OECD upgrades eurozone and China growth forecasts; United Kingdom and USA unchanged


OECD upgrades eurozone and China growth forecasts; United Kingdom and USA unchanged

Monetary policy should remain accommodative in some economies but with an eye on financial stability so as to remain supportive of further rebalancing towards fiscal and structural initiatives.

Even so, the Paris-based institution stuck with its 3.5 per cent global growth forecast for 2017 while upgrading next year to 3.7 per cent from its 3.6 per cent projection made in June.

He said Australia has become a bit of a laggard in the world economy having been a leader during the 2008-2009 global financial crisis. While the OECD didn't revise its forecast for the United Kingdom - which is for 1.6% growth in 2017, falling to just 1% in 2018 - it continues to expect the United Kingdom will exit the European Union without a free trade deal.

The 2017 forecast is unchanged from its June calculation, while the 2018 rate has been revised upwards from 3.6% earlier this year.

In a forecast update Wednesday, the OECD is now predicting eurozone growth this year of 2.1 percent. The upswing is also driven by stronger consumption growth and investment, as well as healthy export growth. The unemployment rate has fallen to below 4.5%, but weak productivity and real wage growth persist. Stagnant wages, combined with a depreciation in sterling that has pushed up inflation, is dampening consumers' appetite for purchases. That's 0.3 percentage point more than its previous prediction in June and means the region will match the expected growth rate of the USA, which was left unchanged.

The OECD predicted better than expected growth in Russian Federation - 2% rather than 1.4% this year and 2.1% rather than 1.6% next year. Global growth was 3.1% in 2016.

"Rising corporate profits should help strengthen business investment through 2018", the OECD added. The investment bank said China's growth remains "on track" although it may soften from 6.9 percent in the second quarter to 6.7-6.8 percent in the third quarter. In the longer run, the GST is expected to boost investment, productivity and growth. Canada's central bank raised rates twice this summer, for a compound increase of 0.5 percentage points, from 0.5 per cent to 1 per cent.

It also said China's strong growth has benefited emerging market economies.



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