Friday, 20 July, 2018

OECD raises Canada's economic outlook, warns trade protectionism could hurt global growth

OECD raises Canada's economic outlook, warns trade protectionism could hurt global growth OECD raises Canada's economic outlook, warns trade protectionism could hurt global growth
Melinda Barton | 13 March, 2018, 18:49

The OECD also projected to rise of global GDP growth by 3.9 percent for both 2018 and 2019. The think tank said United States tax cuts and spending increases, combined with fiscal stimulus in Germany, were the main reasons for the improved outlook.

Germany's economy will grow 2.4% this year (one tenth more than expected in November) and 2.2% in 2019 (two tenths more), the authors of the report say.

President Trump has advocated trade wars and has proposed tariffs on imports of steel into the USA, raising alarm bells about a revival of protectionist policies that could hit trade and growth. The projection for this year was revised up from 3.7 percent and that for 2019 from 3.6 percent.

The German rise will be slightly higher than that of the euro area as a whole, with a forecast increase of up to 2.3% in 2018 and 2.1% in 2019 (two tenths more in both cases).

"Industrial production, investment and trade growth have rebounded, with global trade growth reaching an estimated over 5 percent in 2017, and business and consumer confidence remain elevated", the OECD stated.

"Safeguarding the rules-based global trading system is essential to prevent the longer-term harm to growth prospects that could arise from a retreat from open markets", it said.

Trump last week announced duties of 25 percent on imported steel and 10 percent on aluminium, though his government has said it will consider exceptions and has already spared Mexico and Canada.

The OECD expects the global economy will grow 3.9 per cent in 2018, up 0.2 percentage points from its forecast in November.

He said: "Investment is coming back, and so this is very good news for good new for jobs and growth across the economies".

Growth surprised on the upside in China in 2017, helped by a strong rebound in exports, but is set to soften to 6.7 percent this year and to 6.4 percent by 2019, the OECD said.

"I think it is very important to avoid escalation and to initiate a strengthening in the global dialogue to solve not only the problem for steel but to avoid bigger repercussions in terms of trade".

As growth recovers, monetary policy across the world is gradually returning to more normal levels after years of highly expansionary central bank action.

It said pre-Christmas tax cuts in the USA, the world's largest economy, would account for much of the upgrade though it warned that protectionist policies were a big risk factor.

The body's Interim Economic Outlook - released as Chancellor Philip Hammond was preparing to paint a hopeful picture of Britain's prospects in his spring statement - nudges predicted United Kingdom growth for 2018 up by a tenth of a percentage point to 1.3%.