Global watchdog turns a bit more rosy on world economy

AP News
Posted: Mar 18, 2015 7:19 AM

PARIS (AP) — A key international economic watchdog has nudged up its forecast for global economic growth this year in response to low prices and expectations that interest rates will remain low in many leading economies.

The Organization of Economic Cooperation and Development, a grouping of the world's richest countries that acts like a think tank, said Wednesday that easy and cheap monetary policy in many parts of the world, including Europe, has helped underpin growth. However, it warned that a total reliance on that tool could strain the international financial system.

The Paris-based organization now expects 4 percent growth this year, up 0.1 percentage points from its last such forecast in November. And the prediction for 2016 was raised 0.2 percentage points, to 4.3 percent.

The interim economic assessment concentrates on the world's biggest economies including Brazil, India and China.

Despite the upgrades, the OECD warned that unusually low inflation and interest rates could increase the risk of global financial instability. And it noted still-high unemployment levels in many countries despite the improving growth picture.

After years of crisis and stagnation in Europe, the OECD said plunging oil prices and the recently enacted monetary stimulus from the European Central Bank are a "much-needed opportunity" to get growth going again. It predicted 1.4 percent growth for the combined growth of the 19 countries that use the euro currency.

Insisting that monetary policy alone isn't enough to ensure a return to strong growth, it urged European leaders to stabilize budget rules and other regulations.

The OECD said India should grow faster than China this year, at 7.7 percent. For Japan, it raised forecasts slightly to 1 percent.

It forecast 3.1 percent GDP growth for the United States this year, 7 percent for China and 2.6 percent for Britain, all largely unchanged from its last projections.