OECD warns trade pullback to hamper growth

Reuters

Reuters

The OECD expects global expansion to reach 3.3 percent this year, up from 3 percent in 2016, and pick up again in 2018.

"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.

"Exiting the low-growth trap depends on the joint impact of macroeconomic, structural and trade policy choices, as well as on concerted and effective implementation of existing initiatives".

The global economy portrayed by the Interim Economic Outlook remains beset by sub-par GDP growth and high inequality, calling for policy responses that advance inclusive growth in the context of increased economic integration.

The rapid growth of private credit in emerging economies, especially China, is another key risk, as is the housing market in some advanced economies.

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.

"But, risks of rising protectionism, financial vulnerabilities, potential volatility from divergent interest rate paths and disconnects between market valuations and real activity hang over the outlook", it said.

The Economic Outlook report projected the US economy to grow by one percentage point to 2.4 percent this year on strong domestic demand. For 2018, the rate is set to quicken to at 3.6 percent.

Meanwhile, the OECD said it stood by its 3.3 per cent estimate for global gross domestic product growth this year.

"Supported by accommodative monetary policy and a modest fiscal easing over the coming years", economy of the euro area would report moderate pace.

The OECD warned growth would be hit by "uncertainty" about Britain's future trading relationship with the European Union and rising inflation, which last week was pushed to a two-and-a-half-year high of 1.8% by the collapse in the pound following last year's referendum. The OECD had forecast 2017 growth of 1.2 per cent in November and its 2018 forecast was unchanged.

Growth in China is projected to slip further to 6.5% this year and to 6.3% in 2018 as the economy makes a necessary transition away from a reliance on external demand and heavy industry toward domestic consumption and services.

Two other major emerging economies - Russian Federation and Brazil - are both recovering from deep recessions with the help of higher commodity prices and easing inflation.

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