OECD cuts global growth forecasts for 2019

In its latest Economic Outlook published on November 22, the Organization for Economic Co-operation and Development (OECD) revised down its growth forecasts for next year for most of the world’s major economies due to slower trade growth and less supportive policies.

With the global expansion passing its peak already, OECD’s estimates for global GDP expansion has been revised down to a rate of 3.5% in 2019, compared with the 3.7% forecast in its previous report, and to 3.5% in 2020.

In many countries, the OECD unemployment rate is at a record low and wages are growing modestly while inflation has yet to pick up. However, the OECD warned of rising trade tensions and tightening financial conditions, saying economic storm clouds were gathering on the horizon. The organization estimates that the world economic activity could be much weaker if the US and China charge higher tariffs on each other’s imports in the coming term.

The outlook also highlighted that emerging markets such as Turkey, Argentina, and Brazil remain vulnerable to capital outflows amid higher interest rates and an appreciating US dollar.

The OECD’s forecast for the US GDP growth was unchanged from the September projection at 2.7% for this year and 2.1% for 2019. The growth in China, meanwhile, is expected to continue to slow down to 6.6% in 2018 and 6.3% in 2019.

In the euro area, the economic growth is projected to ease from 1.9% in 2018 to 1.6% in 2020. The outlook also stated that the credibility and effectiveness of the EU fiscal governance should also be strengthened by simplifying fiscal rules and completing the banking union.