Global economic growth remains strong but has passed its recent peak and faces escalating risks,including rising trade tensions and tightening financial conditions, says the latest Economic Outlook by the Organisation for Economic Cooperation and Development (OECD), Paris. Growth forecasts for 2019 have been revised down for most of the world’s major economies.
Global gross domestic product (GDP) is now expected to expand by 3.5 per cent next year, compared with the 3.7 per cent forecast in last May’s Outlook, and by 3.5 per cent in 2020, according to an OECD press release.
In many countries, unemployment is at record lows and labour shortages are beginning to emerge. But rising risks could undermine the projected soft landing from the slowdown. Trade growth and investment have been slackening on the back of tariff hikes.
Higher interest rates and an appreciating US dollar have resulted in an outflow of capital from emerging economies and are weakening their currencies. Monetary and fiscal stimulus is being withdrawn progressively in the OECD area, the report says.
The shakier outlook in 2019 reflects deteriorating prospects, principally in emerging markets such as Turkey, Argentina and Brazil, while the further slowdown in 2020 is more a reflection of developments in advanced economies as slower trade and lower fiscal and monetary support take their toll.
Trade tensions are already harming global GDP and trade, and estimates that if the US hikes tariffs on all Chinese goods to 25 per cent, with retaliatory action being taken by China, world economic activity could be much weaker, says the report.
By 2021, world GDP would be hit by 0.5 per cent, by an estimated 0.8 per cent in the United States and by 1 per cent in China. Greater uncertainty would add to these negative effects and result in weaker investment around the world.
The report also shows that annual shipping traffic growth at container ports, which represents around 80 per cent of international merchandise trade, has fallen to below 3 per cent from close to 6 per cent in 2017.