Global growth

It is good to see that the world economy, after years of stagnation, is showing signs of revival. According to the updated forecasts of the Organisation for Economic Cooperation and Development (OECD), the world economy is expected to see growth accelerate next year but worried that conditions for a sustainable expansion are not yet in place. As the US, China and Eurozone were expected to continue growth next year, the global economy may expand by 3.7 percent next year after growing by 3.6 percent this year. However, "the prospects for continuing the global growth uptick through 2019 and securing the foundation for higher potential output and more resilient and inclusive growth do not yet appear to be in place." As for individual countries, the forecast for growth in the US is raised to 2.2 percent this year and 2.5 percent in 2018. The growth prospects for China which were held steady at 6.8 percent this year will dip to 6.6 percent in 2018. India's outlook for this year is unchanged at 6.7 percent but trimmed to 7.0 percent for next year. The forecast for Eurozone is hiked to 2.4 percent during 2017 but is seen slipping to 2.1 percent next year. Japan is expected to realize a growth rate of 1.5 percent this year but is expected to grow by 1.2 percent during 2018. Brazil's recovery is seen as strengthening, with the OECD increasing its forecast to 0.7 percent this year and 1.9 percent in 2018. The outlook for Russia's recovery is estimated to be at 1.9 percent both for 2017 and 2018.
The news from the OECD, which is famous for making reasonably good assessment of the world economy, particularly its growth prospects, are encouraging. The acceleration of growth, after a protracted slump, in the world economy is of course encouraging. The rebound in the global economy is thought to be modest for the time being but still it has been growing at its fastest pace since 2010, with the upturn being increasingly synchronized across countries, which shows that the upward trend is widespread across the globe as almost all the countries are showing signs of improvement in their economies. We are sure that a higher growth would certainly translate into better per capita income, higher world trade and improved employment prospects. However, the OECD has a caveat. The Paris-based OECD, which advises its 35 mostly industrialised members on economic policy, is not yet certain that the global growth will be sustained over the years. The OECD, instead, has warned that strong and sustained growth is not yet secured. Its Chief Economist, Catherine Mann has, in fact, sounded the alarm on so-called zombie firms - companies that cheap debt allows to continue operating but are not really profitable - saying private debt remains too high. Zombie firms, on the other hand, could increase risks, lower growth and raise inequalities in normal times. The OECD is right in emphasizing on reforms to encourage business activity, trade and investment. It says specifically that "a more robust investment upturn is required for a sustained recovery in advanced economies." While the OECD is not off the mark, we feel that certain other policy measures are also needed to put the global growth on an upward trajectory. The calls for protectionist tendencies from certain quarters must be toned down to facilitate world trade and maximize growth. The Doha Round is almost on the deathbed and must be revived to help revive the spirit of mutual cooperation and freer trade. Finally, the protracted conflicts, particularly in the Middle East, are in no way helpful in conducting proper economic diplomacy which could facilitate economic expansion and lower trade barriers across the countries.