The global expansion has peaked. Global GDP growth is projected to ease gradually from 3.7% in 2018 to around 3½ per cent in 2019 and 2020, broadly in line with underlying global potential output growth. In the near term, policy support and strong job growth continue to underpin domestic demand. However, macroeconomic policies are projected to become less accommodative over time, and headwinds from trade tensions, tighter financial conditions and higher oil prices are set to continue.
Global economic integration has been a powerful driver of increased economic efficiency and improved living standards around the world, and has contributed to sizeable economic gains in emerging market economies (EMEs).
International trade has been a powerful engine of global economic growth and convergence in living standards between countries. Trade liberalisation has contributed to large economic gains of emerging market economies and to poverty decline.
Slowing global growth, limited income convergence and rising fiscal pressures – this is the outlook for the world economy in the new OECD long-term baseline projection. But structural policy reforms can brighten the outlook substantially in all countries, as illustrated in a number of alternative scenarios.
Indebtedness of households and non-financial corporations in many advanced and emerging market economies is high. In many countries, it is continuing to rise. Highly indebted countries may be vulnerable to financial and real shocks, and such indebtedness may undermine the sustainability of growth in the medium term.
In the context where public debt has reached high levels in most OECD countries, it is important to assess the extent of countries' fiscal space and the temporary deficit increase they can afford to run. A rethink is needed for how the fiscal policy stance should be evaluated, particularly in the context where very low sovereign interest rates provide more fiscal space.
Membership of the European Union has contributed to the economic prosperity of the United Kingdom. Uncertainty about the outcome of the referendum has already started to weaken growth in the United Kingdom.
Finance is a vital ingredient for economic growth, but there can also be too much of it. This study investigates what fifty years of data for OECD countries have to say about the role of the financial sector for economic growth and income inequality and draws policy implications.
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