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back to index backLATINtalk December,  2016


OECD optimistic about global growth; anticipates strong performance of Argentine economy next year

Fiscal initiatives could boost global economic growth, the Organization for Economic Cooperation and Development (OECD) said Monday in its semi-annual economic forecast. The Paris-based think tank predicted a global gross domestic product (GPD) growth rate of 3.3% in 2017, a figure that remained unchanged from its last outlook released in June.

It also forecast 3.6% GPD growth in 2018, a rate that would end years of sluggish growth. The projection was backed by strong growth outlooks for the US, Argentina, Brazil and South Africa.

The global economy has the prospect of modestly higher growth, after five years of disappointingly weak outcomes,” said OECD Secretary General Angel Gurria.

In light of the current context of low interest rates, policymakers have a unique window of opportunity to make more active use of fiscal levers to boost growth and reduce inequality without compromising debt levels,” he added.

The OECD based its US projections on expected fiscal stimulus driven by the incoming administration of Donald Trump, who has said he would back large-scale infrastructure projects.

Argentina is forecasted to expand 2.9% next year and 3.4% in 2018, but will end the current fiscal year with a contraction of 1.7%. This is because of a drop in consumer spending and lesser purchasing power from households, however business confidence has experienced a significant boost”.

Part of the improved confidence atmosphere is referred to the reformed stats office, Indec, which has become more transparent, more reliable and trustworthy, helping the Central bank achieve inflation targets.

The current contraction is linked to a weak global demand for commodities and lower international prices, and Brazil's deep recession which is Argentina's leading trading partner particularly in manufactured goods, such as the auto industry.

OECD estimates that the full impact of the reforms introduced by the administration of president Mauricio Macri will be felt during 2017 helping to lower unemployment which now stands above 9%, and a gradual reduction of inflation.

However OECD also points out that there is not much fiscal margin to promote growth because of the huge budget deficit and calls for a gradual but steady fiscal consolidation, avoiding social impacts. Improvements in the tax revenue system should help to lower fiscal pressure for companies, as well as redirecting government spending to public works investment.

The report on Argentina underlines as achievements by the current administration, the unification of the money exchange rate market, normalizing relations with creditors both globally and domestically, as well as a notorious improvement of transparency and governance.

Source: MercoPress - GAI





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