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November 10, 2015

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OECD gloomy over global trade flows and growth

GLOBAL trade flows have fallen dangerously close to levels usually associated with a global recession, although actions taken by China and others should ensure a pickup in 2016, the OECD said in a report yesterday.

The Paris-based Organization for Economic Cooperation and Development, a think tank funded by wealthy countries, also cut its 2015 growth forecast to 2.9 percent in its bi-annual economic outlook from the 3 percent it forecast in September.

It has repeatedly cut its 2015 growth outlook from the 3.7 percent it initially forecast in November last year.

The OECD said the US Federal Reserve should go ahead with its first rate hike since the financial crisis as a recovery gains steam in the United States and Europe, despite a slowdown mostly centered on emerging markets and China.

It said global trade would grow by only 2 percent this year, a level it has fallen to only five times in the past five decades and that coincided with downturns: 1975, 1982-83, 2001 and 2009.

“This is deeply concerning,” OECD Chief Economist Catherine Mann said in the introduction to the report.

“World trade has been a bellwether for global output.”

But the OECD said it expected global output growth to rise to 3.3 percent next year helped by stimulus measures in China, albeit below the 3.6 percent it saw previously, before accelerating to 3.6 percent in 2017.

“Policy actions are already being implemented that will help to address the weak underlying trends. For example, China has announced a range of stimulus measures including lowering bank lending rates and expanding infrastructure investment,” Mann said.

Growth in the US should be 2.4 percent this year and 2.5 percent next year, it said, cutting its 2016 outlook from a previous 2.6 percent.


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