OECD raises Canada's growth forecast after exemption from Trump tariffs

Ebony Scott
March 14, 2018

The worldwide economic forum says while USA tax cuts will aid world growth, its protectionist policies put recovery at risk.

Another upgrade to world economic growth forecasts, due to tax cuts in the U.S., is likely to fire up the debate over the Turnbull government's efforts to cut the company tax rate.

But the OECD also warns trade protectionism remains a key risk to the outlook because it would negatively affect confidence, investment and jobs.

The OECD expects the world economy to expand 3.7 percent this year, up from its previous estimate of 3.9 percent.

"We are getting back to more normal circumstances than what we've seen in the last 10 years".

The OECD said investment, trade and employment were all playing a part in a broad-based expansion that has prompted growth upgrades for six of the seven G7 countries.

Financial markets have been hit by fears of a trade war following U.S. President Donald Trump's move to slap tariffs on steel and aluminum imports.

A forecast of 1.3% growth for this year alone was made by the OECD, up from a 1.2% forecast made last November.

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As the Chancellor prepared to update MPs on the independent Office for Budget Responsibility's latest expectations for growth and borrowing, the OECD predicted the United Kingdom would see the slowest growth among the G20 economies this year, having largely outperformed rivals since the financial crisis.

In November 2017, the OECD predicted an increase of 3.6 percent for 2017 and 2019, and a rise of 3.7 percent for 2018.

"This could obviously threaten the recovery".

However, the growth rate is still very slow compared to other G20 nations, and well below the average for the group, which is expected at 4.1% in 2018 and 4.0% in 2019.

"Certainly we believe this is a significant risk, so we hope that it doesn't materialise because it would be fairly damaging". The Paris-based organization had expected growth to be 1.2 percent in 2018 and 1.0 percent in 2019.

The OECD also revised up its forecasts for Germany and France, but remained gloomy about the prospects for Britain as it approaches the date for Brexit in March 2019.

In 2019, the same year Britain will leave the European Union following Brexit, the forecast for growth is now set at 1.1%, lagging behind other G20 nations. The think tank believes the United Kingdom economy will expand by 1.3% this year, up from 1.2% in November, and by an unchanged 1.1% in 2019.

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