The OECD cuts its GDP estimates for Italy, but also for Germany and other major European economies, as well as for the Eurozone as a whole, the United States and the entire world. Furthermore, in the interim report between the two six-monthly Outlooks published on Thursday 18 February, the Organization for Economic Cooperation and Development speaks of "significant risks" linked to the phase of financial instability and recommends the European Central Bank to maintain a monetary policy " highly accommodating".
THE NEW FORECASTS ON GDP
Compared to the Economic Outlook published last November, the OECD has revised its forecasts on the global economy downwards as follows:
– GDP Italy from +1,4 to +1% in 2016 (while the forecast for 1,4 remains stable at +2017%);
– GDP Germany from +1,8 to +1,3% in 2016 and from +2 to +1,7% in 2017;
– GDP France from +1,3 to +1,2% in 2016 and from +1,6 to +1,5% in 2017;
– GDP Britain from +2,4 to +2,1% in 2016 and from +2,3 to +2% in 2017;
– GDP Eurozone from +1,8 to +1,4% in 2016 and from +1,9 to +1,7% in 2017;
– GDP Use from +2,5 to +2% in 2016 and from +2,4 to +2,2% in 2017
– GDP world from +3,3 to +3% in 2016 and from +3,6 to +3,3% in 2017.
For Japan, growth prospects drop again in 2016 to +0,8% (-0,2 points), while they rise by 0,1 points, to +0,6%, in 2017. Estimates unchanged for the China (6,5% in 2016 and 6,2% in 2017). before the classIndia with +7,4% (+0,1 points) and +7,3% (-0,1) respectively.
EUROZONE: SLOW RECOVERY HOLDS BACK GLOBAL GROWTH
“The slow recovery of the euro area is a strong brake on global growth – writes the OECD – and leaves Europe vulnerable to global shocks. Europe must accelerate on common actions”, find itself and “speak with one voice”, underlines the report, highlighting the slow pace of reforms especially on the front of the single market.
As for the economy, the positive effect of the decline in oil on economic activity has been less than expected and the very low interest rates and the decline of the euro have not yet led to a strengthening of investments. In many European countries, high private debt and the mass of non-performing loans hinder the credit channel of monetary policy transmission. The risk is that the euro area will remain trapped in low growth and low inflation, with medium-term confidence too weak to generate the strong investment and innovations that would boost productivity and job growth. Such a scenario affects the banking sector, as demonstrated by the sharp declines in the prices of shares and bonds of European banks.
MATERIAL RISKS RELATED TO FINANCIAL INSTABILITY
Global growth in 2016 "will not be higher than in 2015 - continues the report -, which already marked the slowest rate in the last five years". Growth is slowing in many emerging economies, while advanced economies are recording "a very modest recovery" and low commodity prices are depressing exporting countries. Trade and investment remain weak. Weak demand leads to low inflation and inadequate wage and employment growth. In addition to this, “the risks of financial instability are relevant. The financial markets are reassessing their growth prospects, which leads to falling stock prices and high volatility”. In this context, the OECD underlines the need for “a stronger political response to support demand. Monetary policy cannot work alone. We need to make greater use of the fiscal lever and the structural one”.
THE ECB AND BOJ'S MONETARY POLICY REMAINS HIGHLY ACCOMMODATIVE
On the other hand, "monetary policies should remain highly accommodating until inflation has shown clear signs of returning towards the official target", writes the OECD again, referring in particular to the ECB and the Bank of Japan. In the case of the USA, after the first rate hike since 2008 which took place at the end of 2015, "in line with the downward revision of GDP growth prospects, the expectation is a very gradual tightening of monetary policy".
