The OECD Interim Economic Outlook: Stronger collective fiscal policy needed

Written by Cemal Karakas,

According to the 2016 Interim Economic Outlook of the Organisation for Economic Co‑operation and Development (OECD), global GDP growth this year is projected to be the slowest in five years. The OECD has lowered its real GDP growth forecast for the euro area for 2016 from 1.8% to 1.4%, and for 2017 from 1.9% to 1.7%. While low inflation and prices are discouraging commodity exporters, low investment and demand have led to stagnation, stifling wage and employment developments.

The OECD recommends a stronger collective policy response in order to strengthen demand. While the impetus for structural reform has slowed in many countries, contractionary fiscal policy has gained new momentum. Monetary policy alone is considered to be insufficient. A sustainable mix of structural, monetary and fiscal policy measures must be deployed in order to boost GDP growth and counter deflationary tendencies. The policy mix, however, varies from country to country, as countries are being affected in different ways by the international economic crisis.

Read the complete briefing on ‘The OECD Interim Economic Outlook‘ in PDF.

GDP growth forecast since November 2015, in % pts

Real GDP growth (%), year-on-year comparison. GDP at market prices adjusted for working days