OECD releases economic outlook for Euro zone’s economies
The Organization for Economic Cooperation and Development (OECD) issued its economic outlook for the Euro zone's largest economies. The OECD indicates that Italy's economy recovered throughout most of 2004, but then fell into recession in 2005 due to high labor costs, the Euro's appreciation and stronger global competition. Domestic demand, which was supported by robust employment growth and low interest rates, has been slowing, said the OECD. Under these circumstances, the OECD expects Italy's economy to contract 0.6% in 2005. The organization also lowered Italy's 2006 growth forecast from 2.1% to 1.1%. The OECD suggests that Italy carry out structural reforms, especially in terms of wage bargaining, in order to strengthen its competitiveness and productivity. On the German front, economic growth remains weak and largely dependent on foreign demand, said the OECD. The organization forecasts that Germany's economy will grow 1.2% in 2005 and 1.8% in 2006. The previous expectations were 1.4% and 2.3% respectively. Furthermore, the OECD cut its forecast for French economic growth from 2% to 1.4% for 2005 and from 2.3% to 2% for 2006.