OECD Economic Review - May 25, 2011

The global recovery is becoming self-sustained and more broad based. The recovery is taking place at 

different speeds, between advanced and emerging economies, but also within the first group of 

countries. Unemployment remains high across most of the OECD countries. In most, headline inflation 

has risen strongly, and expectations are also drifting up; however, underlying inflation seems likely to 

edge up only slowly. Vibrant domestic demand growth, negative supply shocks and strong capital inflows 

in non-OECD economies are generating inflationary pressures prompting policy restraint that could slow 

the recovery.

Such a scenario calls for differentiated policy responses in advanced and emerging economies. In both 

groups of countries structural reforms should play a key role while taking into account country-specific 

needs and institutional features. In advanced economies, structural reforms can boost potential growth, 

thereby facilitating fiscal consolidation and easing the pace of monetary policy normalization. In emerging 

economies, monetary policy should tighten more to curb inflation, but this option risks being constrained 

by inducing stronger capital inflows. In emerging economies structural reforms could make growth more 

sustainable and inclusive, while contributing to global rebalancing and enhancing long-term capital flows.

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