THE GLOBAL ECONOMIC OUTLOOK Mark Baker ECO / MPD 8 September 2016

2

Global GDP growth remains subdued

0

0.5

1

1.5

2

2.5

3

3.5

4

Note: Provisional estimates for 2016Q1 and 2016Q2 based on subset of countries with information available in both quarters (around 80% of global GDP in PPP terms).

World GDP growth (Q/Q annualised %)

3

Global industrial production and

consumption are soft

Source: Thomson Reuters; OECD, Main Economic Indicators database; and OECD calculations.

4

Weak investment and sharp inventory

correction are slowing US growth

0

0.5

1

1.5

2

2.5

3

3.5

4

GDP

Personalconsumption

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

3

Exports Investment Inventories

GDP and Consumption Growth (Y/Y%) Contributions to Growth (Q/Q annualised)

Sources: Bureau of Economic Analysis; OECD calculations

5

Rebalancing continues in China at a gradual

pace

0

2

4

6

8

10

12

14

2009 2010 2011 2012 2013 2014 2015

Consumption Investment

China: Contributions to GDP Growth (Y/Y %)

Source: Thomson Reuters

6

China: Recent stimulus targeted at

infrastructure spending may be fading

0

5

10

15

20

25

May-15 Aug-15 Nov-15 Feb-16 May-16

Infrastructure Other Real Estate

10

11

12

13

14

15

16

17

18

May-15 Aug-15 Nov-15 Feb-16 May-16

Nominal Fixed Investment (YoY%, cmlv) Credit Growth (YoY%)

Source: Thomson Reuters

7

Global growth is expected to remain

subdued

Source: OECD June 2016 Economic Outlook (EO99) database.

World GDP growth Per cent

-3

-2

-1

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

non-OECD OECD World

8

Moderate improvement projected

across most countries

2014 2015 2016 2017

World1 3.3 3.0 3.0 3.3

United States 2.4 2.4 1.8 2.2

Euro area 1.0 1.6 1.6 1.7

Japan 0.0 0.6 0.7 0.4

China 7.3 6.9 6.5 6.2

India2 7.2 7.4 7.2 7.8

Brazil 0.1 -3.9 -4.3 -1.7

1. Moving nominal GDP weights using purchasing power parities. 2. Fiscal years starting in April. Source: OECD June 2016 Economic Outlook database.

Real GDP Growth

9

External forecasts have been revised

downwards since EO99

2016 2017

USA -0.3 0

Japan 0 0.3

UK -0.3 -1.6

Euro Zone -0.1 -0.4

China 0.1 0

Brazil 0.5 0.3

Russia 0.4 0.2

World -0.09 -0.13

Forecast revisions between May 2016 and August 2016

Source: Consensus Economics; OECD calculations

10

Short-term impact of the BREXIT

referendum

85

90

95

100

105£ Effective Exchange Rate Composite PMI

• Heightened uncertainty

• Still too early to tell

• Bank of England stimulus.

46

50

54

58

62

UK Euro area

050

100150200250300350400

Policy Uncertainty Index (2011=100)

11

EO99 BREXIT simulation to end-2018

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

UnitedKingdom

EuropeHigh

EuropeModerate

EuropeLow

BRIICS OtherOECD

Japan UnitedStates

Europe Shock UK shock

% pt difference from baseline

• Series of shocks over time

• Europe negatively impacted

• No policy response assumed

12

Global trade is weak

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2012Q1 2013Q1 2014Q1 2015Q1 2016Q1

World Merchandise Trade Growth (Y/Y %)

Source: CPB Netherlands Bureau for Economic Analysis

13

Trade is particularly weak in Asia and

commodity producers

Source: EO99

14

Bond Yields have continued to descend into

uncharted territory, particularly in Europe and

Japan

Share of Outstanding Sovereign bonds with negative yields

0 20 40 60 80 100

Switzerland

Germany

Sweden

Finland

Denmark

Netherlands

Japan

Austria

France

Sources: Thomson Reuters; Bloomberg; OECD calculations

15

The pace of structural reforms has

decelerated

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.00

0.10

0.20

0.30

0.40

0.50

0.60

Advanced economies Emerging market economies

2011-12

2013-14

2015 (fully implemented)2015 (full implementation of in-process measures)

The share of implemented Going for Growth recommendations

Source: OECD Going for Growth Interim Report 2016

16