OECD raises Canada's economic outlook, warns trade protectionism could hurt global growth

Cheryl Sanders
March 13, 2018

An escalating trade war is one of the only things standing in the way of the global economy growing at its fastest pace since 2010 this year and next, according to the influential Organisation for Economic Co-operation and Development (OECD).

The world's largest economy is expected to grow 2.9 percent this year and 2.8 percent next year.

President Trump has advocated trade wars and has proposed tariffs on imports of steel into the U.S., raising alarm bells about a revival of protectionist policies that could hit trade and growth.

The OECD predicts the fastest world growth since 2011 this year, helped by U.S. tax cuts and spending in Germany.

But while it also revised slightly upwards its expectations for the United Kingdom economy - to growth of 1.3% during 2018 - it said Brexit uncertainty would continue to weigh on performance.

It put global economic growth at 3.9 percent for this year, up 0.2 points from previous expectations, and again 3.9 percent for 2019, an increase of 0.3 points over its previous call.

The OECD raised its eurozone growth forecasts for 2018 to 2.3% from 2.1% and raised its 2019 forecast to 2.1% from a prior 1.9%.

It said rebounding business investment was the core reason for the expected acceleration in global growth - with trade rising 5% this year. Slow growth in the wage base poses a challenge to policymakers trying to inject further momentum into an economy now in its best run of expansion in 28 years.

Among G20 countries, only Russia's growth rate is estimated to have decreased 1.5 percent in 2017.

"Safeguarding the rules-based global trading system will help to support growth and jobs", it said.

The OECD believes that monetary policy in advanced economies gradually will tighten at different speeds.

"Governments should avoid escalation and rely on global solutions to resolve excess capacity in the global steel industry".

It said pre-Christmas tax cuts in the USA, the world's largest economy, would account for much of the upgrade though it warned that protectionist policies were a big risk factor.

While the global outlook had not quite returned to pre-economic crisis levels, stronger investment and improved global trade were nonetheless signs that the world economy is definitely on the mend a decade after the worst recession since the Great Depression of the 1930s.

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