Forecasts look up

GLOBAL growth will pick up faster than previously expected in the coming months, as the Trump administration’s planned tax cuts and public spending fire up the US economy, the OECD said yesterday, revising up its forecasts.

In its twice-yearly Economic Outlook, the Paris-based Organisation for Economic Cooperation and Development estimated global growth would accelerate from 2.9% this year to 3.3% next year and reach 3.6% in 2018.

The OECD was slightly more optimistic about the US outlook, with a forecast for growth next year of 2.3%, up from 2.1% in its last set of estimates dating from September. US growth would pick up further in 2018 to reach 3.0%, the highest rate since 2005, as the incoming Trump administration cut taxes on business and households and embarked on an infrastructure investment programme. That would in turn drive the unemployment rate in the world’s biggest economy down from 4.9% this year to 4.5% in 2018, the OECD estimated.

As the US labour market becomes increasing tight and wages rise, the OECD forecast inflation would increase from 1.2% this year to 2.2% in 2018, prompting the Federal Reserve to raise interest rates gradually to 2.0% by end-2018.

A resurgent US economy would help offset softness elsewhere in the world, with the OECD slightly less pessimistic about Britain, as the central bank has helped ease the economic impact of Brexit.

Britain’s economy was seen growing 2.0% this year, revised up from 1.8%. — Reuters