Citing trade tensions and political uncertainties as key inhibitors to global economic growth, the OECD has slashed its growth forecast for 2019 in the latest edition of its bi-annual Economic Outlook published earlier today.
A year ago, in May 2018, the OECD had predicted global economic growth to climb to 3.9 percent in 2019 thanks to “a welcome rebound in investment and world trade” and “robust job creation in many economies”. But while labor markets remain strong in most of the world’s largest economies, global trade has taken a turn for the worse. “Trade tensions have disrupted growth. With uncertainty high and confidence low, investment has suffered, and the manufacturing sector has taken a hit”, Laurence Boone, OECD Chief Economist, explains with respect to his organization’s decision to cut the global GDP growth forecast for 2019 to 3.2 percent.
Even with this lowered outlook, uncertainty remains, the OECD notes. While the tariffs imposed by the United States and China in 2018 are already incorporated into the projections, the latest escalation in the trade war between the world’s two largest economies isn’t, which could further worsen growth prospects for the global economy. Adding to that the persisting threat of a hard Brexit and uncertainty about China’s ability to stabilize its growth, the OECD warns of “growth outcomes potentially being substantially weaker if negative risks materialize or interact”.
The following chart shows how the latest forecasts for 2019 GDP growth compare to the projections made one year ago. Looking at the world’s largest economies, all but one (the United States) have seen their growth projection for the year downgraded.