OECD cuts global growth forecasts, warns of debt risks

Monitoring stock prices at Bombay Stock Exchange in Mumbai, India. Bourses worldwide have plunged this year amid concern that China's slowdown and the oil price slump will hit global expansion.
Monitoring stock prices at Bombay Stock Exchange in Mumbai, India. Bourses worldwide have plunged this year amid concern that China's slowdown and the oil price slump will hit global expansion.PHOTO: AGENCE FRANCE-PRESSE

PARIS • The Organisation for Economic Cooperation and Development (OECD) cut its global growth forecasts, saying the economies of Brazil, Germany and the United States are slowing and warning that some emerging markets are at risk of exchange-rate volatility.

Global gross domestic product will expand 3 per cent this year, the same pace as last year and 0.3 percentage point lower than predicted in November, the Paris-based OECD said in a report yesterday.

"Financial stability risks are substantial. Some emerging markets are particularly vulnerable to sharp exchange-rate movements and the effects of high domestic debt," it said.

Stock markets around the world have plunged this year amid concern that slowing growth in China and a slump in oil prices will slow global expansion.

With Group of 20 finance ministers and central bankers gathering in Shanghai next week to grapple with the slowdown, the OECD urged them to consider offering more fiscal stimulus to support monetary efforts already under way.

"A stronger collective policy response is needed to strengthen demand," the OECD said. "Monetary policy cannot work alone. Fiscal policy is now contractionary in many major economies. Structural reform momentum has slowed. All three levers must be deployed more actively to create stronger and sustained growth."

The OECD cut its 2016 forecasts for both the US and Germany by 0.5 percentage point. The US is now seen expanding 2 per cent this year and 2.2 per cent next year. German growth will be 1.3 per cent and 1.7 per cent respectively.

The US is facing "an intensification of headwinds, including the drag on exports from the stronger dollar and energy-sector investment from low oil prices", the OECD said.

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A version of this article appeared in the print edition of The Straits Times on February 19, 2016, with the headline 'OECD cuts global growth forecasts, warns of debt risks'. Print Edition | Subscribe