The Organisation for Economic Co-operation and Development on Tuesday maintained its global economic growth forecast for 2018 as the expansion, though modest, becomes more “synchronized” across countries.
“The broad-based cyclical upturn is set to persist into 2018, with global gross domestic product growth projected to strengthen to 3.7 percent,” the OECD said in its economic outlook report. The world economy is expected to register a 3.6 percent increase in 2019.
Lifted by robust exports, Japan’s economy is projected to expand 1.2 percent in 2018, unchanged from the OECD’s previous forecast in September.
But growth will likely slow to 1.0 percent in 2019 as fiscal consolidation resumes, with rising geopolitical tensions in Northeast Asia and trade protectionism moves cited as downside risks to the Japanese economy.
Over the three years through 2019, global growth is estimated to average 3.6 percent a year, which the OECD said is “comparatively modest for a cyclical upswing.”
The Paris-based organization said wage growth and inflation remain moderate in major economies despite recovering employment conditions.
The Bank of Japan should maintain its loose monetary policy until its 2 percent inflation target is achieved, the OECD said, projecting that the country’s core consumer price index will rise 0.8 percent in 2018 and 1.7 percent in 2019.
Despite years of Prime Minister Shinzo Abe’s Abenomics policy mix that includes the BOJ’s monetary easing, Japan has yet to break free from deflation.
As Japan’s debt, the highest among OECD countries, poses “a serious risk,” the report called for a “detailed and concrete strategy” to fix its finances in the next fiscal consolidation plan to be announced in 2018.
“Increasing female employment by expanding childcare and improving work-life balance is also key to boost growth and help put the government debt ratio on a downward trend,” the report said.
Abe has effectively given up the country’s goal of achieving a primary balance surplus by fiscal 2020 as he aims to spend part of the expected revenue from a consumption tax hike in 2019 on child care and education.
In the latest report, the OECD lifted its 2018 outlook for the U.S. and eurozone economies but left its forecast unchanged for the Chinese economy.
The U.S. economy, the world’s largest, is projected to grow 2.5 percent, rather than 2.4 percent estimated in September, and 2.1 percent in 2019 on hopes for increased investment and consumption thanks to envisaged tax reform.
The eurozone is expected to see 2.1 percent growth in 2018 and China’s economy, the world’s second-largest, will likely expand 6.6 percent.