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OECD estimates strong global growth in 2018-19

Xinhua | Updated: 2018-05-31 11:01
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Night view of Guangzhou, Guangdong province, July 20, 2017. [Photo/VCG]

PARIS - The Organization for Economic Cooperation and Development (OECD) on Wednesday predicted higher global growth this year to reach "the historical average of the past few decades," thanks to resilient investment, a rebound in world trade and a favorable fiscal policy.

Its Economic Outlook report projected the world economy would grow 3.8 percent this year and 3.9 percent in 2019, up from an initial forecast of 3.7 percent and 3.6 percent respectively, reaching the long-term average prior to the economic crisis.

"This is a good news. And this news is even better knowing, that in part, the stronger growth of the world economy is supported by a welcome rebound in investment and in world trade," said Alvaro Santos Pereira, the OECD acting chief economist.

"The recovery in investment is particularly worth emphasizing, since the fate of the current expansion will be highly dependent on how investment will perform," he said.

The Paris-based organization also attributed improved global economic performance to higher employment in many economies as well as monetary and fiscal policy support that it said "continues to help underpin activity, with the effect of still-accommodative monetary policy being reinforced by an easing of the fiscal stance in majority of the countries."

"We can say that fiscal policy is the new game in town, three quarters of OECD countries are now undertaking fiscal easing...(that) will have important repercussions for the world economy. In the short term, it will add to growth," Pereira said.

However, he warned about the risk of inflationary pressures of fiscal stimulus in the medium term in countries that have been experiencing longer expansion.

Economic growth across the OECD would remain close to 2.5 percent this and next year due to fiscal easing, according to the OECD report.

Regarding that in the eurozone, the OECD revised up its forecast to 2.2 percent in 2018 and 2.1 percent next year compared to 2.1 percent and 1.9 percent previously.

In the United States, growth would accelerate by 2.9 percent in 2018, then inch down to 2.8 percent in 2019, it said.

In its global outlook, the OECD noted that the activity in emerging markets rebounded thanks to improved global trade, higher commodity prices and stronger investment in infrastructure in Asian economies, notably in China whose growth was expected to reach 6.7 percent this year and 6.4 percent in 2019.

The growth prospects in developing countries appear solid but at different speed patterns, it added.

While the outlook seems rosy for major economies, the OECD warned that increasing fiscal policy easing may hamper action to attain strong self-sustained growth, and that trade protectionism would badly impact investment, job creation and living standards while geopolitical concerns would lead to rise in oil prices.

In order to overcome these challenges, the organization proposed more robust and resilient productivity recovery, investment and living standards, in addition to normalized monetary policy to minimize the risk of financial market disruptions.

It also recommended that fiscal policy should focus on measures to help strengthen medium-term growth, ensuring that recovery would yield widespread benefits.

"In spite of stronger growth, there is no time for complacency. Structural reforms are vital to sustain the current expansion and to mitigate risks," Pereira said.

"At this juncture of the world economy, it's truly crucial to give reforms a chance. After monetary and fiscal policies have done their jobs, it's time for reforms to sustain the expansion, to improve well-being and to make growth work for all," he added.

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