OECD forecast sees global growth at decade low

Organization for Economic Cooperation and Development
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.


Crown prince highlights key ways Saudi budget 2020 will contribute to Vision 2030

Updated 50 min 32 sec ago

Crown prince highlights key ways Saudi budget 2020 will contribute to Vision 2030

  • The budget for the coming year reflects and reinforces the commitment to implement the reforms

RIYADH: After King Salman announced Saudi Arabia’s budget for 2020 on Monday, Crown Prince Mohammed bin Salman highlighted some of its key elements and their implications, along with his thoughts on the ongoing implementation of economic reforms in the Kingdom.

He said that the government’s economic transformation of the country is progressing steadily in accordance with Vision 2030. The budget for the coming year reflects and reinforces the commitment to implement the reforms, plans and programs designed to help achieve this, he noted, and sets specific goals in a number of areas to help create a vibrant society, a prosperous economy and an ambitious homeland.

The crown prince added that the government is working to improve the quality of life in the Kingdom by developing and diversifying the economy, improving job opportunities and enhancing government services in terms of financial and economic stability, which is the main pillar of sustainable economic growth.

He also pointed out that the economic and structural reforms implemented during the past three years are having positive effects on the country’s financial and economic performance. The Kingdom has recently achieved remarkable increases in real GDP growth rates in the non-oil sector, and the government has encouraged the private sector play an important role in the economy, the positive results of which include significant growth in the business sector, the crown prince added. The government has also implemented a number major projects in vital sectors and launched activities that will help to achieve economic growth goals and create job opportunities, he said.

Crown Prince Mohammed stressed the importance of engaging with the private sector as a major and vital partner for the development of the Kingdom. He also noted the continuing program of reforms by the government designed to develop the business sector and create an attractive environment for investors to contribute to economic growth. This has helped to greatly boost the Kingdom’s ranking on international indexes that measure competitiveness and ease of doing business, he added.

“We aim to create an attractive investment environment that contributes to directing the national economy toward broad prospects of diversification, growth and prosperity,” the crown prince said. “The government will continue to move forward with implementing the stages of economic transformation and will progress with diversifying the economy’s productive base while maintaining financial sustainability and providing wider opportunities for a better future for the current and future generations.”

He stated that the government has a clear vision, fixed goals and explicit plans, and is working on implementing them while maintaining financial and economic stability as an essential pillar of sustainable economic growth.

“Financial and economic results and indicators confirm that we are progressing positively,” he said. “We constantly review and update the policies, procedures and programs implemented to ensure their effectiveness and to rectify their course whenever the need arises, in order to achieve the goals of the Kingdom’s Vision 2030, taking into account the global financial and economic conditions and what is in the interest of our homeland and citizens.”

The 2020 Saudi budget has been prepared in light of a global economic atmosphere characterized by challenges, risks and protectionist policies, said Crown Prince Mohammed, which require flexibility in the management of public finances and strengthening the ability of the economy to face the challenges and risks.

“We aim, through this budget, to benefit from the programs that were achieved and rely on them to maintain a balance between economic growth and the sustainable financial stability that guarantees this growth,” he said.

The crown prince noted that financial-control policies and the development of public financial management and its efficiency have contributed to the continued reduction of the budget deficit. This is expected to fall to about 4.7 percent of GDP in 2019, compared with 5.9 percent in 2018 and 9.3 percent in 2017. This confirms the success of ongoing efforts to ensure financial sustainability, and progress in implementing projects to improve the private sector, he added.

He also confirmed that the 2020 budget continues to support programs that contribute to achieving Vision 2030. This includes the financing of major projects, helping to develop medium, small and micro enterprises, and supporting entrepreneurs. These are some of the most important engines for economic growth, which will help to diversify the economy and open up new fields for investment and employment, he added

The budget includes reviews of some of these programs and schedules to ensure they reach their goals, Crown Prince Mohammed said, and the continued development and modernization of government infrastructure and services. He also stressed the government’s focus on improving the efficiency and quality of spending, to make the best use of state resources to achieve the highest possible social and economic income.

He highlighted the recent launch of oil company Saudi Aramco as a major step forward for the Kingdom, and his support for enhancing the role and participation of the private sector in the nation’s economy. He noted that opportunities for the private sector will continue to increase, enhancing its role in the growth and diversification of the economy and in creating job opportunities in the medium and long terms.

The crown prince also pointed out the part played by the Public Investment Fund and the National Development Fund in achieving Vision 2030, as the local and external investment mechanisms and the growth arm of the local economy, which are also contributing to the diversification of the economy and income sources. These are among the most important strategic goals of Vision 2030, he said.