Last Thursday, the Organization for Economic Cooperation and Development (OECD) released its 280-page November 2009 Economic Outlook report in strong support. This biannual OECD report presents the outlook to end-2011 for both OECD member countries, including Turkey, and selected non-OECD countries, covering over 80 percent of the global economy. Besides its short-term projections for 2010-2011, the report also offers, based on a stylized medium-term scenario underpinned by admittedly optimistic estimations of potential output, projections for 2011-2017.
The report begins with an editorial titled “Preparing the Exit,” which argues that it is now the time to prepare for exit strategies from the unprecedented expansionary fiscal and monetary policies against the global crisis. Those policies have to be withdrawn gradually to restore macroeconomic balances and ensure a sound and sustained recovery. But governments must begin now to articulate and communicate their exit strategies, especially from fiscal stimuli, to address the rising financial market risk indicators about gaping budget deficits and skyrocketing levels of debt. (See my column “Confronting the Challenge of Fiscal Consolidation,” Nov. 9.)
In addition to assessing the global and OECD-wide macroeconomic conditions, the report reviews developments in 30 individual OECD countries, the eurozone, and 10 non-OECD countries, including China. It also has a special chapter titled “The Automobile Industry in and beyond the Crisis.” In its assessment of global and OECD-wide conditions, the November report finds even more positive developments, especially in the financial markets, relative to the June report. (For my review of the June 2009 Economic Outlook report see “The Emergence of Cautious Optimism,” June 29.) Interbank lending rates and corporate bond yields have dropped significantly. Money markets are functioning again, enabling banks to get short-term funding very cheaply and earn decent margins. That enables them to extend credit more readily, although they are still reluctant to do so, and strengthen their balance sheets. In strengthening their balance sheets banks have also benefited from their renewed ability to attract private capital which helps them offset the losses from writing down impaired assets. Capital markets are also performing better, with equity and bond financing encouraged by rising share prices and flattened bond yields. A surge in the issuance of bonds has partly made up for the still very tight bank lending as well as the still-dormant private securitization, which collapsed during the global crisis.
Although business investment spending is yet to rise significantly, the real economy has begun to benefit from the turn of the inventory cycle, with the inventory-sales ratios moving toward their long-term averages. The report underlines that the OECD-area recovery has benefited greatly from the stronger growth in the non-OECD countries, especially in Asia, and particularly in China. Related to Asia’s rapid growth, another helping hand has come from the recent very swift rebound in world trade. The negative side of the faster pace of recovery in the non-OECD area is the rising risk of an asset or general price inflation if the extraordinary stimulus measures persist for too long.
I will further my discussions regarding the report’s projections and its suggestions for Turkey tomorrow.
Benzer Haberler 
