
0
1
2
3
United States Japan Euro area
2014 2015

9. Most countries have made good progress on
fiscal consolidation, but further effort is needed
in many cases
9
Note: The average measure of consolidation is the difference between the underlying primary balance in 2015 and the average
underlying primary balance between 2016 and 2030, except for those countries for which the debt target is only achieved after 2030,
in which case the average is calculated up until the year that debt target is achieved.
Source: OECD STEP 95 long-term database.
Consolidation requirements to reduce government debt to 60 per cent of GDP
Change in the underlying primary balance, percentage points of GDP
-2
0
2
4
6
8
10
12
14
16
18
20
NLD
AUT
BEL
SVN
DEU
SVK
ISR
FIN
CZE
ITA
GRC
EA15
IRL
ISL
HUN
PRT
CAN
OECD
FRA
USA
ESP
GBR
JPN
Average 2016-30 2014-15 2010-13

10. Accelerated structural reform could
boost long-term growth
10
.
Source: OECD, PMR database; OECD STEP 95 long-term database; and OECD Calculations.
Note: The 'Faster pace' shows the effect of an increase in the speed of product market reform which roughly matches the
average rate of improvement in the PMR index observed over the period 2008-13 for Greece, Italy, Poland, Portugal and
Slovak Republic. The 'Faster pace of reform to best practice' shows the effect of the same increased speed of product market
reform, but to a level which matches the current best quartile among OECD countries rather than the current OECD average
as in the baseline and first scenario.
Effect of improved product market regulation on GDP in 2030
Percentage points
-5
0
5
10
15
20
25
FIN
PRT
HUN
SVK
EST
CAN
CZE
FRA
BEL
ESP
JPN
CHL
ISL
NOR
CHE
IRL
MEX
SWE
GRC
BRA
LUX
ARG
KOR
SVN
ZAF
TUR
SAU
POL
ISR
IDN
IND
RUS
CHN
Faster pace to best practice Faster pace