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COUNTRY SNAPSHOTS 2017-18

Latvia

Luxembourg

Stronger growth ahead

Robust growth

Economic growth is projected to pick up strongly as the disbursement of new EU funds increases investment and the recovery in Russia increases exports. Household consumption will remain robust, supported by continued wage growth, although unemployment will remain high. Wage growth is set to exceed productivity growth, which will hold back the improvement of export performance.

Economic growth is projected to remain robust, due to ongoing supportive monetary conditions, dynamic domestic demand and a rebound in financial sector activity, which will foster exports. Inflation is projected to rise as slack diminishes and wages are pushed up by the next round of indexation, due at the beginning of 2017.

The fiscal stance is expansionary, which is appropriate in view of ample spare capacity, and reflects higher expenditure on healthcare and government investment. Strengthening active labour market policies and targeting them on the long-term unemployed would increase employment and make growth more inclusive. Raising the quality of vocational training would boost productivity growth by easing skill shortages. GDP growth 2013

Structural reforms, such as strengthening incentives to accept job offers and stricter job search obligations for recipients of unemployment benefits, would improve the use of existing skills and reduce structural unemployment. Reforms that reduce barriers to labour mobility, such as changes in housing-market and life-long learning policies, should be complemented by the provision of adequate infrastructure and public services to accommodate the needs of new residents. GDP growth

2016

Current prices EUR billion

22.8

2017

2018

% real change

1.1

3.0

2013

2016

Current prices EUR billion

3.5

46.3

3.6

Mexico

Pension reforms needed

Domestic demand drives activity

Economic growth is projected to rise to 2.8% by 2018, as investment benefits from low real interest rates and a gradual recovery in export markets. Consumption growth will hold up following a series of increases in the minimum wage. Inflationary pressures will mount as wages rise in response to a further decline in the unemployment rate. The rapidly ageing population calls for prioritising reforms to the pension system and measures that promote labour force participation. In particular, the retirement age should be linked to life expectancy and primary health care should be bolstered. Such measures should particularly focus on low-income workers, given the existing high levels of inequality and poverty.

GDP growth

2018

4.0

4.0

Economic activity has been resilient to sharply lower oil prices, weak world trade growth and monetary policy tightening in the US. Domestic demand remains the main driver of economic activity, supported by recent structural reforms that have cut prices to consumers, notably on electricity and telecoms services. Growth will be held back in 2017 and 2018, mostly through investment and consumer confidence, following uncertainties about future US policy, although the economy could benefit from stronger import demand from the US. Macroeconomic policy is being tightened. Banco de Mexico raised policy rates to counter inflationary pressures and keep inflation expectations anchored near the inflation target and more recently in response to heightened uncertainty in the wake of the outcome of the US presidential election. In order to meet the consolidation path and ensure debt sustainability, the 2017 budget includes expenditure cuts, with the objective of returning to a primary surplus. GDP growth

2016

Current prices EUR billion

35.0

2017 % real change

Lithuania

2013

OUTLOOK

ECONOMIC OUTLOOK

2017

2018

% real change

2.1

2.7

2013

2016

Current prices MXN billion

2.8

16 114.5

2017

2018

% real change

2.2

2.3

2.4

OECD Observer No 308 Q4 2016

47

OECD Observer No 308 Q4 2016  
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