$470 billion trade war looms over OECD's optimistic global outlook

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It said that the tax cuts in the US will boost business investment and could add as much as 0.75 percentage point to growth this year and next in the world's largest economy.

It sees the world economy expanding 3.9 per cent in both 2018 and 2019, the strongest since 2011.

"High inflation continues to damp real household income growth and consumer spending, and business investment is slowing, amidst continued uncertainty about the future relationship between the United Kingdom and the European Union", said the OECD.

"Growth is steady or improving in most G20 countries and the expansion is continuing", the group said.

As downside risks, the report cited persisting gestures of trade protectionism, the normalization of monetary policies in key countries, demographic changes and a decrease in mid- and long-term investment.

The OECD's acting chief economist said any trade war resulting from US President Donald Trump's planned import duties on steel and aluminium products, would prove "fairly damaging".

The world's largest economy is expected to grow 2.9 percent this year and 2.8 percent next year.

Against that backdrop, the Federal Reserve would probably have to raise interest rates four times this year as inflation picks up, Pereira said.

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. The Paris-based organization had expected growth to be 1.2 percent in 2018 and 1.0 percent in 2019. Previously, the OECD had forecast growth of 2.1 percent and 1.9 percent respectively.

The fastest growth this year will be India, with expansion of 7.2 per cent, followed by China at 6.7 per cent, and Turkey and Indonesia both at 5.3 per cent - all revised upwards since November.

Fiscal easing in Germany's coalition agreement was seen lifting growth in the euro zone's biggest economy to 2.4 percent this year (+0.1 percentage point) and 2.2 percent in 2019 (+0.3). The OECD, which groups 35 developed economies, called on the world's major nations to avoid a dispute that could impede trade, demand, competition and, ultimately, the health of the global economy.