- Rising interest rates and oil remain worries
- OECD urges more investment in education
LONDON: Saudi non-banking corporates have one of the lowest borrowing levels among the G-20 countries, according to the OECD’s latest global economic outlook.
The report also showed that Turkey had the most foreign-denominated debt within the G-20, heaping pressure on President Recep Erdogan ahead of elections.
But the next two years looked promising for global GDP growth running at its long-term average of about 4 percent, while world trade levels had recovered since the financial crisis. Unemployment within OECD countries was expected to drop to its lowest since 1980, although measures should be undertaken “to bring more people into the workforce.”
The OECD said: “The global economy is experiencing stronger growth, driven by a rebound in trade, higher investment and buoyant job creation, and supported by very accommodative monetary policy and fiscal easing.”
However, it said there were significant risks posed by trade tensions, financial market vulnerabilities and rising oil prices. And more needed to be done to secure “a strong and resilient medium-term improvement in living standards.”
OECD Secretary-General Angel Gurria said: “The economic expansion is set to continue for the coming two years, and the short-term growth outlook is more favorable than it has been for many years.”
He added: “However, the current recovery is still being supported by very accommodative monetary policy, and increasingly by fiscal easing. This suggests that strong, self-sustaining growth has not yet been attained.”
Gurria said policymakers needed to put greater focus on structural policies to boost skills and to improve productivity to achieve “strong, sustainable and inclusive growth.”
The report highlighted a range of risks to the current expansion. Oil prices had risen significantly in the past year, and, if sustained, could add to inflation while softening real household income growth.
Also, the threat of trade restrictions had begun to adversely affect confidence, and, “if such measures were implemented, they would negatively influence investment and jobs.”
Rising interest rates could expose vulnerabilities created by elevated risk-taking in financial markets and high debt, especially in emerging market economies with high levels of foreign currency debt. Turkey was most exposed, according to OECD data.
The report also urged countries to boost investment in education and skills, as part of improvements in the use of tax and spending policies to raise living standards across the income distribution.
It recommended policies to boost job creation and business dynamism. That would need “improvements to digital and physical infrastructure, enhanced research and development co-operation between universities and industry, as well as reduced barriers to entry into professional services,” said the report.