• Home
• /
• Economy
• /
• Business

OECD cuts 2016 growth forecast to 3%

The Paris-based body trimmed its outlook for this year as growth slows in many emerging countries and advanced economies only expected to achieve modest recovery after a 2015 that saw the slowest growth in five years.

paris - The OECD on Thursday cut its 2016 economic growth forecast to three per cent from 3.3 per cent owing to disappointing data, sluggish demand, weak investment and a high risk of financial instability.
"Financial instability risks are substantial," the 34-member Organisation for Economic Cooperation and Development said in its latest interim outlook, urging a strong collective response to combat sagging global growth, which it predicts will not surpass 2015's already pallid showing.
The Paris-based body trimmed its outlook for this year as growth slows in many emerging countries and advanced economies only expected to achieve modest recovery after a 2015 that saw the slowest growth in five years.
"Global growth prospects have practically flat-lined, recent data have disappointed and indicators point to slower growth in major economies, despite the boost from low oil prices and low interest rates," said OECD Chief Economist Catherine L. Mann at a news conference.
Mann urged "greater use of fiscal and pro-growth structural policies, to strengthen growth and reduce financial risks" after a forecast coming in well below a long-run average of around 3.75 per cent, the OECD said, adding it would expect a higher figure during a "recovery phase" for advanced economies and for "emerging economies in convergence mode".
In its November outlook, the OECD had already downgraded its initial 2016 estimate, citing stagnating trade amid a slowdown in China.
But it said it felt compelled to do so again, while also revising downward an initial November projection for 2017 to 3.3 per cent from 3.6 per cent in an environment likely to impact most severely on the United States, the eurozone and economies reliant on commodity exports.
"A stronger collective policy response is needed to strengthen demand," said the organisation a week before G-20 finance ministers and central bank governors meet in Shanghai, noting "contractionary" fiscal policy in many major economies amid slowing structural reform.
The downgrade reflects "a broad range of disappointing incoming data for the fourth quarter of 2015 and the weakness and volatility in global financial markets", trends "apparent in both advanced and emerging economies," said the OECD, identifying further risk as emerging market currency volatility and debt, notably in Russia, Turkey and Brazil.