Global growth will weaken to 2.9 percent: OECD report

A “deeply concerning” slowdown in trade, particularly with China, will lead to lower global economic growth this year, says the Organisation for Economic Co-operation and Development.

On the United Kingdom, the OECD said economic growth was projected to “continue at a robust pace over the coming two years, driven by domestic demand”.

Many analysts believed that the U.S. Federal Reserve will raise interest rates next month, as Fed Chair Janet Yellen reiterated last week that the central bank may pull the trigger at its December policy meeting if the USA economy is “performing well”.

The OECD called for effective pricing of greenhouse gas emissions and more regulation surrounding those emissions – most climate policies could be, it said, “budget-neutral and support growth”. While the 2015 forecast is unchanged, the 2016 one has been cut from 1.2 per cent.

That’s concerning because it’s China and emerging economies which have been doing the heavy lifting in global growth over the past few years, contributing the lion’s share of that growth while developed markets languished. It estimates that the influx of refugees may add between 0.1 and 0.2 points to growth in 2016 and 2017 thanks to extra government spending.

The global economy could be headed for a “modest revival” in trade and economic growth, despite concerns over weak commodity prices that have derailed growth in resources-dependent countries such as Canada.

– Global growth at +2.9% in 2015, below average.

“Achieving this rebalancing, while avoiding a sharp reduction in GDP growth and containing financial stability risks, presents significant challenges”, it said. This is deeply concerning as robust trade and global growth go hand in hand. Trade growth was expected to reach just 2pc this year, with China’s slowdown “at the heart” of subdued forecasts. It also lowered its global growth forecast for 2016 from 3.8 to 3.3 percent, citing slowing economies in China and other emerging countries and delayed recoveries in the eurozone and Japan, despite a gradual USA recovery.

“Trade should be growing at about double the speed of growth of the world economy because trade is always a locomotive”, Gurria said.

“On the fiscal side, collective action to increase public investment would increase growth sufficiently to reduce debt-to-GDP ratios, as long as investment projects are of high quality and supported by good structural policies”.

“Creating more and better jobs will require further improving the ease of doing business, modernising labour regulations, implementing the goods and services tax and making land transactions easier”, OECD noted in its report. China is forecast to grow 6.8 per cent in 2015. Instead, the OECD predicted the world economy would grow 2.9 percent this year and 3.3 percent next year.

India’s economic growth slowed to 7 per cent in the three months ended June compared to 7.5 per cent expansion recorded in the January-March quarter, as per official estimates.