The OECD Economic Outlook Highlights
Observer 204, February/March 1997
The convergence of cyclical conditions in the OECD area is likely to continue in the coming year, with robust and sustainable growth in the United States and a continuation of the expansions in Japan and Europe, following a pause in 1996 (Table 1). At the same time, substantial output gaps suggest that the risk of a resurgence of inflation will remain low in Japan and continental Europe, at least for the next year or two (Table 2). And in Europe, high unemployment will remain a major problem (Table 3). In some other countries, particularly the United States, where unemployment is low, and the United Kingdom, where it
has fallen significantly, there may be a risk of inflationary pressures although, as yet, there are no convincing indications that inflation is rising. Short-term macro-economic policy requirements for achieving and enhancing non-inflationary growth therefore differ according to country- or region-specificsituations. In a nutshell, judicious use of monetary policy, together with credible, sustained fiscal consolidation over time without heavy concentration of restraint in a short span of time would contribute to faster growth of output and employment without compromising the objectives of inflation control.
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