Global growth weakest since financial crisis, says OECD - GulfToday

Global growth weakest since financial crisis, says OECD


Angel Gurria speaks at a news conference following the ‘1+6’ roundtable meeting in Beijing on Thursday. Reuters

The Organisation for Economic Co-operation and Development (OECD) trimmed its outlook for the global economy on Thursday, saying the world was headed for its weakest economic growth since the 2007-2008 financial crisis.

Urging governments to invest in digital and climate transformation, the Organisation for Economic Co-operation and Development said activity had been hobbled by weaker trade and investment in the past two years, as US President Donald Trump and Chinese leaders continue to be locked in a trade conflict.

The OECD now expects economic activity around the world to expand by 2.9 per cent next year, a decline of 0.1 percentage points from a previous forecast issued in September.

Growth was likely to remain slow, it said, with expansion in 2020-2021 seen at around 3.0 per cent, down from a 3.5 per cent rate projected only a year ago.

This was shaping up to be “the weakest rate since the global financial crisis”, according to OECD chief economist Laurence Boone.

Growth this year was also likely to come in at 2.9 per cent, the OECD said in its November 2019 Economic Outlook.

Boone noted that “for the past two years, global growth outcomes and prospects have steadily deteriorated, amidst persistent policy uncertainty and weak trade and investment flows.” She said that central banks had taken decisive and timely monetary decisions that partly offset the negative effects of trade tensions.

But governments had not done the same, instead failing to invest enough in long-term projects to improve infrastructure, advance digitalisation of their economies or in the fight against climate change.

Boone warned that the OECD was concerned the outlook would deteriorate further due to “unaddressed structural changes more than any cyclical shock”.

She highlighted climate change and digitalisation as two examples, along with the fact that “trade and geopolitics are moving away from the multilateral order of the 1990s.” A breakdown of the forecasts showed that the US economy, the world’s biggest, is tipped “to slow to 2.0 per cent by 2021, while growth in Japan and the euro area is expected to be around 0.7 and 1.2 per cent respectively,” the report said.

In China, the world’s second biggest economy, growth was forecast to “continue to edge down, to around 5.5 per cent by 2021”, it added.

Other emerging-market economies are expected to recover “only modestly,” Boone said.

Separately, international organisations including the International Monetary Fund and the World Bank warned on Thursday that the world is facing a synchronised economic slowdown stemming from factors such as trade tensions between China and the United States and resulting uncertainties. At a press conference following Thursday’s 1+6 roundtable meeting in Beijing, which involved Chinese authorities and various international economic institutions, new IMF Managing Director Kristalina Georgieva said the estimated losses for the global economy due to the China-US trade war will amount to $700 billion by 2020, 0.8 per cent of the world’s GDP.

Chinese Premier Li Keqiang, World Bank President David Malpass, IMF Managing Director Kristalina Georgieva, WTO Deputy Director-General Alan Wolff, ILO Director-General Guy Ryder, OECD Secretary-General Angel Gurria and FSB Chairman Randal Quarles attended a news conference after the “1+6” Roundtable meeting in Beijing on Thursday.

Meanwhile, Wall Street stocks dipped early on Thursday amid continued murkiness in the US-China trade talks, while Macy’s tumbled following poor results.

Investors remained cautious on the US-China negotiations after US President Donald Trump said late Wednesday that China was not “stepping up” sufficiently to finalize a preliminary accord struck last month.

Optimism about trade has lifted US stocks to records in recent sessions but those gains are vulnerable if the talks fall apart.

About 20 minutes into trading, the Dow Jones Industrial Average stood at 27,768.80, down 0.2 percent.

The broad-based S&P 500 also shed 0.2 percent to 3,101.88, along with the tech-rich Nasdaq Composite Index, which was at 8,514.12.

Macy’s fell two percent as it reported a 3.9 percent decline in comparable sales at company-owned stores in the third quarter and cut its annual forecasts, citing a number of issues, including soft business from international tourists and a glitch with its online platform.

TD Ameritrade surged 16.1 percent following reports it is close to a deal to be bought by fellow online brokerage Charles Schwab as the industry reels from competition over low trading fees. Schwab rose eight per cent.

The number of Americans filing applications for unemployment benefits was unexpectedly unchanged at a five-month high last week, suggesting some softening in the labor market.

While other data on Thursday showed a mild pick up in factory activity in the mid-Atlantic region this month, manufacturers reported a sharp slowdown in new orders, shipments and unfilled orders. There were also declines in factory employment and hours measures.


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