Trade barriers could threaten global growth, OECD warns

This improvement largely reflects the combined effects of fiscal and structural initiatives in major economies, notably China, Canada and the USA, together with a more expansionary stance in the euro area, the OECD said.

"The economic nationalism is a much bigger wildcard because we don't know how the language translates into policy at this point", OECD Chief Economist Catherine Mann told Reuters.

The rapid growth of private sector credit and the relatively high level of indebtedness is a key risk in a number of emerging markets and housing valuations are a matter of concern in some advanced economies, it added. Now, more than ever, governments need to take actions that restore people's confidence while at the same time resisting turning inwards or rolling back numerous advances that have been achieved through greater worldwide co-operation'.

The strength of financial market valuations appears disconnected to the outlook for the real economy, where the growth of consumption and investment remains subdued, and there is a risk of global financial market tensions as interest rates adjust and diverge across the major economies.

Publication of the OECD's March global Interim Economic Outlook, entitled Will risks derail the modest recovery? comes as the CME Group FedWatch tool calculates that there's an 84% probability that the Federal Reserve will increase its interest rate target by a quarter of a percentage point to the 0.75%-1.00% range this month and a 40% probability of another quarter-point rise by June.

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"Efforts are needed to strengthen domestic policies that support trade openness, maximize the gains from trade and ensure that the benefits are fairly shared, with obstacles to the process of reallocation and transition for workers reduced", the OECD said.

"House price-to-rent ratios are at record highs in several countries and above long-term averages in many others". However, it was forced to acknowledge better recent growth than expected, with GDP expanding previous year by 1.8 per cent.

Alongside its forecasts for the UK, the OECD predicts that global growth will pick up to 3.6% in 3017, up from the previously forecast 3.3%, reflecting "continuing and expected combined fiscal and structural initiatives in the major economies - notably China, Canada and the United States - together with a slightly more expansionary stance in the euro area". Japan's GDP growth will accelerate this year to 1.2% from 1% in 2016. The outlook for the fiscal year 2018 was retained at 7.7 percent. While the OECD notes that confidence has improved, it describes global consumption, investment trade and productivity as far from strong.

China's growth forecast for this year was raised to 6.5 percent and for next year to 6.3 percent.

Two other major emerging economies - Russian Federation and Brazil - are both recovering from deep recessions with the help of higher commodity prices and easing inflation.

  • Rita Burton