OECD Sees Better Outlook, if Trade Escalation Avoided

OECD Sees Better Outlook, if Trade Escalation Avoided

U.S. economic growth is tipped for a rise from 2017's 2.3% to 2.9% this year and 2.8% in 2019, on the back of tax cuts and spending increases under President Donald Trump.

Global economic growth accelerated a year ago as higher investment and falling unemployment drove pickups in most major economies.

Mr Pereira said global growth would be led by a recovery in investment, while an increase in trade volumes of 5.2% in 2017 was expected to continue in 2018.

"We think the stronger economy is here to stay for the next couple of years", acting OECD chief economist Alvaro Pereira told Reuters."We are getting back to more normal circumstances than what we've seen in the last 10 years".

However, it warned that the recovery risked being undermined by an escalation in trade barriers that would hurt growth and jobs. "Certainly we believe this is a significant risk, so we hope that it doesn't materialize because it would be fairly damaging", Pereira said.

It credited tax cuts in the USA, the world's largest economy, for much of the upgrade - though the worldwide forum warned that protectionist policies were a big risk factor in the forecast.


For South Africa, the OECD has revised the expected GDP growth rate upward to 1.9% in 2018, and 2.1% in 2019 - higher than the growth rate now targeted by National Treasury.

With tax cuts boosting the economy this and next year, the OECD forecast the upper bound of the target federal funds rate could reach 3.25 percent by the end of 2019 from 1.5 percent now. That's up from a November forecast of 1.2 per cent but it would still see the United Kingdom lagging all other G20 countries.

This is up from a forecast last November of 3.7% in 2018 and 3.6% in 2019.

The OECD blamed the UK's position on high inflation dampening consumer demand and continued uncertainty about Brexit. Previously, the OECD had forecast growth of 2.1 percent and 1.9 percent respectively.

The Paris-based intergovernmental group said on Tuesday that it now anticipates the global economy to grow by 3.9 per cent both this year and next, from a previous forecast of 3.6 per cent for both years.

National Treasury now anticipates growth of 1.5% in 2018, rising to 2.1% in 2020.

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