OECD Lifts Global Growth Outlook Despite Trade War Concerns


The west's leading economic thinktank has warned Donald Trump that a trade war prompted by U.S. protectionism threatens to derail a recovery in global growth to its highest level in seven years.

Upgrading its forecasts, the Paris-based group in part cited USA tax cuts for the better numbers.

"We think the stronger economy is here to stay for the next couple of years", acting OECD chief economist Alvaro Pereira told Reuters.

"Growth in the U.S., Germany, France, Mexico, Turkey and South Africa is projected to be significantly more robust than previously anticipated, with smaller upward revisions in most other G20 economies", it added.

The OECD says the revised outlook compares with growth of 3.0 per cent a year ago in Canada.

Japan's growth pace is set to remain at around 1.5% in 2018 before easing to around 1% in 2019, supported by improved export growth, especially in Asian markets, and the additional spending announced in the recent supplementary budget, OECD said.

"This could obviously threaten the recovery".

The OECD added that the tax and public spending reductions in the US during the last three months and Germany's fiscal stimulus were key factors for upgrading global growth predictions in 2018 and 2019. However, it believes faster growth in the world's biggest economy will result in four increases in interest rates from the Federal Reserve, the United States central bank, this year. The OECD, which groups 35 developed economies, called on the world's major nations to avoid a dispute that could impede trade, demand, competition and, ultimately, the health of the global economy.

In November 2017, the OECD predicted an increase of 3.6 percent for 2017 and 2019, and a rise of 3.7 percent for 2018.

The OECD said high inflation would eat into United Kingdom household income while business investment would slow in the face of uncertainty over Britain's future relationship with the EU. The outlook for 2018 USA expansion was upgraded to 2.9 per cent from 2.5 per cent, and the euro area was lifted to 2.3 per cent from 2.1 per cent.

Fiscal easing in Germany's coalition agreement was seen lifting growth in the euro zone's biggest economy to 2.4%this year (+0.1 percentage point) and 2.2% in 2019 (+0.3). The currency bloc is forecast to grow 2.3% in 2018 and 2.1% in 2019.