Despite China Slowdown, Global Economy Expected To Gain Momentum In 2016 And 2017

A slowing China won’t stop the global economy from gaining momentum over the next two years. Global trade and economic growth, hampered throughout 2015 by a broad slowdown in China, are expected to stage a modest resurgence over the next two years.

As China implements policies to ease the domestic effects of a rocky transition from an economy fueled by infrastructure investment and manufacturing to one driven by consumer spending and services, the Organization for Economic Co-operation and Development (OECD) sees the rest of the world as being largely able to absorb the slowing of the world’s second largest economy, according to an economic forecast released Monday.

The OECD’s economists strike a surprisingly optimistic tone regarding China’s recent stimulus measures, noting in the report that Chinese authorities have initiated a range of monetary and financial policy changes to support the domestic stock market, lower lending rates and boost business activity through infrastructure investments.

The policies should help address “weak underlying trends” within China, writes OECD chief economist Catherine Mann in a paper released with the forecast. “These policy actions should help to put a floor under global commodity prices and stabilize commodity-exporting economies.”

The organization’s most recent forecast comes as policymakers and corporate leaders worldwide grapple with the aftershock of China’s deceleration. Asian, European and U.S. financial markets have lurched and countries that rely heavily on commodity exports to China, such as Chile and Australia, have seen economic growth weaken substantially. Chinese policymakers, however, are taking the appropriate steps to mitigate the slowdown’s impact at home and abroad, according to the OECD’s latest report.

As a result, global growth is expected to strengthen in 2016 and 2017. That’s not the case in China, of course. Economic growth there, which averaged 10.5 percent annually from 2003 through 2012, is expected to slow to 6.5 percent in 2016 and 6.2 percent in 2017, down from a projected 6.8 percent in 2015.

Even so, the OECD forecasts global GDP growth gaining momentum, hitting 3.3 percent in 2016 and 3.6 percent in 2017, up from 2.9 percent this year. The group sees world trade lifting off over the next two years, growing at 3.6 percent in 2016 and 4.8 percent in 2017. That’s up from a rather anemic 2 percent rate in 2015.

The OECD’s report is part of the Paris-based group’s twice-annual forecast series. The group, founded in 1961, is an organization of 34 developed countries that seeks to coordinate economic, business and trade policies.