OECD Says Global Growth Slowing Amid Rising Trade Risks

Global economic growth has peaked and is now slowing as the world faces risks from rising trade tensions and tightening financial conditions, the Organization for Economic Co-operation and Development said Wednesday. The Paris-based think tank trimmed its global growth projection for next year to 3.5 percent from 3.7 percent predicted in May, in its latest Economic Outlook report.

The global economy is forecast to expand 3.5 percent in 2020. The outlook for this year was left unchanged at 3.7 percent. "There are few indications at present that the slowdown will be more severe than projected," OECD Chief Economist Laurence Boone said. "But the risks are high enough to raise the alarm and prepare for any storms ahead. Cooperation on fiscal policy at the global and euro level will be needed."

The OECD report also warned that "a much sharper slowdown in Chinese growth would damage global growth significantly, particularly if it were to hit financial market confidence."

Rising risks could undermine the projected soft landing from the slowdown, the report said. "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," the report said. The OECD report said trade tensions have already shaved between 0.1 and 0.2 percentage points from global GDP this year. Further, the report estimates that if the US hikes tariffs on all Chinese goods to 25 percent, world economic growth could fall to close to 3 percent in 2020.

Growth rates would drop by an estimated 0.8 percent in the US and by 0.6 percent in China, the OECD said. The think tank left the US growth forecasts unchanged at 2.9 percent and 2.7 percent, respectively, for this year and next. The US economy is expected to grow just 2.1 percent in 2020. China's projections were lowered to 6.6 percent for this year and 6.3 percent for next. Growth is forecast to slow further to 6 percent in 2020.

Eurozone's growth forecasts for this year and next were cut to 1.9 percent and 1.8 percent, respectively, and is expected to ease further to 1.6 percent in 2020. The UK, which is set to leave the European Union in March 2019, is still forecast to expand 1.3 percent this year. The projection for next year was raised to 1.4 percent. Growth is expected to slow to 1.1 percent the year after.