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41. Economic Survey of Iceland, 2005

Publication Date:
02-2005
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Iceland's impressive economic performance has continued to show the benefits of the refocusing of policies on financial stabilisation and market liberalisation in the 1990s. The most recent recovery, which began in 2003, has been much more vigorous than expected, as buoyant household demand has reinforced the stimulatory effect of the large-scale aluminium-related investment projects underway. Imbalances in the economy – specifically, the large current account deficit and inflation pressures – have mounted and – with GDP growth averaging over 5% in 2004-06 – they may well be similar in size to those seen in the last overheating episode in 2000-01, which resulted in a mild recession. Limiting instability over the next few years is a demanding task for macroeconomic policymakers, and efforts underway in this regard need to be strengthened. There are also challenges for structural policies, notably with respect to the proper assessment of future investment projects and in the environ-mental area. In a longer-term perspective, sustaining the faster productivity growth that structural reforms in the 1990s have brought about will require further action, especially in the education and competition policy fields.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Europe

42. (Danish) Economic Survey Denmark 2005

Publication Date:
02-2005
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Danmark har i mange år ligget nær toppen på OECD's rangliste over BNP pr. indbygger. Danmark har den mest lige indkomstfordeling blandt medlemslandene, delvist so m følge af dets vidtfavnende velfærdsstat. I lyset af befolkningsaldringen er den primære økonomiske udfordring at fastholde væksten i levestandarden og samtidig bevare velfærdssystemet. For at opnå dette er det nødvendigt at øge arbejdsudbuddet og væksten i produktiviteten. Uden forbedringer på disse to områder vil væksten i BNP pr. indbygger fa lde til blot ½ procent om året i løbet af et par årtier.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Europe and Denmark

43. Economic Survey of the Czech Republic, 2004

Publication Date:
11-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Following accession to the European Union the big issue for the Czech Republic is to strengthen growth prospects. Growth potential at present is somewhat above 3 per cent, implying a moderate pace of catch-up to living standards in the EU and elsewhere. There is room for greater ambition in growth performance, and it is welcome to see this reflected in the programme of the new Czech government. This Survey underscores four main challenges. Fiscal consolidation is the dominant challenge for macroeconomic policy, and is not only necessary to cope with ageing and to bring down the tax burden but is also needed to fulfil euro-area entry conditions. A welcome programme of fiscal reform has begun, including proposals for a system of multi-year aggregate spending ceilings and significant expenditure cuts. However, to date, mainly revenue-raising measures have been implemented while the full impact of expenditure measures is yet to be realised. The attempt to secure broad political consensus on pension reform is commendable, but it must be underscored that whatever reform is finally implemented, it will have to bring considerable fiscal savings. Health-care reform also has to deliver savings, but concrete proposals have yet to be made. To facilitate assessment of the true fiscal position, extra-budgetary funds need to be more fully integrated in mainstream government budgeting procedures. Also, with the further decentralisation of public services, the need for good budgeting practices and accountability in regional and municipal governments is all the more important. The Central Bank and the Ministry of Finance have formulated a transparent strategy for entering the euro area, that foresees minimising the time spent in ERM II. Annual reports will assess the economic conditions in relation to the Maastricht Criteria and a request to enter ERM II will only being made if the probability of a positive first assessment by the EU authorities is high. The choice of a 3 per cent inflation target for the run-up to euro entry is justifiable on medium-term grounds. However there may be some difficulty communicating the consistency of this target with the Maastricht criterion for price stability. The Czech authorities should therefore pay close attention to how the Maastricht criteria are interpreted and applied by the European Commission and the ECB and adjust their communication strategy accordingly. Most of the catch-up in living standards will have to come from boosting productivity growth. This means swifter re-allocation of resources across firms as well as stronger in-firm productivity growth. While the Czech Republic is a strong competitor for attracting foreign direct investment, policy towards poorly performing firms and business start-ups has problems, slowing down the exit and entry of firms. Bankruptcy procedures are cumbersome, often long and usually end up in liquidation, with asset stripping not uncommon. Reforms have long-since been planned, and it is welcome that new legislation looks finally set to go ahead. The legislation aims at strengthening the role of creditors, speeding up proceedings and allowing composition to play a bigger role. Likewise, efforts to streamline business registration are welcome and should be implemented as soon as possible. The general business climate is also damaged by issues in network industry competition, as some services, notably internet, are expensive in international comparison. Mobility between jobs and regions is weak. Administrative extensions of collective wage agreements, strict employment protection legislation (EPL) on individual dismissals, rent control, severe poverty traps (particularly for families) and a high tax wedge have contributed to considerable long-term unemployment. The Roma population is hit especially hard in this respect. Migration is to some extent mitigating the labour-market rigidities with Slovaks filling skilled vacancies and other eastern Europeans (mainly Ukrainians) taking up unskilled jobs that are unattractive for locals. Tackling the unemployment problem requires measures across a wide front, but most notably social benefit reform is needed along with reduction in the tax wedge as well as easing of EPL. The widespread social and economic exclusion of the Roma needs more attention, particularly in the education system. A more open immigration policy is needed to address immediate issues such as the inconsistency between granting work permits as well as for better alignment of immigrants' skills with those needed on the Czech labour market.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe, Ukraine, and Czech Republic

