OECD sees global growth accelerating but unsecure

By AFP   November 29, 2017 | 09:29 am GMT+7

'Strong and sustained medium-term growth is not yet secured.'

The world economy should see growth accelerate next year, the OECD said Tuesday as it released updated forecasts, but warned that conditions for a sustainable expansion are not yet in place.

With the United States, China and the eurozone all expected to continue economic growth next year, the global economy should expand by 3.7 percent next year after growing by 3.6 percent this year, the Organisation for Economic Cooperation and Development said.

"The global economy is now growing at its fastest pace since 2010, with the upturn becoming increasingly synchronised across countries," said the OECD, but noted that the rebound is "modest" compared with past recoveries.

"Moreover, the prospects for continuing the global growth up-tick through 2019 and securing the foundations for higher potential output and more resilient and inclusive growth do not yet appear to be in place," it warned.

"Strong and sustained medium-term growth is not yet secured."

The Paris-based OECD, which advises its 35 mostly industrialised members on economic policy, called for reforms to encourage business activity, trade and investment.

"A more robust investment upturn is required for a sustained recovery in the advanced economies," it said.

The OECD raised its forecasts for growth in the United States to 2.2 percent this year and 2.5 percent in 2018.

The forecast for the eurozone was hiked to 2.4 percent this year while growth is seen as slipping to 2.1 percent next year.

For China, which is not part of the OECD, it held its growth forecasts steady from its previous report in September at 6.8 percent in 2017 and dipping to 6.6 percent in 2018.

It lowered its forecast for Japan to a 1.5 percent expansion this year, but held steady its forecast of 1.2 percent growth in 2018.

Beware of the zombies 

The OECD also trimmed its forecast for Britain to 1.5 percent growth this year, but lifted its outlook for next year to 1.2 percent growth.

Brazil's recovery is seen as strengthening, with the OECD increasing its forecast to 0.7 percent growth this year, and to 1.9 percent in 2018.

While India's outlook for 2017 is unchanged at 6.7 percent growth, it trimmed the forecast for next year to 7.0 percent.

The outlook for Russia's recovery was also trimmed to 1.9 percent growth this year and next.

The OECD's chief economist, Catherine Mann, also sounded the alarm on so-called zombie firms -- companies that cheap debt allows to continue operating but are not really profitable -- saying private sector debt remains too high.

"While credit is needed to support economic activity and innovation, it can increase risks, lower growth and raise inequality," she said.

"...Zombie firms still capture too much labour and capital, taking a toll on business dynamism, productivity and real wage growth," said Mann.

The Bank for International Settlements (BIS), which groups the world's central banks together, warned in September that zombie firms would quickly feel the pain of higher interest payments when today's ultra-low rates disappear and could create "headwinds" for global growth.