Mubasher: The Organisation for Economic Cooperation and Development (OECD) on Wednesday downgraded its projections for global economic growth next year amid headwinds including on-going US-Sino trade conflict.
“Recent developments suggest that the global expansion has peaked and is likely to slow over the next two years,” the OECD said in its latest economic outlook report.
The world’s gross domestic product (GDP) is set to grow a real 3.5%, down from 3.7% projection last September, predicting a marginal slowdown to 3.5% in 2020, according to the OECD.
Meanwhile, the organisation maintained its growth projection for this year at 3.7%.
“Labor market conditions are still improving [...] but investment and trade growth have proved softer than anticipated, financial market conditions have tightened, and confidence has continued to ease,” the Paris-headquartered organisation said.
Trade disputes remained a major “source of downside risk to global investment, jobs and living standards,” the OECD warned.
The US raised tariffs on $250 billion worth of Chinese imports, while Washington threatened to levy duties on the remaining $260 billion. China retaliated with tariffs on $110 billion in US goods.
“Higher interest rates and an appreciating US dollar have resulted in an outflow of capital from emerging economies and are weakening their currencies,” it said.
Moreover, the organisation slashed its growth estimates for Japan for this year to 0.9% from 1.2% and to 1% from 1.2% for the next year, as Tokyo is set to raise consumption tax next October which would drag on demand.
The world’s third largest economy is expected to grow 0.7% in 2020.
Growth forecasts for China were slightly lowered to 6.6% for this year, 6.3% for the next and 6% for 2020, as exports and infrastructure grow slower.
For the US, the OECD held its growth projection at 2.9% for this year, 2.7% for the next and 2.1% for 2020, as business investment was being boosted by recent tax reform.
The Eurozone is set to expand at 1.9% for this year, 1.8% in the next and 1.6% in 2020, as the organisation slightly cut its growth forecasts for the bloc.
