Global economy slowing much faster than expected
- Global economic growth will slow to 2.9% in 2019, compared with an earlier forecast for growth of 4%, the Organisation for Economic Cooperation and Development said in a report.
- The Trump administration's trade war with China and Brexit are among the issues causing corporate uncertainty.
- The global economy may get "stuck in a long period of low growth," the OECD's chief economist warned.
The global economy may weaken to a pace not seen since the financial crisis as the impact of the Trump administration's trade war and Brexit erode confidence and investment, the Organisation for Economic Cooperation and Development said Thursday in a report.
Global economic growth is likely to slow to 2.9% in 2019 and 3% in 2020, the weakest annual growth rates since the 2008 financial crisis, the economic research organization said. The trade war between the U.S. and China as well as other trade tensions are "endangering future growth prospects," the group added.
Economic growth in the U.S. will slow to 2% next year, the OECD forecast. By comparison, the Trump administration has targeted 3% annual GDP growth.
The OECD's latest outlook is a downgrade on the group's 2018 forecast that global economic growth would reach 4% in 2019, OECD chief economist Laurence Boone wrote in a blog post. Trade disputes between the U.S. and China, Europe and other countries is causing some businesses to hold off on investing in new equipment or hiring, while U.S. manufacturing has fallen into recession despite President Donald Trump's vows to revive the sector.
"An urgent response is required, failing which we run the risk of finding ourselves stuck in a long period of low growth, the brunt of which will be felt primarily by the most vulnerable," Boone wrote.
The outlook for economic growth has been revised downward for almost all G20 countries, the OECD said. The G20 includes the EU and 19 other countries, including the U.S., Canada and Mexico.
The trade war between the U.S. and China will "exert a significant drag on global activity and trade over the next two years," the report noted.
"All told, the U.S.-China measures could reduce global GDP growth by between 0.3-0.4 percentage points in 2020 and 0.2-0.3 percentage points in 2021," the report forecast. "China and the United States would be most affected by these shocks."