OECD Economic Outlook: Stronger global economy, but risks loom large

• Global growth is supported by easy monetary policy and fiscal easing in some countries.
• Unemployment is at the lowest level since 1980.

Global economy is at the phase of strong growth driven by a rebound in trade, higher investment and buoyant job creation. The oeconmic situation and the growth environment is supported by very accommodative monetary policy and fiscal easing, according to the OECD’s latest Economic Outlook released on Wednesday.

“The pace of global expansion over the 2018-19 period is expected to hover near 4%, which is close to the long-term average. However, the Outlook also underlines that significant risks posed by trade tensions, financial market vulnerabilities and rising oil prices loom large, and more needs to be done to secure a strong and resilient medium-term improvement in living standards,” OECD wrote in the Economic Outlook.

The interest rates are currently at historically low levels and although they are rising is some parts of the world, the global monetary conditions are growth supportive. Thius is combined with  fiscal easing in many countries and it will continue to underpin the expansion, which will see moderate rises in both wage growth and inflation. According to OECD, the unemploymentis expected to drop to the lowest levels since 1980, but more can be done to bring more people into the workforce.

“The economic expansion is set to continue for the coming two years, and the short-term growth outlook is more favourable than it has been for many years,” Angel Gurria, OECD Secretary-General Gurria commented in the report. “However, the current recovery is still being supported by very accommodative monetary policy, and increasingly by fiscal easing. This suggests that strong, self-sustaining growth has not yet been attained.”

“Policymakers need to put greater focus on structural policies to boost skills and to improve productivity to achieve strong, sustainable and inclusive growth,” Gurria further added.

The OECD Economic Outlook highlights a range of risks to the current expansion inbcluding higher oil prices and, if sustained, could add to inflation while softening real household income growth. The threat of trade restrictions has begun to adversely affect confidence, and, if such measures were implemented, they would negatively influence investment and jobs.