PARIS: The trade war between the United States and China has plunged global growth to its lowest levels in a decade, the OECD said on Thursday as it slashed its forecasts.
The Organisation for Economic Cooperation and Development said that the global economy risked entering a new, lasting low-growth phase if governments continued to dither over how to respond.
The global economy will see its weakest growth since the 2008-2009 financial crisis this year, slowing from 3.6 per cent last year to 2.9 per cent this year before a predicted 3.0 per cent in 2020, the OECD said.
The Paris-based policy forum said the outlook had taken a turn for the worse since it last updated its forecasts in May, when it estimated the global economy would grow 3.2 per cent this year and 3.4 per cent in 2020.
“What looked like temporary trade tensions are turning into a long-lasting new state of trade relationships,” OECD chief economist Laurence Boone said. “The global order that regulated trade is gone and we are in a new era of less certain, more bilateral and sometimes assertive trade relations,” she added.
Trade growth, which had been the motor of the global recovery after the financial crisis had fallen from 5 per cent in 2017 into negative territory now, Boone said.
Meanwhile, trade tensions have weighed on business confidence, knocking investment growth down from 4 per cent two years ago to only 1 per cent.
Boone said that there was evidence that the trade standoff was taking its toll on the US economy, hitting some manufactured products and triggering farm bankruptcies. The world’s biggest economy would grow 2.4 per cent this year and 2.0 per cent next year instead of the 2.8 per cent and 2.3 per cent respectively that the OECD had forecast in May. — Reuters
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