World output will expand 2.9 per cent in 2015 and 3.3 per cent in 2016, down from the three per cent and 3.6 per cent predicted in September, the OECD said in a semi-annual report.
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OECD Secretary General Angel Gurria said the slowdown in global trade and the continuing weakness in investment are deeply concerning. China’s growth is expected to slow to 6.8 percent this year and continue to decline gradually reaching 6.2 percent by 2017 as activity rebalances towards consumption and services.
OECD expects the world economy to strengthen to 3.3 per cent growth in 2016 and 3.6 per cent in 2017. Net trade will drag on growth next year, the CBI added.
China was one of the few countries to receive a growth upgrade from the OECD.
“The outlook for Japan remains softer than in other advanced economies, despite an anticipated upturn in real wage growth”, reflecting weak external demand, especially in Asia, and strong fiscal headwinds particularly from the planned tax hike, it said.
Policymakers and economists have been divided over whether cutting spending will eventually bring down countries’ debt piles or in fact prove counter-productive because it dents economic growth.
The outlook calls for greater ambition by OECD and Group of Twenty countries in supporting demand and pursuing structural reforms to boost potential growth and ensure its economic benefits are shared by all.
“Investing in infrastructure is a no brainer”.
However, recent prudential banking measures have reduced housing market risks, allowing room for a rate cut should there be a deepening economic downturn, it says. Not only are Chinese industries buying smaller quantities of their goods, but because China accounts for such a huge percentage of global commodity consumption, a slowdown there will affect prices around the world. This is deeply concerning.
“Also, strengthening growth in major trade partners, such as Europe and the USA, should reinforce growth”.
The OECD said that global trade has plunged to levels dangerously close to those “associated with global recession”.
She said that lacklustre growth in the European Union has been replaced by weak expansion in emerging economies.
The US Labor Department on Friday said that the world’s biggest economy created 271,000 net new jobs in October, nearly twice as many as September, while the unemployment rate fell to a seven-and-a-half year low of 5.0 per cent. Given the right policies, asylum-seekers need not impose an unmanageable economic burden.
The respected organisation predicts trade will slow sharply this year to 2%, from 3.4% in 2014.
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“As economic slack is taken up through 2016, inflation should increase to above the two-per-cent midpoint of the Bank of Canada’s inflation target range in 2017”.
