The Trims Its Global Economic Forecasts Again

The OECD trimmed its global economic forecasts for the 2nd time in 3 months as slower growth in EMs (emerging markets) spilled over into and .

World output will expand 2.9% in Y 2015 and 3.3% in Y 2016, down from the 3 and 3.6% predicted in September, the Organization for Economic Cooperation and Development said in a semi-annual report published Monday.

“Global growth prospects have clouded this year,” the -based organization said. “The outlook for emerging-market economies is a key source of global uncertainty at present.”

With and in recession and China poised to deliver its weakest expansion in more than 20 yrs, the economies that powered world growth in recent years are now slowing it down. Developed economies are feeling the brunt in the form of reduced demand for both commodities and manufactured goods.

Russian is on track to drop 4% in Y 2015 and 0.4% next year, according to the report.

Since the OECD didn’t give an estimate for Russia in September, that compares with a June prediction for a contraction of 3.1% in Y 2015 and expansion of 0.8% in Y 2016.

For emerging markets, “challenges have increased,” the OECD said. Should their situation deteriorate, “growth would also be hit in the Euroarea, as well as Japan.”
Japanese GDP will grow 0.6% this year and 1% next, according to the report. While the Y 2015 forecast is unchanged, the Y 2016 one has been cut from 1.2%.

“The outlook for Japan remains softer than in other advanced economies, despite an anticipated upturn in real wage growth,” the OECD said. “This reflects a larger drag exerted by weak external demand, especially in Asia, and strong fiscal headwinds.”

The Euroarea’s expansion is now seen at 1.5% in Y 2015 and 1.8% in Y 2016, a reduction by 0.1 percentage point for each year.

The US expansion remains on track, with the OECD predicting growth of 2.4% this year and 2.5% in Y 2016. UK GDP is seen rising 2.4% in both years, little changed from September.

“Monetary policy remains very accommodative, which is consistent with stubbornly below-target inflation, subdued wage pressures and hints of downward pressure on inflation expectations.”

The OECD also offered its 1st look at Y 2017, predicting a global expansion of 3.6%. It sees growth of 2.4% in the US, 1.9% in the Euroarea and 6.2% in China.

Stay tuned…