OECD echoes market fears on global outlook for 2016

The OECD has chopped its growth outlook, and in a hard-hitting report echoed many of the worries of financial markets about the health of the global economy.

The Paris-based club regularly issues forecasts for the world’s major trading nations and blocs. The Organisation for Economic Co-operation and Development is now markedly more downbeat than its previous report issued in November.

It said yesterday that the efforts taken by central banks around the world — which in the case of Sweden and Japan have included introducing negative interest rates to encourage commercial banks to lend — “cannot work alone” to spur growth.

“ Financial markets globally have been reassessing growth prospects, leading to falls in equity prices and higher market volatility,” it said.

Meanwhile, “some emerging markets are particularly vulnerable to sharp exchange rate movements and the effects of high domestic debt,” the OECD said.

The world economy will now grow by the slower than expected rate of 3% this year. Growth in the eurozone as a whole will now only reach 1.4% this year, down from the 1.8% rate it expected in November.

Italy’s economy will expand 1%, Germany’s 1.3% and France’s 1.2% The US economy will only expand 2% this year, and not the 2.5% expansion previously forecast.

“A pick-up in global growth remains elusive,” the OECD said.

“Global growth in 20016 is now projected to be about the same as 2015, a further downgrading since the November 2015 OECD Economic Outlook. These rates are the lowest in the past five years and well below long-run averages.

They are also lower than would be expected during a recovery phase for advanced economies and given the pace of growth that catching-up emerging economies could achieve,” said the report.

China’s economy will expand 6.5%, down from 6.9% last year.

It will only grow 6.2% next year.

It expects Brazil’s recession to deepen, as the economy will contract 4% this year after the 3.8% contraction in 2015.

India’s economy is expected to avoid the worst of the global slowdown. Its economy will grow 7.4% this year and by 7.3% in 2017, it forecasts.