The UK’s economy is expected to continue growing at a “robust pace” over the next two years, according to the Organisation for Economic Co-operation and Development (OECD).
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Even so, the OECD forecasts global GDP growth gaining momentum, hitting 3.3 percent in 2016 and 3.6 percent in 2017, up from 2.9 percent this year.
As per OECD’s September estimates, global growth was to be 3 per cent this year and 3.6 per cent in 2016. Over the past five decades there have been only five other years in which trade growth has been 2% or less, all of which coincided with a marked downturn of global growth.
“But a clear pick-up in activity requires a smooth re-balancing of activity in China and more robust investment in advanced economies”, the OECD said.
In Canada, where the global collapse of oil prices led to a temporary recession, policy measures have mainly taken the form of monetary easing – along with a promise from the new government in Ottawa to crank up fiscal spending, primarily in infrastructure projects. The OECD now sees the South American economy shrinking 3.1 percent this year and 1.2 percent in 2016, compared with 2.8 percent and 0.7 percent predicted three months ago. It has pencilled in 2.4% growth in 2017.
This represents the slowest pace of expansion since 2009 and is down from its previous projection of 3pc. “The current account deficit is widening as machinery imports increase, but is largely financed by rising foreign direct investment inflows”, the report said.
After contracting an annualized real 1.2 percent in the April-June period, sluggish exports and production are raising concern that the economy may have shrunk again in the following quarter.
“Brazil and Russian Federation have experienced recessions and will not return to positive growth in annual terms until 2017.
Developments in China appear to be at the heart of this”.
China’s economic pivot has provoked a slump in commodity prices with far-reaching, negative knock-on effects, particularly hurting emerging economies such as Brazil and Russian Federation. Business investment was forecast to increase 3.3 percent per annum over 2015-16 in OECD economies.
South Korea’s exports contracted from a year earlier for the 10th straight month in October, with outbound shipments coming to US$43.47 billion last month, down 15.8 percent from the same month last year.
“Spare capacity is low and a gradual normalization in interest rates, with the first hike in early 2016, would be prudent to contain excess demand pressures that now seem to be developing”, the Paris-based OECD said in a report on Monday. For 2016, it has cut the forecast for OECD countries’ growth to 2.2% from 2.5%.
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The OECD also trimmed its forecast for the euro zone to 1.5 percent this year and 1.8 percent next year, from 1.6 percent and 1.9 percent previously. “Past structural reforms have put the structural unemployment rate on a downward trend, although the recent decision to lift the minimum wage could work in the opposite direction”, it said.
