One thing can be said with some degree of certainty, China’s economy is no way getting better, which is likely to keep ongoing crisis in emerging markets and routs in commodities continuing further in 2016. It now expects Brazil’s economy to contract 2.8 per cent this year instead of 2 per cent forecast in June.
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The global growth forecast has been trimmed to 3 per cent this year from earlier projection of 3.1 per cent. The rate of expansion next year is expected to be 3.6 per cent lower than June estimate of 3.8 percent. OECD expects growth to be 6.7% in 2015 and 6.5% in 2016. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends.
“Global growth prospects have weakened slightly and become less clear in recent months”, the OECD said, despite a recovery in advanced economies.
Coincidentally, within an hour of the report’s release, Standard & Poor’s cut Japan’s investment-grade credit rating by one notch, saying the government’s strategy to revive growth and end deflation was unlikely to reverse the deterioration in the next two to three years. The currency bloc is projected to expand 1.6 percent in 2015, revised up from 1.4 percent.
While the United States recovery was now solid, the OECD said the picture worldwide was muddied by “puzzles” in other big economies with erratic Japanese data, the euro area’s recovery lacking some vigor and activity in China hard to assess.
But it also cautions that relative to the average wage, Ireland has the highest child care costs in the OECD – “so improving affordability is essential, particularly for low-income families”, it says.
“Emerging economies have vulnerabilities that could be exposed by rising U.S. interest rates and/or a sharper-than-expected slowdown in China, giving rise to financial and economic turbulence that could also exert a significant drag on advanced economies”.
It also said the US Federal Reserve would be right to begin raising interest rates this week, warning that uncertainty about the path of tightening posed a greater threat to the economy. The property market needs to be carefully monitored, and further regulatory measures taken if credit growth starts to drive up prices.
The OECD is urging the US not to move quickly to raise rates, as that would strengthen the greenback and cause financial turmoil in the emerging world.
“That’s not our forecast but it gives a sense of how much China matters in the global economy”.
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Looking at the euro zone, its outlook was the brightest in four years. “The survey provides a prescient analysis of the challenges now faced by Ireland and of the policies to address these in areas such as fiscal sustainability, financial stability, inclusive growth, productivity and environmental sustainability”.
