Emerging markets slowdown and weaker trade have raised the downside risks to the world growth outlook and a smooth re-balancing in China and more robust investment in advanced economies are required to boost activity, the Organisation for Economic Co-operation and Development said Monday, while lowering its forecasts for global growth.
Global growth was forecast to be around 2.9 percent this year, slightly less than the 3 percent seen in September, and will be the weakest since 2009, the Paris-based think-tank said in its latest bi-annual Economic Outlook.
The OECD slashed the growth outlook for next year to 3.3 percent from 3.6 percent. The group projected global growth at 3.6 percent in 2017.
“The slowdown in global trade and the continuing weakness in investment are deeply concerning,” OECD Secretary-General Angel Gurria said.
“Robust trade and investment and stronger global growth should go hand in hand.”
OECD forecast global trade to grow 2 percent this year. Business investment was forecast to increase 3.3 percent per annum over 2015-16 in OECD economies.
The growth forecast for the U.S. for this year was retained at 2.4 percent, while the outlook for next year was lowered to 2.5 percent from 2.6 percent. The U.S. economy was projected to grow 2.4 percent in 2017. Growth will be underpinned by household demand, the report said.
The euro area recovery will be helped by accommodative monetary policy, lower oil prices and an easing of the pace of budget tightening, the OECD said.
The group lowered its 2015 growth estimate for the single currency bloc to 1.5 percent from 1.6 percent and the forecast for next year to 1.8 percent from 1.9 percent. The 19-nation economy was projected to expand 1.9 percent in the year after.
Japan’s recovery was derailed this year by a sharp slump in demand from other Asian economies and sluggish consumption, the OECD said while retaining the growth estimate for this year at 0.6 percent. The growth forecast for next year was trimmed to 1 percent from 1.2 percent. The pace of growth was projected to slow to 0.5 percent in 2017.
While China’s growth forecast for this year was raised slightly to 6.8 percent from 6.7 percent, the outlook for next year was slashed to 6.2 percent from 6.5 percent. Chinese growth was forecast at 6.2 percent in 2017.
China’s growth will slow this year and will continue to ease gradually thereafter as activity rebalances towards consumption and services, the report said. “Achieving this rebalancing, whilst avoiding a sharp reduction in GDP growth and containing financial stability risks, presents significant challenges,” it added.
“In other emerging economies, headwinds have generally increased, reflecting weaker commodity prices, tighter credit conditions and lower potential output growth, with the risk that capital outflows and sharp currency depreciations may expose financial vulnerabilities,” the OECD said.
Citing possible further progress in implementing structural reforms, India’s growth estimate for this year was retained at 7.2 percent and the forecast for next year at 7.3 percent. The Indian economy was projected to expand 7.4 percent in the year after.
“Brazil and Russia have experienced recessions and will not return to positive growth in annual terms until 2017,” the OECD said.
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