China receives growth downgrade from OECD

Mann spoke as the OECD updated its economic outlook, in which it trimmed its global growth forecast for this year. “Some strengthening in growth is expected in 2016, but doubts about future potential growth continue to build”, the OECD said.

Suffering like other emerging economies from a commodity price crash, engulfed in recession and with its debt downgraded by Standard & Poor’s this month to junk bond status, Brazil had its economic outlook for this year downgraded to a 2.8-percent contraction instead of a 0.8-percent contraction.

The USA will grow 2.4 per cent this year and 2.6 per cent next year, with the 2015 forecast representing a 0.4 per centage point improvement since June.

Looking at the eurozone, the OECD outlook was the brightest in four years. Meanwhile, stock markets around the world have swung wildly as investors have tried to understand the impact of a slump on Chinese markets over the past three months.

The forecast for Brazil took the biggest hit, by far, in the latest OECD report. Previously back in June, OECD forecasted growth of 6.8% this year.

If the Chinese economy is even weaker than expected, it could have “serious repercussions” extending to advanced economies throughout the world, the 34-member organization said.

Ensuring balanced and sustainable growth in China, as well as addressing vulnerabilities in the financial system will be a major challenge.

“Global growth prospects have weakened slightly and the outlook is clouded by important uncertainties”, said OECD chief economist Catherine L Mann.

It comes as the OECD says there is a broad-based and robust recovery underway in Ireland, but there are still risks to the economy.

It (Other OTC: ITGL – news) urged China to focus on social spending to support consumers, rather than debt-financed infrastructure investment.

Beijing is fighting hard to avoid the world’s second biggest economy stalling, with five interest rate cuts since last November and a devaluation of the yuan, which triggered a summer of turmoil in financial markets.

“The timing of the first rate hike is of secondary importance compared to the pace of increase”. Germany is forecast to grow by 1.6 percent in 2015 and 2 percent in 2016, France by 1 percent in 2015 and 1.4 percent in 2016, while Italy will see a 0.7 percent rate in 2015 and 1.3 percent in 2016.

However, the bloc should be growing as much as a full percentage point faster, Mann said, with a weak euro and low interest rates and oil prices in its favour.