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COUNTRY SNAPSHOTS 2017-18

Portugal

Slovak Republic

Subdued growth

Strong growth to continue

GDP growth is projected to remain subdued, at about 1.25% in 2017 and 2018. High corporate leverage and a fragile banking sector will hold back private investment and still high unemployment will restrain consumption growth. As economic slack will persist, inflation will remain low.

Strong economic growth is set to continue, reaching 3.8% in 2018. An improving labour market will underpin household spending. Investment is expected to recover, as a slowdown in projects financed by EU funds in 2016 will be compensated by other new public infrastructure spending and stronger business investment. Exports will continue to benefit from the expansion in the automotive sector, which is ramping up production.

Boosting investment and productivity are key to raise living standards and growth. Investment incentives could be strengthened through further reforms to simplify administrative procedures, including land use regulations, improvements in judicial efficiency to facilitate insolvency procedures, and easing entry barriers in professional services. Removing distressed legacy loans from bank balance sheets and opening up new sources of financing are needed to facilitate investment. Improving skills is also crucial to raise productivity, including through a continued expansion of adult education and training and more effective vocational education. GDP growth

The euro area monetary policy stance remains supportive, but a more ambitious structural reform programme is needed to share prosperity widely across society. In particular, measures to improve efficiency in health care and education services are important to enhance well-being and make growth more inclusive and sustainable.

GDP growth

2013 Current prices EUR billion

2016

2017

2018

% real change

170.3

2013

2016

Current prices EUR billion

1.2

1.2

1.3

74.2

2017

2018

% real change

3.6

3.4

3.8

Russian Federation

Slovenia

Coming out of recession

Activity to gather pace

After two years of recession, the economy will return to growth in 2017, as higher real wages boost private consumption and lower interest rate support investment. However, structural bottlenecks continue to hinder further diversification of the economy. The strength of the recovery will also remain dependent on the rebound of oil prices. The poverty rate, which increased from 11% in 2014 to 13% in 2015, will progressively decline as the labour market strengthens and inflation slows down.

Economic activity is projected to gather pace in 2017 and 2018. Private consumption will accelerate on the back of employment gains and faster real wage growth. Investment will pick up as renewed EU structural funds bolster infrastructure investments, firms react to capacity constraints, and housing construction responds to higher property prices. Inflation is set to increase as economic slack disappears during 2018.

Tight monetary policy has successfully brought down inflation, and now can be eased further to support the recovery, especially investment. Fiscal policy has been rightly accommodative during the recession. Fiscal consolidation plans for 2017 and 2018 aim at reducing the headline deficit by about 1% of GDP per year on average. A less tight fiscal policy is projected, as considerable economic slack remains and the electoral cycle may push up public spending. GDP growth 2013

As the labour market tightens, there will be greater need for reforms to get the long-term unemployed back to work and improve labour force mobility to enhance the inclusiveness of economic growth. As economic slack is disappearing, fiscal tightening may be needed to prevent inflationary pressures. The sale of state-owned enterprises would promote competition and help to maintain the gains made in international competitiveness.

GDP growth 2016

Current prices RUB trillion

71.0

OUTLOOK

ECONOMIC OUTLOOK

2017

2018

% real change

-0.8

0.8

2013

2016

Current prices EUR billion

1.0

35.9

2017

2018

% real change

2.0

2.4

2.3

OECD Observer No 308 Q4 2016

49


OECD Observer No 308 Q4 2016