Discounted Already

24 May 2006



OECD Forecasts Economic Growth Despite Oil, Commodity Prices

The Organization for Economic Co-Operation and Development (the club for rich countries) released its twice yearly report on the world economic outlook, which its calls with a demonstrable lack of imagination, the “World Economic Outlook.” The OECD expects the economies of the 30 richest countries to grow at a rate of 3.1 per cent this year, up from 2.9 per cent in its November outlook, while leaving unchanged its 2.9 projection for 2007. At the same time, the OECD cautions that rising oil and commodity prices could undermine this growth.

It the report’s own words, “The ongoing expansion is entering its fifth year,” which is good news for everybody. “Notwithstanding the headwinds from high and volatile energy prices, it is projected to continue and even broaden this year and next.” That is even better news, but it does give the prognostication some wiggle-room if things come a-cropper.

By region, the OECD expects US growth to be 3.6 percent in 2006 and 3.1 percent in 2007 after 3.5 percent in 2005. For the euro zone, GDP growth is anticipated to be 2.2 percent this year and 2.1 percent in 2007 after 1.4 percent this year. In Japan, the OECD forecast 2.8 percent growth this year and 2.2 percent in 2007, from 2.7 percent in 2005. In short, the good news is spread far and wide.

Among the less-well-off economies, the OECD says things are going well, too. China, which now has the fourth largest economy in the world after the US, Japan and Germany, is predicted by the OECD to grow 9.7 percent this year. Brazil, which had a lousy 2005, should pick up a bit compared to other emerging market economies, with growth rising to 3.8 percent from 2.3 percent in 2005. India can expect 7.5 percent growth, and Russia is set to grow 6.2 percent, thanks to all that lovely oil-money, the OECD said.

The “World Economic Outlook” assumes oil prices are going to hover at or near $70 a barrel this year as well as next. That means that the price rise from $40 hasn’t derailed things. The report also predicted overall inflation rate for the OECD region to tick up to 2.2 percent in 2006 before retreating next year to 2.0 percent, which is what it was in 2005.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.


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