“Life is full of alternatives but no choice.” G20 leaders at the summit in Brisbane, Australia, in November should reflect on these words by Australian writer Patrick White, a Nobel Laureate, as they prepare their economic strategies for the years to come. For despite signs of recovery earlier in 2014, the global economy remains stuck in the “repair shop”. In the OECD’s latest Interim Economic Outlook growth forecasts for 2014 and 2015 were revised down for the largest G20 countries–by nearly a quarter of a percentage point compared to our April forecasts.
Six years after the start of the crisis, the output gap remains substantial–this is unprecedented, reflecting stubbornly weak demand. Two key cylinders of the global growth engine, trade and investment, remain particularly sluggish and are still not back to their pre-crisis levels. In the euro area, credit continues to shrink, creating a drag on demand. Furthermore, the recovery faces various headwinds, including geopolitical risks.