Economy is stalling worldwide

Economy is stalling worldwide

Experts of the Organization for Economic Cooperation and Development (OECD) have issued a new forecast for the global economy, which is much more pessimistic than the previous one.

The 2016 global growth forecast was reduced to 3% [in the previous version of the report it was 3.3%], and the 2017 global growth forecast was reduced to 3.3% [previously it was 3.6%]. The new version of the report contains the most pessimistic forecast in the last five years.

"The downgrade in forecasts is broadly based, reflecting a wide range of disappointing incoming data for the fourth quarter of 2015 and the recent weakness and volatility in global financial markets. These trends have been apparent in both advanced and emerging economies," RBC cited the document as saying.

In particular,  The OECD lowered its the US growth forecasts from 2.5% to 2% in 2016 [ 2.4% in 2015], its eurozone growth forecasts to 1.4% from 1.8%, China’s growth was lowered from 6.9% to 6.5%.

The forecast for 2017 was also lowered. In particular, the OECD expects a recession in Brazil, as it is not growth but stagnation, and zero economic growth [1.8% decrease]. The forecast for the majority of developed countries was decreased by 0.1-0.2%.

The Chairman of the Board of the National Currency Association (NCA), Dmitry Piskulov, in conversation with the correspondent of Vestnik Kavkaza agreed with the thesis that economic growth has been slowing down in all countries of the world for more than a year. "We see that the European economy hasn't grown in years due to the crisis and structural problems. We see that one of the main reasons is China's reduction in economic growth. That is, the economy is slowing down because the resources for its development were exhausted. Now they are trying to move to a new model, based on the increase in domestic consumption. Therefore, China's growth rate is also declining. The US economy cannot show a decent growth rate either," he noted.

According to the expert, now there is a change of the economic paradigm, as the previous one had exhausted itself, especially in developed countries, which are manipulating their interest rates now. "There are no points of growth, no points of high demand either in infrastructure, or in technology projects, which could ensure world economic growth. And even the drop in oil prices also leads to an increase in economic growth. That is, we are in a situation with a classic crisis of overproduction," Piskulov believes.

The expert said that the economy is now poised near zero growth and any transition to intensive growth is unlikely, since it "requires major government programs in different countries."

An advisor on macroeconomics, the director general of the brokerage house ‘Opening’, Sergei Hestanov, in an interview to Vestnik Kavkaza said that now there is an actual decline in economic growth in all countries. "And the main reason is that the consequences of the economic crisis of 2008-2009 haven't been overcome, but frozen. Most of the troubled companies received state aid, so it prevented an economic cleansing. On the one hand, this is good, because it softened the economic crisis, but on the other hand, it has led to the fact that economic growth is far less than it could be. So the economic slowdown is a kind of payback for the soft passage of the economic crisis of 2008-2009," the expert noted.

The economist also pointed out that the current low energy prices cannot help importers increase production. "That's why, even given the fact that a reduction in prices of energy resources is a positive sign for oil-importing countries, it is not a great advantage," he added.

Speaking about the impact of the global economic slowdown on Russia, Sergey Hestanov noted that, first of all, it doesn't mean that global oil demand will grow rapidly, "so it will cause an additional pressure on oil prices." "Therefore, the main factor is the reduction of the forecast for demand for energy resources," the expert stated.