OECD says investment crucial to improving the world economy

According to the OECD’s latest Economic Outlook, global growth will gradually strengthen towards 2016. Labor markets are slowly improving in the advanced economies and the risks of deflation are not as great as they were.

Nevertheless the OECD was only prepared to give the global economy a ‘B-minus’ grade. Apparently, global growth in the first quarter of 2015 was slower than in any quarter since the financial crisis.

The OECD says weak investment in many economies is preventing an increase in consumption, job growth and wage rises and damaging the prospects for long-term sustainable growth.

"The global economy is projected to strengthen, but the pace of recovery remains weak and investment has yet to take off" OECD Secretary-General Angel Gurría said. "The failure to trigger strong, sustainable growth has had very real costs in terms of lost jobs, stagnant living standards in advanced economies, less vigorous development in some emerging economies, and rising inequality nearly everywhere."The OECD predicts global growth at 3.1 percent in 2015, rising to 3.8 per cent in 2016, lower than the 3.6 percent and 3.9per cent forecast in the previous Outlook in November 2014, largely on account of the unexpectedly slow growth in the first quarter of 2015.

US GDP growth is forecast to be 2.0 percent in 2015 and 2.8 percent in 2016, lower than the November 2014 prediction of 3.1 percent this year and 3.0 percent in 2016.

Output in the Euro area is likely to rise by 1.4 percent this year and 2.1 percent in 2016, more than envisioned in the previous Outlook, when the forecasts were 1.1 percent for 2015 and 1.7 percent for 2016.

Japanese growth is predicted to be 0.7 percent in 2015 (compared with 0.8 percent in the previous Outlook) and 1.4 percent in 2016 (1.0 percent previously).

In China, the 2015 GDP growth forecast is 6.8 percent, revised downward from 7.1 percent in the November Outlook, and to 6.7 percent from 6.9 per cent for 2016.

In India, growth is expected to hold firm in 2015 (at 7.3 percent) and 2016 (7.4 per cent). Russia and Brazil are expected to see low but positive growth in 2016.

"To move from a "B-minus" grade to an "A" means boosting investment in order to create jobs and stimulate consumption", said OECD Chief Economist Catherine Mann. "It means putting in place structural policies to raise productivity and encourage competitive markets as part of a package combining monetary and fiscal policies that deliver adequate demand growth and reduce policy uncertainty."

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