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ECONOMY

OECD more upbeat about Italy’s economy

The Organization for Economic Cooperation and Development (OECD) is feeling more upbeat about Italy’s economic prospects, going so far as to revise its growth forecasts for 2015 and 2016.

Published: 18 March 2015 13:54 CET
OECD more upbeat about Italy's economy
The OECD’s chief economist Catherine Mann praised Italy's ambitious reforms. Photo: Eric Piermont/AFP

In its latest economic assessment, the OECD said Italy would see a growth rate of 0.6 percent this year and 1.3 percent in 2016.

The brighter outlook is thanks to Italy’s ambitious reforms package, which includes an overhaul of the labour market and taxation system, the OECD’s chief economist Catherine Mann said during a press conference on Wednesday.

“Italy has gone from stalling on reform to having an excellent reform pace and that's why we are more positive about the future prospects," she was quoted by Ansa as saying.

"There are opportunities for the country.”

Italian Prime Minister Matteo Renzi’s reforms also include a revamp of the electoral process and the painfully sluggish judicial system as well as the education system.

In a report in February, the OECD said the real game-changer would be the so-called Jobs Act, which was backed by the Senate in December and aims to bring more flexibility to Italy’s job market.

Elsewhere in Europe, Germany is forecast to grow by 1.7 percent in 2015 and 2.2 percent in 2016, and France by 1.1 percent in 2015 and 1.7 percent in 2016.

Low oil prices and monetary easing are boosting growth in the world’s major economies, the organization said.

However, the near-term pace of expansion remains modest, with abnormally low inflation and interest rates pointing to risks of financial instability.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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