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Oliver Haill Sharecast News
16 Sep, 2015 10:02 16 Sep, 2015 10:39

OECD cuts 2015 global growth forecast on emerging market outlook

UK forecasts unchanged, US upgraded for 2015 but revised down for 2016

Brazil's likely recession likely to be worse than previously forecast

Forecasts for global growth this year have been trimmed by the Organisation for Economic Co-operation and Development (OECD) due to the further worsening of the outlook for many emerging market economies.

The OECD cut its global growth forecast for 2015 to 3.0% from the 3.1% it predicted in June, though both the US and Euro-zone were revised upwards.

“Global growth prospects have weakened slightly and the outlook is clouded by important uncertainties,” said OECD chief economist Catherine Mann, who cited US interest rate hikes and Chinese slowing import demand as key global worries.

The OECD kept its projection for the UK to grow at 2.4% in 2015 and 2.3% in 2016, but upgraded its predictions for US growth by 0.4 percentage points to 2.4% this year and lowered its 2016 forecast by 0.2 points to 2.6%.

China's economic growth is expected to slow from 6.7% in 2015 (revised 0.1 points down) and to 6.5% (revised down 0.2 points).

The organisation said a "key puzzle" in the short-term was China, as growth has held up well but some indicators point to a slower underlying pace of economic activity, while the slowdown in import demand has important spillover effects on global growth and for the commodities market.

The outlook is therefore weak for many commodity-exporting nations, the OECD said, with Brazil experiencing a deep recession and deep revisions to its projections. The Brazilian economy is now expected to shrink by 2.8% in 2015 and then by another 0.7% in 2016. Commodities-heavy Canada's growth was revised down by 0.4 points this year and 0.2 the next.

Notable strong growth is expected from Japan, where growth is expected to double from 0.6% this year rising to 1.2% in 2016, while Italy is expected to nearly double from 0.7% to 1.3% in 2016.

India is still expected to be the fastest-growing major economy over the coming two years, despite growth being revised down by 0.1 points to 7.2% in 2015 and again to 7.3% in 2016.

Mann added: “Emerging economies have vulnerabilities that could be exposed by rising US interest rates and/or a sharper-than-expected slowdown in China, giving rise to financial and economic turbulence that could also exert a significant drag on advanced economies.

"Continued policy stimulus is warranted to support global demand, but the mix of policies will differ by country, and choices need to be consistent with financial stability and reviving long-run growth.”

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