OECD: Global growth headed for 6-year high

The global economy is on course this year for its fastest growth in six years as a rebound in trade helps offset a weaker outlook in the US, the Paris-based Organization for Economic Cooperation and Development (OECD) forecast on Wednesday.
The global economy is set to grow 3.5 percent this year before nudging up to 3.6 percent in 2018, the OECD said, updating its forecasts in its latest Economic Outlook.
That estimate for 2017 was not only a slight improvement from its last estimate in March for 3.3 percent growth but it would also be the best performance since 2011.
Yet despite this brighter outlook, growth would nonetheless fall disappointingly short of rates seen before the 2008-2009 financial crisis, OECD Secretary-General Angel Gurria said.
While recovering trade and investment flows were supporting the improving economic outlook, Gurria said barriers in the form of protectionism and regulations needed to be lifted to ensure stronger growth.
The improvement would also not be enough to satisfy people’s expectations for better standards of living and reduce growing income inequality, he said.
The OECD saw an improved global outlook even though it downgraded its estimates for the US, despite a weaker dollar boosting exports and tax cuts supporting household spending and business investment.
The OECD forecasts US growth of 2.1 percent this year and 2.4 percent next year, down from estimates in March of 2.4 percent and 2.8 percent, respectively.
OECD chief economist Catherine Mann attributed the downgraded outlook to delays in the Trump administration pushing ahead with planned tax cuts and infrastructure spending.
Boosted by firmer German growth, the euro zone economy was seen growing 1.8 percent both this and next year, up from 1.6 percent for both years.
Lifted by improving international trade in Asia and fiscal stimulus, Japanese growth was seen at 1.4 percent this year before slowing to 1.0 percent next year, both slightly raised from the OECD’s March estimates of 1.2 percent and 0.8 percent respectively.
The OECD also marginally nudged up its estimates for growth in China to 6.6 percent this year and 6.4 percent in 2018, boosted by stimulus spending.
That, in turn, was supporting strong imports and helping to fuel a revival in Asian trade. As a result, global trade volumes were seen growing 4.6 percent this year, nearly double the rate seen in 2016.
The OECD also saw a potential for “swift snap-back” in US long-term interest rates when the Federal Reserve decides to reduce the size of its balance sheet, especially if it comes at a time of rising policy rates.

Source: Arab News