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OUTLOOK

South Africa

Sweden

Growth to rebound

Growth to slow

Economic growth is projected to rebound in 2017 and strengthen further in 2018, driven by household consumption and investment. In particular, the improvement in electricity production removes bottlenecks and should boost confidence and therefore investment, provided that political uncertainties dissipate. Rising production costs, together with the earlier rand appreciation should weigh on exports.

Economic growth has been strong, but is projected to decline. Shortages of qualified labour and constructible land will slow residential investment, while uncertainty about global demand will slow business investment. Modest real wage gains will continue to damp consumption. The unemployment rate is levelling off as difficult-to-hire low-skilled workers make up a rising share of jobseekers. Labour market tightening will help lift inflation gradually.

The macroeconomic situation is still difficult as growth is weak and inflation is above the central bank’s target. Falling inflation will create scope to ease monetary policy; however, scope for easing may be limited in the short term as the persistent drought is driving up food prices. Lifting barriers to competition and favouring the development of SMEs could boost productivity, employment and living standards. Unless growth accelerates, however, unemployment and inequality will remain very high.

GDP growth 2013

GDP growth 2016

Current prices ZAR billion

3 539

2017

2018

% real change

0.4

1.1

2013

1.7

3 773.4

Spain

Switzerland

Still high unemployment

Moderate growth

The unemployment rate is declining, but remains high, at about 19%. While falling, high long-term and youth unemployment pose particularly acute challenges. More effective active labour market policies and re-skilling are needed, along with a recovery in demand. Boosting living standards in the medium term hinges on increasing productivity via higher investment in innovation, strengthening skills and more intense competition. GDP growth 2013

2017

2018

% real change

3.3

2.7

2.2

Economic growth is rising but will remain moderate as the global outlook remains subdued. The labour market has been resilient, and the recent modest unemployment increase should be reversed by 2018. Interest rates are projected to remain low, helping to revive domestic demand. Deflation is ending as the currency has stabilised. The huge current account surplus will persist. Monetary policy settings are appropriate, but risks from a long period of negative policy rates are rising. Although less buoyant than earlier, the housing market merits continued vigilance. Uncertainties remain regarding the implementation of the immigration quota decided in the 2014 referendum, even though some progress is being made. The ongoing reforms to corporate taxes are welcome. The fiscal position remains solid with the surplus expected to be maintained.

GDP growth 2016

Current prices EUR billion

1 025.6

2016

Current prices SEK billion

The Spanish economy has grown strongly in 2016, led by domestic demand spurred by easy monetary policy in the euro area and a fiscal stimulus. The expansionary phase is expected to continue in 2017 and 2018, with domestic demand leading the recovery, albeit at a slower pace as some factors that have contributed to boost consumption, such as low oil prices and lower taxes, will recede. Inflation will gradually pick up as the effects of low oil prices diminish, but pressures will remain moderate due to still high unemployment.

50

The current very expansionary monetary policy stance is a response to persistently below-target inflation, but has also fuelled a long housing boom which increasingly poses risks. Stronger macro-prudential policy, such as a debt-to-income cap, is called for to reduce financial and macroeconomic vulnerabilities. Easing planning and rental regulations and reforming housing taxation would help stabilise house prices, increase labour market mobility and improve equality.

2017

2018

% real change

3.2

2.3

2013

2016

Current prices CHF billion

2.2

635.0

2017

2018

% real change

1.6

1.7

1.9

OECD Observer No 308 Q4 2016  
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