OECD warns of trade slowdown, cuts its global growth outlook

‘Go green to save the world and world economy’ Fiscal discipline urged Qatar must consider reforms, taxes – min

DOHA, Nov 9, (RTRS): Qatar must urgently consider reforms to its subsidy and tax systems, a senior official said on Monday in a fresh sign that the rich Gulf energy exporting states may make radical changes to cope with low oil and gas prices.

Saleh Mohammed al-Nabit, Qatar’s Minister of Development Planning and Statistics, said in a speech that pressure on state finances meant the government had to be more disciplined in spending on all programmes and projects.

“It has also become an urgent need to consider issues such as the rationalisation of support and providing it to target groups, development of the tax system, and supporting the revenue side of the budget,” Nabit said.

Fuel and food subsidies are part of a lavish social welfare system. Nabit’s remarks suggested subsidies might in future be provided to a smaller group of people, perhaps only Qatari citizens or lower-income people rather than the entire population, which includes many foreign workers.

Nabit did not elaborate on possible tax reforms. Among other measures, Qatar has been discussing with neighbouring countries the introduction of a regional value-added tax.

Qatar, the world’s biggest liquefied natural gas exporter, is one of the Gulf’s richest countries and is in no financial danger. But the value of its energy exports has almost halved this year.

In a report in June, the ministry predicted the government would next year run its first budget deficit in 15 years, of about 4.9 percent of gross domestic product.

But Qatar’s emir said last week that the state budget for 2016 would avoid a big deficit, which implied that spending may become more conservative than originally planned.

Nabit said on Monday that despite lower energy prices, the government would press ahead with tens of billions of dollars worth of infrastructure and social welfare projects.

But he acknowledged that some projects might be delayed because of logistical difficulties, supply bottlenecks and high costs.

The OECD said the US Federal Reserve should nevertheless go ahead with its first rate hike since the financial crisis as a recovery gains steam in the United States and Europe, despite a slowdown mostly centred on emerging markets and China.

It said global trade would grow by only 2 percent this year, a level it has fallen to only five times in the past five decades and that coincided with downturns: 1975, 198283, 2001 and 2009.

“This is deeply concerning,” OECD Chief Economist Catherine Mann said in the introduction to the report. “World trade has been a bellwether for global output.” But the organisation said it expected global output growth to pick up to 3.3 percent next year helped by stimulus measures in China, albeit less than the 3.6 percent it expected previously, before accelerating to 3.6 percent in 2017. “Policy actions are already being implemented that will help to address the weak underlying trends. For example, China has announced a range of stimulus measures including lowering bank lending rates and expanding infrastructure investment,” Mann said.

Growth in the United States should reach 2.4 percent this year and 2.5 percent next year, it said, cutting its 2016 outlook from a previous 2.6 percent. It sees 2.4 percent growth in 2017.

“Rate normalisation should therefore proceed cautiously, while remaining mindful of the risks of waiting too long,” the OECD said. It added that it assumed the Fed would lift rates in December and then increase them gradually.

Meanwhile, the OECD urged nations to step up environmental investments to ward off not only catastrophic climate change but to give the global economy a much-needed boost as China struggles to rebalance its economy.

With a critical UN summit opening in Paris later this month that aims to get an agreement on cutting back greenhouse gas emissions enough to limit the increase in global temperatures to a safe level, the OECD said action could also support the global economy.

“Addressing climate change is critical for long-term economic sustainability and healthy growth,” said the OECD’s chief economist, Catherine Mann, in a statement accompanying the body’s latest update on the global economic outlook.

That report singled out a slowdown in China as it seeks to rebalance its economy from manufacturing and exports to services and consumption as being the main culprit behind slower global growth, along with subdued investment.

Mann said “...environmental spending would both support demand and encourage the necessary rebalancing of the global economy.”

The Organisation for Economic Development and Cooperation, a Parisbased policy analysis group that represents 34 advanced economies, trimmed its forecast for global growth this year to 2.9 percent, while lowering its 2016 forecast to 3.3 percent.

Thanks to prompt introduction of stimulus measures, however, the OECD bumped up its forecast for Chinese growth this year to 6.8 percent, with 6.5 percent growth foreseen in 2016.

Slower Chinese growth has triggered a slump in commodity prices that has affected emerging economies across the world.

Mann characterised as “deeply concerning” the stagnation in global trade this has caused, as in the past this has led to global recessions. Organisation for Economic Co-operation and Development (OECD) Mexican Secretary General Angel Gurria presents the OECD Economic Outlook at the

OECD headquarters in Paris on Nov 9. (AFP)