Monday, 27 March, 2017

World Economic Recovery at Stake, Says OECD

Recent data indicates price growth has eased in most urban centers Rising Property Prices Put Australia Economy at Risk
Juana Turner | 09 March, 2017, 00:32

The Organisation for Economic Co-operation and Development has adjusted its forecast for the UK's economy ahead of tomorrow's budget.

The OECD on Tuesday increased its United Kingdom growth forecast for 2017 to 1.6%, up from a previous estimate of 1.2%, presented in November a year ago.

Global economic growth is expected to pick up modestly next year to around 3.6 % from a projected 3.3% in 2017 but a risk of rising protectionism, financial vulnerabilities, potential volatility from divergent interest rate paths and disconnects between market valuations and real activity hang over the outlook, according to the OECD.

The OECD is particularly concerned with political uncertainty in Europe amid rising support for anti-establishment parties.

'Falling trust in national governments and lower confidence by voters in the political systems of many countries can make it more hard for governments to pursue and sustain the policy agenda required to achieve strong and inclusive growth, ' the OECD said.

"Policy choices, including on the composition of fiscal spending, taxation, regulation and trade, are likely to have a significant impact on growth outcomes", the group said.

Only last week, the Trump administration made clear it did not feel bound by World Trade Organisation rulings, saying it "will aggressively defend American sovereignty over matters of trade policy".

Trump has consistently said his priority is to protect American jobs and has promised to renegotiate the North American Free Trade Agreement with Canada and Mexico.

Trump also complained that the U.S. gave up too much in the Trans-Pacific Partnership, an Asia-Pacific regional deal he scrapped immediately after taking office.

In Japan, fiscal easing was seen underpinning growth of 1.2 per cent though the rate was seen falling back to 0.8 per cent in 2018. It first gave the figure in November.

With lower interest rates, many countries can afford to take on new debt to finance initiatives boosting growth and employment, especially if those are coupled with structural reform, it argued.

But several obstacles could still get in the way of the global recovery.

The OECD said that with only a modest recovery in view in most countries, financial markets were becoming disconnected from economic reality as consumer spending and business investment remained weak. One remedy would be for governments to use any leeway in public finances to help struggling demand.

"The economic nationalism is a much bigger wildcard because we don't know how the language translates into policy at this point", Mann told Reuters as the OECD updated its outlook for major economies.

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