On track for a soft landing
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The economy grew very rapidly in the first half of the year, adding to an already positive output gap and inflation pressures. However, the pace of activity is now starting to slow, as higher interest rates dampen domestic demand and the effects of exchange rate appreciation continue to spread through the economy.
Labour shortages persist and real wage growth may accelerate, although capacity constraints will be eased through high rates of investment.The economy is on track for a soft landing, and successive moves taken to tighten monetary policy during 2004 should prove to be sufficient. Additional fiscal stimulus at this point in the cycle would be unhelpful and would anyway need to be offset by higher interest rates in order to bring the economy back onto a sustainable growth path.
| Population (000s), 2003 | 4 009 |
| Area (000 sq km) | 269 |
| Currency | Dollar |
| GDP (Billion USD), 2003 | 79.0 |
| Life expectancy at birth (Women, Men), 2001 | 80.9, 76.0 |
| Total labour force (000s), 2003 | 2 024 |
| Government type | Parliamentary Democracy |
| Indicators | % change unless otherwise indicated |
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| 2004 | 2005 | 2006 |
|---|
| GDP growth | 4.8 | 2.1 | 2.6 |
| Consumer price index | 2.3 | 3.0 | 2.8 |
| Short-term interest rate (%) | 6.1 | 6.7 | 6.7 |
| Unemployment rate (%) | 4.1 | 4.2 | 4.2 |
| General government financial balance (% GDP) | 2.9 | 2.1 | 1.9 |
| Current account balance (% GDP) | -5.1 | -5.3 | -5.0 |
Source: OECD©
OECD Observer No 245, November 2004
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