The Organization for Economic Cooperation and Development (OECD) offered its global outlook on the economy, both worldwide and in major regions. It expects solid growth in most areas and improvement worldwide this year and in 2018.
The OECD forecast global growth in gross domestic product (GDP) of 3.0% this year and 3.6% in 2018. India is expected to pace the world’s economy with an expansion rate of 7.3% this year and 7.7% next. India ranks seventh in the world based on GDP at about $2.2 trillion. China’s growth is expected to slow. This year, the OECD expects 6.6%, and a drop of 6.4% next year. China has the world’s second largest economy at $11.1 trillion. China has been a primary catalyst to global growth for a decade, and any slowing poses a threat to the world’s economic health.
The U.S. economy, still the world’s largest, with a GDP of $18.4 trillion, is expected to grow 2.1% this year and 2.4% next. While the number is a reasonable recovery from the Great Recession, it is still a great disappointment. While unemployment is near multidecade lows, real estate is booming along with the stock market. Corporate earnings tend to be strong. However, wages have been relatively stagnant, and the jobs recovery has lost some of its steam.
Japan, which has been the slowest growing large economy in the world for over two decades, should post 1.4% GDP growth this year and 1.0% next. Its GDP is about $4.8 trillion, which puts it behind only the United States and China.
The economy of the European Union, the most badly battered large economy during the Great Recession, is expected to post growth of 1.8% this year and next. The EU’s numbers are dominated by Germany and France.
The OECD posted comments:
On the positive side, the Outlook points to the ageing capital stock of firms that may spur stronger-than-expected replacement investment in higher quality capital with more advanced technology. This would improve cyclical conditions and support a revival of investment-intensive global value chains, with knock-on benefits to domestic demand. Higher quality capital would also improve productivity and boost potential output.
Among downside risks, the Outlook points to financial risks and vulnerabilities in advanced and emerging economies, high policy uncertainty in many countries and continued weak wage growth.
In other words, politics could drive most economies well above or below the forecast.