Organisation for Economic Co-operation and Development (OECD) on 6 November 2014 released Economic Outlook 2014. According to the Economic Outlook 2014, Global GDP growth is projected to reach a 3.3 percent rate in 2014 before accelerating to 3.7 percent in 2015 and 3.9 percent in 2016.
The global growth pace is modest when compared with the pre-crisis period which was below the long-term average. This forecast is slightly lower than the September 2014 forecast.
Highlights of Economic Outlook 2014
• The global economy remains stuck in low gear but is expected to accelerate gradually if countries implement growth-supportive policies. Besides, widening differences across countries and regions are the major risks on the horizon.
• Financial risks remain high and may increase market volatility in further and 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.
Growth in developed economies
• The United States recovery remains robust among the major advanced economies, which is projected to grow by 2.2 percent in 2014 and around 3 percent in 2015 and 2016.
• Euro zone growth is expected to pick up slowly, from 0.8 percent in 2014 to 1.1 percent in 2015 and 1.7 percent in 2016.
• Japan growth is expected to be 0.9 percent in 2014, 1.1 percent in 2015 and 0.8 percent in 2016 and the growth will continue to be impacted by consumption tax hikes.
Growth in BRIC nations
• Brazil growth has slumped, with the economy set to expand by only 0.3 percent in 2014, 1.5 percent in 2015 and 2 percent in 2016.
• The Russian economy will expand by only 0.7 percent in 2014 and growth is expected to fall to zero in 2015 before recovering to 2 percent in 2016 due to hit by lower oil prices and weakening trade.
• India growth is projected 5.4 percent in 2014, 6.4 percent in 2015 and 6.6 percent in 2016 due to investment picks up.
• China is projected to grow at around 7 percent over the 2015-16, down slightly from 7.4 percent in 2014. It is rebalancing its economy while trying to achieve a controlled slowdown to more sustainable growth rates.
Downside risks to the Global economy
• There are significant downside risks and major concern is the weakness of demand in the euro area, which points to a rising risk of a prolonged period of stagnation and low inflation.
• Tightening of US monetary policy can lead to financial market volatility for emerging market economies.
• High levels of debt in some advanced and emerging economies also raise financial stability concerns.
• A key risk is that the slowdown in potential output growth since the crisis leads to even weaker trend growth than currently anticipated.
Recommendations made by Economic Outlook 2014:
• Monetary policy still needs to support demand in all the major advanced economies especially the United States, continued growth and tightening labour markets should allow policy rates to begin rising from mid-2015.
• The Bank of Japan should continue quantitative easing until its inflation target has been sustainably achieved and fiscal consolidation should proceed steadily in Japan.
• The euro zone area inflation far below target and drifting downward so the European Central Bank should expand its monetary policy stimulus that is even beyond measures already announced - building on the positive steps taken to date.
• Ambitious structural reforms that complement macroeconomic policies can boost growth in advanced and emerging countries are different. To look into the issue, G20 countries are set to deliver national growth strategies at the Brisbane summit that could collectively lift G20 GDP by about 2 percent by 2018 relative to the 2013 level.
• Reforms to tax, trade, labour, and product markets will benefit domestic investment and global trade, and support greater employment and consumption around the world.
• The potential pay-off from the structural reform agenda under consideration is tremendous, but countries must implement the measures that have been identified to get the global economy into higher gear.
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