44. Economic Survey of Finland, 2004

Publication Date:
10-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The transformation of the Finnish economy over the last decade represents one of the few examples of the "new economy" taking hold in Europe. Output and productivity growth over the second half of the 1990s was among the highest in the OECD, and the recovery from the global downturn has been much stronger than for the euro area as a whole. However, imminent population ageing threatens to expose weaknesses in the labour market. Demographic developments, which over past decades have been broadly neutral, could reduce the growth rate of GDP per capita by 1/4 of a percentage point per annum over the remainder of this decade and by almost 1 percentage point over the next decade. This, combined with the likelihood of smaller productivity gains in the information and communication technology (ICT) sector, a continuation of falling ICT prices as well as the mediocre performance in the sheltered sectors, threatens the future growth of living standards. Within a decade, and in the absence of further policy changes, these developments together could imply that Finland not only loses its top performer status but could face a protracted period of slow growth, as illustrated in the following scenario.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Europe

45. Employment Protection: Costs and Benefits of Greater Job Security

Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Deregulating labour markets – for example making it easier for firms to hire and fire employees – is at the heart of the employment debate in many OECD countries. Laws on firing or layoffs and other employment protection regulations are thought by many to be a key factor in generating labour market "rigidity", as well as one reason for the large differences in labour market performance among OECD countries, notably between the United States and some of the larger European countries.
Topic:
Civil Society, Development, Economics, and Government
Political Geography:
Europe

46. Economic Survey of Portugal, 2004

Publication Date:
09-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Convergence of the Portuguese economy toward the more advanced OECD economies seems to have halted in recent years, leaving a significant gap in per capita incomes. The proximate cause is low labour productivity, as employment rates across the board are substantially higher than the EU average. Nor is there a shortage of capital goods in aggregate. But capital equipment in the business sector is not always efficiently used or allocated, and new technologies are not readily adopted. Furthermore, the Portuguese labour force – even its younger members – have had less formal education than workers in other EU countries, including among the new entrants from Central and Eastern Europe, and workers in Portugal also have less access to training than in many other countries. Traditional Portuguese low value-added highly labourintensive products now face increasing competition from developing countries and from the new EU entrants.
Topic:
Development, Economics, and Government
Political Geography:
Europe and Eastern Europe

