OECD highlights low Saudi corporate debt, but risks for Turkey

The outlook for global economic growth is promising according to the OECD despite worries over trade and tariffs. (Getty)
Updated 31 May 2018

OECD highlights low Saudi corporate debt, but risks for Turkey

  • 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.


German economy to shrink by 5.2% this year, grow by 5.1% next year

Updated 22 September 2020

German economy to shrink by 5.2% this year, grow by 5.1% next year

  • The number of people out of work is seen rising to 2.7 million this year from 2.3 million in 2019
  • The Ifo institute cautioned that there was an unusually high degree of uncertainty attached to the forecasts

BERLIN: Germany’s Ifo institute on Tuesday said Europe’s largest economy would likely shrink by 5.2 percent this year, raising its previous estimate for a 6.7 percent drop, in the latest sign the damage caused by the COVID-19 pandemic could be smaller than initially feared.
“The decline in the second quarter and the recovery are currently developing more favorably than we had expected,” Ifo chief economist Timo Wollmershaeuser said.
For 2021, Ifo cut its economic forecast for Germany to 5.1 percent growth from its previous estimate of 6.4 percent. It expects the economy to expand by 1.7 percent in 2022.
The number of people out of work is seen rising to 2.7 million this year from 2.3 million in 2019, before edging down to 2.6 million in 2021 and then to 2.5 million in 2022.
That would translate into a jump in the unemployment rate to 5.9 percent this year from 5.0 percent last year. The rate would then drop to 5.7 percent percent in 2021 and 5.5 percent in 2022, Ifo said.
The Ifo institute cautioned that there was an unusually high degree of uncertainty attached to the forecasts. It pointed to the rising number of coronavirus infections, the risk of a disorderly Brexit and unresolved trade disputes.