Global economic growth is strengthening as advanced economies rebound, led by the United States, Japan, and the euro area. However, risks remain from high unemployment in Europe, slowing growth in emerging markets like China, and potential deflation in the euro area. To support stable growth, policies should gradually reduce monetary stimulus in the US, repair banking systems and continue monetary easing in Europe, launch structural reforms in Japan, and boost reforms in all countries to address scars from the crisis and raise potential growth.

1. WHAT IS
THE GLOBAL
ECONOMIC OUTLOOK?
Paris, 6 May 2014
Angel Gurría, Secretary-General and Rintaro Tamaki,
Deputy Secretary-General and Acting Chief Economist

2. Growth in advanced economies is
rebounding…
Real GDP growth
Per cent
0
2
4
6
8
10
0
2
4
6
8
10
2010 2011 2012 2013 2014 2015
OECD
BRIICS
Source: OECD May 2014 Economic Outlook database.

3. … driving a strengthening of global growth
Real GDP growth
Per cent
Source: OECD May 2014 Economic Outlook database.
2011 2012 2013 2014 2015
World1
3.7 3.0 2.8 3.4 3.9
OECD1
2.0 1.5 1.3 2.2 2.8
BRIICS
1,2
7.3 5.7 5.4 5.3 5.7
United States 1.8 2.8 1.9 2.6 3.5
Euro area 1.6 -0.6 -0.4 1.2 1.7
Japan -0.5 1.4 1.5 1.2 1.2
China 9.3 7.7 7.7 7.4 7.3
2. Brazil, Russia, India, Indonesia, China and South Africa.
1. Moving nominal GDP weights, using purchasing power parities.

4. Some of the stalled cylinders of growth are
starting to fire again
Fixed investment
Volume index, 2007 = 100
Trade in goods and services
Volume, year-on-year percentage change
2012 2013 2014 2015
70
80
90
100
110
120
70
80
90
100
110
120
United States Japan Euro area
Pre-crisis level
2012 2013 2014 2015
-2
0
2
4
6
8
10
-2
0
2
4
6
8
10
World
OECD
Average growth of world trade (1990-2007)
Source: OECD May 2014 Economic Outlook database.

5. Financial conditions are facilitating faster growth
OECD Financial Conditions Index (FCI)1
1. The FCI takes into account interest and exchange
rates, credit condition surveys and household wealth. A
unit increase raises GDP by ½ to 1% after 4-6 quarters.
Bank lending rates for European companies1
3-month moving average, per cent
1. Rate on new loans to non-financial corporations (all
maturities), except for Greece (up to one year).
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6
2011 2012 2013 2014
United States
Japan
Euro area
Easierconditions
Source: OECD May 2014 Economic Outlook database; OECD
calculations
Source: ECB MFI interest rates.
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
2011 2012 2013 2014
Germany Spain
France Greece
Italy Portugal

6. Drag from fiscal consolidation in the United States
and the euro area is diminishing
Consolidation effort
Change in underlying primary balance1 as per cent of potential GDP
1. Budget balance excluding interest payments and adjusted for the economic cycle.
-1
0
1
2
-1
0
1
2
2011 2012 2013 2014
United States
Euro area
Japan
Source: OECD May 2014 Economic Outlook database.

7. Unemployment is falling, but from high
levels, and the euro area is lagging
Unemployment rate
Per cent
Number of unemployed persons
Millions
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
United States Euro area Japan
0
10
20
30
40
50
60
0
10
20
30
40
50
60
2007 2008 2009 2010 2011 2012 2013 2014 2015
Other OECD USA Euro area
11 million
17 million
15 million
7 million
12 million
19 million
Source: OECD May 2014 Economic Outlook database.

8. RISKS

9. Falling inflation in the euro area points to
increased deflation risks
Euro area headline inflation1
Per cent
1. Year-on-year change of harmonised index of consumer
prices.
Inflation expectations in the euro area
From inflation swaps; 10-day moving average, in per cent
0
1
2
3
0
1
2
3
2011 2012 2013 2014 2015 2011 2012 2013 2014
0
1
2
3
0
1
2
3
Between 1 and 2 years
Between 5 and 10 years
Source: OECD May 2014 Economic Outlook database. Source: Datastream; OECD calculations.

10. Credit has grown quickly in some EMEs,
increasing financial vulnerabilities
Credit growth to the private sector1
Per cent
1. Average annual growth between end-December 2006
and end-September 2013.
Selected shadow banking products in China
Per cent of GDP
0
5
10
15
20
25
0
5
10
15
20
25
Average credit growth for US, euro area, Japan
Source: BIS; OECD calculations.
Source: CRBC; Kwan (2014); Bureau national des
statistiques de Chine; et la Chine fiduciaire Association.
0
10
20
30
40
0
10
20
30
40
2008 2009 2010 2011 2012 2013
Wealth management products Trust assets

11. POLICY
REQUIREMENTS

12. United States: gradually reduce monetary stimulus,
strengthen active labour market policies
Household consumption
Volume index, 2007=100
Employment and labour force
participation
Per cent of working age population
2007 2008 2009 2010 2011 2012 2013 2014
50
55
60
65
70
50
55
60
65
70
Unemployed
Employed
2007 2008 2009 2010 2011 2012 2013 2014 2015
95
100
105
110
115
95
100
105
110
115
Source: OECD May 2014 Economic Outlook database.

13. Euro area: monetary stimulus needed
alongside banking system repair
Bank credit to non-financial private corporations
Percentage change1
Unemployment rate
Per cent
2006 2008 2010 2012 2014
0
5
10
15
20
25
30
0
5
10
15
20
25
30
Germany
France
Italy
Spain
Portugal
Greece
-12
-6
0
6
-12
-6
0
6
March 2012 - March 2013
March 2013 - March 2014
Source: OECD May 2014 Economic Outlook database.
Note: February to February for Italy.
1. Adjusted for loan sales and securitisation.
Source: ECB; Bank of Italy.

14. Japan: continue with monetary easing and fiscal
consolidation, launch 3rd arrow (structural reform)
Core inflation1
Per cent
Gross government debt
Per cent of GDP
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2012 2013 2014
Initiation of “Q-squared” easing by BoJ
190
200
210
220
230
240
190
200
210
220
230
240
2011 2012 2013 2014 2015
Source: OECD May 2014 Economic Outlook database.
1. Excluding food and energy.

15. Reforms are needed to address the scars
from the crisis and boost growth
Estimated effects of the crisis on potential
per capita output of OECD countries
Percentage deviation from pre-crisis scenario1
OECD structural unemployment
Per cent of labour force
2007 2009 2011 2013 2015
6.0
6.5
7.0
7.5
6.0
6.5
7.0
7.5
2007 2009 2011 2013 2015 2017
-12
-10
-8
-6
-4
-2
0
2
-12
-10
-8
-6
-4
-2
0
2
Upper/lower quartile
OECD aggregate
1. In the counter-factual baseline, productivity growth continues at its
2000-07 rate and structural unemployment and participation rates
remain at their 2007 levels.
Source: OECD May 2014 Economic Outlook database; OECD calculations.

16. A faster pace of structural reform is needed in the
BRIICS also, given the slowdown in potential growth
.
Potential output growth
Per cent
0
2
4
6
8
10
12
0
2
4
6
8
10
12
China India Russia Indonesia South Africa Brazil
2007 2014
Source: OECD May 2014 Economic Outlook database.

17. Key messages
.
Major advanced economies are building momentum,
driving the pick-up in global growth.
Nevertheless, risks remain that could blow the
recovery off course.
More ambitious structural reforms are needed to
create jobs and sustain stronger growth.