OECD trims economic outlook over trade and emerging market woes

PARIS: Global economic growth has peaked out in the face of rising trade frictions and emerging market turbulence, the OECD said, trimming its earlier outlook.

The world economy is on course for growth this year of 3.7% this and next year, up from 3.6% last year, said the Organisation for Economic Co-operation & Development (OECD).

In its last economic outlook in May, the Paris-based policy forum had forecast growth of 3.8% this year and 3.9% in 2019, but it said in an update yesterday that growth had peaked since those last projections were made.

The OECD said trade growth, the engine behind the global upswing in recent years, had slowed this year to around three % from 5% in 2017 as tensions between the United States and its major trade partners weighed on confidence and investment.

Even though the United States is the source of these trade frictions, the economic outlook for the United States was nevertheless the brightest amongst the OECD’s major developed economies, thanks to tax cuts and government spending.

The OECD left its forecast for US growth this year unchanged at 2.9%, but trimmed the forecast for next year to 2.7%, from 2.8% previously.

It said that US import tariffs were beginning to have an impact on the world’s biggest economy, estimating that those already imposed would lift overall US prices 0.3-0.4 %.

Particular products were even more affected, with US prices for washing machines jumping 20% between March and July while US exports of cars to China were down nearly 40% over one year.

Meanwhile, the OECD said that a weaker currency had so far helped China - which is not an OECD member – absorb the impact of higher US tariffs, leaving its growth forecasts unchanged at 6.7% for this year and 6.4% for next year.

Rising US interest rates and a stronger US dollar spelled trouble for emerging market economies such as Argentina, Brazil and Turkey, the OECD said, slashing its forecasts for those three countries.