OECD’s Economic Outlook 2014 Released

OECD’s Economic Outlook 2014 Released

Organisation for Economic Development and Cooperation/OECD has just released the Economic Outlook 2014 on November 6th, 2014. As per the Economic Outlook, global GDP is projected as reaching 3.3% in 2014 before acceleration to 3.7% in 2015 and 3.9% in 2016. This is a modest pace of global growth as compared with the pre-crisis period and it is better than the September 2014 forecast. The report indicated that global economies implementing growth supportive policies will be able to increase the rate of the acceleration of the international economy though the latter is currently stuck in low gear. Growing differences across countries as well as regions are also creating a risk element. Financial risks continue to be high and this may contribute to a rise in market volatility and increasing risk of stagnation in the Euro zone.

Countries should seek to use monetary, fiscal and structural reforms to bring about growth and development plus meet the risks. Among the advanced and developed economics, the United States recovery remains robust and it is projected to grow by 2.2% in the year 2014 and 3% in the years 2015 and 2016. Euro zone is also expected to pick up slowly to 1.1% in 2015 from 0.8% in 2014 and 1.7% in 2016. Growth in the eastern nation of Japan is pegged at 0.9% in 2014, 1.1% in 2015 and 0.8% in 2016. Growth will continue to receive impact from consumption tax hikes. Brazil’s growth has slumped with the economy seeking expansion only by 0.3% in the year 2014 and 1.5% in 2015 as against 2% in 2016. The Russian economy also expands by about 0.7% in 2014 and growth is expected for each zero in 2015 before recovering to 2016’s 2 percent. The dismal economic results are estimated on account of lowering oil prices and weakening trade for the Russian nation.

India’s projected a growth of 5.4% in 2014 and 6.4% in 2015 as against a 6.6 in 2016 is an estimation based on pro growth and development policies and the spurring of trade and investment in this Asian nation. China is projected to grow at around 7% in 2015-2016 down from 7.4% as it balanced its economy while achieving a controlled growth which is sustainable.

Significant risks and major concerns are the weakness of demand in the Euro zone which points to stagnation and low inflation. Tightening of the monetary policy of the US may lead to volatility for emerging market economies. In advanced as well as emerging economies, financial stability concerns have been raised due to high level of debt.Slowdown in growth ever since the crisis has led to bad results for the global economy on the whole.

Economic Outlook 2014: Recommendations

The report recommends the need to support demand in advanced economies such as the US apart from continued growth and tightening of labour markets so policy rates can rise from mid 2015. Quantitative easing by the Bank of Japan should continue until considerable achievement of the inflation target and fiscal consolidation in Japan. Euro zone inflation is on the downward drift and the European Central Bank should engage in expansion of the monetary policy stimulus beyond current measures announced. Structural reforms that boost macroeconomic growth are needed. For dealing with the issue, G20 countries are all set to deliver national growth strategies at the summit in Brisbane for lifting the GDP of the G20 by 2% in 2018 as against the 2013 level. Tax, trade, labour and product markets will also benefit from the reforms in these sectors which will spur greater employment and consumption in the nations.

“We have yet to achieve a broad-based, sustained global expansion, as investment, credit and international trade remain hesitant,” OECD Secretary-General Angel Gurría was quoted as saying while launching the Outlook in the run-up to the G20 Leaders’ Summit in Brisbane. “Financial risks remain high and may increase market volatility in the coming period. There is an increasing risk of stagnation in the euro area. Countries must employ all monetary, fiscal and structural reform policies at their disposal to address these risks and support growth,” Mr Gurría said. The advanced OECD Economic Outlook - (the complete report will be presented on 25 November) - provides policy recommendations for strengthening growth and combating downside risks.