OECD Says Global Growth Improving, But Self Sustained Recovery Not Secured
Global growth momentum has improved and is more broad-based now, yet a self-sustained recovery is far from secured as inflation remains subdued and there exists an unmet need for structural reforms, the Organization for Economic Cooperation and Development said Wednesday.
The world economy is set to expand 3.5 percent this year and 3.7 percent next year, the Paris-based think tank said in an interim update for its economic projection. Global growth was 3.1 percent in 2016.
The growth forecast for this year was unchanged from the economic outlook report released in June, while the projection for next year was raised by 0.1 point.
Expanding investment, employment and trade support have synchronized growth across most countries, the report said.
However, the recovery of business investment and trade remain too low to sustain healthy productivity growth, the OECD said. Further, wage growth has been disappointing on average, and not equitable across workers, the report added.
"The short-term outlook is more broad-based and the upturn is promising, but there is no room for complacency," OECD Chief Economist Catherine Mann said.
"Monetary policy should remain accommodative in some economies but with an eye on financial stability so as to remain supportive of further rebalancing towards fiscal and structural initiatives."
The economist also stressed that structural efforts must be intensified to bolster the nascent investment recovery, to address slow productivity growth and to ensure the recovery yields benefits for all.
The US economy's growth forecasts were left unchanged at 2.1 percent and 2.4 percent for this year and next, respectively. Growth was supported by stronger consumer spending and business investment and job creation has remained strong.
That said, the extent to which fiscal easing and regulatory reform may provide an additional boost in 2018 remains uncertain, the report added.
Meanwhile, projections for Eurozone were raised from 1.8 percent to 2.1 percent for this year and to 1.9 percent for next year. The OECD attributed the upgrade to stronger growth in key European countries.
Growth forecasts for Germany, France and Italy were also raised.
Still in Europe, the UK growth forecast for this year and next were left unchanged at 1.6 percent and 1 percent, respectively.
The previously identified growth slowdown is expected to continue through 2018, while uncertainty remains over the outcome of negotiations around the decision to leave the European Union, the OECD said.
Canada is set to log the fastest growth among advanced economies this year with the country's projection raised to 3.2 percent from 3 percent. The projection for next year was kept at 2.3 percent.
Japan's growth forecasts were raised by 0.2 points each to 1.6 percent and 1.2 percent, respectively.
China's projections for the two years were also boosted by 0.2 percentage points each to 6.8 percent and 6.6 percent.
In contrast, India's outlook for this year was trimmed by 0.6 points to 6.7 percent and the forecast for next year was cut by 0.5 points to 7.2 percent.
The downward revision was due to the transitory effects of demonetization and of the implementation of the Goods and Services Tax (GST), the group said.
Brazil had its forecast for this year slashed by 0.1 point to 0.6 percent, while the prediction for next year was left unchanged at 1.6 percent.
Russia had its projections raised by 0.6 points and 0.5 points, respectively, to 2 percent and 2.1 percent.