Global economic growth will peak at an eight-year high next year, as insufficient investment growth and increasingly dangerous debt levels limit opportunities for further improvement, the OECD (Organization for Economic Co-operation and Development) said.
The global economy is expected to grow by 3.6% this year and by 3.7% next year, after which growth will slow to 3.6% in 2019, follows from the updated OECD forecast.
The OECD has raised its estimate of growth for this year from 3.5% expected in September. The forecast for 2018 has remained unchanged.
Weak private investment and growing debt levels of households and companies limit the opportunities for global economic growth, the organization said.
The OECD warned last week that private debt growth in both developed and developing countries poses a risk to economic growth. At the same time, Canada, South Korea and the United Kingdom lead in household borrowing.
The eurozone is expected to outperform other major developed economies this year. The GDP of 19 countries of the bloc will increase by 2.4%, showing the best dynamics in a decade.
In 2018, the growth rate will decrease to 2.1%, in 2019 – to 1.9%. In September, the OECD expected the eurozone economy to grow by 2.1% this year and by 1.9% next year.
OECD slightly increased US GDP growth estimate. According to the organization’s forecasts, the world's largest economy will grow by 2.2% this year and by 2.5% in 2018, which will be facilitated by the expected reduction in corporate and income taxes. In 2019, however, US GDP growth will decline to 2.1%.
Meanwhile, the OECD lowered its forecast for Japan's GDP growth for this year to 1.5%. The organization maintained its forecast for next year at 1.2%. In 2019, growth is expected to slow to 1%. However, organization experts warned that public debt, the highest among OECD countries at 220% of GDP, poses a serious risk and requires a large-scale plan to maintain confidence in Japan's financial stability.
OECD left China economic growth forecast without changes. The country's GDP growth is expected to slow from 6.8% this year to 6.6% in 2018 and 6.4% in 2019 as exports slow down.
The economy of Russia is recovering from a recession and, according to OECD estimates, it will grow by 1.9% in 2017 and 2018, after which growth will slow to 1.5% in 2019. The OECD September forecast assumed Russia's GDP growth by 2% in 2017 and by 2, 1% next year.
"There continues to be evidence that prices for financial assets are not consistent with expectations of future growth and policies (of central banks), which exacerbates the risks of correction for financial risks and lower growth, "the OECD warned.
The MSCI World index rose by about 18% this year and more than doubled compared to February 2009 levels, and the likelihood of a “sharp” correction is high, the OECD said.
A soft monetary policy contributed to higher asset prices, but central banks are now cutting incentives, said OECD chief economist Katerina Mann.
Although this does not necessarily indicate that the world will face another financial crisis in 2008, this means that a recession in the market can lead to a slowdown in the growth of the real economy, according to the OECD.