After a lengthy period of weak growth, the world economy is finally growing around 4%, the historical average of the past few decades, according to the latest Organisation for Economic Cooperation and Development (OECD) report.
Álvaro S. Pereira, Chief Economist ad interim of the Economics Department of the OECD, said: “This is good news. And this news is even better knowing that, in part, the stronger growth of the world economy is supported by a welcome rebound in investment and in world trade.
“The recovery in investment is particularly worth emphasising, since the fate of the current expansion will be highly dependent on how investment will perform.”
Although long anticipated, the pick-up in investment remains weaker than in past expansions.
The same is true for global trade, which is expected to grow at a respectable, albeit not spectacular, rate, unless it is derailed by trade tensions.
In spite of the good news, risks loom large for the global outlook.
Risks continue to abound regarding an escalation of trade tensions, namely between the US and China.
Another important risk going forward is related to the rise in oil prices.
Oil prices have risen by close to 50% over the past year, and persistently higher oil prices will push up inflationary pressures and will aggravate external imbalances in many countries.
Pereira concluded: “In spite of stronger growth, there is no time for complacency. Structural reforms are vital to sustain the current expansion and to mitigate risks.
“Therefore, at this juncture of the world economy, it is truly crucial to give reforms a chance. After monetary and fiscal policies have done their jobs, it is time for reforms to sustain the expansion, to improve well-being, and to make growth work for all.”
Read more: IMF - Global Economy Growing Stronger