Global growth is slowing amid rising trade and financial risks

tankers un news

San Francisco, United States (Unsplash, 2018)

This article is brought to you in association with OECD.


Global economic growth remains strong but has passed its recent peak and faces escalating risks including rising trade tensions and tightening financial conditions, according to the OECD’s latest Economic Outlook.

Growth forecasts for next year have been revised down for most of the world’s major economies. Global GDP is now expected to expand by 3.5% in 2019, compared with the 3.7% forecast in last May’s Outlook, and by 3.5% in 2020.
In many countries, unemployment is at record lows and labour shortages are beginning to emerge. But rising risks could undermine the projected soft landing from the slowdown. Trade growth and investment have been slackening on the back of tariff hikes. Higher interest rates and an appreciating US dollar have resulted in an outflow of capital from emerging economies and are weakening their currencies. Monetary and fiscal stimulus is being withdrawn progressively in the OECD area.
The shakier outlook in 2019 reflects deteriorating prospects, principally in emerging markets such as Turkey, Argentina and Brazil, while 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

Presenting the Outlook, OECD Secretary-General Angel Gurría said: “Trade conflicts and political uncertainty are adding to the difficulties governments face in ensuring that economic growth remains strong, sustainable and inclusive.”
“We urge policy-makers to help restore confidence in the international rules-based trading system and to implement reforms that boost growth and raise living standards – particularly for the most vulnerable.” Read the full speech.
The Outlook says trade tensions have already shaved between 0.1 and 0.2 percentage points from global GDP this year and estimates that if the US hikes tariffs on all Chinese goods to 25%, world economic growth could fall to close to 3% in 2020. Growth rates would drop by an estimated 0.8% in the US and by 0.6% in China. The Outlook shows that annual shipping traffic growth at container ports, which represents around 80% of international merchandise trade, has fallen to below 3% from close to 6% in 2017.
Growth in China has eased over the course of 2018 amid tighter rules on “shadow bank” financial intermediaries outside the formal banking sector, a more rigorous approval process for local government investment and new US tariffs on Chinese imports. Stimulus measures and easier financial conditions by the central bank may help to bolster slowing growth and help engineer a soft landing, but could also aggravate risks to financial stability, says the Outlook. A much sharper slowdown in Chinese growth would damage global growth significantly, particularly if it were to hit financial market confidence.

With very low interest rates in many countries – particularly in the euro area – and historically high  debt-to-GDP levels (both public and private), policy-makers’ room for manoeuvre in case of a more marked global downturn is limited. The Outlook says it is important to maintain the capacity for tax and spending policies to stimulate demand if growth weakens sharply. Although such fiscal space is limited, co-ordinated action will be far more effective than countries going it alone. Such action should be focussed on  growth-friendly measures, such as investment in physical and digital infrastructure and targeting consumption spending more towards the less well-off.

Laurence Boone, OECD Chief Economist, said: “There are few indications at present 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. Cooperation on fiscal policy at the global and euro level will be needed.”

She added: “Shoring up the global economy also involves responding to people’s concerns about the lack of improvements in wages, living standards and opportunities. Promoting competition to improve business dynamics can help by increasing workers’ bargaining position and lowering prices for consumers. Investing in skills is also crucial. It raises productivity and income and reduces inequality between workers.”

A special chapter in the Outlook shows how, as digitalisation spreads, the divide between high-skill, low-routine jobs and low-skill, high-routine work continues to grow, posing the risk of further widening inequalities. It says strengthening product market competition would not only prompt wider diffusion of new technologies, thereby raising productivity growth, but also help transfer output and efficiency gains to wages.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Businesses are thriving, societies are not. Time for urgent change

Internet Forum: Prioritize technologies most needed for sustainable development

Digitalization is changing banking – These 3 trends will help shape its future

AI-driven companies need to be more diverse. Here’s why

Preventing the Pandemic of Mental Illness

Qualcomm to be the next target of EU antitrust regulators? China might be the answer

