US, China need to reverse course in trade row to help economy: OECD

The Organization for Economic Cooperation and Development forecast the United States would outpace other big developed economies with growth of 2.8 percent this year. (AFP)
Updated 21 May 2019

US, China need to reverse course in trade row to help economy: OECD

  • OECD: The global economy would grow by only 3.2 percent this year
  • China, which is not an OECD country, has been seeking to stimulate its economy

PARIS: Economic growth in China and the United States could be 0.2-0.3 percent lower on average by 2021 and 2022 if the two countries do not row back on tit-for-tat tariffs in their dispute that has dampened the global economic outlook, the OECD said on Tuesday.
US President Donald Trump has raised tariffs on $200 billion on Chinese imports to 25 percent from 10 percent in the long-running trade row, while Beijing said it would hit back by lifting tariffs on $60 billion in US goods.
The global economy would grow by only 3.2 percent this year as growth in trade flows is nearly halved this year to only 2.1 percent, the Organization for Economic Cooperation and Development (OECD) said in its biannual Economic Outlook.
That would be the slowest pace of global economic growth since 2016 and was down marginally from the Paris-based policy forum’s last forecast in March for growth of 3.3 percent.
The world economy should fare slightly better next year with a growth rate of 3.4 percent, but only if the United States and China pull back from tariff hikes announced this month.
The OECD said growth in China and the United States could come in 0.2-0.3 percent lower on average by 2021 and 2022 if the two nations did not reverse course.
Without taking the latest round of tariff increases into account, the OECD forecast the United States would outpace other big developed economies with growth of 2.8 percent this year, up from the 2.6 percent the organization had projected in March.
The world’s biggest economy was seen slowing to 2.3 percent next year even if the new tariff hikes are not carried through.
China, which is not an OECD country, has been seeking to stimulate its economy but growth was still seen easing from 6.2 percent this year to 6.0 percent in 2020, the lowest rate in 30 years for the world’s second-biggest economy.
Global investors are closely watching to see how much more support Beijing will inject to shore up growth after China already loosened monetary policy, cut taxes and allowed local governments to issue special bonds to fund infrastructure projects.
Japan’s export-dependent economy is suffering from the drop in trade flows with growth expected at only 0.7 percent in 2019 and 0.6 percent in 2020, trimmed from the OECD’s March forecasts of 0.8 percent and 0.7 percent respectively.
The euro zone is also paying a heavy price for the global trade slowdown, with its growth seen this year at 1.2 percent before rising to 1.4 percent year. That was slightly better than the 1.0 percent and 1.2 percent expected in March as Italy’s downturn proves slightly less severe than previously expected
Meanwhile, the OECD raised Britain’s growth forecast to 1.2 percent this year from 0.8 percent previously, as the prospect of its exit from the European Union was pushed back. UK growth is expected to fall to 1.0 percent, marginally better than the 0.9 percent expected in March.


OECD forecast sees global growth at decade low

Updated 22 November 2019

OECD forecast sees global growth at decade low

  • Governments failing to get to grips with challenges, outlook says

PARIS: The global economy is growing at the slowest pace since the financial crisis as governments leave it to central banks to revive investment, the OECD said on Thursday in an update of its forecasts.

The world economy is projected to grow by a decade-low 2.9 percent this year and next, the Organization for Economic Cooperation and Development said in its Economic Outlook, trimming its 2020 forecast from an estimate of 3 percent in September.

Offering meagre consolation, the Paris-based policy forum forecast growth would edge up to 3 percent in 2021, but only if a myriad of risks ranging from trade wars to an unexpectedly sharp Chinese slowdown is contained.

A bigger concern, however, is that governments are failing to get to grips with global challenges such as climate change, the digitalization of their economies and the crumbling of the multilateral order that emerged after the fall of Communism.

“It would be a policy mistake to consider these shifts as temporary factors that can be addressed with monetary or fiscal policy: they are structural,” OECD chief economist Laurence Boone wrote in the report.

Without clear policy direction on these issues, “uncertainty will continue to loom high, damaging growth prospects,” she added.

Among the major economies, US growth was forecast at 2.3 percent this year, trimmed from 2.4 percent in September as the fiscal impulse from a 2017 tax cut waned and amid weakness among US trading partners.

With the world’s biggest economy seen growing 2 percent in 2020 and 2021, the OECD said further interest rate cuts would be warranted only if growth turned weaker.

China, which is not an OECD member but is tracked by it, was forecast to grow marginally faster in 2019 than had been expected in September, with growth of 6.2 percent rather than 6.1 percent.

However, the OECD said that China would keep losing momentum, with growth of 5.7 percent expected in 2020 and 5.5 percent in 2021 in the face of trade tensions and a gradual rebalancing of activity away from exports to the domestic economy.

In the euro area, growth was seen at 1.2 percent in 2019 and 1.1 percent in 2020, up both years by 0.1 percentage point on the September forecast. It is seen at 1.2 percent in 2021.

The OECD warned that the relaunch of bond buying at the European Central Bank would have a limited impact if euro area countries did not boost investment.

The outlook for Britain improved marginally from September as the prospect of a no-deal exit from the EU recedes.

British growth was upgraded to 1.2 percent this year from 1 percent previously and was seen at 1 percent in 2020.