OECD: Investment needed to sustain global growth

The global economy is growing at its fastest pace since 2010, but sluggish investment levels mean the momentum will not be sustained, according to the latest economic forecast from the Organization for Economic Cooperation and Development (OECD).

In its latest economic outlook, which it publishes twice a year, the 35-member intergovernmental economic organization projects global GDP growth to be 3.5 percent in 2017 and 3.75 percent in 2018.

However, while the OECD welcomes the overall, sustained recovery that has taken place in the global economy since the financial crisis of a decade ago, it notes that "it remains modest compared with the standards of past recoveries."

The outlook also predicts global growth to taper off slightly to 3.6 percent in 2019, stating that "the foundations for higher potential output and more resilient and inclusive growth do not yet appear to be in place."

The report states that the lingering effects of the financial crisis are still being felt in terms of sub-par growth in the areas of investment, trade, productivity and wage developments, and this is likely to hold back global growth in the next few years, particularly in emerging economies.

Concerns over investment levels

"Projected investment rates remain too low to sustain the acceleration of activity," states Catherine Mann, the OECD's chief economist in the report. "As a result, our projection for global GDP for 2019 shows a tempering of growth rather than continued strengthening."

Read more: China leads growth in global investment - UN

The report, which runs to 249 pages, carries detailed assessments of the economies of all OECD member states, as well as several "selected non-member economies".

For Germany, the OECD predicts the country's GDP growth rate to ease a little in the short-term but overall, offers an upbeat assessment of the German economic situation.

Citing a strong export position, powered by a strong recovery in the value of the euro, and a "buoyant" construction market driven by the country's increased housing needs, the report notes Germany's stable economic position, further underpinned by increasingly strong employment figures.

However, the outlook says that while Germany's fiscal policy is "mildly supportive" of growth, the supply of childcare and primary schools needs to expand and aspects of the country's infrastructure need to be modernized.

Brexit, again

Brexit, and its potential economic impact across Europe, is a dominant theme throughout the report and some of the risk factors in relation to the German economy are considered, namely the way in which the UK's exit may harm some key German sectors such as the automotive and chemicals industries.

On the other hand, the potential boon the German economy may receive from businesses fleeing to it from the UK is also considered.

Overall, the assessment for Germany is positive. "Economic growth is projected to ease somewhat but still remain robust and broadbased. The recovery in the euro area sustains exports and business investment," it concludes.

aos/kd (Reuters, AFP)