Published: Thu, June 08, 2017
Sci-tech | By Doreen King

United Kingdom economy will slow next year because of Brexit, says OECD

United Kingdom economy will slow next year because of Brexit, says OECD

According to the OECD report, two BRICS countries - China and India - lead the world in terms of economic growth.

"High house prices and household debt still pose macroeconomic and financial risks, which call for continued use of macro-prudential tools", it said.

It also criticizes some of the Ontario government's recent efforts to slow the rapid rise in Toronto-area home prices - specifically the expansion of rental control, which it said could discourage the supply of new rental housing and have broader economic ramifications.

As for the European Central Bank, the OECD recommends it wind down bond purchases in 2018 and raise its key interest rate by the end of that year.

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The Organization for Economic Cooperation and Development says in its latest outlook report, published Wednesday, that world growth should accelerate from 3 percent in 2016 to 3.6 percent in 2018.

However, it revised down its gross domestic product (GDP) forecast this year to 2.1 percent this year and 2.4 percent next year from previous estimates of 2.4 percent and 2.8 percent respectively.

The OECD said the risks to the US outlook remain sizeable, mainly the size and timing of the fiscal stimulus are uncertain.

Despite policies to support private confidence and consumption, the OECD notes that household spending is expected to take a dip due to a weakening labour market and higher inflation reducing real wage growth.

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The OECD also said increased trade and investment flows had offset a weaker outlook in the USA, while German growth is helping to boost the eurozone economy, with 2017 growth forecasts at 1.8% for the latter and 2.1% for the former.

In March, the OECD forecast 3.3 percent growth this year and 3.6 percent next year.

"The stronger policy-driven demand growth in China and many other Asian economies that is helping to underpin the modest global upturn projected in 2017 and 2018 can not be sustained indefinitely", the OECD said.

The OECD also saw a potential for "swift snap-back" in USA long-term interest rates when the Federal Reserve decides to reduce the size of its balance sheet, especially if it comes at a time of rising policy rates.

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- With files from The Associated Press.

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