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Belgium

Canada

Low productivity growth

Growth to strengthen outside resource sector

Economic growth is projected to rise only slightly over the next two years. Sluggish real wage growth will hold back private consumption, although lower taxation of labour will support employment. Investment is moderate, despite high profit margins and favourable financial conditions. Consumer price inflation is projected to be stable at under 2%.

Economic growth is projected to increase to 2.3% in 2018. As contraction in the resources sector slows, activity in the rest of the economy is projected to strengthen. Non-energy exports should continue to benefit from stronger export market growth and earlier exchange rate depreciation. Consumer price inflation should pick up to around 2% as the effect of falling energy prices fades and excess capacity is gradually eliminated.

Productivity growth has been lower than in most other OECD countries in recent years. It would be boosted by structural reforms that remove barriers to entrepreneurship, strengthen innovation, reduce skill mismatches and foster labour mobility. Improving educational outcomes and labour force participation of vulnerable groups, including first and second-generation immigrants, would raise productivity and enhance inclusive growth. House prices and household mortgage debt have increased in recent years, although prudential measures and improvements in bank balance sheets have mitigated the associated risks to the real economy.

OUTLOOK

ECONOMIC OUTLOOK

The moderately expansionary policy stance in the 2016 federal budget will help to speed the economy’s return to full employment. It also increases scope to raise interest rates, which would mitigate financial stability risks arising from high and rising house prices and household debt. A gradual removal of monetary stimulus is projected from late 2017 to stabilise inflation at around the 2% midpoint of the official target range. Macroprudential measures have been strengthened recently, but may need to be tightened further and targeted regionally to reduce financial stability risks.

GDP growth 2013

2016

Current prices EUR billion

391.7

2017

2018

% real change

1.2

1.3

1.5

GDP growth 2015

2016

Current prices CAD billion

1 983.3

2017

2018

% real change

1.2

2.1

2.3

Brazil Chile

Fiscal adjustment needed The economy is emerging from a severe and protracted recession. Political uncertainty has diminished, consumer and business confidence are rising and investment has strengthened. However, unemployment is projected to continue rising until 2017 and decline only gradually thereafter. Inflation will gradually return into the target range. The fiscal stance is mildly contractionary over the projection period, which strikes an adequate balance between macroeconomic stability requirements and the need to restore the sustainability of public finances through a credible medium-term consolidation path. An effective fiscal adjustment would allow monetary policy to loosen further and support a recovery of investment. Raising productivity will depend on strengthening competition, including through lower trade barriers, fewer administrative burdens and improvements in infrastructure.

Growth to edge up Economic growth moderated in 2016, reflecting weaker commodity prices and external demand, while consumer and business confidence have been fragile. Growth is projected to edge up in 2017 and 2018 as a somewhat stronger global economy underpins a gradual recovery in investment and private consumption. As the effects of past currency depreciation wear off, inflation will fall into the central bank’s tolerance range. Monetary policy remains supportive, with the policy interest rate at 3.5%. Recent measures to boost productivity and strengthen investment may help to diversify the economy and support more sustainable growth. However, more needs to be done to address skill mismatches and tackle inequality.

GDP growth 2013

2013

2016

Current prices BRL billion

5 316.5

2016

Current prices CLP billion

GDP growth 2017

2018

137 229.6

2017

2018

% real change

1.7

2.5

2.6

% real change

-3.4

0.0

1.2

OECD Observer No 308 Q4 2016

41

OECD Observer No 308 Q4 2016  
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