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Financial News: OECD Sees World Economic Growth At 6-year High

OECD Sees World Economic Growth At 6-year High

06/07/2017 - 08:16:00 (RTTNews)

(RTTNews) - Global growth is set to improve this year with the world economy likely to expand at the fastest pace in six years and the momentum is expected to continue, but more efforts are needed to ensure that benefits of such expansion and globalization are more widely shared, the Organisation for Economic Co-operation and Development said on Wednesday.

The world economy is projected to grow 3.5 percent this year, the Paris-based think tank said in its semi-annual Global Economic Outlook report. That would be the fastest growth since 2011.

The forecast was raised from 3.3 percent predicted in November and retained in an interim report in March. In 2016, the global economy grew 3 percent.

The projection for next year was retained at 3.6 percent.

The improvement in the growth momentum is expected to be underpinned by stronger business and consumer confidence, rising industrial production and recovering employment and trade flows.

The U.S. economic growth forecasts for this year and next were trimmed to 2.1 percent and 2.4 percent, respectively, from 2.4 percent and 2.8 percent predicted in March.

The OECD said the risks to the U.S. outlook remain sizeable, mainly the size and timing of the fiscal stimulus are uncertain.

Eurozone growth projections for this year and next were raised to 1.8 percent from 1.6 percent seen in March. Recovery would be led by domestic demand, the report said.

The think tank said the ultra-easy monetary policy stance of the European Central bank remains appropriate as inflation is still well below the bank's "below, but close to 2 percent" target.

"As the economic outlook improves and inflation approaches the target by end-2018, the degree of monetary stimulus is projected to be somewhat reduced, with the asset purchase programme being tapered off gradually over 2018 and the deposit rate being increased by 15 basis points towards the end of 2018," the report said.

The OECD also warned that a growing backlash against globalization could trigger protectionist policies and undermine international trade, leading to lower growth.

Further, the group identified Brexit negotiations as a significant risk and cautioned that a break-up of negotiations or the prospect of an unfavorable deal could hurt confidence and trade.

"As growth and inflation prospects in core euro area economies improve, there is a risk that monetary policy tightens too rapidly, weighing on the recovery in countries with high unemployment, high public and private debt and large negative output gaps," the report said.

Growth projections for the U.K. for this year and next was retained at 1.6 percent and 1 percent, respectively. The major risk for the British economy is the uncertainty surrounding the exit process from the European Union, the report said.

"Higher uncertainty could hamper domestic and foreign investment more than projected, but swift progress in negotiations and an outcome that retains strong trade linkages with the European Union would lead to better outcomes than projected," the OECD said.

China's growth forecasts for this year and next were raised slightly to 6.6 percent and 6.4 percent, respectively, from 6.5 percent and 6.3 percent seen in March. Growth will be mainly supported by infrastructure investment, the report said.

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