Global economic growth seen leveling out this year

United Kingdom growth was revised lower by -0.3% to 2.1%.

Estimates for this year for France, Germany and Italy were all cut.

Last year, it forecast 2016 growth of 3.3%.

Meanwhile, OECD stated that with China anticipated to proceed rebalancing its economy from manufacturing to providers, progress is forecast at 6.5 % in 2016 and 6.2 % in 2017.

The OECD warned that growth in the core euro area economies remains slow and GDP in the area has only just returned to its pre-crisis peak of early 2008.

The OECD’s latest downgrade growth downgrade – fuelled by a mix of weak trade and investment and low commodity prices – means global growth this year would be no higher than in 2015, which was itself the slowest pace in the past five years. Brazilian output shrank by 3.8% in 2015 but will stabilise in 2017, the OECD report said.

“This underlines the downside risk to economic activity”. “European financial firms have been hit particularly hard with bond spreads rising significantly and equity prices of banks falling by more than 20% since the beginning of 2016”.

Despite the Fed’s move in December to nudge up its benchmark interest rate from an unprecedented near zero level, monetary policy in the US and worldwide remained stimulative, the OECD said.

The damning report comes as financial market investors increasingly question the underlying strength of numerous world’s biggest economies – chiefly Japan, China and Europe. The group noted that using monetary policy alone as the sole tool for stimulus did not work well: “Monetary policy can not work alone”.

On the publication of the first Economic Outlook of 2016, the OECD urged governments able to borrow at very low interest rates to boost spending on infrastructure. The group called for more spending by governments to help stimulate growth.

It also urged a strong collective response to combat sagging global growth, which it predicts will not surpass 2015’s already pallid showing.

It says sluggish recovery from the global economic downturn and slow progress on economic reforms are hindering progress. Chief economic adviser Arvind Subramanian’s suggestion for more investment by the government in critical infrastructure projects has been backed by the corporate sector but several economists and a section within the government has opposed the proposal. “All three levers must be deployed more actively to create stronger and sustained growth”, OECD said.

U.S. growth was downgraded for this year from 2.5% to 2% and the OECD called into question the Federal Reserve’s decision to raise interest rates in December. It left its growth forecasts for China unchanged.

This is also lower than would be expected during a recovery phase for advanced economies, and given the pace of growth that could be achieved by emerging economies in convergence mode.

The slowdown is due to disappointing demand, weak investment and a “substantial” risk of further financial instability.