The Organisation for Economic Cooperation and Development on Wednesday cut its global economic outlook for 2016, as growth remains subdued in the United States, Europe and Japan amid sluggish trade activity.
The OECD now expects the global economy to expand 2.9 percent this year, downgraded from the 3 percent forecast in June, also citing the effects of Britain’s vote to leave the European Union as undermining conditions in advanced economies.
“The world economy remains in a low-growth trap with persistent growth disappointments weighing on growth expectations and feeding back into weak trade, investment, productivity and wages,” the Paris-based organization said in its interim economic outlook.
The OECD revised downward its growth outlook for Japan to 0.6 percent from 0.7 percent, as the yen’s appreciation and weak Asian trade are expected to weigh on the country’s exports, although government stimulus measures and a delay in the sales tax hike will bolster consumer demand.
As for the repercussions from the “Brexit” vote in June, the OECD said markets have since stabilized, and it upgraded the growth outlook for Britain to 1.8 percent from 1.7 percent for this year, reflecting the economy’s strong performance prior to the referendum.
But the organization said the country’s gross domestic product is now projected to slow considerably to 1 percent in 2017 from the earlier forecast 2 percent, citing uncertainty about the future policy path and downside risks that remain.
The OECD downgraded its growth projection of the eurozone to 1.5 percent for this year, lower than the previously estimated 1.6 percent, and 1.4 percent for 2017, down from the earlier projected 1.7 percent.
“Spillovers to the global economy, notably the euro area, have been modest so far,” the OECD said, but added “more negative effects on the euro area are likely to become apparent in 2017.”
Regarding monetary policy in the eurozone and Japan, the OECD said an accommodative policy stance remains appropriate, while warning that any decision to increase the size or expand the scope of unconventional policies “should weigh the benefits, costs and risks very carefully.”
As for the United States, the organization slashed its GDP growth forecast to 1.4 percent from 1.8 percent due to weak investment partly resulting from developments in the energy sector amid declining crude oil prices.
The OECD left unchanged its growth projection for the Chinese economy at 6.5 percent in 2016.
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