Business Review from the Economist
World stuck in low growth, OECD warns
In its latest twice-yearly global assessment, the Organization for Economic and Cooperative Development (OECD) warned that the world economy is "stuck in a low-growth trap." The organization said that monetary policy alone could no longer be relied on to deliver growth and that governments should be using fiscal tools at their disposal, such as increases in investment spending, to stimulate demand. It also pointed to several downside risks to global growth, the most immediate of which would be if Britain votes to leave the European Union in a referendum on June 23.
The OECD forecast that Brazil's economy will shrink by 4.3 percent this year. Official data last week showed that the country's GDP contracted by 5.4 percent in the first quarter compared with the same period last year. Although bad, many economists were expecting the figure to be much worse.
Shinzo Abe, Japan's prime minister, delayed a controversial rise in the country's sales tax until 2019. The increase, from 8 percent to 10 percent, was supposed to take place next April, having already been postponed once. An initial rise in the tax in 2014 was widely blamed for throwing Japan into recession.
India's economy grew by 7.9 percent in the first three months of the year compared with the same quarter in 2015. For the fiscal year ending March 31, GDP rose by 7.6 percent, the fastest pace in five years. The government was quick to take the credit, pointing to its pro-business reforms. But India's impressive figures came with the usual warnings about their reliability. Other indicators, such as weak private investment and exports, suggest the economic picture is more mixed.
Consumer spending in the United States grew by 1 percent in April compared with March, the biggest increase in nearly seven years. The data will be taken as more evidence that the economy is racing ahead by those who want the Federal Reserve to lift interest rates again in coming months.
Yusuf Alireza unexpectedly quit as chief executive of Noble Group, Asia's biggest commodities-trading firm. Noble, which is based in Hong Kong, has been hit by the slump in commodity prices and faces allegations from a research outfit that it overstated its assets, which the company denies. On the day that Alireza's departure was announced, Noble also said it would sell its profitable American retail-energy business; the proceeds will go toward repairing its balance sheet.
The Obama administration detailed new rules to regulate providers of payday loans. Such lending is aimed at people on low incomes and attracts very high interest rates. The government wants lenders to do more to assess a borrower's ability to repay.
Saudi Arabia's sovereign-wealth fund plowed $3.5 billion into Uber and got a seat on its board. It is the taxi-hailing app's biggest single infusion of cash, and brings the total from its latest round of financing to $5 billion. The privately held firm is estimated to be worth more than General Motors.