It could be a very happy new year for the U.S. and other industrialized nations in both 2006 and 2007.
The latest economic forecast from the Paris-based Organization for Economic Cooperation and Development (OECD) projects inflation-adjusted average growth in 2006 and 2007 of 2.9% among its 30 member nations. That's two-tenths of a percentage point better than the 2.7% with which the countries are expected to close out 2005. Inflation in 2006 and 2007 is expected to be a manageable 1.9%, down from a 2.1% average in 2005. Unemployment among the OECD countries also is expected to be down to an average of 6.3% in 2006 and 6% in 2007 from a 6.5% average in 2005.
|Source: OECD. Numbers are percentage change from previous year except for unemployment, which is yearly average.|
What could go wrong? Several things, indicates OECD's Cotis. "They include a renewed surge in oil prices, ever-worsening current account balances [the broadest measures of countries' international economic positions] and abrupt exchange rate realignments, as well as long-term interest rate back-ups and asset price reversals." What are the chances of them happening? That's a very difficult question to answer, Cotis says, particularly for energy prices. "On the one hand, oil prices could still be on an upward mid-term path, but on the other hand they may well have overshot in the short-run."