OECD Raises 2017 UK Economic Growth Forecast To 1

In general, OECD expects improvement in world trade, especially in Asia, but believes that the growth will happen at a slower pace than that recorded before the 2008-2009 global financial crisis.

"Global GDP growth is projected to increase, rising from just under 3% in 2016 - the slowest pace since 2009 - to 3.3% in 2017 and around 3½ percent in 2018", the OECD said in its interim economic outlook, released on Tuesday.

The projected improvement largely reflects continuing and expected combined fiscal and structural initiatives in the major economies - notably China, Canada and the United States - together with a slightly more expansionary stance in the euro area, which could be more ambitious.

"A rollback of existing trade openness would be costly, with a significant share of jobs in many countries linked to participation in global value chains", it said.

Though not named in the report, some of the concerns are related to the policies of U.S. President Donald Trump's administration, including his threats to impose tariffs on nations he deems to have an unfair advantage, The OECD also said there's a "disconnect" between equity valuations and the outlook for the real economy, with the market performance partly linked to anticipation of a Trump stimulus package.

The rapid growth of private credit in emerging economies, especially China, is another key risk, as is the housing market in some advanced economies.

Next year, the US economy is projected to grow by 2.8 per cent and Canada's is expected to expand by 2.2 per cent, ahead of the other G7 countries.

In 2018, US growth was seen at 2.8 down from a previous estimate of 3 percent.

The world economy will witness modest growth in the next few years but it could be derailed by financial and policy instability, according to the Organisation for Economic Cooperation and Development.

Political uncertainty in many countries risks hampering a modest global economic expansion this year and next, the OECD warns.

The new prediction is in line with the Eurozone's expected growth of 1.6% although due to Trump's spending promises the USA economy is forecast at 2.4% for 2017. Japan's GDP growth will accelerate this year to 1.2% from 1% in 2016. Prospects will depend on the extent to which labour-market duality is reduced and wage growth picks up.

As rising inflation hits British consumers and businesses put investment on hold over Brexit, British growth was seen slowing from 1.6 per cent this year to 1.0 per cent in 2018.

  • Todd Kelly