Economic nationalism and volatility threatens modest recovery - OECD

Economic nationalism and volatility threatens modest recovery - OECD

The Organisation for Economic Co-operation and Development did not mention US President Donald Trump by name, but warned that ripping up trade agreements hurts everybody, especially those who put up new obstacles to trade.

A modest recovery underway in the global economy is at risk from economic nationalism and diverging central bank policies, the OECD said yesterday as it forecast only a slight pick-up in growth.

The global economy portrayed by the Interim Economic Outlook remains beset by sub-par GDP growth and high inequality, calling for policy responses that advance inclusive growth in the context of increased economic integration.

'Falling trust in national governments and lower confidence by voters in the political systems of many countries can make it more hard for governments to pursue and sustain the policy agenda required to achieve strong and inclusive growth, ' the OECD said.

The OECD predicts that global economic growth this year will be 3.3 percent and rise to around 3.6 percent in 2018.

"Exiting the low-growth trap depends on the joint impact of macroeconomic, structural and trade policy choices, as well as on concerted and effective implementation of existing initiatives".

Only last week, the Trump administration made clear it did not feel bound by World Trade Organisation rulings, saying it "will aggressively defend American sovereignty over matters of trade policy".

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In 2018, USA growth was seen at 2.8 down from a previous estimate of 3 percent. It first gave the figure in November.

At the same time, many countries have new governments, face elections this year or rely on coalition or minority governments.

OECD Chief Economist Catherine L. Mann said: 'The pick-up in growth from countries taking fiscal initiatives is broadly welcome, but we can not ignore the danger that the recovery gets knocked off track by policy errors or financial risks and vulnerabilities. One remedy would be for governments to use any leeway in public finances to help struggling demand.

The OECD also raised its estimates for several of the world's biggest economies, including the United States and China, but kept its world economic estimate unchanged at 3.3 per cent - just slightly better than last year's weak 3.0 per cent.

European powerhouse Germany, which is running a record-high budget surplus, has recently come under increasing pressure from its EU partners to loosen its purse strings to push imports and consumer spending.