OECD cuts India's FY18 growth outlook

NEW DELHI; The Organisation for Economic Co-operation and Development has trimmed India’s growth forecast for the current financial year, citing the temporary impact of the rollout of the goods and services tax and demonetisation, expecting the economy to expand at a slower pace than China.
OECD said India’s economy will likely grow 6.7% in FY18, lower than its estimate of 7.3% in June.

In contrast, China’s economy gets a 0.2% lift from its earlier assessment to 6.8% for 2017.

The Paris-based group of 35 advanced and emerging countries cut its forecast for India’s growth to 7.2% in FY19 from 7.7% estimated earlier. China is predicted to grow 6.6% in 2018.

“In India, the transitory effects of demonetisation and of the implementation of the Goods and Services Tax (GST) have led to a downward revision in 2017 growth projections, while business investment has remained weak. In the longer run, the GST is expected to boost investment, productivity and growth,” it said in a country assessment.

Global GDP growth is projected to pick up to about 3.5% in 2017 and 3.7% 2018, higher than in 2016 but still below historical norms, OECD said. Growth is seen higher in the euro area, Russia, Japan and Canada.

The forecast for the US is unchanged at 2.1% for 2017 and 2.4% for 2018. The group warned against complacency in the face of stronger short-term momentum.

“To secure robust medium-term growth, monetary policy should remain accommodative in some economies but with an eye on financial stability, so as to continue to provide support while a further rebalancing is done towards fiscal and structural initiatives,” it suggested, while calling for the prudent use of fiscal room in countries where available.

GLOBAL TRADE REBOUND
World trade is expected to grow 3.6% in 2017, well above last year’s lacklustre growth of 1.3%, buoyed by a revival in import demand in Asia and North America.

The World Trade Organization upgraded the forecast for 2017 on Thursday as “trade rebounds strongly” from its earlier projection of 2.4%. The stronger growth in 2017 is attributed to a resurgence of Asian trade flows as intra-regional shipments picked up and as import demand in North America recovered after stalling in 2016.

“The improved outlook for trade is welcome news, but substantial risks that threaten the world economy remain in place and could easily undermine any trade recovery,” said WTO Director-General Roberto Azevêdo.

These risks include the possibility that protectionist rhetoric translates into trade-restrictive actions, aworrying rise in global geopolitical tensions and a rising economic toll from natural disasters. “However, trade growth was becoming more synchronised across regions than it had been for many years, which could make the current trend self-reinforcing,” he said.

The multilateral trade body expects the pace to moderate next year and is estimated at 3.2%, within a range of 1.4-4.4%. This is because the US and euro zone monetary policies are expected to tighten and China is likely to rein in easy credit to stop its economy from overheating.