Published: Wed, March 08, 2017
Markets | By Erika Turner

OECD Says Global Growth To Pick Up Modestly Amid Vulnerabilities, Risks

OECD Says Global Growth To Pick Up Modestly Amid Vulnerabilities, Risks

The think-tank said Canada's economy will be supported this year by export growth, a better market for commodities and government spending initiatives.

"In financial markets, there are apparent disconnects between the positive assessment of economic prospects reflected in market valuations and forecasts for the real economy", the Paris-based organization said in its latest economic outlook.

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

"Now, more than ever, governments need to take actions that restore people's confidence while at the same time resisting turning inwards or rolling back numerous advances that have been achieved through greater worldwide co-operation", OECD Secretary-General Angel Gurría said, commenting on the report.

The strength of financial market valuations appears disconnected to the outlook for the real economy, where the growth of consumption and investment remains subdued, and there is a risk of global financial market tensions as interest rates adjust and diverge across the major economies.

OECD chief economist Catherine Mann said that higher interest rates in the United States could unleash damaging volatility on financial markets for some borrowers while potentially pushing the dollar higher.

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The OECD also raised its estimates for several of the world's biggest economies, including the United States and China, but kept its world economic estimate unchanged at 3.3 per cent - just slightly better than last year's weak 3.0 per cent.

China's growth forecast for this year was raised to 6.5 percent and for next year to 6.3 percent.

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. The world's second-largest economy will likely expand 6.5 percent this year, up from 6.4 percent forecast earlier, and by 6.3 percent in 2018, up from 6.1 percent. For 2018, the rate is set to quicken to at 3.6 percent. The organization expects global GDP to grow by 3.3 per cent in 2017 and 3.6 per cent in 2018. And growth in consumption and investment is still lagging.

As to Brazil and Russian Federation, both suffering a deep recession, would register growth recovery thanks to higher commodity prices and easing inflation, according to the OECD report.

The OECD says governments need to manage risks, enhance economic resilience and strengthen the environment to boost growth, with improvements in both productivity and inclusiveness.

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