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November 22, 2018

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Tariffs and monetary woes will cut growth

The global economy has peaked and faces a slowdown driven by international trade tensions and tighter monetary conditions, the Organization for Economic Co-operation and Development warned yesterday.

The OECD, which groups the top developed economies, said it had trimmed its growth forecast for 2019 to 3.5 percent from the previous 3.7 percent.

The 2018 estimate was left unchanged at 3.7 percent.

For 2020, the global economy should grow 3.5 percent, it said in its latest Economic Outlook report.

“The shakier outlook in 2019 reflects deteriorating prospects, principally in emerging markets such as Turkey, Argentina and Brazil,” it said.

“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.”

OECD chief Angel Gurria highlighted problems caused by trade conflicts and political uncertainty.

Restore confidence

“We urge policy-makers to help restore confidence in the international rules-based trading system,” Gurria said.

Trade tensions have already shaved 0.1-0.2 percentage points off global GDP this year, the Economic Outlook report said.

If Washington were to increase tariffs to 25 percent on all Chinese imports — as US President Donald Trump has threatened to do — 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, it added.

For the moment, the OECD puts US economic growth at 2.9 percent this year and 2.7 percent in 2019, unchanged from previous estimates, but trimmed China by 0.1 percentage point each to 6.6 percent and 6.3 percent.

Laurence Boone, OECD chief economist, said: “There are few indications that the slowdown will be more severe than projected. But the risks are high enough to raise the alarm and prepare for any storms ahead.”




 

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