Dark spots on EU humanitarian aid spending

Two major EU projects falter; the Schengen Agreement now freezes and Eurozone fails to resolve the Greek enigma

The job description for a COVID-19 community health worker – and how this could fight US unemployment

‘Everything is still to be agreed’: informal talks between Parliament and Council on Rule of law conditionality continue

State aid: Commission approves €3.2 billion public support by seven Member States for a pan-European research and innovation project in all segments of the battery value chain

France and Germany can’t reach consensus regarding EU’s top jobs

At UN, youth activists press for bold action on climate emergency, vow to hold leaders accountable at the ballot box

Myanmar: Conflict resolution at ‘total standstill’, military commanders must answer for crimes against humanity

Ebola outbreak in DR Congo conflict zone ‘remains dangerous and unpredictable’ – UN chiefs

Trade wars won’t fix globalization. Here’s why

OECD and European Commission join forces to further support structural reforms in European countries

Amid Venezuela exodus, UN refugee envoy Angelina Jolie visits camps on Colombian border, appeals for humanity, more support

Nicaragua: MEPs condemn brutal repression and demand elections

Will Turkey abandon the refugee deal and risk losing a bonanza of money?

New UN rights report paints bleak picture in eastern DR Congo

An introduction to ‘Eco-Medical Literacy’ and its importance in shaping expert medical professionals

UN aid teams scramble to reach ‘most remote places’ cut off by Cyclone Kenneth in Mozambique

Sudan: Amidst deaths, injuries, imprisonments, UNICEF stresses children’s protection ‘at all times’

Taxation: Commission refers Spain to the Court for imposing disproportionate sanctions for failure to report assets held abroad

UN chief appeals for calm as Mali presidential election draws to a close

Strong EU trade enforcement rules enter into force

Back to the basics for the EU: Investment equals Growth

Nuclear testing has ‘disastrous consequences’ for people and planet, General Assembly told

FROM THE FIELD: One teen’s journey from refugee camp to US school principal

How the institutional response to COVID-19 can prepare us for climate change

How the world’s best teacher is changing lives in Africa

COVID-19 lets us see the world through a different lens

Lack of investment and ambition means Youth Guarantee not reaching potential

European Business Summit 2014: Sting Report, Day I

EU’s new environmental policy on biofuels impacts both the environment and the European citizen

The Shifting Rhythms of Harmonious China: Ancient, Modern & Eternal

US, Russia oblige each other in Syria and Ukraine selling off allies

Tech must embrace teamwork to transform the world

Just 24% of news sources are women. Here’s why that’s a problem

A Sting Exclusive: “Cybersecurity Act for safer European Industries and Consumers against cyberthreats”, by MEP Niebler

A top economist shares 3 ways leaders can help economies recover

Partner countries get €3bn in loans to prop up economies affected by pandemic

Budgetary Control Committee asks for stronger measures to protect EU spending

Schengen: new rules for temporary checks at national borders

Building a Climate-Resilient Future – A new EU Strategy on Adaptation to Climate Change

Trailing the US-EU economic confrontation

Student-to-Tutor Ratio: a thought about the ideal model

The Sahel is engulfed by violence. Climate change, food insecurity and extremists are largely to blame

South Eurozone countries threatened by rising borrowing cost and expensive euro

Turbocharging scientific discovery: with bits, neurons, qubits – and collaboration

Why the UN is investigating poverty in the United Kingdom

EP leaders call for negotiations on upgraded Transparency Register to continue

A new kind of company is revolutionising Africa’s gig economy

UN agencies welcome regional road map to help integrate ‘continuing exodus of Venezuelans’

Brexit poses ‘particular risk’ to British people in poverty: UN independent expert

Women in video games: ‘Accept it, or don’t buy the game’

Opening – EP remembers Nelson Mandela and mourns attacks on Roma in Ukraine

UNESCO food and culture forum dishes up fresh serving of SDGs

With security improving in DR Congo’s Kasai, thousands of refugees head home from Angola

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s