Higher Oil Prices and Budgetary Consolidation Dampen Economic Growth. Economic Outlook for 2000 and 2001

  • Ewald Walterskirchen

The massive rise in oil prices and more determined policy efforts to consolidate public finances will make for a slowdown in economic growth next year. Following a strong cyclical upswing in 2000 (+3.5 percent), activity is set to expand by a more moderate 2.8 percent in 2001. Inflation is expected to abate once oil prices start falling from their current peak, and the rate of unemployment should remain on a clear downward trend. The general government deficit target of ¾ percent of GDP can be met on the basis of the tighter fiscal stance, while the public revenue/GDP ratio will rise significantly.