OECD cuts outlook for global growth

Trade tensions and higher interest rates are slowing the global economy, though for now there are no signs of a sharp downturn, the Organisation for Economic Cooperation and Development (OECD) said yesterday, lowering its outlook for next year.

The OECD forecast that global growth would slow from 3.7 per cent this year to 3.5 per cent in 2019 and 2020. It had previously projected 3.7 per cent for 2019.

The slowdown would be worst in non-OECD countries, with many emergingmarket economies likely to see capital outflows as the US Federal Reserve gradually raises rates. The OECD cut its outlook for countries at risk such as Brazil, Russia, Turkey and South Africa.

Rising interest rates could also spur financial markets to reconsider and thus reprice the risks to which investors are exposed, the OECD said. “We’re returning to the long-term trend. We’re not expecting a hard landing, however, there’s a lot of risks. A soft landing is always difficult,” OECD chief economist Laurence Boone said. “This time it is more challenging than usual because of the trade tensions and because of capital flows from emerging markets to countries normalising monetary policy,” she added.

A full-blown trade war and the resulting uncertainty could knock as much as 0.8 per cent off global GDP by 2021, the OECD calculated.