On average, the euro area economy grows by 2.2 percent per year during the projection period, while the unemployment rate drops to 7.5 percent in 2011. Between 2005 and 2011, the nominal effective exchange rate of the euro appreciated by an average of 2.4 percent per year. Inflation, measured by the change in the area's GDP deflator, stabilizes at 1.5 percent at the end of the period, while consumer inflation in 2011 rises to 2.1 percent.
The nominal effective exchange rate of the euro area increased by an average of 2.4 percent per annum over the period 2005-2011, reflecting higher inflation and smaller interest rate hikes in the other major parts of the world. Member States grew by an estimated 3.1 percent, Executive Summary of the 2005-2011 NIME World Economic Outlook. The nominal effective exchange rate appreciates on average by 1.9 percent per annum over the period 2005-2011, mainly due to lower average inflation than in other parts of the world.
In the United States, real GDP growth is estimated to have come in at 4.5 percent in 2004, driven primarily by strong growth in domestic demand. Japanese real GDP rose an estimated 4.2 percent in 2004, boosted by high business investment, rising private consumption and rising exports. The rest of the world's output is estimated to have grown by an impressive 6.1 percent in 2004.
The currencies of the rest of the world depreciated by an average of 3.8 percent over the period 2005-2011 compared to the currencies of other major economic areas, reflecting an average higher rate of inflation.
EXECUTIVE SUMMARY
THE 2005-2011 NIME WORLD ECONOMIC OUTLOOK
This, in turn, reduces employment growth, which grows by an average of only 0.7 percent per year. Exports increase by an average of 5.1 percent during the period 2006-2011, mainly due to relatively high effective foreign demand. The current account to GDP ratio closes gradually, reaching 0.4 percent of GDP.
At the same time, GDP inflation drops to 1.9 percent at the end of the period. In 2005, the real GDP growth of the New EU Member States falls back to a more stable growth rate of 3.4 percent. Growth in residential investment remained strong, coming in at 10.9 percent, compared to 8.8 percent a year earlier.
Growth in private consumption increased by an estimated 3.6 percent in 2004, compared to 3.3 percent the year before. At the same time, economic growth in labor productivity remained strong, rising by 3.4 percent. Building on the 1 percent growth in 2004 and declining unit labor costs, total employment will increase by 1.5 percent in 2005.
Private consumption benefited from a 3.4 percent increase in disposable income and a 2.4 percent increase in total household assets. Import growth picked up in 2004, increasing by 8.9 percent, after posting a growth rate of 5 percent the year before. Employment is estimated to have increased by 0.9 percent in 2004, reflecting strong output growth and falling unit labor costs.
Consumer prices continued their downward spiral, falling 1.3 percent in 2004, following a 1.4 percent decline the previous year. Total employment will grow by 0.3 percent in 2005, compared to an increase of 0.9 percent the year before. Indeed, consumer prices fell by 0.4 percent, after falling by 1.3 percent last year.
Overall, this translates to public sector net borrowing at 6 percent of GDP, down from 7.1 percent in 2004. Inflation remained relatively moderate at 5.5 percent in 2004, only slightly higher than the previous year.
DETAILED WORLD AREA TABLES
New EU Member States' includes Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia, as well as Bulgaria and Romania.
FOCUS ON THE LISBON STRATEGY
Finally, after initially worsening, the debt ratio falls to 0.1 percentage point below the baseline in 2010, as the deficit to GDP ratio. The simulation shows that while a reduction in social contribution rates could help move the euro area in the right direction, the size of the reduction required makes it difficult to rely on this. Therefore, this analysis is limited to simulating the effects of an exogenous increase in the euro area labor force, calibrated to increase the euro area employment rate by 1 percent of the working-age population in 2010.
Simulations show that if such measures were implemented in 2005, real GDP of the eurozone. The employment rate increases by 0.9 percentage points in 2005 and then rises to a full 1 percentage point as the influx of new workers is smoothly absorbed into the labor force. In line with these improved fiscal deficits and a higher nominal GDP, the debt-to-GDP ratio falls by 0.6 percentage points in 2005 and reaches 1.4 percentage points below the baseline in 2010.
Based on this study, we estimate that if the euro countries were to deregulate by about half the existing gap compared to the US benchmark, and if the business sector. Once again, the NIME model was used to calculate the macroeconomic effects of a variant where we increase euro area labor productivity to raise concurrent labor productivity (real . GDP per employee) by 1 percent. above the baseline in 2010. the ratio to GDP falls by 0.3 percentage points in the first year and by 2.5 percentage points in 2010.
This predetermined path is calibrated to reduce the deficit to GDP to 0.15 percentage points below the baseline in 2005, before gradually reducing it further, down to a full 1 percentage point below the baseline in 2010. In 2010, the unemployment rate is flat. 0.26 percentage points above baseline, while the employment rate is 0.25 percentage points below baseline. The increase in private sector employment is very modest despite the fall in real producer wages.
Real producer wages are falling in line with the fall in labor productivity and the rise in the unemployment rate. The debt ratio falls by 0.9 percentage point in 2008 and then reaches 2.3 percentage point below baseline in 2010. The NIME World Economic Outlook emphasizes that without accelerating structural reforms, the eurozone will most likely fail to meet the Lisbon growth and employment targets by 2010.
TECHNICAL ASSUMPTIONS
THE NIME MODEL
NIME STUDIES AND PUBLICATIONS
