OECD downgrades world growth outlook

By Muhammed Ali Gurtas

ANKARA

The Organization for Economic Co-operation and Development (OECD) on Thursday downgraded its global economic growth forecast for 2018 and 2019, largely due to high uncertainty.

"Global growth is projected to settle at 3.7 percent in 2018 and 2019, marginally below pre-crisis norms, with downside risks intensifying," the organization said in its latest interim economic outlook report.

Its latest annual growth forecasts for the world economy are down 0.1 percentage point for this year and down 0.2 percentage point for next year compared with its previous estimates in May.

"Policy support and strong job growth continue to underpin domestic demand, but some emerging market economies are facing significant headwinds from rising financial market pressures," it said.

Pointing to slow global trade growth in the January-June period, the organization noted that trade tensions had adverse effects on confidence and investment plans.

"Additional trade restrictions will harm jobs and living standards, particularly for low-income households," it said.

According to the OECD, the emerging market economies could experience additional financial market troubles with "faster-than-expected monetary policy normalization in advanced economies or a deepening of trade tensions".

"A decade after the financial crisis, vulnerabilities remain in financial markets from elevated asset prices and high debt levels.

"Reforms have strengthened the banking system, but risks have shifted towards less tightly regulated non-bank institutions," it said.

The organization also made some suggestions about economic policies, which are facing various threats surrounded by noticeable uncertainties.

"A gradual normalization of monetary policy is needed, but to a varying degree across economies," it said, noting that fiscal policies should aim to improve the prospects for sustainable and more inclusive medium-term growth.

"Monetary and fiscal policy space needs to be restored gradually to provide scope for support in a future downturn," the organization said.

On the emerging market economies side, the OECD said that policy choices should focus on restoring confidence and stability and avoid harm to medium-term growth prospects.

In strengthening financial resilience, it noted that enhanced deployment of macro-prudential policies would be effective.

"Greater structural reform ambition is required to enhance medium-term living standards and improve opportunities for all," it added.