OECD Interim Economic Outlook: GETTING STRONGER, BUT TENSIONS ARE RISING
The world economy will continue to strengthen in 2018 and 2019, with global GDP growth projected to rise to about 4%, from 3.7% in 2017.
Stronger investment, the rebound in global trade and higher employment are helping to make the recovery increasingly broad-based.
New tax reductions and spending increases in the United States and additional fiscal stimulus in Germany are key factors behind the upward revision to global growth prospects in 2018 and 2019.
Inflation remains low, but is likely to rise modestly.
Still-elevated risk-taking and high debt levels in many countries raise financial vulnerabilities. Monetary policy normalisation could also result in greater volatility of exchange rates and capital flows, particularly in emerging market economies.
Medium-term growth prospects remain much weaker than prior to the financial crisis, reflecting less favourable demographic trends and a decade of sub-par investment and productivity.
Economic policies face several challenges:
- A gradual normalisation of monetary policy is needed, but to a varying degree across the major economies. Continued clear communication about the path to normalisation is essential to minimise the risk of financial market disruptions.
- Fiscal policy choices should avoid being excessively pro-cyclical and be clearly focused on measures that strengthen the prospects for sustainable and more inclusive medium-term growth.
- Structural reform efforts should be revived, seizing the opportunity of the stronger economy to help secure a more robust recovery of productivity, investment and living standards.
Safeguarding the rules-based international trading system will help to support growth and jobs. Governments should avoid escalation and rely on global solutions to resolve excess capacity in the global steel industry.
