OECD Lowers Global Growth Forecasts Again
PARIS, FRANCE – March 7, 2019
The Organization for Economic Cooperation and Development (OECD) has again lowered forecasts for global economic growth for 2019 and 2020, warning of the negative effects of trade conflicts and uncertainty around Brexit.
OECD lowered its forecast for global economic growth for 2019 by 0.2 percentage points compared to the November estimate to 3.3%. The forecast for 2020 has been reduced by 0.1% to 3.4%.
The revision followed the November decline in growth forecasts.
High political uncertainty, persistent trade tensions, and the further erosion of business and consumer confidence contribute to slower growth, the organization’s report says.
Significant political uncertainty persists in Europe, including with regard to Brexit. The indiscriminate withdrawal of [Britain from the European Union] will significantly increase the costs for European economies, warns the OECD.
The organization's experts expect that EU GDP will increase by only 1% annually in 2019 and 1.2% in 2020. The November forecast predicted a rise of 1.8% and 1.6%, respectively.
The organization sharply lowered the growth forecast for the German economy, the largest in Europe, for the current year from 1.6% to 0.7%. Next year, growth is expected to accelerate to 1.1%.
The estimate of GDP growth in France for 2019 was reduced by 0.3% to 1.3%. In 2020, the economy is expected to grow at the same pace.
Italy's GDP, according to forecasts, this year will decline by 0.2%, and next year will show an increase of 0.5%.
OECD senior economist Lawrence Boon noted that the revised forecasts reflect a sharp slowdown in world trade, especially in the EU, where export growth fell to zero at the end of 2018, and political uncertainty that affects business investment.
According to her, the recent negotiations between the US and China give little hope for the revival of trade, since "tensions between the two countries go beyond what is now being discussed." In addition, the US has trade disputes with other developing countries, such as India, and with the EU.
The OECD expects that under the condition of a “soft” Brexit with a transition period until the end of 2020, the UK economy will grow by only 0.8% in 2019 and 0.9% in 2020. In the case of a disorderly exit from the bloc, the UK may face a recession, which will be a "serious adverse shock for Europe." In this case, Ireland, Denmark and the Netherlands will face the biggest loss of exports.
Another big risk for the global economy will be a sharper slowdown in economic growth in China, the OECD predicts. At the same time, the organization expects incentive measures to offset weak trade and private demand.
According to OECD estimates, China’s GDP in 2019 will increase by 6.2%. Next year, growth is expected to slow to 6%.
The Chinese government lowered its target for economic growth in 2019 to 6–6.5% after last year’s growth in the world's second largest economy slowed to 6.6% and was minimal since 1990.
The US economy, the largest in the world, will grow by 2.6% in 2019, which is less than the November estimate. At the same time, the forecast for 2020 has improved to 2.2%.
The forecast of Japan’s GDP growth for the current year is worsened from 1% to 0.8%. Growth is expected to slow to 0.7% in 2020.
Growth forecasts for India are reduced to 7.2% and 7.3%, respectively.