Governments must boost spending to escape 'low-growth trap': OECD
Source: Reuters
Ensnared in a "low-growth trap", the world economy will meander along at its slowest pace since the financial crisis for a second year in a row in 2016, the OECD forecast on Wednesday, urging governments to boost spending.
With businesses wary of investing and consumers cautious about spending, the global economy will grow only 3.0 percent this year, the Organisation for Economic Cooperation and Development estimated.
That would be no better than last year, which was already the worst since 2009, although growth would pick up modestly to 3.3 percent next year, the OECD forecast in its biannual Economic Outlook.
Growth at those levels deprives youths of job opportunities and means old people will not get the healthcare and pension benefits they expect, OECD Chief Economist Catherine Mann told Reuters.
"We are breaking promises to young people and old people. Therefore policymakers have to act to break us out of the low growth trap," Mann said in an interview.
Read more: http://www.reuters.com/article/us-global-economy-oecd-idUSKCN0YN46O
Mann warned against counting on central banks alone to lead the return to higher growth rates, with the benefit-to-risk balance of their exceptionally loose monetary policies tipping to the latter.
Therefore, governments should not hesitate to plough money into growth-boosting initiatives like education and infrastructure, financing higher spending thanks to rock-bottom interest rates in many countries.
"The low interest rate environment created by the central banks opens up fiscal space to governments and we are saying that you should use it," Mann said.
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