OECD said in a report released today that global growth has already peaked and it’s now set for a “soft landing”. And, the global economy is navigating “rough seas” with “downside risks abound”. It also noted that “policy makers will have to steer their economies carefully towards sustainable, albeit slower, GDP growth.” The organization also pointed out that “global trade and investment have been slowing on the back of increases in bilateral tariffs while many emerging market economies are experiencing capital outflows and a weakening of their currencies”. OECD also warned that ” accumulation of risks could create the conditions for a harder-than-expected landing”. And the risks include firstly, further trade tensions, secondly, tightening financial conditions and thirdly, a sharp slowdown in China.
For 2019, global growth forecasts was revised down to 3.5% and stay there in 2020. US growth was left unchanged at 2.7% in 2019 and then slow to 2.1% in 2020. Eurozone growth was revised down to 1.8% in 2019 then slow further to 1.6% in 2020. Japan growth would accelerate to 1.0% in 2019, an upward revision, but slow to 0.7% in 2020. China’s growth is projected t slow to 6.3% in 2019, downwardly revised, and then further to 6.0% in 2020.
OECD Secretary-General Angel Gurría warned that “trade conflicts and political uncertainty are adding to the difficulties governments face in ensuring that economic growth remains strong, sustainable and inclusive.” And, “we urge policy-makers to help restore confidence in the international rules-based trading system and to implement reforms that boost growth and raise living standards – particularly for the most vulnerable.”
According to OECD, trade tensions have already shaved between 0.1-0.2% from global GDP this year. If US raise tariffs on all Chinese goods to 25%, world economy growth could fall to just 3.0% in 2020, no more 3.5%. And, growth in the US could drop by -0.8% and by -0.6% in China.