Trade conflict, weak business investment and persistent political uncertainty are weighing on the world economy and
raising the risk of long-term stagnation, according to the OECD’s latest Economic Outlook.
World GDP growth is expected to be 2.9% this year - its lowest annual rate since the financial crisis - and remain at
2.9%-3.0% in 2020 and 2021. Global GDP expanded 3.5% in 2018.
Bold action is needed to address both the high levels of uncertainty facing businesses as well as the fundamental
changes taking place in the global economy. Policy-making must lead the transition to cleaner energy and to an
increasingly digital world. Governments must work together urgently to boost investment and establish fair international
rules on taxation and trade.
Presenting the Outlook in Paris OECD Chief Economist Laurence Boone said: “It would be a mistake to consider that low
growth is due to temporary factors that can be addressed with monetary or fiscal policy; the issues are structural.
Without coordination for trade and global taxation, clear policy directions for the energy transition, uncertainty will
continue to loom large and damage growth prospects.”
The slowdown involves advanced and emerging-market economies alike although its severity varies according to the
importance of trade in individual countries. Growth in the US is forecast to slow to 2% in 2020 and 2021. In the euro
area and Japan, growth is expected at around 1% and ¾ %, respectively, while the deceleration in China’s expansion is
set to reach 5.5% in 2021, compared with 6.6% last year.
Two years of escalating conflict over tariffs, principally between the US and China, has hit trade, is undermining
business investment and is putting jobs at risk. Although household spending has been holding up, signs of it weakening
are emerging. Car sales have declined sharply over the past year.
While the fragility of the world economy can be blamed in large part on deliberate policy decisions, it also reflects
deeper, structural changes, says the Outlook. Digitalisation is transforming business models while climate and
demographic changes are already disrupting existing patterns of activity. China, meanwhile, is rebalancing away from a
reliance on exports and manufacturing towards consumption and services.
Speaking in Beijing where he was meeting Chinese Premier Li Keqiang and other heads of international organisations, OECD
Secretary-General Angel Gurría said : “The alarm bells are ringing loud and clear. Unless governments take decisive
action to help boost investment, adapt their economies to the challenges of our time and build an open, fair and
rules-based trading system, we are heading for a long-term future of low growth and declining living standards.”
Aggregate investment growth in the G20 countries, excluding China, slowed from annual rate of 5% at the start of 2018 to
only 1% in the first half of 2019, the Outlook shows. Global trade volume growth of goods and services is estimated to
have slowed to 1% this year – its lowest rate since 2009. Although a modest pick up is projected, it is expected to
remain weak.
The Outlook warns that any further escalation of the trade conflicts would create additional disruptions to supply
networks and weigh on confidence, jobs and incomes. Uncertainty about a future EU-UK trade relationship poses a further
risk to growth as does the current high level of corporate debt.
For the OECD, strengthening international cooperation is crucial, particularly the need to agree on transparent and fair
international taxation and trade rules. The OECD is also looking at how dedicated public investment funds can be geared
to help meet long-term objectives such as ensuring society benefits fully from advances in digital technology or
facilitating transition to a low carbon future.
This data visualisation is available at https://www.oecd.org/economic-outlook/#business-uncertainty.