OECD cuts 2016 growth forecast to 3.0%

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 OECD said.

The OECD report pointed to recent weak data from major economies, including the United States and Canada, as well as financial instability that’s reflected in the fall of equity and bond prices worldwide.

“All three levers of policy must be deployed more actively to create stronger and sustained growth”.

The organization joins a growing list of voices declaring that monetary policy alone is no longer enough to stoke the world’s economy.

Growth prospects in the United Kingdom and global economy have been slashed as the Organisation for Economic Co-operation and Development (OECD) called for “urgent” action to boost flagging growth.

“A central concern is the risk of the euro area getting stuck on a low-growth, low-inflation path with confidence about medium-term growth being too weak to generate higher investment and the innovations and reallocation that would strengthen productivity and employment growth”, it said.

The OECD downgrade came as Statistics Canada reported Thursday that wholesale sales rose 2.0 per cent to $57.2 billion in December, led by record results by the motor vehicle and parts subsector which climbed 10.6 per cent to $11.3 billion.

Like the International Monetary Fund (IMF), which was also revised down its figures in January, the Paris-based organization fears the consequences of lower oil prices and raw materials, as well as the slowdown Chinese economy.

Among major economies, Brazil is the only one now in recession and it’s a recession that is proving deeper and more prolonged that predicted. The euro area was projected to grow at a 1.4% in 2016 and 1.7% next year.

It calculated that raising public investment in the OECD club of 34 economies by 0.5pc of gross domestic product (GDP) each year over two years would pay for itself through higher growth in the UK, US, eurozone and Canada.

In a rare bright spot, the OECD raised its 2016 forecast for India’s growth by 0.1 percentage points to 7.4 percent.

In particular, The OECD lowered its the USA growth forecasts from 2.5% to 2% in 2016 ( 2.4% in 2015), its eurozone growth forecasts to 1.4% from 1.8%, China’s growth was lowered from 6.9% to 6.5%.

“Meeting fiscal plans will remain challenging while nominal growth outcomes disappoint, hence pointing to the need for a new strategy”, it said.

“Quality infrastructure projects would help to support future growth, making up for the shortfall in investment following the cuts imposed across advanced countries in recent years”, it said.

The OECD said that monetary policies in major economies should remain “highly accommodative until inflation has shown clear signs of moving durably towards the official target”. This should focus on policies with strong short-run benefits and that also contribute to long-term growth.