OECD: Global growth will slow down in 2019



11/22/2018 11:13 AM


The growth rate of the world economy in 2019-2020 will be lower than in 2018, as follows from the updated forecast of the Organization for Economic Development and Cooperation (OECD). First, the slowdown will affect developing markets, then, as incentive programs are exhausted, it will spread to developed countries. In 2020, growth in the United States can be as low as 2.1%, in the euro area - 1.6%, and in China - 6%, according to the OECD.



Following the International Monetary Fund, the OECD presented its somewhat pessimistic outlook for the global economy. The paper says that the world economy has passed its local peak and will grow only by 3.5% next year - not by 3.7%, as was expected in May. The increase will be the same in 2020. Thus, the final year of 2018 with its 3.7% may remain peak in the medium term. “For many countries, a slowdown in growth would be natural, given the extremely low levels of unemployment, but increasing risks may undermine this “soft ” slowdown scenario, the OECD says. "So far, few of the indicators show that the decline will be more significant than expected, but the risks are sufficient to issue a warning," indicates the organization's chief economist Lawrence Boone.

Next year, developing economies, such as Turkey, Argentina and Brazil, may suffer in the first place. Tightening monetary policy and strengthening the US dollar carry additional risks for these countries, but by 2020 the main reasons for the decline in global growth will be developed markets, which will face the exhaustion of incentive programs (both fiscal and monetary) and the consequences of reducing world trade. By 2021, according to the OECD, the introduction of 25 percent US duties on all Chinese imports and the adoption of similar measures by China will cost the global economy 0.5% of GDP (the situation of uncertainty will also lead to lower investment). At the same time, the loss of the United States will amount to 0.8% of GDP, China - 1% of GDP. It is noteworthy that the growth of world freight (this is 80% of all shipments) has already slowed down from about 6% in 2017 to less than 3% this year.

The revision has not yet touched the forecast for the United States - 2.9% growth in 2018, 2.7% in 2019 and 2.1% in 2020. For the euro area, the forecast was reduced by 0.1 percentage points for this and the following years (to 1.9% and 1.8%, respectively). In 2020, growth could be as high as 1.6% (for comparison, in 2017 - 2.5%), the strongest corrections are for Germany and Italy. The UK economy, by contrast, will grow by 1.3% in 2018, next year; growth will accelerate to 1.4% - although as early as September, growth was expected to slow to 1.2%.

The estimate of the growth of Chinese GDP for 2018–2019 was reduced by 0.1 percentage points, to 6.6% and 6.3% (by 2020, to 6%). The reasons for the slowdown will be not only trade protectionism, but also the fight against shadow banking, as well as restrictions on the implementation of investment projects by regional authorities. Mitigating financial conditions can alleviate the situation, but it threatens to increase the risks associated with the debt burden. A more serious downturn in the Chinese economy, especially if it causes panic in the financial markets, carries with it a significant global risk, warns in the OECD. Forecasts for India for this and next year are worsened to 7.5% and 7.3%, for Brazil - to 1.2% and 2.1%.

source: oecd.org


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