OECD raises global growth forecast; India to be fastest-growing major economy

Organization for Economic Cooperation and Development (OECD) has raised its global growth predictions to 4 per cent in 2015 and 4.3 per cent in 2016, an increase of 0.1 per cent and 0.2 per cent respectively over its November outlook.

In its latest interim economic assessment released yesterday, the Paris-based global organisation said that India is expected to be the fastest-growing major economy over the coming two years.

The think tank has revised India's growth projections to 7.7 per cent in 2015 and 8 per cent in 2016, significantly higher than the 6.4 per cent and 6.6 per cent forecast in November.

''Lower oil prices and widespread monetary easing have brought the world economy to a turning point, with the potential for the acceleration of growth that has been needed in many countries,'' said OECD chief economist Catherine Mann.

The OECD has not made any change to the growth prospects of the United States, the world's largest economy, which has been kept at 3.1 per cent and 3 per cent in 2015 and 2016 respectively.

According to the report, strong domestic demand is driving growth in the United States, which, combined with dollar appreciation, is adding to demand in the rest of the world.

Growth forecast for the euro area has also been revised up to 1.4 per cent and 2.0 per cent over the coming two years, an increase of 0.3 per cent each from OECD's earlier outlook.

The euro area should benefit from low oil prices, monetary stimulus and euro depreciation, which combine to offer the chance to escape from stagnation, the report said.

In Europe, growth prospects differ widely among major economies. The UK is expected to grow 2.7 per cent in 2015, better than Germany's 1.7 per cent and France's 1.1 per cent. Italy will see a 0.6 per cent growth for the year.

The gradual slowdown in China, the world's second-largest economy, is moving towards the government's new official growth target. The country is expected to post 7-per cent growth in both 2015 and 2016.

In Japan, monetary and fiscal stimulus provide the impetus for faster near-term growth, but longer-term challenges remain. The economy is projected to grow by 1 percent in 2015 and 1.4 percent in 2016.

The OECD said that the outlook is likely to worsen for many commodity exporting nations, with Brazil falling into recession. Brazil's economy is expected to shrink by 0.5 per cent before returning to a 1.2 percent growth rate in 2016.

Growth forecast for Canada, another resource based nation, has also been revised downward to 2.2 per cent in 2015 and 2.1 per cent in 2016.

''There is no room for complacency, however, as excessive reliance on monetary policy alone is building-up financial risks, while not yet reviving business investment. A more balanced policy approach is needed, making full use of fiscal and structural reforms, as well as monetary policy, to ensure sustainable growth and public finances over the longer term,'' OECD cautioned.