The OECD has cut its global economic growth forecast for this year but says it expects lower oil prices to ensure a gradual recovery, even if weak investment remains a worry.
Growth is also being buoyed by ultra-supportive central bank policy in the big developed economies and in many places outside the US by a stronger dollar, which makes the exports of other currency zones relatively cheaper.
The Paris-based Organisation for Economic Co-operation and Development (OECD), a think-tank funded by its membership of primarily wealthy countries, cut its 2015 growth forecast to 3.1% from the 3.7% it was forecasting last November.
It said it expected a rise in pace to global GDP growth of 3.8% in 2016, with China’s GDP expansion rate of recent years tapering to 6.8% in 2015 and 6.7% in 2016, from 7.4%. US growth, which fell in early 2015, is now seen at 2% for the year, marginally lower than last year’s 2.2%, before picking up to 2.8% in 2016.
Aided by the triple-booster of cheaper oil, ECB asset-buying and the rise in the dollar exchange rate, the eurozone countries are expected to post GDP growth of 1.4% this year and 2.1% next year, the OECD said.
Ultra-supportive central bank policies have helped the US and European economies, and also Japan, where GDP this year is expected to be 0.7%, before 1.4% in 2016. While praising monetary policy responses and saying it saw oil prices adding a quarter of a percentage point to growth rates in 2015 and 2016, the OECD voiced concern.
“The main reason for the weakness in investment is the weak recovery, itself, and doubts over the prospects for stronger growth,” the OECD said in its economic outlook.
“There are also specific reasons for individual countries: still tight lending conditions in parts of Europe, lower oil prices in north America, past investment excesses in China and continued adjustment in housing in much of the OECD.”
Unemployment of about 7% at OECD level had now dipped back to the levels of 2008, when the international financial and economic crisis started to hit hard, but it remained noticeably high in the eurozone bar Germany, it said.
It forecast a eurozone jobless rate of 11.1% in 2015 and 10.5% in 2016, down from 11.5% in 2014. Even the drop over this year and next would still leave the eurozone jobless rate at double the expected US rate of 5.2% in 2016 and well above the OECD average, seen at 6.6% in 2016.
For central banks, the OECD said “the gradual disappearance of slack in the US, and the associated prospect of inflation moving to its target, calls for gradual increases in policy rates.”
It added: “In the euro area and Japan, very low inflation warrants continued supportive monetary policy, as planned.”
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