The OECD is calling for governments to take ‘bold action’ to address fundamental changes in the world’s economy, which threaten long-term growth.
According to OECD’s latest Economic Outlook, world GDP growth fell to 2.9 per cent in 2019 and is expected to remain stuck at 3 per cent over the next two years. This is down from the 3.5 per cent rate growth in 2018, and is the lowest annual rate since the global financial crisis.
The Organisation for Economic Cooperation and Development (OECD) attributes weak growth to “high levels” of uncertainty in business, as well as “fundamental changes” in the global economy. To prevent prolonged stagnation governments must co-operate.
Presenting the Outlook in Paris OECD chief economist Laurence Boone said: “It would be a mistake to consider these changes as temporary factors that can be addressed with monetary or fiscal policy: they are structural.
“Without coordination for trade and global taxation, clear policy directions for the energy transition, uncertainty will continue to loom large and damage growth prospects.”
The slowdown involves both advanced and emerging economies. Growth in the US is forecast to slow to 2 per cent in 2020 and 2021, while China’s expansion is set to reach 5.5 per cent in 2021, compared with 6.6per cent last year. Europe and Japan’s growth rate is expected at around 1 per cent.
The OECD said that two years of escalating conflict over tariffs, mainly between the US and China, has affected trade, business investment and employment.
Uncertainty about Brexit and Britain’s general election in December poses a further risk to growth.
Before the EU referendum the OECD predicted the UK would see a growth of more than 20 per cent by 2019. However figures for business investment have hardly moved in the past three years.
While a no-deal Brexit will not affect the UK’s GDP growth rate, the OECD warned it would damage the economy and leave the UK more vulnerable to a global downturn.
In addition to policy decisions, the OECD blames poor GDP on “deeper, structural changes”, such as digitalisation and climate change
OECD secretary-general Angel Gurría said: “The alarm bells are ringing loud and clear. Unless governments take decisive action to help boost investment, adapt their economies to the challenges of our time and build an open, fair and rules-based trading system, we are heading for a long-term future of low growth and declining living standards.”