47. Economic Survey of Germany, 2004

Publication Date:
08-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
With the effects of adverse external shocks diminishing, a strong and competitive export industry is helping the German economy out of a three-year period of near stagnation. Domestic demand has been declining over the last couple of years, as poor labour market performance has weighed on consumer sentiment and business confidence. The labour market still suffers from weak economic growth and distorted incentives, with both contributing to problems in taking up work and providing employment. Productivity growth is not high enough to compensate for the adverse effect of low labour utilization on economic growth. Fiscal targets have been missed on account of both cyclical and structural factors. The government has launched a major reform initiative to reinvigorate economic growth. These reforms are welcome, have to be continued and need to be broadened further to reduce government debt, remove fiscal distortions, and improve incentives to supply and demand labour. Furthermore, there remains considerable scope to foster the creation of new enterprises and widen product market competition, thereby also maintaining the strong innovative capacity of the economy. The major challenges are to link fiscal consolidation to public sector reform and to increase the capacity of the economy to create employment and increase productivity growth. To create confidence and to restore Germany's traditional economic strength it is necessary that reforms reflect a coherent vision about the reorientation of economic policy – combining a growth and stability oriented macroeconomic policy with structural reforms – and are implemented according to a transparent and predictable roadmap.
Topic:
Development, Economics, and Industrial Policy
Political Geography:
Europe and Germany

48. Economic Survey of Poland, 2004

Publication Date:
06-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Poland has made impressive progress in the transformation of its economy and the accession to the European Union on 1st May 2004 marks another historical event. It follows 15 years of profound change and accomplishment. More than 75 per cent of GDP is now produced in the private sector, the economy is well integrated with those of western European nations and inflation has been brought down to low levels. After an initial fall, output has been growing continuously for more than 10 years and, on average, Poles are much better off now than they were then. However, the striking drop in employment since 1998 is suggestive of serious remaining problems. To address these, much more needs to be done, notably in terms of raising productivity, expanding employment and increasing per capita income, which is 41 per cent of OECD levels.
Topic:
Development and Economics
Political Geography:
Europe and Poland

49. Economic Survey of the Netherlands, 2004

Publication Date:
05-2004
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
The economic downturn in the Netherlands, like the boom that preceded it, has been more marked than in most other European countries. This is partly attributable to greater exposure to international trade, especially with the US, and to greater sensitivity to international stock price movements. But there are also some structural policies – pension fund regulation, housing and wage setting institutions – that have undermined economic efficiency and contributed to the amplitude of the cycle. Furthermore there has been a marked deterioration in public finances, part of which is structural. Longer term growth trends too are unfavourable. In view of these developments, the main challenges are to reform those policies that have reduced efficiency and increased volatility, put public finances on a sustainable path, and, most importantly, increase trend growth by increasing both employment and productivity.
Topic:
Agriculture, Economics, Environment, Human Rights, International Organization, and Political Economy
Political Geography:
Europe and Netherlands

50. Economic Survey of euro area, 2003

Publication Date:
07-2003
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Entering its fifth year of existence, the European Economic and Monetary Union (EMU) has met major headwinds. At the advent of the single currency the euro area experienced solid economic growth, with unemployment falling and public finances rapidly improving. However, a number of structural problems were exposed with the cyclical downturn since 2001, from which the area is recovering only hesitantly. The challenges facing policy makers at present are both of a short-run and medium-run nature. Policy makers are currently grappling with sluggish demand. Responding to this challenge, monetary policy has been eased and fiscal policy reacted through the automatic stabilisers. However, the room for manoeuvre was reduced by lingering inflationary pressures and earlier insufficient fiscal adjustment in several member states. Meanwhile the euro exchange rate has appreciated significantly. Over the medium term, the Community has set ambitious targets and a vast programme for enhancing the performance of labour, product and financial markets. This programme needs to be pursued with vigour, thereby raising the odds of large gains in trend growth and jobs while making it easier to achieve sound fiscal positions.
Topic:
Diplomacy, Economics, International Organization, International Trade and Finance, and Political Economy
Political Geography:
Europe