Global economy set to top out at 3.7%

‘Companies need to invest’

GLOBAL economic growth is set to peak at an eight-year high next year as uninspiring investment and increasingly dangerous debt levels limit room for further improvement, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.

The global economy is on course to grow 3.6 percent this year before reaching 3.7 percent next year, then ease back to 3.6 percent in 2019, the OECD said in its latest outlook.

The Paris-based policy forum nudged up its estimate for this year from 3.5 percent in its last forecasts dating from September, and left its 2018 projection unchanged.

“Things look really good now, but unless we see some robust private-sector activity and renewal of capital stock, generating higher real wages, we are not going to maintain the growth rates we see today,” OECD chief economist Catherine Mann told Reuters.

“There is still work done.”

Mann said that, in particular, companies were not investing enough to make up for the depreciation of existing assets, and even less so in making additional investments for further growth.

Despite weak private investment, households and companies were bingeing on cheap debt in many countries, exposing themselves to trouble as central banks tighten monetary policy.

With its in a decade, the euro area was seen outpacing other major developed economies this year with 2.4 percent growth before easing to 2.1 percent in 2018 and 1.9 percent in 2019.

In September, the OECD had foreseen growth of 2.1 percent this year for the euro area and 1.9 percent next year.

Marginally raising its estimates for the US, the OECD forecast growth in the world’s biggest economy would pick up from 2.2 percent this year to 2.5 percent in 2018, boosted by an expected cut in corporate and income tax, before easing to 2.1 percent in 2019.