Subdued trade drags down global growth

6 June 2019

Although it is now stabilising at a moderate level, global growth slowed sharply in late 2018 with escalating trade conflicts, a slowdown in China and dangerous financial vulnerabilities threatening a new weakening of activity.

This is one of the main findings of the latest Economic Outlook produced by the Organisation for Economic Cooperation and Development (OECD) which projects that the global economy will grow by 3.2% in 2019 and 3.4% in 2020.

China remains key to global economic growth, according to the Outlook.

Significant fiscal policy stimulus has buffered the economy as it rebalances from investment and export-led growth to a more domestic footing. A sharper slowdown than already seen in China would, the OECD argues, pose important risks to both global growth and trade prospects.

The Outlook identifies continuing trade tensions as the principal factor weighing on the world economy.

It notes that world trade — a key artery of the global economy — is projected to grow by just over 2% this year, which would be the lowest rate in a decade. It underlines that the current cycle of trade disputes is hurting manufacturing, disrupting global value chains and generating significant uncertainty that is weighing on investment decisions, and highlights the risk of further disruption.

Chief Economist Laurence Boone said: “Growth is stabilising but the economy is weak and there are very serious risks on the horizon. Governments need to work harder together to ensure a return to stronger and more sustainable growth.”

The Outlook calls on governments to act now to ensure a stronger economic future. It urges a return to international cooperation and multilateral dialogue to restore predictability in policy and to relaunch trade.

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