Global growth headed for six-year high: OECD


FILE PHOTO: Construction cranes are seen in downtown Los Angeles, California, U.S., May 22, 2017. REUTERS/Lucy Nicholson
Construction
cranes are seen in downtown Los Angeles

Thomson Reuters

 

By Leigh Thomas

PARIS (Reuters) – 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 United States, the 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 Paris-based Organisation
for Economic Cooperation and Development 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.

"Everything is relative. What I would not like us to do is
celebrate the fact that we're moving from very bad to mediocre,"
Gurria told Reuters in an interview.

"It doesn't mean that we have to get used to it or live with it.
We have to continue to strive to do better," he added.

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 United States, despite a weaker dollar
boosting exports and tax cuts supporting household spending and
business investment.

The OECD forecast U.S. 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.

The weaker U.S. outlook was offset by slightly improved
perspectives for the euro zone, Japan and China.

EURO ZONE LOOKING BETTER

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.

Among the risks to the OECD's outlook, it warned that the growing
divergence between monetary policy rates among the major central
banks raised the chances for financial market volatility.

The OECD also saw a potential for "swift snap-back" in U.S.
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.

(Reporting by Leigh Thomas; Editing by Hugh Lawson)

Read the original article on Reuters. Copyright 2017. Follow Reuters on Twitter.

 

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