OECD Sees Better Outlook, if Trade Escalation Avoided

It said that the tax cuts in the USA will boost business investment and could add as much as 0.75 percentage point to growth this year and next in the world's largest economy.

Updating its outlook for the G20, the OECD, which groups 34 of the world's leading economies, raised its global growth forecast for 2018 and 2019 to 3.9 percent - the highest since 2011 - from a previous estimate of 3.6 percent for both years.

"Stronger investment, the rebound in global trade and higher employment are helping to make the recovery increasingly broad-based".

Alvaro Pereira, the OECD's acting chief economist, said: "US steel and aluminium tariffs will raise costs and harm consumers, while not solving the global overcapacity problem".

The world's largest economy is expected to grow 2.9 percent this year and 2.8 percent next year.

Ahead of the Spring Statement, the think-tank raised its United Kingdom growth forecast to 1.3% in 2018 amid a strengthening global recovery.

However, the growth rate is still very slow compared to other G20 nations, and well below the average for the group, which is expected at 4.1% in 2018 and 4.0% in 2019.

The Paris-based organisation said the world economy was on course to expand at an annual pace of 3.9% over the next two years.

With tax cuts boosting the economy this and next year, the OECD forecast the upper bound of the target federal funds rate could reach 3.25 percent by the end of 2019 from 1.5 percent now.

"In Japan, where underlying inflation and inflation expectations remain low, current stimulus measures need to be continued to help achieve the inflation target", the OECD said.

In contrast, stronger growth in France and Germany boosted the outlook for the broader euro zone to 2.3 percent for this year and 2.1 percent in 2019.

"Countries should rely on collective solutions like the Global Forum on Steel Excess Capacity to address specific issues".

"Trade protectionism remains a key risk that would negatively affect confidence, investment and jobs", it said on Tuesday.

The fastest growth this year will be India, with expansion of 7.2 per cent, followed by China at 6.7 per cent, and Turkey and Indonesia both at 5.3 per cent - all revised upwards since November.

(Copyright © 2015. All Rights Reserved.)
 
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