Trade tensions cloud best global growth outlook in seven years: OECD

Trade tensions cloud best global growth outlook in seven years: OECD

United States economic growth is tipped for a rise from 2017's 2.3% to 2.9% this year and 2.8% in 2019, on the back of tax cuts and spending increases under President Donald Trump.

In its interim economic outlook report, the OECD projects 3.9 percent global growth for 2018 and 2019, up from the November forecasts of 3.7 percent and 3.6 percent, respectively.

Fiscal easing in Germany's coalition agreement was seen lifting growth in the euro zone's biggest economy to 2.4 percent this year (+0.1 percentage point) and 2.2 percent in 2019 (+0.3).

However, the report also warned that "an escalation of trade tensions is a serious risk" following Trump's decision to introduce tariffs on steel and aluminium imports.

Rebounding global business investment would keep global trade growth at about 5 percent this year, the OECD forecast.

On Britain, the OECD struck a particularly cautious note, pencilling in growth of only 1.3 per cent this year.

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.

The global economy will grow close to 4 per cent this year and next, better than previously anticipated, according to the OECD, which added a warning that a trade war could roll back the gains seen in recent years.

This is up from a forecast last November of 3.7% in 2018 and 3.6% in 2019. The Paris-based organization had expected growth to be 1.2 percent in 2018 and 1.0 percent in 2019.

"The world economy will continue to strengthen over the next two years", the OECD said.

"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.

"Governments should avoid escalation and rely on global solutions to resolve excess capacity in the global steel industry".

The eurozone economy will likely see a robust and broad-based expansion, with growth in gross domestic product estimated at 2.3 percent this year and 2.1 percent next year.

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

Related:

Comments


Other news