Ending a long and severe recession

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The economy is gradually recovering from a long and severe recession. Real GDP is likely to grow by 1.25% in 2004 and 2005, accelerating to 2.25% in 2006, which would still leave a large negative output gap.
Modest wage growth, needed to restore international competitiveness, and only gradually accelerating employment account for the delayed return of private consumption to trend growth. The unemployment rate will increase temporarily as a consequence of supply-side reforms, helping core inflation to edge down further.There is a risk that the additional labour supply resulting from the current social benefit reforms may not be fully absorbed at current wage rates. Hence, the government should complement these reforms with measures increasing wage flexibility, aimed at enhancing employment prospects for lowskilled workers. The general government budget deficit reached 3.2% of GDP in 2003 and needs to come down to 3% or less by no later than in 2005. It is likely that this goal will be achieved in 2004.
Population (000s), 200316 224
Area (000 sq km)41
GDP (Billion USD), 2003512.7
Life expectancy at birth (Women, Men), 2002 80.7, 76.0
Total labour force (000s), 20038 287
Government typeConstitutional Monarchy
Indicators% change unless otherwise indicated
GDP growth1.21.22.4
Household savings ratio10.710.79.9
Consumer price index1.32.11.6
Short-term interest rate (%)
Unemployment rate (%)
General government financial balance (% GDP)-2.9-2.7-1.9
Current account balance (% GDP)
Source: OECD© OECD Observer No 245, November 2004

Economic data


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